11 – Controlling the Sales Efforts

Introduction

Sales managers must be aware of the expenses incurred before and after the sale and the sales money earned. Budgeting has emerged as a critical role in sales management. It is often referred to as a blueprint for producing profitable sales. It forecasts how much money will be made and how much money will be spent. A proper budget estimates the company’s sales volume, selling expenses, and earnings. Personal selling objectives, both quantitative and qualitative, shape sales-related marketing policies, which in turn shape personal selling methods. The strategies are developed with two main factors: the type of sales employees and the size of sales personnel. All of this contributes to creating sales budgets, and sales force management begins after the expenses have been calculated.

11.1 Sales Budgeting and Control

A sales budget is a financial plan that shows how resources should be allocated to maximise sales. Sales budgeting aims to plan for and control the expenditure of resources (money, materials, people, and facilities) required to meet sales targets.

Sales forecast and sales budget are linked in the sense that if the sales budget is insufficient, the sales prediction will not be met, and if the sales forecast is increased, the sales budget must be increased appropriately. It also serves as a tool for assessing and planning sales efforts. It seeks to maximise revenues by concentrating on the most profitable divisions, customers, and goods.

11.2 Purpose of Sales Budget

It provides three primary functions:

1. Planning Tool:

Sales managers plan by stating the critical costs to achieve goals and objectives. This aids in profit planning and serves as a roadmap for accomplishing goals.

2. Instrument of Coordination:

The budget serves as a tool for coordination. Selling is one of marketing’s responsibilities and requires assistance from the marketing mix. Budgets also aid in integrating other departments, such as sales, finance, production, and purchasing.

3. A Tool for Control:

The comparison of budgeted and actual expenditures results in a study of the variables producing variances, allowing the sales manager to identify problem areas or better plan for expected outcomes. Volatility analysis improves sales managers’ understanding and enables them to create and develop realistic sales budgets with little variance in the future.

11.3 Methods of Sales Budgeting

1. Affordable Method:

Many businesses base their promotion budget on what they believe the firm can afford. Firms dealing in capital-intensive industrial items employ this strategy, as do businesses with a small workforce.

2. Rule of Thumb (Percentage of Sales Method):

Most businesses allocate their sales budget as a percentage of sales (either current or anticipated). Companies that sell large quantities of goods and those with a strong financial focus frequently employ this strategy.

3. Competitors Parity Method:

This method is utilised by huge corporations that face stiff rivalry. It is presumptuous that you know your competitor’s activity and resource allocation.

4. Objective and Task Method:

This method instructs marketers to create budgets by first identifying the sales function’s objectives and then determining the selling and related tasks required to meet those objectives. The overall budget is then arrived at by calculating the cost of each task/activity. Tasks and budgets can be adjusted.

5. Zero Base Budgeting;

Zero Base Budgeting is a procedure in which the sales budget for each year is started from zero, justifying all spending and rejecting all conventions and rules of thumb. Its restriction is that it is a lengthy and laborious process.

In practice, businesses employ a combination of these approaches.

11.4 Preparation of Sales Budget

The most significant aspect of sales is the sales budget. In general, three fundamental budgets are created:

1. Sales budget

2. Selling expense budget Notes
3. Sales department administrative budget

Different sales organisations follow different procedures. However, a standard procedure is followed.

Budgeting Flexibility

It enables sales managers to keep track of financial success in terms of conventional cost ratios. Another facet of sales budget flexibility is modified or changing market conditions, prompting a change in the firm’s investment efforts.

11.5 Sales Control

Controlling sales and the performance of sales operations is one of the most critical responsibilities of a sales manager. Sales must be monitored on an ongoing (continuous) basis as well as every year. The sales control function supports the manager in determining which sales levels have been met, why there has been a discrepancy, and what corrective action may be taken to obtain the desired outcomes.

11.5.1 Purpose of Sales Control 

1. Sales control aids the sales manager in the following ways:

2. initiating corrective actions.

