Part III
SALES FORCE STRUCTURE
Management Resource:
Designing Territories
Territory Design: Unbalanced Territories
2.0
Workload Across Sales Territories
1.8
1.6
Actual Territory Workload
Workload
1.4
+15%
1.2
1.0
Ideal Territory Workload
0.8
-15%
0.6
0.4
0.2
Territories Sorted by Workload
Figure MR6-1: Unbalanced Territories for a Cosmetics Company
Territory Design: Why Sales Increase
250
Sales Lost
170
Sales Gained
130
Sales lost by reducing size of
large territories is more than
offset by sales gained by
increasing small territories.
90
500
750
1000
1250
Sales Potential in Territory ($000)
NOTE: Each dot on the graph represents one territory
1500
Territory Design:
Reasons for Realignment
 A change in sales force size
 A change in sales force structure
 Mergers and acquisitions
 Shifts in market opportunities
 Demographic shifts
 New Products
 Need to shake things up
Figure MR6-2: Reasons for a Major Territory
Territory Design: Process
Events triggering
sales territory
adjustments:
 Mergers
 Division consolidation
 Division split
 Sales force turnover
 Plant relocations
 Product line changes
1
Select geographic
control units
2
Decide on
alignment objectives
3
Choose
starting points
4
Combine control
units adjacent to
starting points
5
Make final
adjustments
6
Assign salespeople
to new territories
Figure MR6-3: Territory Design Process
Revise territory
Boundaries
to balance
workload and
potential
Territory Design:
Process Steps
 What are triggering events?
 The Buildup Method -- Six Steps (9-1)
1. Select control units
 Census tracts -- good for dividing cities
 Counties - convenient and data readily available
2. Choose starting points
 Salesperson’s home
 Large customer - cut transportation cost
 Big city - convenient for services
Territory Design:
Process Steps (Cont.)
3. Determine Allocation Criteria
 Territory balance -- effect on morale
 Customer balance - distribute commission
 Potential balance - share business growth
 Size balance - reduce transportation costs
4. Combine Adjacent Control Unit (9-3)
5. Compare Sales Territories
 Mountains, roads, population center locations?
6. Assign people to Sales Territories
Territory Design:
Common Geographic Control Units
Countries
Cities
States or provinces
Zip codes
Counties
Census tracts
Metropolitan areas
Customers
Table MR6-1: Geographic Control Units Used in Territory Design
Territory Design:
Sample Alignment Metrics
Pharmaceuticals:








Doctor Specialty Counts
Patient Volumes
Epidemiology Data
Influential Doctors
Teaching Institutions
Managed Care Org.
Surgical Procedures
Total Hospital Beds
Health and Beauty Aids:



Retail Outlets
Store All Commodity Volume
Call Activity Requirements
Office Products:





Number of White Collar Workers
Office and Distribution Locations
Headquarter Locations
Number of Accounts
Customer Types
Diagnostic Equipment:



Testing Volume
Installed Machines
Contract Information
Building Materials:



Housing Starts
# of Architects, Builders,
Contractors
Projected Population Growth
Territory Design: Kentucky
The numbers in each county are
population figures and are
a measure of potential.
OHIO
INDIANA
WEST
VIRGINIA
ILLINOIS
VIRGINIA
TENNESSEE
Kentucky Counties, Major Cities, and Population Centers
Figure MR6-4: Kentucky Counties, Major Cities, and Population Centers
Territory Design:
Three Kentucky Territories
Major super highways
Territory borders
OHIO
INDIANA
WEST
VIRGINIA
Territory 2
Territory 3
ILLINOIS
Territory 1
VIRGINIA
TENNESSEE
Three Kentucky Sales Territories
Figure MR6-5: Three Kentucky Sales Territories
Territory Design:
Comparing Three Kentucky Territories
Territory
Potential as
Measured by
Population
Number of
Counties
1
1,124,897
47
2
1,129,290
27
3
1,131,137
43
Table MR6-2: Comparing Three Kentucky Sales Territories
Territory Design:
Dividing a Large Territory
Figure MR6-4: Dividing a Large Territory
Territory Design:
What Would You Do?
Conway was recently promoted to southeastern regional
manager, overseeing four area salespeople. Part of his promotion
was a transfer to Atlanta from Dallas. The southeastern region
was the poorest performing region in the country.
Prior to his move to Atlanta, Conway spent a month studying
the southeastern region: its past performance, sales potential,
and staff. After much consideration, he decided that the problem
was in the territory alignment. The business climate was
changing, but the territories were not changing with them. For
example, there was one salesperson based in charlotte, North
Carolina to cover Kentucky, South Carolina, and the burgeoning
business in North Carolina. Conway felt that he needed one
salesperson to cover North Carolina exclusively, and move south
Carolina and Kentucky to other territories.
Territory Design:
What Would You Do?
(Cont.)
Conway concluded that he should realign three of the four
salespeople and hire three new salespeople. Now he just had to
convince company management of the soundness of his plan and
get his three salespeople, none of whom would have to move, to
buy in. He knew that management would be concerned about
added costs in a poorly performing area, and that his salespeople
would worry that their compensation potential would be
threatened.
As a first-time manager, he was torn on how he should
approach the situation. Should he call a meeting with
management, or submit a proposal? And, should he seek the
salespeople’s opinions, so they feel that they were part of the
decision process? If so, should he do this before or after his
meeting with management? What do you think?
Territory Design:
In-class Exercise T-1
1. Why do companies redesign territories?
2. In this role play, what were the reasons
for redesigning territories?
3. What problems are likely to arise when
territories are redesigned?
4. Which salespeople are most likely to be
resistant to change?
Territory Design:
In-class Exercise T-1
(Cont.)
5. What mistakes were made in territory
realignment?
6. What options are available?
7. Should the company give in to Hughes and
not change his territory?
8. What if seven other people in the district
come to you asking for the same deal as
Hughes? What do you tell them?
Territory Design:
Territory Assignment Study Results
Candidate-Territory Fit:
Obese Candidate
Non-Obese Candidate
2.57*
3.85
Preference for not placing Candidate:
Obese Candidate
40%
Non-Obese Candidate
10%
* The higher the mean, the more fit for the assignment (out of 7)