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Chapter 13

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  1. Chapter 13 Sales Territories I think it’s fair to call this hostile territory. Captain Leo Davidson,Planet of the Apes

  2. Sales Territory • Comprises a number of present and potential customers, located within a given geographical area and assigned to a salesperson, branch, or intermediary (retailer or wholesaling intermediary). • Key word: customers

  3. Benefits of Good Territory Design • Enhances customer coverage • Reduces travel time and selling costs • Provides more equitable rewards • Aids evaluation of sales force • Increases sales for the sales organization • Increases morale

  4. Procedure for Designing Sales Territories (Fig. 13-1) Determine Basic Territories Select a Control Unit Determine Location and Potential of Customers Assign Salespeople to Territories Set Up Territorial Coverage Plans Evaluate Effectiveness of Design

  5. Territorial Control Units • States • Counties • Cities • Zip-code areas • MSAs (Metropolitan Statistical Areas)

  6. Build-up Method of Territorial Design (Fig. 13-3) Management must determine: Desirable call patterns: Call frequency per account per year Total calls needed in each control group Workload capacity: Total calls possible per rep per year = number of daily calls x days selling Tentatively set territorial boundary lines by combining control units until total calls needed = total calls possible Modify territories as needed

  7. Territory Design: Build-up Method Worksheet Control Units Illinois Iowa Kentucky Customer Call Calls Calls Calls class frequency Accounts per year Accounts per year Accounts per year A 2 per month 10 240 7 168 5 120 B 1 per month 30 360 17 204 10 120 C 1 every 2 months 68408 55330 27162 108 1,008 79 702 34 402 Workload capacity for one rep: 6 calls/day x 5 = 30 calls/week x 50 = 1,500 calls/year Distribution of one rep’s calls 1,008 + 491 or 402 Possible control combinations 100% 70% or 100% Illinois Iowa Kentucky So, a territory could either be: 100% Illinois + 100% Kentucky, or 100% Illinois + 70% Iowa

  8. Territory Size and Workload Factors Workload Factor Territory Size Increase/Decrease Nature of Job: Lots of presale and post-sale activity Decreases Nature of product: A frequently purchased product Decreases A limited repeat-sale Increases Market development stage: New market--fewer accounts Increases Established market--more accounts Decreases Market coverage Selective coverage Increases Extensive coverage Decreases Competition: Intensive Decreases – unless market is oversaturated Limited Increases

  9. Breakdown Method of Territorial Design (Fig. 13-5) Management must determine Company sales potential Sales potential in each control unit Sales volume expected from each sales person Tentatively set territorial boundary lines by combining control units total sales potential = total sales volume expected Modify territories as needed

  10. Territory Design: Breakdown Method Worksheet Company sales potential = $200,000,000 Targeted volume rep = $ 10,000,000 Number of reps needed Company sales potential$200,000,000 Targeted volume/rep $ 10,000,000 Territory volume as Targeted volume/rep $ 10,000,000 Company sales potential $200,000,000 = = = 20 = = = 5% Each territory should comprise 5% of sales potential or $10,000,000 Combine adjacent control units until each sales potential of $10,000,000

  11. Sales Territories for Pharmaceutical Sales Reps • Divide… • The 48 states into 5-10 regions • Each region into several districts • Each district into 8-12 territories (typically 1 rep per territory)

  12. Computers in Territory Design • Geographic Information System (GIS) • Combines multiple layers of information to provide in-depth understanding of a sales territory. • Elements of a complete GIS: • Software • Hardware • Data • Trained people

  13. Before Alignment (one small and one big territory)Total Sales Potential = $2,000Total Sales = $100 + $360 = $460 $450 $360- $340- Actual Sales in Territory $250 After Alignment (two balanced territories)Total Sales Potential = $2,000Total Sales = $340 + $340 = $680 $100 $500 $750 $1000 $1250 $1500 Sales Potential Adapted from: Prabhakant Sinha, and Andris Z. Zoltners, “Sales-Force Decision Models: Insights from 25 Years of Implementation,” Interfaces, 31:3, Part 2 of 2, May-June 2001, pp. S8-S44. Figure 13-6

  14. Area C Area B Area A x Routing the Sales Force • Routing is the managerial activity that establishes a formal pattern for sales reps to follow as they go through their territories. • Reduces travel expenses as it ensures a more efficient territory coverage. • Some reps resent it. • Best for routine sales jobs with regular call frequencies. Area B: Typically the “problem” area.

  15. Case 13-1 Village Beds Current Sales Territories Realigned Sales Territories

  16. 1 6 2 7 3 4 5 9 1 6 3 2 7 8 10 4 5 Case 13-1 Village Beds Current Sales Territories Realigned Sales Territories