3. Revision of the sales policy and techniques used.

4. Putting measures in place to boost sales team productivity.

5. Improving the effectiveness of target-setting sales strategies and budget functions.

6. Boosting sales profitability.

11.5.2  Sales Control System 

The following guidelines should be followed while establishing a sales control system:

1. Establishing specific goals (round key result areas).

2. Establishing performance evaluation standards.

3. Gathering data on actual sales activity and outcomes.

4. look at the difference between what happened and what was expected.

5. Taking corrective action (need-based).

A comprehensive sales information system is required for an effective sales control system. This can be accomplished by tracking sales by value, customer, salesperson, territory, distribution channel, cash, or credit. Despatch notes, client call reports, daily activity reports, route plans, sales quotations, sales expenditure forums, and discount and allowance records are all vital documents besides invoices.

11.5.3 Sales Control Methods

1. Sales Analysis
2. Marketing cost analysis
3. Sales management audit

11.6 Sales Analysis

It thoroughly investigates sales volume by area, salesperson, client, product line, etc. It operates on the premise that trends in overall sales volume disguise rather than disclose market reality. According to researchers, many customer order areas in most organisations generate a tiny percentage of total sales. This is known as the 80-20 rule.  80% of orders account for more than 20% of sales, and 20% of selling units account for 80%. Similarly, the iceberg concept shows that overall sales volume may reflect 10% of the actual market situation above the surface, while the remaining 90% may stay undetected. As a result, it is necessary to segment sales by geography, salesperson, and client to learn the truth and gain insightful information.

The sales manager scans total sales by territory. Any unusual conditions in any territory, such as severe competition, labour unions, transportation strikes, etc. that adversely influence the company’s products are considered for further sales analysis. In the preceding example, actual sales are compared to desired sales, and the causes for the differences are investigated.

11.6.1 Marketing Cost Analysis

The cost of achieving sales is considered here. It is not simply sales that are important, but sales with budgeted profits or expenses as well. It is a fact-finding analysis that compares the cost to sales volume and the resulting profit. It discusses the cost and financial aspects of each selling transaction and activity. It may generate

1. cost of goods per rupee of sale;

2. profit per territory, product pack, and sales person;

3. profit per rupee of sale;

4. sales volume and receivable turnover;

5. stock turnover and profitability;

6. average value of order;

7. average cost per order;

8. total value of orders.

The usefulness of Marketing Cost Analysis:

A successful cost analysis assists the manager in determining the following:

1. Relative cost and profitability of the sales operation;

2. Profitable, not-so-profitable, and not-profitable territories;

3. Products, pack size, market segments, distribution channel;

4. Minimum order level quantity;

5. Productivity of the salesperson;

6. Profitability of different sales promotion techniques; and

7. The profitability of different marketing mix programmes.

11.6.2 Audit of Sales Management

Sales analysis and marketing cost analysis concern routine and operational issues. The third sales control technique concerns strategic sales control conversations.

A sales management audit is a comprehensive, systematic, impartial, and periodic examination of the firm’s sales policy, objectives, strategies, organisation, and procedures. It aims to analyse the firm’s sales management and investigate the veracity of the foundation and assumptions upon which the sales function is organised and handled. Critically examining sales management in light of the changing market environment identifies rising areas of opportunity and areas that require attention.

The following are some of the issues considered in a sales management audit:

1. Appropriateness of selling functions and objectives.

2. The role of the selling function in the promotional mix and the integration of sales and marketing.

3. Salesforce organisation and work norms, as well as size

4. Salesforce recruitment, selection, promotion policies, and compensation motivation

5. The basis for sales quotas, budgets, territory allocation, and market suitability.

6. Sales force quality, appraisal criteria, sales personnel training and development

7. Sales function productivity.

8. System for sales planning and control.

9. Commercial practices and methods of sales promotion

It is a management control strategy. It is extremely beneficial when undertaken by independent specialists and officials.

