Chapter 13
Sales
Territories
I think it’s fair to call this hostile territory.
Captain Leo Davidson,
Planet of the Apes
McGraw-Hill/Irwin
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
Sales Territory

Comprises a number of present
and potential customers,
located within a given
geographical area and
assigned to a salesperson,
branch, or intermediary (retailer
or wholesaling intermediary).
– Key word: customers
13-2
Benefits of Good Territory Design
 Enhances
customer coverage
 Reduces
travel time and selling costs
 Provides
more equitable rewards
 Aids
evaluation of sales force
 Increases
sales for the sales organization
 Increases
morale
13-3
Procedure for Designing Sales Territories
Select a
Control Unit
Assign
Salespeople to
Territories
Determine Location
and Potential of
Customers
Set Up
Territorial
Coverage
Plans
(Fig. 13-1)
Determine
Basic
Territories
Evaluate
Effectiveness
of Design
13-4
Territorial Control Units
 States
 Counties
 Cities
 Zip-code
areas
 MSAs (Metropolitan Statistical Areas)
13-5
Build-up Method of Territorial Design
(Fig. 13-3)
Management must determine:
Desirable call patterns:
Call frequency per account per year
Total calls needed
in each control group
Workload capacity:
Total calls possible per rep per year =
number of daily calls x days selling
Tentatively set territorial boundary lines
by combining control units until total
calls needed = total calls possible
Modify territories as needed
13-6
Territory Design: Build-up Method Worksheet
Illinois
Customer
class
Call
frequency
Control Units
Iowa
Calls
Accounts per year
Kentucky
Calls
Accounts
per year
Calls
Accounts
per year
A
2 per month
10
240
7
168
5
120
B
1 per month
30
360
17
204
10
120
C
1 every 2 months
68
408
55
330
27
162
108
1,008
79
702
34
402
Workload capacity for one rep: 6 calls/day x 5 = 30 calls/week x 50 = 1,500 calls/year
Distribution of one rep’s calls
1,008
Possible control combinations
100%
Illinois
+
491
or
402
70%
Iowa
or
100%
Kentucky
So, a territory could either be:
100% Illinois + 100% Kentucky, or
100% Illinois + 70% Iowa
13-7
Territory Size and Workload Factors
Workload Factor
Territory Size
Increase/Decrease
Nature of Job:
Lots of presale and post-sale activity
Decreases
Nature of product:
A frequently purchased product
A limited repeat-sale
Decreases
Increases
Market development stage:
New market--fewer accounts
Established market--more accounts
Increases
Decreases
Market coverage
Selective coverage
Extensive coverage
Increases
Decreases
Competition:
Intensive
Limited
Decreases – unless
market is oversaturated
Increases
13-8
Breakdown Method of Territorial Design
(Fig. 13-5)
Management must determine
Company sales potential
Sales potential in each control unit
Sales volume expected from
each sales person
Tentatively set territorial
boundary lines by combining
control units total sales potential
= total sales volume expected
Modify territories as needed
13-9
Territory Design: Breakdown Method Worksheet
Company sales potential = $200,000,000
Targeted volume rep
= $ 10,000,000
Number of reps needed = Company sales potential = $200,000,000 = 20
Targeted volume/rep
$ 10,000,000
Territory volume as
=
Targeted volume/rep = $ 10,000,000 = 5%
Company sales potential $200,000,000
Each territory should comprise 5% of sales potential or $10,000,000
Combine adjacent control units until each sales potential of $10,000,000
13-10
Sales Territories for Pharmaceutical Sales Reps
Divide…
•The 48 states into 5-10 regions
•Each region into several districts
•Each district into 8-12 territories (typically 1 rep per territory)
13-11
Computers in Territory Design
 Geographic
Information System (GIS)
– Combines multiple layers of information to provide
in-depth understanding of a sales territory.
 Elements
of a complete GIS:
– Software
– Hardware
– Data
– Trained people
13-12
Figure 13-6
Before Alignment
Actual Sales in Territory
(one small and one big territory)
Total Sales Potential = $2,000
Total Sales = $100 + $360 = $460
$45
0
$360$340-
$25
0
After Alignment
(two balanced territories)
$10
0
Total Sales Potential = $2,000
Total Sales = $340 + $340 = $680
$500
$750
$1000
$1250
$1500
Sales Potential
Adapted from: Prabhakant Sinha, and Andris Z. Zoltners, “Sales-Force Decision Models: Insights from 25 Years
of Implementation,” Interfaces, 31:3, Part 2 of 2, May-June 2001, pp. S8-S44.
13-13
Routing the Sales Force
 Routing
is the managerial activity that
establishes a formal pattern for sales reps to
follow as they go through their territories.
 Reduces
travel expenses as it ensures a more
efficient territory coverage.
Area C
 Some
reps resent it.
 Best
for routine sales
jobs with regular call
frequencies.
Area B
Area A
x
Area B: Typically the “problem” area.
13-14
Case 13-1 Village Beds
Current Sales Territories
Territory
1
2
3
4
5
6
7
8
9
10
SUM TOTAL
Total
Population
41,313,324
20,169,484
65,326,238
63,432,088
26,121,520
12,332,667
50,316,057
279,011,378
Population No. of
Last
65 years Nursing
Year's
Square
& older Homes
Sales
Miles
5,446,964
2,142 $11,928,455
123,409
2,892,892
1,205
$4,507,086
82,022
8,341,166
5,396 $41,204,566
581,589
8,363,438
3,332
$6,256,858
483,920
2,732,645
1,643
$3,227,755
458,376
1,367,003
972
$4,660,451
742,629
5,575,266
1,942
$7,390,888
548,400
$0
$0
$0
34,719,373 16,632 $79,176,059 3,020,345
Realigned Sales Territories
Territory
1
2
3
4
5
6
7
8
9
10
SUM TOTAL
Total
Population
32,898,974
35,662,349
17,433,625
46,366,539
36,108,554
15,021,085
50,316,057
8,521,535
20,221,598
16,461,062
279,011,378
Population No. of
65 years Nursing
& older Homes
4,336,270
1,778
4,796,380
1,858
2,263,948
1,560
6,333,763
2,261
3,969,526
2,425
1,724,562
1,352
5,575,266
1,942
1,191,376
1,011
2,520,327
1,283
2,007,956
1,162
34,719,373
16,632
Last
Year's
Sales
$9,906,898
$7,056,168
$11,918,306
$4,236,766
$4,720,321
$7,607,334
$7,390,888
$7,775,857
$9,760,699
$8,802,821
$79,176,059
Square
Miles
115,619
130,410
77,513
294,724
606,974
824,911
548,400
125,985
199,055
96,754
3,020,345
13-15
Case 13-1 Village Beds
Current Sales Territories
1
7
6
2
3
4
5
Realigned Sales Territories
7
9
6
8 10
5
3
1
2
4
13-16