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.

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.

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 prospecting, 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.

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 basic 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 segment 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 require 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.

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. Routing 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.

What is a Sales Quota?

A sales quota refers to a time-bound sales target set by management for a particular region, sales
team, or individual rep. Sales quotas are often attached to a daily, monthly, or quarterly period.
Sales quotas can be measured in a number of different ways, including by profits, sales, or rep
activity.

The Importance of Setting Sales Quotas

Not only do sales quotas play an important role in sales forecasting and monitoring rep activity,
they also set expectations and motivate sales reps to hit a given level of activity.

Managers can also use sales quotas to learn more about their team’s productivity, success rate,
and optimal sales processes.

Setting sales quotas allows you to:

 Ensure compensation plans (including commissions) are fair and effective

 Reveal weaknesses or bottlenecks in the sales pipeline
 Highlight successful reps and replicate their sales techniques
 Monitor and regulate selling expenses
 Create achievable goals and benchmarks

Choosing the Right Type of Sales Quota for Your Team

Before deciding how to set sales quotas for your team, you need to understand the different four
main types of quotas. Sales quotas are often based on revenue, sales activity, volume, or some
combination of the three.

1. Revenue Quotas

The most common type of sales quota is revenue-based. Reps are expected to sell enough units
or subscriptions to earn a certain amount of revenue for the given period.

This type of sales quota is usually set for the quarter or the month. However, businesses in
industries with a longer sales cycle might use annual revenue quotas. For instance, since many
SaaS companies operate on monthly contracts, they might choose to set quotas based on the
value of the client’s annual contract.

Revenue quotas can refer to net revenue, especially in cases where prices are flexible and
upselling is common or expected. If your products have a range of different profit margins, you
might use profit quotas instead of focusing on revenue. Profit quotas incentivize reps to spend
time selling items that yield a higher profit.

2. Activity Quotas

Another option is to create quotas based on sales activity. This can include the number of new
clients landed for a given period. However, it can also expand to include activities that are part of
the sales process but don’t translate directly into sales.

For example, reps might be expected to make a certain number of phone calls every week, book
a certain number of meetings per month, or close a certain number of deals by the end of the
quarter.

3. Volume Quotas

Quotas based on volume incentivize reps to move a certain amount of inventory or register a
certain number of new users. These types of quotas are often set for the team to achieve over a
given year. Depending on the business, the quota might break down further by region, product,
or individual sales rep.

4. Combination Quotas

Many sales teams operate with some combination of sales quotas in place. Combined quotas
often involve an aspect of both sales volume and rep activity. For instance, reps might be asked
to set ten appointments with new prospects and close 40% of those leads for a total of four new
customers.
However, setting too many different types of quotas can be problematic if it causes your sales
team to become unfocused. When in doubt, prioritize a select few activities or benchmarks that
you want your team to prioritize, rather than asking everything of your sales reps.