11.7 Sales Quotas

A sales quota is a quantifiable target established for a sales unit for a specific period. A territory, a branch office, an area, a distributor, or a person can all be considered sales units. Sales quotas organise, guide, control, and assess a company’s actions. Their effectiveness is determined by the type, quantity, and quality of marketing information utilised in setting them and management’s expertise in managing the quota system.

Sales quotas serve as a source of motivation, a basis for reward and remuneration, raise performance requirements for salespeople, and reveal the firm’s selling structure’s strengths and deficiencies. Salespeople are quota achievers, and their drive may dwindle if the quotas are simple. The sales manager establishes sales quotas for individual salespeople or sales districts. The executives who set sales quotas must be experienced and well-versed in their territories.

Budget Quotas

1. Define various units in a sales organisation to regulate expenses, gross margins, or net profit.

2. Spending caps

3. Expense quotas are most commonly employed with sales volume quotas.

4. Management provides financial incentives to sales employees to keep their spending under control.

5. Expense quotas are typically expressed as a percentage of sales to prevent administrative burden and confusion.

6. Problems:

a. Because of variations in coverage difficulties and other environmental conditions, setting the same expense percentage for all regions is impractical.

b. Because various salespeople offer different product combinations, some incur more expenses than others.

7. Advantages:

a. Increases the cost-consciousness of sales employees.

8.  Gross margin or net profit quotas

a. Useful when the product line includes both high- and low-margin goods.

b. Issues

-Salespeople do not decide the pricing and do not influence manufacturing costs. As a result, gross margin is not responsible.

-Certain selling expenses are out of the salesperson’s control.

-Increased secretarial and administrative charges.

9. Activity quotas

a. Define the critical activities that salespeople perform; then set target performance frequency

b. Appropriate when salespeople perform important non-selling activities

c. Control and recognition of salespeople performing non-selling activities

d. Reward salespeople based on quantity of work, regardless of quality

e. Problems in motivating the sales force

Combination & Other Point System Quota

1. Combination quotas

a. Control performance of both selling and non-selling activities

b. Overcome the difficulty of using different measurement units to appraise different aspects of performance

c. Performances are computed as percentage, known as point systems, with the points being per cent points.

d. Consolidate total performance into a single metric

e. Problems

-Salespeople may have trouble comprehending and judging their accomplishments.

-Design flaws may cause salespeople to concentrate too much on one component activity.

2. Full line quotas

a. To achieve a desired sales balance across multiple goods.

Administering the Quota System

1. Quotas that are accurate, fair, and attainable

2. Relies not only on the quality of management’s judgement but also on the sales force’s competence and drive.

3. Obtaining and retaining sales personnel acceptance of quotas

4. Sales employee participation in quota formulation

5. Keeping sales personnel informed

6. Need for continual managerial control

Reasons for not using Sales Quotas

1. Establishing an accurate sales estimate for many industrial goods is difficult.

2. Because quotas necessitate statistical procedures, there is a risk that salespeople will refuse to accept quotas prepared using difficult-to-understand techniques.

3. Put too much focus on sales: a valid critique of sales volume quotas

4. Quotas are ineffective when a product is in short supply.

11.7.1 The Function of Sales Quotas

Sales quotas serve numerous functions. The following are the primary objectives:

-Providing Objectives and Incentives to Achieve a Specific Performance Level

-More incentives are given if performance is exceeded. When establishing quotas, it is critical to ensure they are specific, measurable, attainable, realistic, and time-bound. (SMART).

11.7.2 Managing Salesperson Activities

Quotas allow you to:

1. Direct and control the selling activity of your salespeople.

2. To limit the number of calls per day.

3. Obtaining fresh accounts.

4. To organise demonstrations.

5. For the collection of funds from account holders.

6. To take corrective action if the salesperson fails to meet his or her targets.

The total control process includes setting the target performance, assessing actual performance, determining deviations, and taking corrective action.

