LECTURE 5

SALES TERITORIES

A sale territory is a number of present and potential customers

located within a geographical area and assigned to a sales

person, a branch, a dealer or a distributor.

• It ensures proper coverage of the potential market.

• It increases the sale person’s interest and effectiveness.

• It also increases the sales person’s ability to route, plan calls,

and identify problems which needs to be addressed.

 SALES TERITORIES
• It serves as a basis for control and evaluation of the
salesperson’s activities. Since the territory is a
defined and assigned territory given, management is
able to follow activities within that territory and
based on the performance of the territory the sales
person is evaluated.
• Sales territories facilitate the performance of other
sales and management function. For example ;
• It enhances research and development collection and
analyses of sales and cost data.
 SALES TERITORIES
• Sales territories help reduce selling cost. This benefit
derives from the fact that territorial definition eliminates
overlapping of territories and waste of expenditure. This
is derived from the fact that there is better routing
which reduces travelling time and expenditure.

• It improves customer relations. This is because the

salesperson assigned to a given territory is able to apply
him or herself to relationship marketing skills, thereby
creating better acquaintances, which is; through
knowledge of customer habits, preferences and
motivations – buying patterns.
 Designing Territories
• The size of a salesforce determines the total amount of selling effort that a
firm has available to generate sales from accounts and prospects. The
effective use of this selling effort often requires that sales territories be
developed and each salesperson be assigned to a specific salesperson.

• The overall objective is to ensure that all accounts are assigned salesperson
responsibility and that each salesperson can adequately cover the assigned
accounts.

• Although territories are often defined by geographic area (e.g., the

Oklahoma territory, the Tennessee territory, the Adenta territory), the key
components of a territory are the accounts within the specified geographic
area
Routing of sales people
Routing is a managerial activity which
establishes a formal pattern for a sales person to
follow as he or she goes through a given
territory. The pattern is usually marked or listed.
 Procedure for establishing Routing Plan.

a. List present and potential customers.

b. Locate these customers on a map of the territory.
c. Determine how many times you will visit your heavy
users’ or high users / high volume / low volume. This implies
the number of calls/visit per day or week in addition, the
method of transportation should also be determined.
d. Draw an itinerary on a map to minimize travel time and
back tracking.
e. Establish several route plans because sales frequencies
usually differ. For example plan A would include all
customers and plan B only the profitable firms of the
customers.
 Procedure for establishing Routing Plan.

f. The plan should be tentative until timed out and

proved accurate.
g. Establish control mechanisms such as call reports
to ensure efficiency and accountability e.g. call report,
visit, and delivery.
• Adjust/revise territories if problem are identified or
market condition change or there is a change in the
caliber of sales people.

NB: It must be noted that for effective adjustment of

sales territories, there is the need to conduct territorial
sales and cost studies on a continuing basis.
5 Territory Design Example
Trading Areaa Present Effort (%)b Recommended
Effort (%)c
Andy 1 10 4
2 60 20
3 15 7
4 5 2
5 10 3
Total 100 36
Sally 6 18 81
7 7 21
8 5 11
9 35 35
10 5 11
11 30 77
Total 100 236
a
Each territory is made up of several trading areas.
b
The percentage of salesperson time spent in the trading area (100% = 1 salesperson
 The current territory design

The current territory design does not provide proper

selling coverage of the trading areas. The trading areas in
Andy's territory should require only 36 percent of his time,
yet he is spending all his time there.

Clearly, the firm is wasting expensive selling effort in Andy's

territory. The situation in Sally's territory is just the
opposite. Proper coverage of Sally's trading areas should
require more than two salespeople, yet Sally has sole
responsibility for these trading areas. In this situation the
firm is losing sales opportunities because of a lack of selling
attention.
 Sales performance
• Sales performance in Sally's territory is much lower
than it might be if more selling attention were
given to her trading areas.
• Profit performance is low in Andy's territory
because too much selling effort is being expended
in his trading areas.

