Sales Territories

Sales 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

Territory
Your 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 Resources
For 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