Performance Evaluation

Performance versus quotas also aids in recognising the salesperson’s strengths and weaknesses, as well as the performance of qualitative and quantitative tasks. The performance of various items and territories can be evaluated. A salesman’s performance may differ, but only to the satisfaction of the sales executive. If a salesperson is below average in numerous respects, the CEO should think about it and take action.

Keeping Sales Expenses Under Control 

It is the salesperson’s responsibility to maintain sales expenses within reasonable limits. Expense quotas assist businesses in setting profit quotas. Expenses are also linked to pay. Typically, a limit is set for external circumstances. These include city type, job kind, terrain type, product type, and so on. These are determined after discussions with the salesperson to ensure they are informed of the situation.

Make Effective Compensation Plans

Proper compensation plans incentivise salespeople; some Indian organisations only pay when quotas are met or surpassed. Some use it as a basis for bonus reasons, awarding bonuses only when a portion or the entire quota is met.

Quotas should not be set arbitrarily or based on the management’s whims and fancies. These should be based on criteria such as previous experience, potential demand, market analysis, competitive factors, quality, and price. Once the quotas are set and appear to be enough, they can be gradually increased to obtain more sales. Sales quotas are sometimes employed in various forms of sales competitions. These further stimulate the salesperson, and special awards might be provided to meet quotas in these contests. These are also called “special quotas” because they assist the average salesperson in doing better.

11.8 Different Types of Sales Quotas

There are four fundamental forms of sales quotas, and different types or combinations of them can be utilised depending on the situation, procedures, regulations, selling challenges, and executive judgement.

1. Sales Volume quotas
2. Financial quotas
3. Activities quotas
4. Combination of these Quotas.

11.8.1 Sales Volume Quotas

These are the most often utilised and are calculated depending on sales volume. The volume of sales made by an individual can be:

1. The volume of sales made by an individual.

2. The number of sales made in a specific geographic area.

3. The amount of money sold in a product line.

4. The amount of money sold in a distribution outlet.

Sales volume quotas are also imposed to balance the sales of slow and quick-moving products. They can be established in terms of unit sales, rupee sales volume, or both, and on an overall and product-by-product basis. Some businesses combine the two and use a point-by-point basis, i.e., 1000 equals 1 point. Various products can also be assigned different scores: 3 for product A, 5 for product B, etc.

Unit sales volume quotas are effective in markets where product prices change significantly or when the unit price is relatively high. A rupee sales volume quota is useful for salespeople who sell numerous goods to one or more types of consumers.

11.8.2 Methods of Setting Sales Volume Quotas

Sales volume quotas can be established on the following principles:

Past Sales: Sales targets are set primarily based on previous sales history. If sales quotas are to be set for this year, we must first determine last year’s sales and then add the predicted percentage growth in market share to last year’s sales.

For example, if last year’s sales were 100%, the predicted gain in market share is 10%. The sales quota for this year will then be – 110%.

This strategy implies that the previous year was average. We can also add the growth rate to the average for the previous three years.

Total Market Estimates: In this approach to creating sales quotas, the company makes total market forecasts for the year, and sales quotas are determined from this. Two ways are commonly employed.

Market size estimates can be derived from existing data and the executive’s judgement at the head office.

Sales quotas can also be calculated based on forecasts made by field personnel at each territory office.

Territorial Sales Potentials: Many managers calculate sales volume quotas using sales potentials. The maximum sales opportunities available to the same selling unit are represented as sales potential. This method is appropriate when:

Territorial sales potentials are calculated in tandem with territorial design. In this situation, sales volume quotas are established by calculating the percentage relationship between each territorial sales potential and total sales potential and then allocating the company’s sales forecast among territories using the obtained percentages. For example, if Region X’s sales potential is 3% of the total and the company’s sales estimate is $10 million, the Territory X sales volume quota is $300,000.

