4/19/2018

Learning Objectives
• To understand the concept of and reasons for
sales territories
Management of Sales
• To learn designing sales territories and assigning
Territories and Quotas salespeople
• To know territory coverage, including routing,
scheduling, and time management
• To understand objectives and types of sales
quotas
• To learn the methods of setting sales quotas
• To get insight into setting and administration of
sales quotas

Sales Territories
• A sales territory consists of existing and potential
Procedure for Designing Sales Territories
customers, assigned to a salesperson
• Most companies allot salespeople to geographic • Select a control unit*
territories, consisting of current & prospective customers • Find location and potential of present and
prospective customers within control units**
• Decide basic territories by using
Major Reasons / Benefits of Sales Territories • Build-up method,
• Increase market / customer coverage Or
• Control selling expenses and time • Break-down method
• Enable better evaluation of salesforce performance *A control unit is a geographical territorial base
• Improve customer relationships **Unnecessary & expensive for consumer
• Increase salesforce effectiveness products
• Improve sales and profit performance

Procedure in Build-up Method Procedure in Breakdown Method

• Estimate company sales potential for total
• Decide customer call frequencies
market
• Calculate total customer calls in each control unit
• Forecast sales potential for each control unit
• Estimate workload capacity of a salesperson
• Estimate sales volume expected from each
• Make tentative territories salesperson
• Develop final territories • Make tentative territories
Objective is to equalise the workload of • Develop final territories
salespeople
Objective is to equalise sales potential of territories

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Assigning Salespeople to Territories Management of Territorial Coverage

Sales Manager should consider two criteria:
(A)Relative ability of salespeople
• It means: How salesperson should cover the
• Based on key evaluation factors:
(1) Product knowledge, (2) market knowledge, (3) assigned sales territory
past sales performance, (4) communication, (5) • It includes three tasks for a sales manager:
selling skills
(B) Salesperson’s Effectiveness in a Territory • Planning efficient routes for salespeople
• Decided by comparing social, cultural, and physical • Scheduling salespeople’s time
characteristics of the salesperson with those of the
territory • Using time-management tools
• Objective is to match salesperson to the territory

Routing Procedure for Setting up a Routing Plan

• Routing is a travel plan used by a salesperson for • Identify current and prospective customers on a territory
map
making customer calls in a territory
• Classify each customer into high, medium, or low sales
• Benefits of or Reasons for routing: potential
• Reduction in travel time and cost • Decide call frequency for each class of customers
• Build route plan around locations of high potential
• Improvement in territory coverage
customers
• Importance of routing depends on : • Computerised mathematical models are developed
• Nature of the product – Important for FMCG • Commonly used routing patterns are:
• Type of jobs of salespeople – Important for driver- Base C
(B) 1 B
cum-salesperson job, but creative selling job B

needs a flexible route plan C

5
C
4
C
3
C
2

Straight line / Hopscotch Circular Clover Leaf

Scheduling Time Management - for Salespeople

• Scheduling is planning a salesperson’s visit time to To help outside salespeople* to manage their time
customers. It deals with time allocation issue efficiently and productively, the tools available are:
• How to allocate salesperson’s time? • High-tech equipment like laptop computers and
• Sales manager communicates to salesperson major cellular phones
activities and time allocation for each activity
• Inside salespeople to provide clerical support,
• Salesperson records actual time spent on various technical support, and for prospecting, and
activities for 2 weeks qualifying, as they remain within the company
• Sales manager and salesperson discuss and decide
• Outside salespeople can then spend more time
how to increase time spent on major activities
getting more orders & building relationships with
• Companies specify call norms for current customers,
major customers
based on sales and profit potentials, and also for
prospective customers *Outside salespeople travel outside the
organisation

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Sales Quotas
Time Management – for Sales Managers • What are Sales Quotas?
• Sales quotas are sales goals or targets set by a company for
• High-tech equipment : Laptop Computers, Smart its marketing / sales units for a time period
Phones. • Marketing / sales units are regions, branches, territories,
salespeople, and intermediaries
• Computerised support systems • Generally, company sales budget is broken down to sales
• CRM quotas for various marketing units
• ERP • Objectives of Sales Quotas
• Make plans – daily and weekly • To use quotas as performance standards or performance
goals
• Respond email/calls, politely learn to say -No • To control performance
• Prioritize activities – use ABC analysis • To motivate people by linking quotas to compensation plans
• Learn to delegate • To identify strengths and weaknesses (after analysis) of the
company

Types of Quotas
• Organisations set many types of sales quotas: (1) Sales Volume Quotas (Continued)
sales volume, (2) financial, (3) activity, (4)
combination • Unit sales volume quotas are suitable when
• Sales volume quotas
• Salespeople are selling a few products
• For effective control, sales volume quota should
be set for the smallest marketing units, such as • Prices of the product fluctuate rapidly
salesperson, districts / branches, product items /
• Price of each product / service is high
brands
• Sales volume quotas can be stated in (a) rupees / • Point sales volume quotas are appropriate when
dollars, (b) units, or (c) points the company wants salespeople to sell products
• Rupees / dollars sales volume quotas are that contribute more to profits
appropriate when salespeople are required to sell
many products

