Unit:2

Sales Territories
 What is a sales territory
• A sales territory is composed of a group of
customers or a geographic area assigned to a
salesperson.
• 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
• The emphasis is on customers rather than on
area which the sales man work
• Deciding territories means dividing the market
• Properly designed territory is a more
homogeneous market area, market data will be
more meaningful
• When area is divided into well defined territory,
planning, implementation, control will be easier
 Major benefits/advantages of sales territories

• Helps the firm to achieve better market coverage

• Helps to improve the performance of the
salesman
• Helps to reduce the lost sales
• Helps optimum calls on all classes of customers
and eliminate wastages
• Helps to give individual attention to major
customers
• Makes market data more meaningful
• Helps assigning responsibilities for achieving
specific objectives
• Helps better co-ordination of personal selling
and advertising efforts
• Facilitate market research
• Attend properly to customer’s need
• Control selling expenses and time
• Enable better evaluation of sales force
performance
• Improve customer relationships
• Increase sales force effectiveness
• Improve sales and profit performance
Factors to consider while designing
sales territory
 FACTORS TO CONSIDER WHEN DESIGNING SALES TERRITORIES

Sales force objectives may be based on

factors such as contribution to profits,
return on assets, sales/cost ratios, market
share, or customer satisfaction.
 S elect B a s ic A n a ly z e D eter m in e B a sic
C on tr o l U n it W o r k lo a d T er r ito r ies

E v a lu a te, R ev ise C u sto m er A ss ig n to

if N eed ed C o n ta ct P la n T er rito ries
 SELECT BASIC CONTROL UNITS

• States
• Counties
• Cities and zip-code areas
• Metropolitan statistical areas
• Trading areas
• Major accounts
• A combination of two or more factors
 ANALYZE SALESPEOPLE’S WORKLOADS

• Workload is the quantity of work expected

from sales personnel. Three of the main
influences on workload involve the nature of
the job, intensity of market coverage, and type
of products sold.
 Intensity of Market Coverage

Distribution methods:
• Intensive distribution
• Selective distribution
• Exclusive distribution
DETERMINE BASIC TERRITORIES

The breakdown approach uses factors

such as sales, population, or number of
customers.

Forecasted Sales
Sales Force Size = Average Sales per Salesperson
SIX STEPS TO CONSIDER WHEN DETERMINING A FIRM’S BASIC TERRITORIES

1. Forecast sales and determine sales 4. Tentatively establish territories.

potentials.

2. Determine the sales volume needed 5. Determine the number of accounts

for each territory. for each territory.

3. Determine the number of 6. Finalize the territories, and draw

territories. the
boundary lines.
Equalized Workload
This method uses the number, location, and size
of customers and prospects to determine the
frequency of sales calls and amount of time a call
takes by using such data as:
• Time required for each sales call.
• Frequency of sales calls per given customer.
• Time intervals between sales calls.
• Travel time around territories.
• Nonselling time.
ASSIGN TO TERRITORIES

Some salespeople can handle large territories

and the travel associated with them; some
can’t. Some territories require experienced
salespeople; some are best for new people.
Some people want to live in metropolitan
areas; others prefer territories with smaller
cities.
CUSTOMER CONTACT PLAN

The customer contact plan involves

scheduling sales calls and routing a
salesperson’s movement around the
territory.
Scheduling refers to establishing a fixed
time when the salesperson will be at a
customer’s place of business.

In theory, strict formal route designs enable the

salesperson to:
1. Improve territorial coverage.
2. Minimize wasted time.
3. Establish communication between
management and the sales force in terms
of the location and activities of individual
salespeople.
 THREE BASIC ROUTING PATTERNS

S t r a ig h t - L in e P a t t e r n
F ir s t C a ll
B ase c
c c c c W o rk B ack

C lo v e r le a f P a t t e r n c M a jo r - C it y P a t t e r n
c c

2 3
c c
c c c c
1
c B ase c
5 4
c c c c
c c c c

c c
1 - D o w n to w n
c
E ach L eaf O u t an d
B ack Sam e D ay
EVALUATION AND REVISION OF SALES
TERRITORIES

Territorial control is the establishment of

standards of performance for the individual
territory in the form of qualitative and
quantitative quotas or goals.
WHO IS R ESPONSIBLE FOR TERRITORIAL
DEVELOPMENT?