Bottom-up planning and forecasting techniques are used to obtain the sales estimate in the sales forecast. In this case, management provides final revised estimates of territorial sales potentials, which become the territorial sales volume quotas after considering factors such as past sales, competition, changing market conditions, differences in personal ability, and contemplated changes in prices, products, promotion, and the like.

Compensation Plan: Companies will occasionally establish sales volume limits based on the estimated amounts of pay that management believes sales employees should receive. Quotas are tailored solely to match the sales compensation plan, disregarding territorial sales potentials, overall market estimations, or historical sales experience. If, for example, salesperson A gets a monthly salary of 2,000/- plus a 5% commission on all monthly sales over 40,000/-, and A’s monthly sales reach 40,000/-, management limits A’s compensation-to-sales ratio to 5%. Even though it is labelled “salary and commission,” A is paid on a straight commission plan.

11.9 Limitations of Sales Quotas

1. Quotas serve no purpose when items are in short supply. These can only be employed in buyers’ markets where goods are plentiful and competition is fierce.

2. Generally, quotas are set at a high level, which causes salespeople to become frustrated.

3. Realistic market sales projections are difficult to obtain, and data collection is exceedingly expensive; therefore, many quotas are based on historical performance and guesswork.

4. Some sales quotas are challenging for salespeople to understand, so they are opposed.

11.10 Administration of Quota System

The abilities required to run the quota system are fundamental; they aid not only in realising the total value for control purposes but also in ensuring staff participation in making the system work. It is vital to gain and keep the acceptance of people to whom quotas are assigned.

Some salespeople are opposed to sales quotas, and anything that causes them to doubt the accuracy, fairness, or attainability of sales quotas reduces the system’s performance.

Quotas that are accurate, fair, and attainable

Quotas must be accurate, fair, and achievable. The quota-setting technique is responsible for obtaining accurate quotas. Accurate quotas are the product of a skilled combination of planning and operational data with solid judgment. Setting a reasonable quota entails determining the right mix of sales potential and previous experience.

If management feels that their quota-setting method delivers accurate quotas and that fair quotas are assigned, they should be reachable.

Securing and Maintaining Sales Personnel’s Acceptance

Management must ensure that salespeople understand quotas and the process for setting them. This understanding must be communicated for personnel to accept quotas. If salespeople do not understand the process for establishing quotas, they may think, for example, that the quotas are a ruse to get them to work more at no expense to the organisation. This mentality undermines the quota’s effectiveness as a motivator. Salespeople must grasp the importance of quotas as communicators of “how much for what period,” but they are more likely to consider their quotas realistic, fair, and reachable if they also understand the quota-setting system. The quota-setting process should be simple enough for salespeople to comprehend while yet being smart enough to allow for acceptable accuracy.

Participation of Sales Personnel

When salespeople are involved in quota setting, explaining how they are calculated is easier. Although delegating the entire quota-setting process to the sales force is not advisable, some sales force participation can result in more accurate and realistic targets.

Keeping Sales Personnel Up to Date

Effective sales management keeps sales employees up-to-date on their progress toward quotas. Salespeople are given regular reports that explain their performance to date. This enables individuals to assess their strengths and weaknesses and take corrective action. Of course, salespeople require encouragement, counsel, and, sometimes, caution before opting to improve their performance.

Managerial Control and Review on an Ongoing Basis

Continuous performance monitoring is required when administering any quota system. Arrangements must be established collaboratively, and performance statistics must be analysed as soon as possible.

Continuous managerial evaluation and appraisal are essential because an accurate, fair, and reachable quota at the start of an operating period may prove impossible as selling conditions change. It is critical to be adaptable when administering the system. If a quota is too high, it should be reduced.

Administrative flexibility is desired but not excessive. Small changes can be overlooked; significant changes necessitate modifications. A balance must be struck between adaptability to minor changes and inflexibility in the face of significant changes.

