Sales TerritoriesSales territory is the segment of the market for which a salesperson is

responsible.

Sales territory is a usually a geographical area assigned to a

salesperson or group of persons. The geographical area may also be

assigned to franchisee, distributor, or agent. A sales territory may also

be assigned by type of customers, as all retailers or all wholesalers in

geographical area. A sales territory may be as large as: a continent, a

nation or half a nation, or as small as a: town or city.

Territory assignments may be exclusive, meaning no other salesperson

can sell in that territory, or nonexclusive. Territories may be defined in

terms of geographic or market segments, product or product lines, size

of customer or by specific customers or prospects. The best territories

with the greatest revenue potential are usually assigned to the best

salespeople. The individual talents or characteristics of the salespeople

can also be used to determine territory assignments. It takes a

different skill set to make sales to large corporations than to small

retailers. Geographic territory assignments should be made so as to

minimize the travel expenses incurred by any one salesperson. When

creating geographic territories, the density of the prospect base will

determine the size of the territory. For example, New York City alone

may offer as many prospects as several Northwestern states

combined.

Sales Territory Management

Whether you work in sales management or sales operations, efficient

and productive sales territory management is essential to your

success.

Territory management develops and implements a strategy for

directing selling activities toward customers in a sales territory aimed

at maintaining the lines of communications, improving sales coverage,

and minimizing wasted time. It includes the allocation of sales calls to

customers and the planning, routing, and scheduling of the calls.

We know that territory management is a two-way street – a dual

process of information and communication.  First, territory

management provides sales managers with accurate measurements of

territory results, and the relative success of that territory’s sales

teams.  And second, territory management offers the sales team

strategic information about the impact of promotional campaigns and a

variety of other data and analyses.

Some of the Business Benefits provided by territory management

include:

Managers can gain an up-to-the minute view of their individual

territory pipeline from the highest level to the most granular.

Regional sales teams can keep lock-step with one another when

collaborating on important deals.

Your company will gain better insight into sales effectiveness and

performance by territory

Easy set up and assignment of territories

Simplifying territory realignments after sales reorganizations

Eliminating lag time in lead assignment

Stretching your selling day and spending more time with your

customers

Planning effectively and avoiding losing sales to better organized

competitors

Selling more, earning more and accomplishing more

Setting goals and priorities to maximize your selling

effectiveness

Increasing selling time by minimizing distractions and

procrastination

Maintaining contact with key prospects and accounts

Making more productive use of travel time

Improving your return on investment (ROI) and reducing turnover

Territory Management enables organizations to automatically

route opportunities, accounts, contacts, and activities to exactly

the right sales team members, based on a set of flexible and

configurable business rules. Sales team members can include

your employees as well as your channel partners' employees, for

leverage of partnerships and corporate relationships across sales

organizations. Assignment rules can be based on geography,

industry, product interest or virtually any other criteria you

choose.

Territory Management allows you to manage your various sales

territories by setting up a customized company position chart that

maps your reps into territories. Regional managers can easily access

critical pipeline information and monitor all the deals active within their

territory. As the organization changes, territory management allows

you to very quickly and easily transfer accounts from one rep to

another, build cross-functional teams, share reports, dashboards and

documents, and run reports segmented by the territories you define.

Sales Territory Alignment Benefits

A sales territory comprises of a group of present and potential

customers assigned to a sales person, a group of sales person, a

branch, a dealer, a distributor or a marketing organization at a given

period of time.

Development of sales territories is usually the responsibility of the

sales manager overseeing the larger sales units within the

organization.

Here are some benefits of good territorial design:

The Benefits of Sales Territory Alignment

Aligning sales territories is an important initiative and can lead to

many benefits for a business. Good territory alignment will increase

revenue and customer coverage, reduce travel time and associated

costs, provide a competitive advantage, and foster equity and morale

among sales people.

1.Better customer coverage through

balanced sales territories

When territories are properly aligned, issues of under- and over-

capacity are reduced or eliminated. Each territory is created

allowing the sales person to reach and spend time with the greatest

number of high potential customers, thus increasing sales. When

your salespeople have manageable territories, they do a better job

of calling on customers regularly, which improves account revenues

and customer retention. The key to creating manageable territories

is designing balanced territories.

2.More selling time through reduced travel

time

Due to the geographic nature of sales territories, better alignment

means less travel time to reach customers. Less time spent in the

car means more time spent with customers, thus more time for

selling. Salespeople work hard calling on customers, traveling from

one site to another. When your salespeople can spend less time

traveling between customers, they can spend more time with each

customer, resulting in more sales calls and more sales.

