CLMM/131

IBS Center for Management Research

Sales Territory Design: An Exercise

This caselet was written by J S K Chakravarthi, K S Venu Gopal Rao and Debapratim Purkayastha,
IBS Hyderabad. It was prepared from generalized experience sources, and is intended to be used
as a basis for class discussion rather than to illustrate either effective or ineffective handling of a
management situation.

 2017, IBS Center for Management Research. All rights reserved.

To order copies, call +91 9640901313 or write to IBS Center for Management Research (ICMR), IFHE Campus,
Donthanapally, Sankarapally Road, Hyderabad 501 203, Telangana, India or email: [email protected]

www.icmrindia.org

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 CLMM/131

Sales Territory Design: An Exercise

Early in the morning on February 2, 2016, Mr. Baker, the Country Head of Hushtek Corporation,
called Mr. Desai, the newly appointed Head-Sales of the South Indian state of Telangana, on the
telephone to discuss and finalize issues related to the launch of Hushtek Brands in his territories.
Baker planned to initiate the sales operations in Telangana state depending on how quickly Desai
prepared the blueprint for the launch. The essence of Baker’s phone call was to get an update on
the territory design. Two months earlier, Baker had presented his action plan to his boss in which
he had indicated that the territory design for the state of Telangana would be completed by the end
of February 2016. Baker felt that before proceeding with the appointment of channel partners, the
territories had to designed and assigned. With Baker indicating on the phone that he was going to
call Desai for a meeting on February 26 to review the progress, Desai had his task cut out for him.
He started building up the logic for designing the territories that made business sense as well as
fulfilled market coverage.

ABOUT HUSHTEK AND ITS INDIA OPERATIONS

Started in 2010, Hushtek Corporation (Hushtek) operated in the fast moving consumer goods
(FMCG) business and had been identified as one of the fast growing players in the European
detergents business. Competing with giants like P&G and Unilever, Hushtek had learnt the tricks
of the trade and started giving stiff competition to these behemoths in certain markets. In 2015, the
company started making elaborate plans to enter India, which was experiencing steady growth in
GDP. Hushtek was aiming to do well in emerging countries like India.
Before joining as the Country Head of Hushtek, Baker had worked with companies like ITC, P&G,
Reckitt Benckiser, and Marico across sales and marketing management functions in India. With
his vast experience, Baker was given the charge of launching Hushtek’s brands in India. Baker
wanted to initially concentrate on some of the southern states of India (namely Kerala, Tamil
Nadu, Andhra Pradesh, and Telangana) and then gradually expand across the country.
Baker had appointed Desai as Sales Head for Telangana state. Incidentally, Desai hailed from
Telangana and was familiar with the topography of the state. Exhibit 1 provides the details for the
‘Detergents soap and powder’ category for the various districts of Telangana and Exhibit 2 gives
details about the population and size of its districts. The immediate task for Desai was to study the
market closely and provide an action plan for launching the Hushtek brands in the next six months.
Baker in his discussion on the phone insisted that Desai take up the task of designing the territories
as his first priority so that they could move ahead with the recruitment plan for Sales Officers in
the state.
The state of Telangana was divided into ten districts with Hyderabad as the capital city. Exhibit 3
provides a geographical indication of all 10 districts (see map).The FMCG market in Telangana
was highly competitive with entrenched players vying for market share and coverage. The top two
companies in the detergent market (Unilever and P&G) enjoyed high brand visibility and loyalty
among trade partners and retailers. The market in Hyderabad was by far the most competitive as
well as the one with the highest potential, contributing to as much as 40% of the total market by
value.

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 Sales Territory Design: An Exercise

