Sales and Retail Management (22MBAMM304)

Module-2
Management of Sales Territory & Sales Quota

Management of Sales Territory & Sales Quota: Sales territory, meaning, size, designing, sales
quota, procedure for sales quota. Types of sales quota, Methods of setting sales Quota. Recruitment and
selection of sales force, Training of sales force.

SALES TERRITORY

• Meaning: A sales territory is a geographic area, industry, or group of accounts that is assigned to an
individual or team of salespeople. Sales territories are designed to ensure that all potential customers
are covered by a salesperson and that salespeople are able to efficiently and effectively manage their
accounts.

• A sales territory is a geographical region or group of customers assigned to a salesperson or sales

team for the purpose of selling a company's products or services. Sales territories are typically
defined by zip codes, cities, counties, or states, and they can be as small as a single neighborhood or
as large as an entire country.

Sales territories are important for several reasons:

• They help to organize and manage the sales force. By dividing the sales force into smaller
teams, companies can ensure that each salesperson is responsible for a manageable number of
customers. This can help to improve the efficiency of the sales process and reduce the amount of
time that salespeople spend traveling.

• They help to focus the sales force on specific markets. By assigning salespeople to specific
territories, companies can ensure that each salesperson is familiar with the local market and the needs
of the customers in that market. This can help to improve the effectiveness of the sales force and
increase sales in that market.

• They can help to motivate salespeople. Salespeople are often more motivated when they are
responsible for their own territory and have control over their own sales targets. This can lead to
increased sales and improved performance.

Size

The size of a sales territory depends on a number of factors, including the following:

• The number of customers in the territory

• The density of the territory (i.e., how close the customers are together)
• The complexity of the product or service being sold
• The salesperson's experience and skills

Designing sales territories

When designing sales territories, it is important to consider the following factors:

• Geographic distribution of customers: Sales territories should be designed so that salespeople can

Assistant Professor Archana M, MBA, AIET, Bengaluru 562110

 Sales and Retail Management (22MBAMM304)

efficiently and effectively reach their customers. This may involve grouping customers together by
geographic region or by industry.

• Account value: Sales territories should be designed so that each salesperson has a mix of high-value
and low-value accounts. This helps to ensure that all salespeople have the potential to earn a good
commission.

• Salesperson's experience and skills: Sales territories should be designed to match the salesperson's
experience and skills. For example, a new salesperson may be assigned a smaller territory with fewer
complex accounts.

Designing effective sales territories is crucial for boosting your sales team's efficiency and achieving
revenue goals. Here's a comprehensive breakdown of the process:

1. Define your goals and strategy:

• What are your overall sales objectives?
• Which customer segments are most profitable?
• What's your preferred sales approach (geographic, industry-focused, etc.)?

2. Analyze your market and existing customers:

• Gather data on customer locations, demographics, and purchase history.
• Identify high-value accounts and potential markets.
• Analyze competitors' territories and market share.

3. Segment your market:

• Group customers based on shared characteristics like industry, size, or needs.
• This helps to allocate resources and tailor sales strategies for each segment.

4. Consider these factors when designing territories:

• Workload balance: Territories should be roughly equal in revenue potential and workload.
• Travel time and logistics: Minimize travel time and expenses for representative.
• Sales rep strengths and preferences: Match territory characteristics to individual skills and
experience.
• Customer relationships: Maintain continuity for existing accounts.
• Competition: Avoid territory clashes with competitors.

5. Tools and techniques for territory design:

• CRM software: Visualize customer data and map territories.
• Data analysis tools: Identify trends and patterns in customer data.
• Territory optimization software: Automate territory design and analysis.

6. Implement and monitor your plan:

• Clearly communicate territory assignments to your sales team.
• Set performance goals and track progress against metrics.
• Regularly review and adjust territories as needed based on performance and market changes.

Assistant Professor Archana M, MBA, AIET, Bengaluru 562110

 Sales and Retail Management (22MBAMM304)

1. Select the basic geographic control units: This involves choosing the level of granularity for your
territories, such as states, countries, cities, or even ZIP codes. The appropriate level will depend on factors
like your product, market density, and sales rep capabilities.