3.Lower sales force turnover through better

morale

Balanced territories with maximum selling time not only increase

sales and productivity, they allow you to evaluate the

efforts of your salespeople more easily. Sales territories improve

morale and decrease turnover by providing a fair and objective

means of setting performance measures, quotas, and

compensation. Balanced territories, objectively measured, provide a

level playing field for evaluation and reward.

4.Gain competitive advantage

This benefit of sales territory alignment is often overlooked.

However, if you have better coverage in your territories, you can

reach new opportunities faster than your competitors, again leading

to increased sales.

5.Decrease cost of sales

Optimally aligned territories result in shorter drive times and

associated travel expenses for sales people, making each sale more

profitable.

6.Equity and morale

Nothing can be more discouraging to a sales person than to see an

associate milking a highly profitable territory while they’re stuck

servicing an area with low potential. Properly aligned territories

provide a more equitable distribution of accounts, level the playing

field in terms of achieving rewards, and boost morale among sales

people. In addition, sales people stay longer, thus lowering the costs

associated with new hiring.

7.Improve sales force satisfaction

Balanced workloads and earning potential will improve morale and

career satisfaction among your sales force, leading to higher

motivation and lower turnover.

When to Align Sales Territories

Many companies conduct a yearly review of sales territories. The

year’s performance may or may not lead to a change in the shape or

makeup of the sales territories. However, a number of situations

should compel you to embark on a sales territory alignment initiative,

including:

If your sales territories are based on historical data rather than

potential for sales.

If you have a new or changed sales team due to acquisition,

merger, partnering or restructuring.

If your company is launching a major strategic initiative and

sales staffing is not matched to it.

If your sales team has experienced significant changes over a

short period of time.

Each of these situations is ripe with the potential for decreased

productivity, missed customer opportunity, and confusion and

competition among sales people. Sales territory alignment can help

rectify all these situations.

Sales Territory Design Process Examples

New Sales Force for New Product A national medical

supply company requires not only territories...but a prediction of

the required number of sales people as well. Teams work

together to study the sales potential at hospital and clinic

locations as well as travel time and other work load factors.

Maximizing Franchise Revenues A business services

franchise grows beyond designing territories by "what the

franchisee wants". A web based system helps them use

demographics to create the greatest number of optimal areas.

Standardize & Update By ZIP Code A home cleaning

service wants to transition to territories defined by ZIP Codes.

Older maps are used to redefine and update new areas.

10 Year Growth Plan A national home protection service

looks to establish over 1,200 new territories over the next 10

years. A combination of customer profiling, demographic

projections and a statistical study of distance weighted factors

provide the basis for a yearly plan.

Translate Legal Documents A national fast food franchise

looks to establishing a computer based territory management

system. A web based mapping system was created which helps

the user to visually translate legal descriptions into computer

mapping formats.

Territories by Household Income A regional home

service looks to expand nationally. A model based primarily upon

the number of households with children in areas within a certain

income range is used to create territories.

Balance by Customers, Prospects, Drive Time A

regional office supply company looks to update sales territories.

The locations of customers and prospects are factored with

current revenues, current account growth and new account

prospects to create a balance of sales opportunities with work.

Design by Retail Outlets & Ethnic Populations With

successful growth, a seller of phone cards looks to create new

territories, often splitting existing ones. Analysis of sale history

and location of retail outlets in relationship to targeted ethnics

populations provided the basis for the new territories.

Door-to-Door Delivery Tools A national publisher of

phone books distributes by door-to-door delivery. An online

system allows them to easily plan for each market, design each

delivery route and print the packet of instructions and delivery

map used by each book deliverer each day.

Delivery by a National Grid A shipping and delivery

services company looks to create sales territories, analyze data

and manage deliveries through a custom national grid system. A

web based system helps them build and maintain this "nested

grid" territory system, as well as input customer data and track

delivery resources.

How to Develop a Sales TerritoryYour sales territory is where you

build your personal revenue, establish your value to the

company and develop your professional reputation. Creating a

productive sales territory can take months or even years, but if

you have a solid plan to follow, then you can have confidence in

the results you will achieve. Developing a sales territory is a top-

down process. Once your largest prospects become customers,

the word begins to spread and your territory begins to develop

itself.The Only Way to Build Your Sales Territory

First of all you got to realize that you are an interruption when

prospectng, and you have to be comfortable with this fact if you

are going to be successful in sales.

Here's the formula you gotta follow to build any sales territory,

client base, or business market:

1 – Identify Your Strengths,

2 – Create a Profile of Prospects Who Will Want Your Strengths,

3 – Advertise to Attract These Prospects,

4 – Sell a Desired Product to an Interested Prospect.

It's very simple, but too many people don't follow this. You see as

a professional salesman, you often have to be a marketer and a

business man too.

