Management of territories

Controlling the Salesforce

Project management approach

SDM-Ch.7 1
 Sales Territories
A sales territory consists of existing and potential
customers, assigned to a salesperson
 Most companies allot salespeople to geographic
territories, consisting of current & prospective
customers

Major Reasons / Benefits of Sales

Territories
 Increase market / customer coverage
 Control selling expenses and time
 Enable better evaluation of salesforce performance
 Improve customer relationships
 Increase salesforce effectiveness
 Improve sales and profit performance
SDM-Ch.4 2
 Procedure for Designing Sales
Territories

Select a control unit*

Find location and potential of present and
prospective customers within control units**
Decide basic territories by using
• Build-up method,
Or
• Break-down method
*A control unit is a geographical territorial
base
**Unnecessary & expensive for consumer
products

SDM-Ch.4 3
 Procedure in Build-up
Method

 Decide customer call frequencies

 Calculate total customer calls in each
control unit
 Estimate workload capacity of a salesperson
 Make tentative territories
 Develop final territories
Objective is to equalise the workload of
salespeople

SDM-Ch.4 4
 Procedure in Breakdown
Method
Estimate company sales potential for total
market
Forecast sales potential for each control unit
Estimate sales volume expected from each
salesperson
Make tentative territories
Develop final territories
Objective is to equalise sales potential of
territories
SDM-Ch.4 5
 Management of Territorial
Coverage

It means: How salesperson should cover

the assigned sales territory
It includes three tasks for a sales
manager:
• Planning efficient routes for salespeople
• Scheduling salespeople’s time
• Using time-management tools

SDM-Ch.4 6
 Routin
g

Routing is a travel plan used by a salesperson

for making customer calls in a territory
Benefits of or Reasons for routing:

•Reduction in travel time and cost

•Improvement in territory coverage
Importance of routing depends on the
application:
•Nature of the product – Important for FMCG
•Type of jobs of salespeople – Important for
driver-cum-salesperson job, but creative
selling job needs a flexible route plan
SDM-Ch.4 7
 Procedure for Setting up a
Routing Plan
 Identify current and prospective customers on a
territory map
 Classify each customer into high, medium, or low
sales potential
 Decide call frequency for each class of customers
 Build route plan around locations of high potential
customers
 Computerised mathematical models are developed
 Commonly used routing patterns are:

Base C
(B) 1 B
B
C C C C
5 4 3 2

Straight line / Hopscotch Clover Leaf

Circular
SDM-Ch.4 8
 Scheduli
ng
 Scheduling is planning a salesperson’s visit time to
customers. It deals with time allocation issue
 How to allocate salesperson’s time?
• Sales manager communicates to salesperson major
activities and time allocation for each activity
• Salesperson records actual time spent on various
activities for 2 weeks
• Sales manager and salesperson discuss and decide
how to increase time spent on major activities
 Companies specify call norms for current customers,
based on sales and profit potentials, and also for
prospective customers

SDM-Ch.4 9
 Quotas
 Used when companies want to control salesforce
performance on key selling and non-selling activities
 Focus on a few types of quotas, to avoid confusing
salespeople. An example:

Type of Quota Quota Actual Percent Weight Percent

Quota (Importance) Quota x
Weight
Sales Volume (Rs) 5,00,000 4,50,000 90 3 270
Receivables (days) 45 50 89 2 178
New Customers 04 05 125 1 125
(Nos)
Total 6 573

• Total point score=573/6=95.5 for a salesperson

• Typically use ‘points’ as a common measure to resolve the
problem of different measures used by various types of quotas
 Evaluation of Effectiveness of Sales Organisation
 To know “what happened”, companies analyse their sales,
costs, profits, and productivity
 Effectiveness model of a sales organisation

Sales Analysis

Effectiveness Cost Analysis

of a
Sales
Organisation Profitability Analysis

Productivity Analysis

• We shall examine each of the above factors

SDM-Ch.7 11
 Sales Analysis
 Sales analysis of a company can be done in different ways:
 Different alternatives are shown in a framework below:
National and/or international levels sales organisation
Regional level
All levels
In Sales Branch /district level
Organisation Territory level
Individual level
Sales Analysis

Total sales of the company

By type of products
Different
By type of distribution channels
Type of
Sales By type of customer classifications
By size of orders

