1. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 13 Sales Territories You have to recognize when the right place and the right time fuse and take advantage of that opportunity. There are plenty of opportunities out there. Ellen Metcalf TM 13-1

2. Copyright © 2003 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 TM 13-2

3. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. 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 TM 13-3

4. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Procedure for Designing Sales Territories TM 13-4 (Fig. 13-1) Select a Control Unit Determine Location and Potential of Customers Determine Basic Territories Assign Salespeople to Territories Set Up Territorial Coverage Plans Evaluate Effectiveness of Design

5. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Territorial Control Units States Counties Cities Zip-code areas MSAs (Metropolitan Statistical Areas) TM 13-5

6. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Buildup Method of Territorial Design TM 13-6 (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

7. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Territory Design: Build-Up Method Worksheet TM 13-7 Control Units Illinois Iowa Kentucky Customer Call Calls Calls Calls class frequency Accounts per year Accounts per year Accounts per year A 2 per month 10 240 7 168 5 120 B 1 per month 30 360 17 20410 120 C 1 every 2 months 68 408 55 33027 162 108 1,008 79 70234 402 Distribution of one rep’s calls 1,008 + 491or 402 year (1,500)* Possible control combinations 100% 70%or 100% Illinois Iowa Kentucky Alternative territories 100% Illinois + 100% Kentucky 100% Illinois + 70% Iowa *6 calls/day x 5 = 30 calls/week x 50 = 1,500 calls/year

8. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Territory Size and Workload Factors Nature of Job: Lots of presale and post-sale activityDecreases Nature of product: A frequently purchased productDecreases A limited repeat-saleIncreases Market development stage: New market--fewer accountsIncreases Established market--more accountsDecreases Market coverage Selective coverageIncreases Extensive coverageDecreases Competition: IntensiveDecreases – unless market is oversaturated LimitedIncreases Workload FactorTerritory Size Increase/Decrease TM 13-8

9. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Breakdown Method of Territorial Design TM 13-9 (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

10. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Territory Design: Break-Down Method Worksheet Company sales potential = $200,000,000 Targeted volume rep = $ 10,000,000 Number of reps needed Company sales potential $200,000,000 Targeted volume/rep $ 10,000,000 Territory volume as Targeted volume/rep $ 10,000,000 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 = = = 20 5% == TM 13-10

11. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. 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) TM 13-11

12. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. 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 TM 13-12

13. Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. 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. Some reps resent it. Best for routine sales jobs with regular call frequencies. x Area C Area B Area A Area B: Typically the “problem” area. TM 13-13