Financial Quotas Activity Quotas

• Profit Contribution
• Sales percentage (percentage of sales) • These are set when salespeople perform
• Expense quotas both selling and non-selling activities
• In many companies, expense quotas are stated as a • Objective is to direct salespeople to carry
percentage of sales out important activities
• Expense quotas to be administered with flexibility, to make
salespeople cost conscious, allowing reasonable expenses • For effective implementation, activity
quotas are combined with sales volume
and financial quotas
• E.G. Calling on high potential customers,
payment collection from defaulting
customers

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Combination Quotas
Methods for Setting Sales Quotas
• Used when companies want to control salesforce performance
on key selling and non-selling activities • Several methods are used for establishing sales
• Focus on a few types of quotas, to avoid confusing
salespeople. An example:
quotas
• In practice, companies use more than one of the
Type of Quota Quota Actual Percent Weight Percent
(Importance) Quota x
following methods to increase their confidence in
Quota
Weight sales quotas
Sales Volume (Rs) 5,00,000 4,50,000 90 3 270 • Total market estimates
Post Purchase 50 45 89 2 178 • Territory potential
Follow-up
New Customers 04 05 125 1 125 • Past sales experience
(Nos) • Executive judgement
Total 6 573
• Salespeople’s estimates
• Total point score=573/6=95.5 for a salesperson
• Typically use ‘points’ as a common measure to resolve the
• Compensation plan
problem of different measures used by various types of quotas We shall briefly discuss each of the above methods

Total Market Estimates Method Territory Potential Method

• The Process followed by established • The procedure followed by new companies is as under:
companies is as under: 1) Estimate next year’s industry sales forecast or market
1) Estimate next year’s total market demand, or potential, using sales forecasting methods
industry sales forecast, using sales forecasting 2) Estimate multiple factor index for each territory, based
methods on factors that influence sales of the product.
2) Decide the company’s estimated market share 3) Industry sales forecast in a territory (or territory market
for next year potential=(1)x(2)
3) Company’s next year sales forecast= (1) x (2) 4) Territory sales quota = (3) x estimated market share of
4) Find each territory’s percentage share out of the the company in the territory
total company sales in the previous year
5) Territory sales quota = (3) x (4)

Past Sales Experience Method Executive Judgement Method

• The process consists of taking past one year’s • Senior executives use their judgement when the
product, territories, and the company are new or
sales (or an average of previous 3 to 5 year’s
very little market information is available
sales), adding an arbitrary percentage (or a
• Executives predict company sales budgets and
percentage by which the market is expected to
also territory sales quotas
grow), and thus setting each territory sales quota
• This method should generally be used along with
• The assumption that future sales are related to other methods
past sales may not be always correct
Salespeople’s Estimate Method
• This method should not be the only method
• Some firms ask their salespeople to set their own
used quotas
• Past sales should be one of the factors used for • Many salespersons either set very high or too low
deciding sales quotas sales quotas

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Salespeople’s Estimate Method (Continued) Insight into Setting & Administration of Sales
Quotas
• For setting proper quotas, many sales managers use 2 or
3 of above methods, discuss with salespersons to get • Set realistic quotas
their inputs, and decide sales quotas • Understand problems in setting quotas –Launching
many new products – many products and customer with
Compensation Plan Method individual quotas
• Some organizations set quotas to fit with their sales • Ensure salespeople understand quotas
compensation plan • By allowing salespeople to participate in the process
• E.G. A company wants to pay a monthly salary of Rs • By continuous feedback to salespeople on their
5000, and a commission of 3% on monthly sales above performance compared to quotas
Rs 1,00,000. The quota of Rs 1,00,000 is set in such a • Have flexibility in administering quotas
way that salesperson would find it very difficult to cross • Change quotas in cases of major changes in market
total compensation of Rs 8000 per month (5000+3000) demand or company strategies
• Use monthly or quarterly quotas for incentives and
annual quotas for performance evaluation
• Select a few quotas that have relationships with
marketing environment and sales situations

Key Learnings Key Learnings (Continued)

• Time management tools available to outside salespeople
• A sales territory consists of existing and prospective are high-tech equipment and inside salespeople
customers, assigned to a salesperson • Time management for sales managers include high-tech
equipment, computerised support system, and right
• While assigning salespeople to territories, sales
practices.
manager should consider relative ability of salespeople
• Sales quotas are sales goals or targets set by a
and salesperson’s effectiveness in the territory
company for its marketing units like regions, territories,
• Management of territorial coverage includes routing, salespeople
scheduling, and time-management tools. • Firms set many types of quotas like sales volume,
• Routing is a travel plan used by a salesperson for financial, activity, and combination of above
making customer calls in a territory • Companies use more than one of the several methods
• Scheduling is planning a salesperson’s visit time to used for setting sales quotas. These are: total market
customers, based on sales and profit potentials of estimates, territory potential, past sales experience,
customers executive judgment, salespeople’s estimates, and
compensation plan
• Companies should select a few quotas, which should be
realistic and should be administered with flexibility