Procedure for setting up Sales Territories

The success of a selling programme largely depends on a proper selection of territories because if territory potential is properly assessed in terms of the company’s marketing plan and the customer’s expectations, the organization can effectively employ its various marketing programme to gain the optimum benefit from a territory.

One of the quite widely utilized ways of setting up a territory is to base it on some geographical basis. Accordingly, one can have a territory confined to a village, town, city, region, or state.

Rationale of designing a sales territory

The rationale for designing a territory on a geographical basis is that by clubbing together customers located in one or more particular places, the company will be able to serve them most economically and conveniently. Many companies ignore this geographical consideration, and allocates sales responsibilities to sales personnel on the basis of the class of customers, regardless of their location.

In certain cases, companies have highly specialized sales people who are assigned the job of serving customers who are in need of their skills. This is particularly true of companies selling complicated machinery, which may require five to six salesmen, each specializing in a part of the product line or a particular product, and each serving the company’s customers regardless of their geographical location. It is, however, not always necessary or desirable for a company to assign geographical clusters of customers or prospects to salesmen. In fact, the determination of such assignment depends on the type of product, customer service requirements, the cost involved in meeting it, etc.

While allocating territory, the following facts should be borne in mind:

Procedure for setting up Sales Territories

1. Territories should be so defined that the expected commission for each salesman may be roughly the same.

2. Territories should not be too big, otherwise they will not be properly served;

3. They must not be too small, because the size of the territory affects the salesman’s earnings;

4. A new salesman should not be given an independent territory. He should rather be asked to help a senior salesman in that territory and pick up the technique of work;

5. Territories should be so planned that the expenditure incurred on covering them is maintained at the lowest possible level;

6. Territories should be flexible. A larger territory should be given to a senior salesman as a sort of promotion;

7. As far possible, the transfer of salesman from one territory to another should be avoided on account of the limited scope for work. However, for temperamental reasons, a transfer may become desirable.

8. With certain classes of product, such as highly technical equipment or materials or specialty goods, the principle is often adopted of creating territories by class of business.

Important factors in deciding Sales Territories

Several important factors have to be taken into account before deciding about the allocation of sales territories, such as:

1. The number and location of customers a salesman can efficiently deal with:

2. The frequency of the salesman’s visit, i.e. the number of calls he should make on customers;

3. The place of production;

4. The nature and type of the product;

5. The nature of demand — whether seasonal or otherwise;

6. Transportation facilities available and the facilities that can be given to the salesman;

7. Sales resistance and competition; because if these are high, each sale will take a longer time to negotiate;

8. The expenditure incurred;

9. The ease or difficulty of sale;

10. The method of distribution;

11. The frequency of contact with customers; and

12. Government policy in so far as customers duties, sales tax, etc. are concerned.

The foregoing factors and the supervisory ability of the senior sales staff determine the size of the territory. The main objective is to devise and develop the sales personnel in such a way that they may be able to perform their task in a most effective and economical way.

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