Development of sales territories is usually the

responsibility of the sales manager overseeing
the larger sales units within the organization.
 Assigning Salespeople to Territories
Sales Manager should consider two criteria:
(A)Relative ability of salespeople
• Based on key evaluation factors:
(1) Product knowledge, (2) market knowledge, (3) past
sales performance, (4) communication, (5) selling skills
(B) Salesperson’s Effectiveness in a Territory
• Decided by comparing social, cultural, and physical
characteristics of the salesperson with those of the
territory
• Objective is to match salesperson to the territory
Why sales territories may not be developed:

• Salespeople may be more motivated if they

are not restricted.
• The company may be too small.
• Management may not want to take the
time, or have the know-how.
• Personal friendship may be the basis for
attracting customers.
 Sales Quotas
• What are Sales Quotas?
• Sales quotas are sales goals or targets set by a
company for its marketing / sales units for a time
period
• Marketing / sales units are regions, branches,
territories, salespeople, and intermediaries
• Generally, company sales budget is broken down
to sales quotas for various marketing units
 Objectives of Sales Quotas

• To use quotas as performance standards or

performance goals
• To control performance
• To motivate people by linking quotas to
compensation plans
• To identify strengths and weaknesses of the
company
 Sales Quotas
• A Sales Quota refers to an expected
routine assignment to sales units, such as
territory, districts or branches etc.
• Sales Quotas can be set for individuals
• Used to Plan, Control and evaluate the
selling activities of a company.
EVALUATE Appraising

Control Expences,profitability

Plan Sales Plans,Forecasts,Budgets

 Types of Quotas
• Organisations set many types of sales quotas: (1) sales
volume, (2) financial, (3) activity, (4) combination, (5) Profit ,
(6) Expense
• Sales volume quotas
• For effective control, sales volume quota should be set
for the smallest marketing units, such as salesperson,
districts / branches, product items / brands
• Sales volume quotas can be stated in (a) rupees / dollars,
(b) units, or (c) points
• Rupees / dollars sales volume quotas are appropriate
when salespeople are required to sell many products
 Sales Volume Quotas (Continued)

• Unit sales volume quotas are suitable when

• Salespeople are selling a few products
• Prices of the product fluctuate rapidly
• Price of each product / service is high
• Point sales volume quotas are appropriate when the
company wants salespeople to sell products that
contribute more to profits
 Example

A. Quota Actual Sales Difference Performace Index

B. 5696000 5792000 96000 101.7%
C. 5584000 4842000 -742000 86.7%
D. 6012000 6046000 34000 100.6%
 Financial Quotas
• Financial quotas control (a) gross margin or net profits, and (b)
expenses of marketing units
• Gross-margin / Net-profit quotas
• Calculate gross margin by subtracting ‘cost of goods sold’ (i.e. cost
of manufacturing) from sales volume. Sales managers are not
responsible for cost of manufacturing
• Net profit quotas are generally accepted by sales mangers as it is
calculated by subtracting direct selling expenses from the gross
margin
• Expense quotas
• In many companies, expense quotas are stated as a percentage of
sales
• Expense quotas to be administered with flexibility, to make
salespeople cost conscious, allowing reasonable expenses
 Activity Quotas
• These are set when salespeople perform both
selling and non-selling activities
• Objective is to direct salespeople to carry out
important activities
• For effective implementation, activity quotas
are combined with sales volume and financial
quotas
• E.G. Calling on high potential customers,
payment collection from defaulting customers
 Combination 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) 49 50 102 2 204
New Customers 04 05 125 1 125
(Nos)
Total 6 599

