Sales Territory | Meaning | Objectives | Factors Determining Allocation

What is a Sales Territory?

A sales territory refers to a geographical area assigned to a salesman for the purpose of marketing the products of his concern. Generally, a firm divides the markets into specific geographical zones or areas and assigns each salesman a specific zone in which he has to carry out his selling operations. The specific geographical zone or area assigned to a salesman becomes his sales territory. Each of the territory is served by one or more salesmen.

Sales Territory - Meaning, Objectives, Determining factors
Sales Territory – Meaning, Objectives, Determining factors

Allocation of Sales Territory

Allocation of sales territories to a salesman is one of the important duties of the sales manager. The allocation of sales territories must be given serious thought by the sales manager as it is one of the important tools of control. It does not pose a problem for the small-organization because their market is limited.

However, for big organizations having nation-wide coverage, it poses a big challenge to the sales management.

Objectives of Allocation of Sales Territory

The main objective of allocation of sales territories can be summarized as:

1. To hold the salesman responsible for sales and services.

2. Supervise and control over the sales force.

3. To meet competition easily.

4. To save time and expenses.

Factors Determining Allocation of Sales Territories

The allocation or division of sales territories among the salesmen is based upon several considerations or factors, such as the nature of the product, the potential demand for the product in the area, the extent of competition present in the area, transport and communication facilities available, channels of distribution, types of customers, the capacity of the salesmen, the types of customer services to be provided, the sales expenses ratio, etc. Each of these factors are explained in detail.

1. Nature of the product

First, the nature of the product is of utmost importance. There are certain consumer items which have constant demand in the market. They are high turnover goods and they need little selling efforts. Thus, for such products a large territory can be assigned. For luxurious, bulky and durable articles, which need concentrated selling efforts small sales territory can be assigned.

2. Demand for product

While allocating sales territories to salesmen, the demand for a particular product should also be taken into account. If the demand for a particular product is constant and frequent, then the whole sales filed can be divided into small sales territories. However, in case of low demand and infrequent purchase of articles, the size of the sales territory should be large.

3. Transport facilities

The marketing of a particular product depends to a large extent on the availability of transport facilities. If the transport facilities like road, railway and air links etc., are satisfactory, then large sales territories can be allotted to salesmen. However, areas having poor transport facilities should be divided into very small sales territories. If the company provides vehicles such as a car or motor cycle for the salesmen, then larger sales territories can be assigned.

4. Competition and Frequency of Contact

Competition cuts the size of the territories and increases the frequency of contact. In other words, the salesman has to meet dealers and customers very frequently in highly competitive areas. On the other hand, limited competition or near monopoly situation lengthens the frequency of contacts between the salesmen and the dealer/customer. In such situations, the salesmen can be assigned larger sales territories.

5. Population

The density of population in a particular area determines the size of the territories. In other words, if particular area of a territory is thickly populated, there arises the need to divide the sales field into small sales territories. On the other hand, if the area is thinly populated, then larger sales territories can be allocated to salesmen.

6. Distribution System

Very often the distribution system of a particular organization determines the size of its sales territories. In case the company sells through middlemen like wholesalers, dealers, retailers etc., larger sales territories can be allocated to salesmen. On the other hand, if the product is sold directly to consumers or very few middlemen are used, then small sales territories can be assigned to salesmen.

7. Advertising and Sales Promotion Activities

Companies which have widespread advertising and other sales promotion activities, can assign small sales territories to each salesmen in view of the demand for the product created by advertisements. This enables them to sell extensively in territories allotted. On the other hand, low advertised products need large sales territories for each salesman.

8. Ability and Experience of Salesman

The size of the sales territory also depends on the ability and experience of the sales force. Experienced and talented salesmen are able to sell more and, therefore, they can easily be allotted large sales territories. New and inexperienced salesmen are usually allocated small sales territories as their ability to sell is limited. A salesman is expected to produce maximum sales turnover from his area with the minimum amount of time and effort. The commonly used division are states, districts, cities and trading areas.

The allocation of sales territories is often followed by the planning of the route which a salesman should follow within his sales territory. The planning of the route involves the determination of places to be visited (including exploration of new markets), the number of customers to be contacted and the number of calls to be made every day by the salesman.