11.11 Sales Territories

A sales region is a collection of clients, marketplaces, or geographical areas. A sales territory is a geographical area a salesperson may cover conveniently and canonically.

Territories can be developed based on geographical areas, industry, product use, purchasing method, and distribution route. Organizations can achieve more excellent coverage of potential markets through territorialisation because it allows for better planning, proper coverage of potential markets, efficient call patterns, and better customer service. Some services, such as insurance and mutual funds, are sold through personal contacts rather than expanding regions. The company itself handles house accounts. Large clients prefer to interact with the company directly. This may affect the salesman’s morale because the company does a substantial portion of the company’s business directly, and the salesman is not paid a commission.

Territory management is the planning, implementing, and controlling of a salesperson’s actions to realise their designated territory’s sales and profit potential.

1. The commercial division’s sales efforts should be matched with sales opportunities.

2. Territorial assignment guides the sales force’s planning and control.

3. By developing territories, management learns the company’s strengths and shortcomings in serving different markets.

4. Realistic planning is possible Because regions are more homogeneous than the overall market.

5. By segmenting the market into small groups, precise goals may be established, and more control can be exercised.

6. Salesperson performance approval becomes necessary so that directions can be offered.

11.12 Territories in Development

The design of a sales organisation is not complete until territories are correctly specified. Territories can be constituted based on the following criteria:

1. Geographical location
2. Industry
3. Product use
4. Method of buying
5. Channels of distribution
6. Sales of potential
7. Workload in territories
8. Arbitrarily
9. Rational basis.
By territorialisation better coverage can be achieved because it facilitates:
(a) Better planning
(b) Proper coverage of potential markets

(c) Efficient call patterns
(d) Better customer service
(e) Choosing appropriate salesmen for specific accounts.

It is better not to create sales territory in specific businesses that rely on social and personal ties, such as LIC, mutual funds, stocks, and so on.

The following factors influence a territory’s sales volume:

1. Size
2. Market potential
3. Number of customers’ accounts
4. The firm’s experience
5. Market share in the territory.

Factors that affect the size of the territory are:

1. The number of customers and prospects in an area
2. Call frequency on existing customers
3. The number of calls that the salesperson makes in a day.

At the most basic level of aggregation, a company’s sales territory represents basic responsibility units. Several territories are merged to form a district, several districts to create a region, several regions to form zones, and several zones to form a national market.

Salespeople are in charge of individual accounts and a group of accounts (Territory Management). This is the first step toward transitioning from selling to managing. It necessitates sales effort, planning, and supervision. Territories are long-term structural configurations established by dividing the company’s whole market into smaller portions or assembling smaller market units into larger territories.

The steps taken in developing territories are outlined below:

1. Determination of the Basic Control Unit for the Determination of Territorial Boundaries

Selecting a basic geographical control unit is the starting point in territorial planning. Villages, tehsils, towns, and so on are the most often utilised control units, followed by cities, standard metropolitan statistical areas, trading areas, and states. The following are the two arguments for picking a compact control unit:

If the control unit is too large, areas with low sales potential are obscured by areas with strong sales potential, and vice versa; these units remain reasonably stable, making redrawing territorial boundaries difficult.

Increasing one region while decreasing another is more accessible with fewer control units. Aside from villages, tehsils, and towns, there are three other basic units for defining territorial boundaries.

2. Metropolitan Statistical Areas (MSA)

An MSA is a geographical area with neighbouring settlements that are economically and socially integrated with the nucleus.

Companies with MSAs too large to serve as basic geographical control units interact directly with a large number of consumers in urban areas and frequently allocate two or more salespeople to the same MSA. In such instances, companies employ either a minor political division of a city or a cluster of contiguous census tracts as control units.

3. Trading Areas

Trading zones are established based on the natural flow of trade. The trading area recognises that when deciding where to buy, consumers, retailers, and wholesalers pay little attention to political boundaries. Consumers, for example, consider convenience and merchandise selection to be important factors in deciding where to shop.

