CHAPTER FIVE
Territory Management
TERRITORY
A
territory
geographically defined area
assigned to a sales person
present customers
potential customers
SALES FORCE
PRODUCTIVITY
A
crisis-In the last ten years, selling costs
have risen almost twice as fast as
average sales volume per
salesperson
HOW SALESPEOPLE
SPEND THEIR TIME
 Face-to-Face
Selling = 30%
 Telephone Selling = 21%
 Waiting / Travelling = 20%
 Administrative Duties = 17%
 Service Activities = 12%
SALES FORCE
PRODUCTIVITY
 How
can we improve productivity?
Focus on high volume accounts
Focus on selling time
MINIMUM ACCOUNT
SIZE
 Don’t
pursue accounts that are
unprofitable!!
COST PER CALL
 Cost

per call is a function of
number of calls per day
number of days available to make
calls
direct selling expenses
Direct Selling Expenses
# Calls per day X # Days to Sell
COST PER CALL
 Example
(see Table 5.1; page 230)
 Total Direct Expenses = $90,250
 205 days to sell; average 3 calls per day
 Cost per call = $90,250 / 205 x 3 =
$146.75
BREAK EVEN SALES
VOLUME
 The
sales volume necessary to cover
direct selling expenses
 Breakeven Volume is a function of:
 Cost
per call
 Number of calls to close
 Sales costs as a percentage of sales
BREAK EVEN SALES
VOLUME
Cost Per call X # of Calls to Close
Sales costs as a % of Sales
BREAK EVEN SALES
VOLUME
See Table 5-2; page 231
Electronics Industry
--Cost per call = $133.30
--Number of calls to close = 3.9
--Sales Costs as a % of sales = 12.0
Breakeven volume = $133.30 x 3.9 /
.12
= $4,332.25
TERRITORY
IMPLICATIONS
 Perform
a customer by customer
analysis!
 Assess selling strategy
ALLOCATION OF
SELLING EFFORT
 Consider
the time we spend with
customers!
 Single Factor Models
 Portfolio Models
 Decision Models
SINGLE FACTOR
MODELS
 Easy
to develop and use
 Classify accounts into categories based
on one factor, such as market potential
 Assign all accounts in the same
category the same number of sales
calls
 Decisions are made on the basis of one
factor. Differences among accounts
are not taken into consideration
SINGLE FACTOR MODEL
CATEGORY AVG SALES AVG SALES
CALLS-1998 CALLS-1999
A
25
32
B
23
24
C
20
16
D
16
8
PORTFOLIO MODELS
 Accounts
are classified into categories
of similar attractiveness for receiving
sales call investment.
 Selling effort is allocated so that the
more attractive accounts receive more
selling effort.
ACCOUNT
ATTRACTIVENESS
 Account
Opportunity
 The
account’s need for and ability to
purchase the product
 High / Low
 Competitive
 The
Position
strength of the relationship between
the firm and the account
 Strong / Weak
PORTFOLIO MODEL
SEGMENTS
 Strong
Competitive Position/High
Account Opportunity
 “Core Accounts”
 Accounts
are very attractive due to strong
competitive position
 Accounts should receive a heavy
investment of selling effort to
maintain/improve competitive position
PORTFOLIO MODEL
SEGMENTS
 Weak
Competitive Position/High
Account Opportunity
 “Growth Accounts”
 Accounts
are potentially attractive due to
high opportunity
 Additional analysis required to identify
accounts where competitive position can
be improved. Target these accounts
PORTFOLIO MODEL
SEGMENTS
 Strong
Competitive Position/Low
Account Opportunity
 “Drag Accounts”
 Accounts
moderately attractive; future
opportunities are limited
 Accounts should receive an effort
sufficient to maintain current position
PORTFOLIO MODEL
SEGMENTS
 Weak
Competitive Position/Low
Account Opportunity
 “Problem Accounts”
 Accounts
very unattractive
 Accounts should receive a minimal of
selling effort. Less costly forms of
marketing might be considered
(telemarketing, direct mail) and/or the
elimination of account coverage
PORTFOLIO MODEL
EXAMPLE
HI AO / STRONG CP
Avg Calls 1998: 6.1
Avg Sales: $8,615
Number: 49
HI AO / WEAK CP
Avg Calls 1998: 3.5
Avg Sales: $247
Number 35
LO AO / STRONG CP
Avg Calls 1998: 5.8
Avg Sales: $2,990
Number: 20
LO AO / WEAK CP
Avg Calls 1998: 3.3
Avg Sales: $130
Number: 56
DECISION MODELS
 Examine
accounts on an individual
basis
 Allocate sales calls to accounts that
promise the highest sales returns
 The objective is to achieve the highest
level of sales and to increase sales calls
until marginal costs equal marginal
returns
DECISION MODEL
EXAMPLE
# PEOPLE
100
MGL
PROFIT
$85,000
MGL SALES
COSTS
$75,000
101
$80,000
$75,000
102
$75,000
$75,000
103
$70,000
$75,000
MANAGING TERRITORY
PROFITABILITY
 Allocation
of Effort
 Mix of Products Sold
 Price Concessions
ROUTE MANAGEMENT
 Route
should be circular
 Route should never cross itself
 Don’t use same route to go to and from
a client
 Customers in neighboring areas
should be visited in sequence
TIME MANAGEMENT
 Telephone
interruptions
 Drop in visitors
 Crises
 Meetings
 Lack of objectives
 Indecision/procrastination
 Poor communications
TIME MANAGEMENT
 Get
control of your time!
Set goals and objectives
Set priorities
Develop a daily “to do” list
Focus on the most important tasks
MANAGEMENT’S ROLE
 Close
Supervision
 Hands-off Management
 Management Recommendations
FROM THE INTERNET
 The
granddaddy of time management
sites:
 http://www.relibrary.com/10tm1.htm
FROM THE INTERNET
 See
what a consultant says about
improving sales force productivity at:
http://www.brickerinc.com/netgain.ht
m
FROM YOUR TEXT
 Read
everything in chapter five except
pages 238 to 240 (Sales Funnel
Method)
pages 242 to 245 (Largest Angle
Method)