• The firm is not achieving the level of sales and

profits that might be achieved in the territories
were design to provide more productive market
coverage.
 Procedure for Establishing Territories: (Reviewing Territories)

Sales territorial planning must be proceeded by a

comprehensive research to ensure that;
• Districts are equal in sales potential
• They are equal in work load
Steps involved include;
• Selection of the base or control unit
• Analyze sales people workload
• Determine basic territories considering the sales
potential and core patterns
• Assignment of sales people to territories are based on
the following factors
• To establish a route plan for sales people
 Procedure in Designing Territories
The procedure is illustrated manually by using
Andy's and Sally's territories as an example
application. The basic problem is to organize the 11
trading areas into three territories that provide
proper market coverage of account in each territory
and equal performance opportunities for each
salesperson. Three territories are developed
because the decision model results presented
indicate that two salespeople cannot adequately
cover these trading areas.
FIGURE 5.17 Territory Design Procedure

Select Analyze Form Assess Finalize

Planning Planning Initial Territory Territor
and and Control Territories Workload y
Control Unit Design
Unit Opportunit
y
Designing territories requires a multi-stage approach. Although most territory design
approaches follow the stages presented in this figure, the method used at each stage
differ considerably, depending on the analytical tools used.
EXHIBIT 5.6 Territory Design Data
Trading Area Market Potentials Number of Sales of
Sales Calls

1 $ 250,000 25
2 $ 700,000 100
3 $ 350,000 35
4 $ 150,000 15
5 $ 200,000 20
6 $ 2,000,000 175
7 $ 750,000 65
8 $ 500,000 50
9 $ 1,000,000 100
10 $ 500,000 50
11 $ 1,750,000 175
 Select Planning and Control Unit
• Select Planning and Control Unit
The first step in territory design is to select the
planning and control unit that will be used in the
analysis-that is, some entity that is smaller than a
territory. The total market area served by a firm is
divided into these planning and control units, then
they are analyzed and grouped together to form
territories.
 Analyse Opportunity of Planning and Control Unit
• First, determine the amount of opportunity
available from each planning and control unit.
Specific methods for performing these calculations
will be converted.

• However, the most often used measure of

opportunity market potential. The market
potentials for the 11 trading areas in our example
have been provided. Everything else being equal,
the higher the market potential, the more
opportunity is available.
 Form Initial Territories
• Once planning and control units have been selected and
opportunity evaluated, initial territories can be designed. The
objective is to group the planning and control units into
territories that are as equal as possible in opportunity.

• This step may take several iterations as there are probably a

number of feasible territory designs. It is also unlikely that any
design will achieve complete equality of opportunity.

• The best approach is to design several different territory

arrangements and evaluate each alternative. Each alternative
must be feasible in that planning and control units grouped
together are contiguous.
 Assess Territory Workloads

• The preceding step produces territories of nearly equal

opportunity. It may, however, take more to realize this
opportunity in some territories than in others.

• Therefore, the workload of each territory should be

evaluated by (1) the number of sales calls required to
cover the accounts in the territory, (2) the amount of
travel time in the territory, (3) the total number of
accounts, and (4) any other factors that measure the
amount of work required by a salesperson assigned to
territory.
 Finalize Territory Design
• The final step is to adjust the initial territories to
achieve equal workloads for each salesperson.
The objective is to achieve the best possible
balance between equal opportunity and equal
workload for each territory.

• Typically, both of these objectives cannot be

completely achieved, so management must
decide on the best trade-offs for its situation.
Territory Design Data
Alternative 1 Alternative 2
Territory Trading Area Market Potentials Trading Area Market Potentials
1 1 $ 250 1 250
2 $ 700 2 700
3 $ 350 3 200
4 $ 150 4 500
5 $ 200 5 1000
1650 2650

2 6 $ 2,000 6 2000
7 $ 750 7 750
8 $ 500 8 350
3250 2750

3 9 $ 1,000 9 150
10 $ 500 10 500
11 $ 1,750 11 1750
3250 2750
Workload Evaluations
Territory Trading Area Sales Calls
1 1 25
2 100
5 20
8 50
9 100
295

2 6 175
7 65
240

3 3 35
4 15
10 50
11 175
275

EXHIBIT 5.9 Final

Final Territory Design

Territory Trading Area Market Potentials Sales Calls

1 1 250 25
5 200 20
7 750 65
8 500 50
9 1000 100
2700 260

2 2 700 100
6 2000 175
2700 275

3 3 350 35
4 150 15
10 500 50
11 1750 175

2750 275