• Total point score=599/6=99.8 for a salesperson

• Typically use ‘points’ as a common measure to resolve the problem of
different measures used by various types of quotas
 Profit Quotas
• Used in Multi product Companies Where
different products contribute to varying
levels of profits .
• Concentrate on the high profit products
by the sales person.
 example
Product SP Margin Volume Net profit
A 400 280(70%) 60000 168 lac
B 200 80(40%) 25000 2 lac
C 100 20(20%) 10000 2lac
 EXPENSE QUOTA
• Expense Quotas are related to Selling
costs .
• Set Quotas for expenses linked to
different levels of sales attained by their
sales force
• % of sales volume in a territory and sales
person many spend only this amount as
an expenditure.
 Methods for Setting Sales Quotas
• Several methods are used for establishing sales quotas
• In practice, companies use more than one of the
following methods to increase their confidence in sales
quotas
• Total market estimates
• Territory potential
• Past sales experience
• Executive judgement
• Salespeople’s estimates
• Compensation plan
We shall briefly discuss each of the above methods
 Total Market Estimates Method
• The Process followed by established companies is
as under:
1) Estimate next year’s total market demand, or
industry sales forecast, using sales forecasting
methods
2) Decide the company’s estimated market share for
next year
3) Company’s next year sales forecast= (1) x (2)
4) Find each territory’s percentage share out of the
total company sales in the previous year
5) Territory sales quota = (3) x (4)
 Territory Potential Method

• The procedure followed by new companies is as under:

1) Estimate next year’s industry sales forecast or market
potential, using sales forecasting methods
2) Estimate multiple factor index (MFI) for each territory, based
on factors that influence sales of the product. These factors
are given weights corresponding to the degree of sales
opportunity.
3) Industry sales forecast in a territory (or territory market
potential=(1)x(2)
4) Territory sales quota = (3) x estimated market share of the
company in the territory
 Past Sales Experience Method
• The process consists of taking past one year’s sales
(or an average of previous 3 to 5 year’s sales), adding
an arbitrary percentage (or a percentage by which
the market is expected to grow), and thus setting
each territory sales quota
• The assumption that future sales are related to past
sales may not be always correct
• This method should not be the only method used
• Past sales should be one of the factors used for
deciding sales quotas
 Executive Judgement Method
• Senior executives use their judgement when the
product, territories, and the company are new or very
little market information is available
• Executives predict company sales budgets and also
territory sales quotas
• This method should generally be used along with
other methods
Salespeople’s Estimate Method
• Some firms ask their salespeople to set their own
quotas
• Many salespersons either set very high or too low
sales quotas
 Salespeople’s Estimate Method (Continued)
• For setting proper quotas, many sales managers use 2 or 3 of
above methods, discuss with salespersons to get their inputs,
and decide sales quotas
Compensation Plan Method
• Some organizations set quotas to fit with their sales
compensation plan
• E.G. A company wants to pay a monthly salary of Rs 5000, and
a commission of 3% on monthly sales above Rs 1,00,000. The
quota of Rs 1,00,000 is set in such a way that salesperson
would find it very difficult to cross total compensation of Rs
8000 per month (5000+3000)
• Sales quotas should not be based only on this method,
because it would “put the cart before the horse”
Insight into Setting & Administration of Sales Quotas
• Set realistic quotas
• Understand problems in setting quotas
• Ensure salespeople understand quotas
• By allowing salespeople to participate in the process
• By continuous feedback to salespeople on their
performance compared to quotas
• Have flexibility in administering quotas
• Change quotas in cases of major changes in market
demand or company strategies
• Use monthly or quarterly quotas for incentives and annual
quotas for performance evaluation
• Select a few quotas that have relationships with marketing
environment and sales situations
 To be successful, the sales quota should
satisfy these conditions:
• It must be set scientifically
• It must be flexible
• It must relate to sales potential determined by
market research
• It must be simple
• It must be set in consultation with and
cooperation of the salesmen
• It must provide definite incentives to the
salesman
• It must be planned in a manner that it
facilitates various company activities
 Factors affecting Sales quota setting