Start with identifying your strengths. Know what you do well, and

know what your competitors do well. Get specific, get nuanced,

and get into fuzzy things like the persona, style and attitude of

the company and products you are selling (because these things

attract people). "Plan your work, and work your plan."

Create a profile, written down – yes written down – of the people

who will want what you got. This is hugely important, and one of

the easiest and most overlooked methods for getting more deals.

Far too many sales careers have run out of gas for believing that

"everyone is my prospect." Focus on people who are likely to

want what you got and you instantly will see a mega increase in

your closing ratio.

Advertise to attract your desired prospects. Sales people think

that they can't advertise – that this is something that "the

company" is supposed to do.

Well cold calling is advertising. Emailing is advertising. Mailing

letters and postcards is advertising. Until you have a relationship

established with a prospect, your initial contact attempts are

"advertising".

"Advertise" a message about your strengths to a prospect that is

likely to want what you got, and you'll get some interested

people contacting you.

Then all you gotta do is sell them. And selling a prospect

interested in you, predisposed to think that you can do what they

want is they way to build your territory.

Build your sales territory on a strong foundation. Do it the right

way, and you'll have long term success in selling.Sales Territory

Alignment: Grow Sales Without Adding ResourcesFor many companies,

the sales force is one of their most expensive human resource

investments, with sales calls costing upwards of several hundred

dollars. Companies have turned to Sales Force Automation (SFA)

systems, Customer Relationship Management (CRM) systems,

enhanced sales training and account management programs to

gain more productivity from their sales force. While each of these

initiatives has merit, many companies have found that a sales

territory alignment initiative can increase productivity and sales

at a relatively low cost.Sales territories, by nature, are

geographic in nature. When they are out of balance, some areas

with high potential customers may be underserved while other

areas are saturated. Too much effort may be expended against

low potential customers. Sales and service people spend too

much “windshield time” driving from sales call to sales call and

don’t spend enough time seeing and listening to customers.The

result of these inefficiencies is that companies not only often

leave millions of dollars on the table, they suffer from low morale

and high turnover among sales people.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.

STEPS IN DESIGNING SALES TERRITORIES:

The ideal aim in designing sales territories is to have all territories

equal in both sales potential and the work load. This has two

advantages. First, it becomes easy to evaluate and compare the

performance of salespersons. Secondly, equal workload helps to

reduce disputes and improve the morale of sales force. However, it is

difficult to attain this ideal due to changing market conditions.

The process of establishing sales territories involves the following

steps:

1. Select a control unit for boundaries

2. Find location and potential of present and

prospective customers within control units

3. Decide basic territories by using

i. Build-up method,or

ii. Break-down method

4. Assign people to territories

5. Establish a coverage plan

6. Ongoing assessment

1.Select a control unit for boundaries

While designing sales territories the first step is to decide the

basic control unit as a territorial base. Commonly used

geographical units are regions, states, districts, cities, etc. A

typical sales territory may consist of several individual units. For

example, a salesperson’s district may consist of five towns and

ten villages. The unit should be small so that it pinpoints the

geographical sales potential and enables the management to

adjust the territories whenever necessary.

Sales territories built around States are simple, convenient and

inexpensive. But States in India differ widely in terms of size and

sales potential. State is a good control unit for a firm which has a

small sales force covering a national make and which uses a

selective distribution policy. City as a control unit has often been

used by manufactures and wholesalers of food, drugs and

tobacco products. In case of a very big city, the city may be

divided into wards, etc.

2.Find location and potential of present and

prospective customers within control units

The location and potential of both present and prospective

customers within each selected control unit should be

determined. Location of present customers may be judged from

the sales records. Prospective customers can be identified with

the help of salespersons, trade directories, telephone directory,

credit card films, etc.

Once the present and prospective customers are identified, the

potential business expected from each customer is assessed. On

the basis of estimated sales potential the customers are

classified into different categories.

3.Decide basic territories

In the third step, a fundamental territory is established, on the

basi of statistical measures and computers. There are two

methods used for this purpose.

a) build-up method : In this method, territories are

determined by combining small geographical areas so as

to equalize the workload of sales peoples. Geographical

areas are decided on the basis of the number of calls a

salesperson is expected to make in each control unit.

b) Breakdown method : This method involves division of

the total market into approximately equal segments based

on sales potential. The firm’s customer base is broken

down into groups of customers that can be meaningfully

serviced by individual sales persons. The build-up method

is suitable for manufacturers of consumer products and for

companies that use intensive distribution policy. On the

other hand, break down method is suitable for

manufacturers of industrial products and for companies

that use selective distribution policy.

c) Incremental method : Under this method, additional

sales territories are created as long as the marginal profit

generated exceeds the cost of servicing them.