Desai planned to launch the brands across all the districts of Telangana, preferably using a 3-level
channel (Company – CFA – Dealer – Wholesaler/Retailer – End-user). To understand exactly how
many territories needed to be created, the company had asked him to consider market size, sales
potential, competitor activities, distance between the markets, etc. Desai was also assured of a
good promotional budget and a free hand for the first year of operations.
Though P&G and Unilever had a tight grip on the market, both Baker and Desai were confident
that Hushtek could make rapid inroads into the market. Desai needed to decide how many Sales
Officers he would recruit for Telangana. The role of the Sales Officers was crucial as it was they
who would handle the dealers and retailers in a given territory. They were responsible for target
achievement and building relationships with clients for the assigned territory.
Considering that Husktek was just setting up its operations, the sales organization was flat –
Country Head (Baker) – State Head (Desai) – Sales Officer (to be recruited)]
As Desai started preparing his plan, he had to also consider the following:
1. A Sales Officer could only meet a maximum of 35 A & A+ class retailers/wholesalers on any
given day, irrespective of the market he or she dealt with. It was understood that to get good
business from these A & A+ outlets, the visiting frequency of the Sales Officers had to be at
least fortnightly. The dealer’s salesperson would handle the B and C class outlets of the
respective markets along with fulfilling the few unexpected orders that came from A & A+
retailers.
2. After the market visit, the Sales Officer could meet the dealers to address grievances, if any,
collect primary orders, handle secondary orders, record inventory, brief them about the
available promotions for the month, etc.
3. In a month of 26 working days, the Sales Officers worked for only 24 days. Two days were
spent in planning and other review meetings.
4. The Hushtek management indicated that the company’s sales potential stood at 30% of the
market size.
5. District headquarters contributed 60% sales of the district and the remaining towns or mandals
mentioned in the map contributed uniformly to the remaining.
6. Out of the total number of outlets across all categories, 60% were located in the District HQ
alone and the remaining 40% were uniformly distributed in the towns mentioned in the map
given. All the markets indicated in Ranga Reddy and Hyderabad districts contributed
uniformly in terms of value of business, indicating they were of equal potential.
Having considered these facts, Desai was now required to identify the contours of each territory in
Telangana, hire the required number of Sales Officers, and assign them to different markets. He
had to do this immediately as the date for the meeting with Baker was fast approaching. Desai
decided to start the exercise with the Nizamabad market (See Exhibit 4).

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 Sales Territory Design: An Exercise

Exhibit 1
Product category: FMCG - Detergent soaps & Powder for Telangana

Business Contribution of
(Value) Rupees millions

No. of C Class Retailers

No. of B Class Retailers
Market size per annum

top two companies (%)

A & A+ Outlets to the

Total No. of Retailers

No. of A & A+ Class
Name of the market

Retailers (%)
Sl. No.

( %)

(%)
1 Hyderabad 1750 50 20 40 40 15000
2 Ranga Reddy 800 40 20 40 40 7000
3 Nalgonda 420 25 10 25 65 3200
4 Karimnagar 580 40 15 40 45 6000
5 Mahbubnagar 240 52 20 15 65 4000
6 Adilabad 200 40 15 20 65 3500
7 Nizamabad 360 40 20 40 40 4000
8 Warangal 500 55 22 38 40 5000
9 Medak 50 40 18 22 60 2000
10 Khammam 100 35 15 25 60 4000
5000 53700

Exhibit 2
District-wise details with population and area coverage
Sr. Population Density
District District HQ Area (km2)
No. (2011) (/km2)
1 Adilabad Adilabad 2741239 16105 170
2 Hyderabad Hyderabad 3943323 18480 217
3 Karimnagar Karimnagar 3776269 11823 322
4 Khammam Khammam 2797370 16029 175
5 Mahbubnagar Mahbubnagar 4053028 18432 219
6 Medak Sangareddi 3033288 9699 313
7 Nalgonda Nalgonda 3488809 14240 245
8 Nizamabad Nizamabad 2551335 7956 321
9 Rangareddy Hyderabad 5296741 7493 707
10 Warangal Warangal 3512576 12846 274
Source: Source: http://www.mapsofindia.com/maps/telangana/districts/

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 Sales Territory Design: An Exercise

Exhibit 3:
Telangana state map with District HQ & markets indicated

Note: Maps featured are before reorganisation of Telangana

Source: http://www.telangana.gov.in/About/Districts

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 Sales Territory Design: An Exercise

Exhibit 4
Number of A/A+ Outlets in NIzamabad
Market Name No. of A/A+ Outlets
NIZAMBAD URBAN (60%) 240
NIZAMBAD RURAL (40%) 240
BALAKONDA 45
ARMOOR 46
BODHAN 46
BANSWADA 46
JUKKAL 45
YELLAREDDY 46
KAMAREDDY 46

Note: Maps featured are before reorganisation of Telangana

Source: http://nizamabad.nic.in/

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