• Analysis of the past sales

• The buying capacity for the products being
marketed of each salesmen’s territory and the
ability of the salesman
• The demand trend for the industry
• Competition within the industry
• Special efforts planned
 Analysis of past sales
• For accuracy it is necessary to consider sales
during a longer period
• Depends on the availability of accurate and
complete past records
• Records and data are kept tabulated and
analysed by the statistical department in a
large concern and by office manager or other
executives in a small organisation
• Quotas are based on statistics
• Statistics combined with a knowledge of
market conditions, sound judgement and
commonsense helps in setting fair and
accurate quotas
• Special care is needed
 Buying capacity of sales territory and ability
of salesman
• All territories do not have the same buying
power or same need for the same product
• Sometimes a territory may have a very high
sales potential but requires a long period of
hard remunerative work and so during the
initial period it can only carry a small quota
• All salesmen are not of equal ability
• No business can afford to sell only in most
lucrative areas and neither can it hope to
employ only ‘topnotchers’ as salesmen
• Quotas must reflect these two conditions
 Demand trend for industry
• Every industry has a definite trend in the
nature of the demand for its products
• Find out whether the demand is fluctuating
upwards or downwards
• The cause of these trends should be
understood
 Competition within the industry
• Quotas must be set high to maintain the lead
of the competitors
 Special efforts
• Advertising campaign
• Special sales promotion efforts
Controlling sales person through supervision

• Management controls sales people through

supervision
• Objective is to improve the job performance
of sales personnel
• The executive with supervisory responsibilities
establish working relations with sales
personnel for the purpose of observing,
evaluating and reporting on performance,
• Correcting deficiencies
• Clarifying responsibilities and duties
• Providing motivation
• Informing sales personnel of changes in
company policy
• Helping to solve business and personal
problems
• Continuing sales training
 Conditions under which supervision is
needed
• Sales personnel turnover rate excessive in a
branch, district or other organizational unit
• High turnover of accounts
• Increased complaints from customers
• Mail or phone orders increasing for no known
reason
• Low ratio of orders to sales calls
• Total number of calls too low or very high
• Increasing ratio of selling expenses to sales in
an organizational unit
• Low morale, as implied by negative attitude
towards company
• Lack enthusiasm
• Signs of restlessness and job hunting
 Who should supervise
• Depending upon the company and its organization
 Sales personnel may be supervised by home office
personnel, branch or district managers, or field
sales supervisors
 Sales supervision may be either through
specialists whose jobs are mainly supervising
 If sales force is small and experienced, sales
supervision is generally through the top sales
executive or an assistant
• Control through home office supervision is
minimal
• Companies having decentralized sales
organization assign the supervision
responsibility to branch or district managers
• Specialist are well prepared to supervise the
field sales personnel
 Qualifications of sales supervisors
• They must be good teachers
• Recognize training needs
• Know how to train
• Be patient with those who have less skills
• Be tactful in pointing out better ways of doing
things
• They must understand the problem of both
And reconcile them in the field
• They must be skilled in handling people and
equipped to deal with many complex
situations
 conclusion
• The field supervisors job is difficult
• Pay is comparatively low in most companies
• Many sales person are eager for promotions
to supervisory positions, since they often are
stepping stones to higher positions
 Salesman’s Report
 Submit Weekly or Monthly Reports & Annual as
well as Special Reports on particular Occasions.
 To the Head Office, when he is on tour,
appraising the company of his progress.
 Clever salesman keeps a diary.
 Notes down all important events of the week
and goes through the same carefully at the end
of the week to prepare his report.
 Helps management to appraise and evaluate
salesman’s performance and offer advise and
essential for coordination of overall company
sales activity.
 Instructions to be Followed while
Drafting Report
 It should be Specific.
- Avoid Generalities
 It should be Realistic.
- Since the reports are filed and maintained
for future reference.
 It should be Brief.
- Best reports are concise and to be written in
telegraphic business style.
 It should avoid Cliches.
- Statements like “I’ll do my best.”
 He should not repeat the same point over and over
again
 He should not try to make a big show out of a small
thing.
 He should not try to defend his mistakes.
 The report should not be over written or over typed.
 The report should try to depict the correct picture as
far as possible.
 The report should be made in paragraph.
 Points the Report should Cover
 Number of calls made with relevant details about
each call.
 The total volume and value of sales made.
 Number of new customers contacted and sales
made to them.
 Number of old customers lost and reasons.
 Expenses incurred.
 Information about credit worthiness of the
customers.
 Collections made
 Effectiveness of advertising and other sales
efforts.
 Competition in the market
 Complaints from customers
 Types of Reports
 Progress or Call Report
It is prepared individually for each call or
cumulatively covering all calls made daily
weekly. It keep management informed of the
sales person activity. It records not only calls
and sales, but also class of customers,
competitive brands, strength of competitors,
best time to call and future promises.
 Expense Report
The purpose is to control the nature and
amount of salesman’s expenses. Expenses are
reimbursed and itemized expense records are
required for income tax purpose.
 Sales Work Plan
The salesman submits a work plan for a
future period usually, a week or a month. The
purpose assist sales person in planning and
scheduling activities. The work plan provides
basis for evaluating the sales person’s ability.
 New Business or Potential New Business Report
This report informs management of accounts
recently obtained and prospects who may
become sources of new business.
 Lost Sales Report
the salesman reports the reason for the
loss of the business. It helps management to
investigate for the future.
 Report of Complaint or Adjustment
Provides information for analyzing
complaints arising from sales person’s work.
This assist management to make improvement
in the product, service practices and policies.
 Ethics of sales person
“Ethics has to do with what my feelings tell me is
right or wrong."
"Ethics has to do with my religious beliefs."
"Being ethical is doing what the law requires."
"Ethics consists of the standards of behavior
our society accepts."
 Common Ethical Issues for Salespeople