Administrative difficulties, however, hamper the

application of this method. It requires a cost accounting

system for determining sales, costs, and profit associated

with various levels of input.

4.Assign people to territories

Once the sales territories are designed, individual sales person

can be assigned to each territory. Sales person differ in their

selling abilities and selling effectiveness. They also vary in age,

physical conditions, experience, selling skills, initiative, etc. A

particular sales representative may succeed in one territory but

fail in another territory. For example, a salesperson with a

technical background is likely to be more effective in a sales

territory in which a large number of customers are engineers.

Differences in local custom, religion, ethnic background, etc. also

influence sales effectiveness. While assigning sales people to

territories, flexibility should be maintained in management of

sales force. It is necessary to match the characteristics of each

salesperson to the nature and the requirements of the territory

assigned to him/her. The ideal would be to assign each

salesperson to the territory where his or her relative contribution

to the company’s profits would be higher.

5.Establish a coverage plan

After establishing sales territories and assigning sales persons to

each territory, management prepares a plan as to how it sales

representative will cover his/her territory. This is an exercise in

managing the time of sales force which is necessary to control

field selling costs. A territorial coverage plan involves routing

the sales force and scheduling their time. Routing indicate the

order in which each segmebt of territory is to be covered so that

both travel time and travel expenses are reduced. Scheduling is

creating a time table of calls by sales persons. Many sales

persons object to routing and scheduling thinking that it reduces

their initiatives and flexibility.

6.Ongoing assessment

Once established sales territories may become outdated due to

changes in market conditions and company policies. Sales

territories also requires re-alignment because they are either too

small or too large. Therefore sales executives should review the

sales territories every year to see whether any revision is

needed. Re-alignment and re-adjustment of sales territory may

have an adverse impact on the motivation and morale of some

salespersons. Therefore, due care should be exercised while

revising sales territories.

WHEN NOT TO ESTABLISH SALES TERRITORIES

sales coverage is far below sales potential - e.g., a new

company wants to cherry pick for the most profitable prospects

first

the sales force is highly specialized - e.g., when the

salesforce is organized along the lines of product specialty rather

than along the lines of customer location.

sales are made on the basis of personal contacts and

by referrals

SOME GUIDELINES FOR DESIGNING TERRITORIES

sufficient potential - with insufficient potential, a salaried

salesperson will not be used effectively, and commissioned

salespeople will leave the company for greener pastures

reasonable size - is a salesperson's time being spent

traveling or making face to face sales calls?

adequate coverage - is the salesperson able to service all

accounts and able to meet new prospects?

minimum impediments - try to set territories such that

rivers, mountains, railroads, etc. set the borders of territories

rather than run through the middle.

ROUTING

Routing is a travel plan used by a salesperson for making customer

calls in a territory.

Benefits of or Reasons for routing

Managerial routing reduces the travel expenses by ensuring an orderly

thorough coverage of the market.routin that typical salesperson is

unable to do the job satisfactorily left to their own routing criss cross

their territories in order to be home as early as possible, several times

a week.

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.

Following these guidelines will help in ensuring that tours are as short

as possible:

tours should be circular

tours should not cross

the same route should not be used to go to and from a customer

customers in neighboring areas should be visited in sequence

ROUTING PATTERNS

More efficient (shorter) routes will tend to exhibit one of these

patterns:

hopscotch

cloverleaf

The cloverleaf pattern better follows the guidelines that were

given above. Indeed, with the example territories and focal point

above, the cloverleaf routes would probably require less travel

time if such routing is possible on existing roads.

The above circular area was divided into five equally sized territories

with a focal point at the center. A route to visit customers in the

territories was then drawn in either a circular clover leaf pattern or in a

hopscotch pattern. This way of making territories and of routing sales

calls would be appropriate if, say, five salespeople reported to a

common office in the center. It would also be appropriate if, say, a

single salesperson was assigned to a remote territory and must divide

the territory into five daily routes to visit customers once per week.

Scheduling

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

Time Management Tools

To help outside salespeople to manage their time efficiently and

productively the tools available are High tech equipment like laptop

computers and cellular phones Inside salespeople to provide clerical

support technical support and for prospecting and qualifying as they

remain within the company Outside salespeople can then spend more

time getting more orders building relationships with major customers

Outside salespeople travel outside the organization.

Key learning Territory Management

Assigning sales person to territories Horses for courses Sales persons

vary in knowledge skills energy market relations Optimum assignment

of territories workload market build up mostly for industrial goods

potential equality of opportunity Starting point centre HQ of territory

Beat route planning to improve productivity planning control

scheduling of calls calls frequency