2. Consider factors influencing modifications: Several factors can necessitate changes to your initial
territory design. These include mergers and acquisitions, market shifts, customer relocations, and changes in
your product line or lifecycle.

3. Decide on the criteria for allocation: Determine how you will assign customers and accounts to different
territories. Common criteria include sales potential, customer concentration, workload balance, and travel
time.

4. Decide on the starting point: Choose a reference point for building your territories, such as a major city
or your headquarters. This will help you avoid gerrymandering and ensure balanced workloads.

5. Combine control units adjacent to the starting point: Begin by grouping together geographic units that
are close to your starting point and each other. This helps minimize travel time and expenses for your sales
representative.

6. Modify territorial boundaries to balance workload and potential: Analyze the workload and sales
potential of each territory and adjust boundaries as needed to ensure fairness and efficiency.

7. Compare territories on allocation criteria and conduct workload analysis: Once you have a
preliminary set of territories, compare them against your chosen allocation criteria and conduct a workload
analysis to ensure balance.

8. Assign sales force to new territories: Finally, assign your sales representative to the new territories
based on their skills, experience, and preferences.

Sales Quota

• Meaning: A sales quota is a quantitative goal that is assigned to a salesperson or sales team. Quotas
are typically set for a specific period of time, such as a month, quarter, or year.

• According to “Philip Kotler, A sales quota is the sales goal set for a product line, company division,

Assistant Professor Archana M, MBA, AIET, Bengaluru 562110

 Sales and Retail Management (22MBAMM304)

or sales representative. It is primarily a managerial device for defining and stimulating sales effort.

IMPORTANCE OF SALES QUOTA

• Sales quotas play a crucial role in driving the success of any sales team and business. Here are some
key reasons why they are so important:

1. Goal setting and direction:

• Quotas provide a clear, measurable target for sales representative to strive towards. They give
purpose and direction, guiding representative on what needs to be achieved and keeping them
focused on priorities.

2. Motivation and performance:

• Quotas can be powerful motivators. Achieving or exceeding quotas often comes with incentives and
recognition, which can boost morale and encourage representative to push their limits. The pursuit of
the target can also drive higher levels of effort and productivity.

3. Performance measurement and accountability:

• Quotas serve as a benchmark for evaluating individual and team performance. They allow sales
managers to track progress, identify areas for improvement, and provide targeted coaching and
support. This increased accountability leads to better sales performance overall.

4. Revenue predictability and forecasting:

• By setting quotas, businesses can gain a better understanding of their expected revenue generation.
This enables better financial planning, resource allocation, and budgeting.

5. Sales strategy and resource allocation:

• Quotas inform sales strategies by highlighting which products, services, or customer segments
require the most focus. This helps with resource allocation, ensuring that efforts are directed towards
areas with the greatest potential for revenue growth.

6. Improved efficiency and customer focus:

• The pressure to meet quotas can encourage representative to optimize their sales process and
prioritize high-value opportunities. This can lead to increased efficiency and a sharper focus on
meeting customer needs and closing deals.

PROCEDURE OF SALES QUOTA SETTING

The procedure for setting sales quotas typically involves the following steps:

1. Analyze past sales data: This helps to identify trends and patterns in sales data.
2. Set sales goals: This involves setting ambitious but achievable sales goals for the upcoming period.
3. Assign quotas to salespeople and sales teams: This involves dividing the overall sales goal into
individual or team quotas.
4. Review and adjust quotas as needed: It is important to review and adjust quotas on a regular basis to
ensure that they are still realistic and achievable.

RELATIONSHIP BETWEEN SALES TERRITORY AND SALES QUOTA

• The sales territory and sales quota are closely related. The sales territory determines the potential
customer base that a salesperson has, and the sales quota determines the amount of revenue or units
that the salesperson is expected to generate from that customer base.

• It is important to ensure that the sales territory and sales quota are aligned. For example, if a

Assistant Professor Archana M, MBA, AIET, Bengaluru 562110

 Sales and Retail Management (22MBAMM304)

salesperson has a large territory with a lot of potential customers, they should have a higher sales
quota than a salesperson with a small territory with fewer potential customers.