What are the most common ethical issues facing salespeople?

Many of the most common situations you could face as a
salesperson involve issues such as the following:
1. A customer asking for information about one of their
competitors, who happens to be one of your customers
2. Deciding how much to spend on holiday season gifts for
your customers .
3. A buyer asking for something special, which you could easily
provide, but aren’t supposed to give away.
4. Deciding to play golf on a nice day, since no one knows if you
are actually at work or not
 7 Principles of Admirable Business Ethics

1. Be Trustful: Recognize customers want to do

business with a company they can trust; when trust
is at the core of a company, it's easy to recognize.
Trust defined, is assured reliance on the character,
ability, strength, and truth of a business.
2. Keep An Open Mind: For continuous improvement
of a company, the leader of an organization must be
open to new ideas. Ask for opinions and feedback
from both customers and team members and your
company will continue to grow.
3. Meet Obligations: Regardless of the circumstances,
do everything in your power to gain the trust of past
customer's and clients, particularly if something has
gone awry. Reclaim any lost business by honoring all
commitments and obligations.
4. Have Clear Documents: Re-evaluate all print materials
including small business advertising, brochures, and
other business documents making sure they are clear,
precise and professional. Most important, make sure
they do not misrepresent or misinterpret.
5. Become Community Involved: Remain involved in
community-related issues and activities, thereby
demonstrating that your business is a responsible
community contributor. In other words, stay involved.
6. Maintain Accounting Control: Take a hands-on approach
to accounting and record keeping, not only as a means of
gaining a better feel for the progress of your company,
but as a resource for any "questionable " activities.
Gaining control of accounting and record keeping allows
you to end any dubious activities promptly.
7. Be Respectful: Treat others with the utmost
of respect. Regardless of differences,
positions, titles, ages, or other types of
distinctions, always treat others with
professional respect and courtesy.
 
 Microsoft Values

Our values guide our behaviors and must shine through in

all our interactions with each other and our
stakeholders. Microsoft employees are great people who
share the following values:
1.Integrity and honesty
2. Passion for customers, partners, and technology
3. Open and respectful with others and dedicated to
making them better

 
4. Willingness to take on big challenges and see
them through
5. Self-critical, questioning, and committed to
personal excellence and self-improvement
6. Accountable for commitments, results, and
quality to customers, shareholders, partners,
and employees