Trading regions are difficult to describe because they vary depending on the product. For example, basic work clothes can be purchased from a small town shop, but dress apparel requires shops in larger towns or places. Trading spaces for things purchased regularly are generally smaller in size and thus more numerous than those for luxury items.

The sizes and shapes of trading zones change seasonally, just like the weather. However, some businesses designate trading zones for their products.

4. States

These are geographical units in which state territoriation is justified. The first is when the sales team covers the market extensively rather than intensively, and the second is when a corporation seeks nationwide distribution.

The fundamental problem with employing it as a control unit is that it is a political split rather than an economic division.

5. Combining Control Units into Tentative Territories

The next stage is to combine units into ‘tentative’ sales territories to produce a first ‘approximation’ of sales territories by merging continuous control units into tentative areas with about the same sales potential.

At this phase, the number of territories is determined based on the assumption that all sales professionals are of average skill. Essentially, the typical salesperson’s percentage of overall sales potential is estimated. Past sales experiences aid in determining the number of regions in this assessment. In effect, the planner assesses sales productivity per sales personnel unit and divides it by the total predicted sales potential and the number of sales personnel units and territories necessary. Management, for example, estimates that an average salesperson should achieve 25 lakhs of total sales potential in 250 thousand–ten territories, and ten units (25,00,000/ 2,50,000) of sales professionals are necessary.

Compulsory control units are grouped into preliminary regions with about equal sales potential after this evaluation and computation.

6. Procedure for Developing Territories

A system must be followed while developing territories, and objectives such as workload and opportunity equalisation must be addressed. There are numerous ways to do this, all of which are quantitative. If changes need to be made, the process begins with a specific unit of aggregate or base and involves specific locations.

11.13 Objectives and Criteria for Territory Formation

Proper territory formation is critical because:

1. It impacts sales force morale and performance. Sales volume, market share, and profits can all be used to gauge success. A sales manager’s task is to create the optimal number of territories and their arrangements. If there are insufficient territories, sales will decrease due to a lack of coverage. If too many territories are developed, the account will be fractured because salespeople may not earn enough sales from their separate areas, resulting in a higher labour turnover.

2. Another goal is to equalise the region’s potential. This provides equitable possibilities for salespeople because territories differ in many ways, including potential, and hence become large or tiny. Another issue is the requirement for travel and coverage. In addition, the current potential of a territory cannot be appraised at a specific time.

In many circumstances, territories with varying levels of potential are classified as potential territories, and they may be used as training grounds for novice salespeople. In contrast, more productive territories are assigned to senior salespeople. As a result, considerations such as regions with varying sales potential, the sales skill or performance index of the salesperson, and territory covering difficulty should be addressed when constructing territories.

Another consideration is the frequency with which calls are made. When fewer calls or the frequency is lower, sales chances are lost; when there are too many calls, time and money are squandered.

The workload of a sales representative must also be considered: if he is prospecting and selling, he must make more calls, whereas a person who is servicing accounts (investors, writing orders, and teaching people about products) would make fewer calls.

The type of goods can also influence territorial size. The larger the territory, the more selective the product. Other factors include organisational skills.

11.14 Purpose of Sales Territories

Sales territories are established to meet specific objectives.

1. Proper Market Coverage:  We can more efficiently cover the market by strategically assigning specific areas to salespeople. This targeted approach ensures that each salesperson is responsible for their territory, leading to more thorough coverage.

2. Market Coverage and Territory Salesman: The company will fail if sales efforts are not aligned with sales possibilities. Correct market coverage can be accomplished if territories are strategically set up and proper assignments to salespersons are created. The region must be designed so salespeople can quickly and affordably cover it. The territories should be designed so that more time is spent with customers and less time is spent on the road. The S.P. should be able to call on different classes of clients (A, B, and C) at the appropriate frequencies. Regular calls result in repeat sales, and salespeople’s tenacity converts prospects into regular clients.

