The emphasis in the sales territory concept is upon customers and prospects rather than upon the area in which an individual salesperson works. When house accounts are excluded from sales territory – adverse effects on sales force morale are possible,, if the sales personnel feel that they are being deprived of the best customers. However if sales force understand that their territories are particular customers and prospects rather than geographical areas, then their morale is less affected by House account designation to them or not.
If territories are set up intelligently, it is possible to obtain proper market coverage. The design of territories should permit the sales personnel to cover them conveniently and economically. Good design allows the sales force to spend sufficient time with customers and prospects and minimize the time on road. Good territorial design along with proper assignment to the sales force results in low expenses ( sales force spend fewer nights away from home – reduces lodging and food charges, transportation charges ) and high sales volume ( from increased productive selling time i.e contact time with the customers and prospects ). By analyzing the market territory by territory and assigning the sales and cost responsibility to individual sales personnel, management has the information to set the sales target and evaluate each persons’ performance against them. Well designed territories are convenient for sales personnel to cover, represent reasonable work load, makes the personnel as productive as possible, few conflicting claims to the same accounts and minimum time spend on roads increase the morale of the sales personnel. Territorial assignments make every dealer the responsibility of some of the sales personnel and proper routing and scheduling ensures that the sales person meets the dealer at appropriate time relative to the break of consumer advertising campaign and equip the dealer with the product and promotional tools prior to targeting the customers through advertising.
Two reasons for selecting a small control unit : a. Precise geographical identification of sales potential : clear demarcation between the high and low sales potential areas. b. Small units remain usually stable and unchanging : possible to redraw the the territories easily by redistributing control units among the territories.
3. Number of territories : If planner estimates that average sales person should realize Rs. 2500 of total sales potential of Rs. 25000, then number of territories or number of sales persons required = 25000/2500 = 10.
The Sales Territory concept
A sales territory is a grouping of customers and
prospects assigned to an individual salesperson.
• Irrespective of geographical designations sales
territory is grouping of customers and prospects that
can be called upon conveniently and economically by
an individual salesperson.
• For instance:
When sales personnel sell mainly to personal
acquaintances as in selling insurance or investment
securities, little logical basis exist for dividing the
The Sales Territory concept
House Accounts :
• An account handled by a group of
executives or home office personnel.
• Generally house accounts are responsible
for significant shares of company’s
Reasons for Establishing / Revising
1. To provide proper market coverage.
2. To control selling expenses.
3. To assist in evaluating sales force personnel.
4. To contribute to sales force morale.
5. To aid in the coordination of personal selling and
6. To establish a sales person’s responsibility.
7. To improve customers relations.
Procedure for setting up sales
territories1. Selecting a basic geographical control unit.
Commonly used units are postal code numbers,
areas, towns or cities. Sales territories are put
together as consolidations of basic geographical
2. Determining the sales potential present in each unit.
Sales potential : Maximum possible sales
opportunities open to a specific company selling a
good or service during a stated future period to
particular market segment.
Identify the present and prospective buyers
precisely in a unit and ascertain the unit’s total
market potential that the company has an
opportunity to obtain i.e. Sales Potential.
3. Combining control units into tentative territories.
Assumption : No significant differences exist in the
physical and other characteristics of the control
Contiguous control units are combined into tentative
territories having approx. same sales potential.
Planner decides the number of territories.
• Planner then decides the territory shape.
Wedge: For territories containing both urban
and non urban areas. Radiates out from
densely populate urban center. Travel time
among the adjoining wedges by balancing
urban and non urban calls.
Clover Leaf: When accounts are located
randomly through a territory.
Circle: Appropriate when accounts and
prospects are distributed evenly throughout
4. Adjusting for differences in coverage difficulty.
• Removal of unrealistic assumption that no differences in
the characteristics of geographical control units exist.
Certain large cities, for instance, have greater sales
potential than some states but time required to contact the
customers in city is less as compared to the state.
• The optimum arrangement is reached when incremental
sales per dollar of selling expenditures are equated among
• Differences in coverage difficulty represent differences in
work loads. When final adjustments for coverage
difficulties are made, sales territories have varying sales
potential and different sized work loads, but none exceeds
the maximum desirable work load depending upon the
capacity of the sales person.
Factors influencing the
modifications of a territory:
• Market consolidation
• Split in division
• Sales force turnover
• Customer relocations
• Product life cycle change
• Product line change
Deciding assignment of sales
personnel to territories
• Up to this point in territorial planning an implicit
assumption has been that all sales personnel are
“average”, i.e. all are interchangeable, each capable
of producing same results at similar costs regardless
of territorial assignments. This assumption is
• Sales persons vary in ability, initiative and
effectiveness and also in the desirable work load.
One sales person might be outstanding in one
territory but a failure in another. Performance,
moreover is conditioned by customer characteristics,
customs and ethnic influences.
Routing and Scheduling Sales
Personnel• Routing and scheduling plans aim to maintain the lines of
communication, to optimize sales coverage and minimize
• When management is informed at all times about the
whereabouts of sales person it is easy to contact him and
give last minute instructions.
• While deciding the route detailed information is required
on the numbers and location of customers, means of
transportation and desired call frequency rates.
• Routing and scheduling plans reduce wasted time by sales
personnel in backtracking and travelling and gives a
optimized sales coverage which automatically builds up
the size of average order and increases the efficiency and
productivity of sales personnel.
• In assigning sales personnel to territories,
management seeks the most profitable alignment of
selling efforts with sales opportunities.
• Management should “ assign each sales person to
the particular territory where his or her relative
contribution to profit is the highest”.
Advantages of designing a sales
It ensures better market coverage
Effective utilization of the sales force
Efficient distribution of workload among sales
It is convenient to evaluate the performance of
To control over the direct and indirect costs of the
Optimum utilization of sales time by sales people