Comparisons with sales quotas / targets

Comparisons with previous periods
Different
Comparisons with industry / competitors
Type of Comparisons within sales organisations
Analysis
Comparisons with sales forecasts
SDM-Ch.7 12
 Sales Analysis (Continued)
 Sales analysis is done at all levels of the sales organisation
 Reasons
(1) For evaluation and control: sales analysis needed at different organisation
levels like regional, district, territory
(2) For identifying problems:
Use hierarchical sales analysis. E.G.
• Sales performance at national level below sales volume budget
• Find which regions have problems in achieving sales quotas
• Focus sales analysis of branches reporting to problematic regions
• Do sales analysis of territories under problematic branches
• Further analysis of problematic territories to be done by talking to
salespeople, customers, branch managers
• Corrective actions can then be taken to improve sales
 Extend hierarchical sales analysis to different type of sales
 Out of different type of analysis, comparisons with sales quotas are widely
used

SDM-Ch.7 13
 Procedure for Evaluating and Controlling
Salesforce Performance

The steps involved in the procedure are:

 Set policies on performance evaluation and control
 Decide bases of salespersons’ performance evaluation
 Establish performance standards
 Compare actual performance with the standards
 Review performance evaluation with salespeople
 Decide sales management actions and control
We shall describe above steps briefly

SDM-Ch.7 14
 Establish Performance Standards
 Performance standards for efforts / behavioural criteria are
difficult to set
• For this, companies do “time and duty analysis” or use
executive judgement
 After establishing standards, salespeople must be informed
• Compare Actual Performance with Standards
• Graphic rating scales
• Behaviourally anchored rating scale (BARS)
• Management by Objectives (MBO)
• Descriptive statements

SDM-Ch.7 15
 Business Ethics and Sales Management

 Sales managers and salespeople have ethical responsibilities

 Some of the ethical situations are:
• Relations with the company. EGs. Expense statements,
credit for damaged merchandise
• Relations with customers. EGs. Gifts, false information to
get business, customer entertainment
 Ethical guidelines
• A code of ethics developed by the company would be
effective if it is enforced by top management

SDM-Ch.7 16
 Decide Bases for Salespersons’ Performance Evaluation
 A firm should decide which of the following bases / criteria it would use: (1) result /
outcome based, (2) efforts / behavioural based, or (3) Both
Quantitative results / Quantitative efforts / Qualitative efforts /
outcome bases / criteria behavioural bases / criteria behavioural bases / criteria
• Sales volume • Customer calls • Personal skills
• In value / units  No. of calls per day  Selling skills
•Percentage of quota  No. of calls per  Planning ability
•Potential Mkt share customer  Team player
• by products & • Non-selling activities • Personality & Attitudes
customer segments  overdue payments  Cooperation
•Comp to prev yrs collected  Enthusiasm
sales  No. of reports sent Knowledge
• Accounts / Dealer meetings Product
 New accounts nos. Inventories noted Policies
 Lost accounts nos. Service calls Trade and
Order—calls No of days worked competition
Sales—orders Emails/letetrs sent Laws
 gross margins by Direct Expenses
customers and products As a percent of sales
As a percent of target
 KEY RESULT AREAS

I. FINANCIAL RESULTS
II. PROCESS RELATED RESULTS
III.CAPABILITY BUILDING
 Financial Results
Topline :
REVENUE 1. Ach Vs Targets
2. GOLY

Margins/ Profits : Ach vs. Targets

1. Mix Management – higher weights to
PROFITABILITY high GC contributors
2. GOLY
Retail & W/Sale Coverage:
1. ECO – Effective Coverage (vs. mapped)
DISTRIBUTIONN 2. Benchmarked Coverage to Cat. Leader
3. % Contbn of various Channels

FORECAST Sales & Inventory Planning:

ACCURACY 1. Variance from Plan –
2. Rolling Sales Plan Variance –
3. Promotions Planning
COLLECTIONS Receivables Management:
1. % outstandingto T/Over
2. Total Outstanding & Ageing
Process Led Results

Overheads :
Returns
Channel subsidies
Channel & Team Incentives Overheads
Travel
Business Meeting Expenses

Channel Programs :
Displays, Contests
Channel Loyalty Programs Channel Programs
Distribution Enhancement Initiatives

Admin Tasks :
Monthly Review Meetings
Team & Self PJP Planning Administrative
Compensation related
Periodic Assessment related
 Capability Building
Resource Planning :
CAPACITY 1. Efficiency Planning – FTE productivity
PLANNING 2. Role mapping to skills

Skill Upgradation :
1. SSM level – basic skills
TRAIN & EQUIP 2. Frontline Officers - NPD Launches,
Channel management, market devpmt,
Leadership
Periodic Assessment:
1. Attrition Levels
EVALUATION 2. Field Force Efficiency – revenue ↑
3. Quality of Sales – lines sold, visual
merchandising, CSAT

COMPETENCE Retrain & Improve :

ENHANCEMENT 1. Mentoring for higher responsibilities
2. Raise the bar on performance metrices
3. Best Practice Sharing within company
 responsibility management

SDM-Ch.7 22