3. Managing and Selling Expenses: A good territorial design has several advantages, including increased sales volume, lower selling expenses, fewer nights away from home, and lower expenses for travel and lodging. Proper planning is required. If the trip is unplanned and unnecessary, more travel and spending will occur. Territories that are well-designed allow for greater contact time than travel time. The goal is not to cut costs but to see if cutting costs results in higher output.

4. Assists in Personnel Evaluation: When the complete market is separated, the company’s strengths and weaknesses can be assessed, and necessary measures may be taken. It can assess employee performance. It is capable of assigning sales and cost responsibility to specific S.P. It aids in the establishment of quotas and the evaluation of performance against them.

5. Contributing to Sales Force Morale: Well-designed territories are easy for the sales force to cover. They provide S.P. with fair job loads that they can do, enhancing their morale. Good territorial design, as well as clever and professional S.P., help increase the company’s sales.

6. Morale is also high because when sales territories are not given, there are no “conflicting claims” for the S.P. on the same account. Conflicting claims pose an issue to management. Better planning allows the S.P. to spend less time on the road, thanks to well-designed territory.

7. Aiding in Personal Selling and Advertising Coordination: Management may revise territories to help coordinate personal selling and advertising. Combining these can produce a synergistic effect. Before releasing a new product, sales professionals determine dealers’ goals, supply them with displays and other promotional materials, and make enough supplies for them.

8. Effective Sales Force Deployment: Proper awareness of the territory’s demands enables managers to place the right individual in the correct region. When occupations become distinct and responsibilities are well defined, the workload can be allocated fairly. When loads are distributed evenly, there is less or no conflict since no one encroaches on the area of another.

9. Efficient Customer Service: Well-designed territories promote buyer-seller contacts and salesperson management. It ensures that customer calls are answered frequently and that improved customer service is provided.

10. Objective Sales Force Evaluation: Salespeople can be evaluated more effectively and objectively based on their performance. Territory-by-territory analysis also reveals changes in market movements. As a result, the techniques can be modified to adapt to changing conditions.

11. To assist management in increasing sales and marketing productivity: A well-designed region can combine selling operations with other marketing functions of the organisation. Marketing planning can be used to set quotas more efficiently and profitably.

Instead of analysing the entire market, sales and cost analysis can be done on a territory-by-territory basis. Functions such as initiating an advertising campaign, distribution, point-of-purchase displays, and launching promotional schemes can be controlled more effectively in regions than in the entire market.

Reasons for not Establishing Sales Territories

There are three situations in which the territory function is inappropriate.

1. When a corporation has a small territory, it is important to be flexible.

2. When friendship sales are critical.

3. Regarding high-tech sales, these accounts are few, so preventing specialised salespeople from moving around and losing revenue would be ridiculous.

Reasons for Revising Territories

When a corporation first establishes territories, it may not know everything. It must make modifications as it learns about the clients, the sorts of accounts, and the dynamics of business activity.

Territories are revised for a variety of reasons.

Customer-Related Reasons: A territory may be revised owing to a change in the customer’s business, which may be geographical, technical or related to the firm’s product policies. More hostile domestic or international competition may also call for change.

Reasons Related to Sales: Revisions can begin with physical or psychological changes. A salesperson getting on in years may not have the energy to deal with the demand. A salesperson’s family difficulties may force modifications. A salesperson may also be dissatisfied due to insufficient difficulties or financial constraints. Any of these causes may need a change.

Management Error: This could underestimate a territory’s sales potential. Overestimation of territory is more common than underestimation of territory. A salesperson will only skim the region rather than work extensively if the region is significant. When sales are overstated, either small or too large, territories are developed.

Realignment is also required when introducing new product lines since the company’s product mix may become too large or the product may attain maturity. All of these variables contribute to territorial shifts.