TYPES OF SALES QUOTA

• Revenue quota: A revenue quota is a goal set for the amount of revenue that a salesperson or sales
team is expected to generate in a given period of time. Revenue quotas are typically the easiest to
track and measure, and they can be a good way to motivate salespeople to sell high-value products
and services. However, revenue quotas can also lead to salespeople cutting corners or focusing on
short-term sales at the expense of long-term relationships with customers.

• Unit quota: A unit quota is a goal set for the number of units that a salesperson or sales team is
expected to sell in a given period of time. Unit quotas can be a good way to ensure that salespeople
are focusing on selling the company's most popular products or services. However, unit quotas can
also lead to salespeople discounting products or services in order to meet their quotas.

• Profit quota: A profit quota is a goal set for the amount of profit that a salesperson or sales team is
expected to generate in a given period of time. Profit quotas can be a good way to align the sales
team with the company's overall financial goals. However, profit quotas can be complex to calculate
and can be difficult to achieve, especially in industries with low profit margins.

• Activity quota: An activity quota is a goal set for the number of sales activities that a salesperson or
sales team is expected to complete in a given period of time. Activity quotas can be a good way to
ensure that salespeople are staying busy and focused on their sales goals. However, activity quotas
can also lead to salespeople focusing on quantity over quality, and they can be difficult to track and
measure.

• Combination quota: A combination quota is a goal that combines two or more of the types of quotas
listed above. For example, a salesperson may have a quota that includes a revenue goal and a unit
goal. Combination quotas can be a good way to address the weaknesses of each individual type of
quota.

• Forecast quota: A forecast quota is based on the salesperson's or sales team's historical sales
performance. Forecast quotas can be a good way to set realistic and achievable
quotas. However, they can also lead to salespeople becoming complacent and not striving to improve
their performance.

METHOD OF SETTING SALES QUOTA

There are two main methods of setting sales quotas: top-down and bottom-up.

Top-down quota setting

• In a top-down approach, sales leaders set quotas based on the company's overall sales goals. They
then break down these goals into individual or team quotas.
• The top-down approach is relatively simple to implement, but it can have some drawbacks. For
example, it can lead to quotas that are unrealistic or unattainable for some salespeople. It can also
lead to a lack of buy-in from salespeople, who may feel that they were not consulted in the quota-
setting process.

Bottom-up quota setting

• In a bottom-up approach, salespeople or sales teams are involved in setting their own quotas. This
approach starts with salespeople developing their own individual or team sales goals. Sales managers

Assistant Professor Archana M, MBA, AIET, Bengaluru 562110

 Sales and Retail Management (22MBAMM304)

then review these goals and make adjustments as needed.

• The bottom-up approach is more time-consuming to implement than the top-down approach.
However, it has several advantages. For example, it can lead to quotas that are more realistic and
achievable for salespeople. It can also lead to a greater sense of ownership and buy-in from
salespeople.

Hybrid approach

• Some companies use a hybrid approach to quota setting. In a hybrid approach, sales leaders and
salespeople work together to set quotas. This approach can help to combine the benefits of both the
top-down and bottom-up approaches.

RECRUITMENT AND SELECTION OF SALESFORCE

• The recruitment and selection of a salesforce is a critical process for any company that relies on sales
to generate revenue. By recruiting and selecting the right salespeople, companies can increase their
chances of success in the marketplace.

RECRUITMENT

• The recruitment process involves attracting and identifying qualified candidates for sales positions.
There are a number of different ways to recruit salespeople, including:
• Job postings: Job postings on online job boards and company websites are a common way to recruit
salespeople.
• Referrals: Referrals from current employees, customers, and other contacts can be a good way to find
qualified candidates.
• Networking: Sales leaders can network with other professionals at industry events and conferences to
identify potential candidates.
• Recruiting agencies: Recruiting agencies can help companies to identify and recruit qualified
salespeople.
• Once a company has identified a pool of qualified candidates, it needs to screen them to identify the
best candidates for the job. This may involve reviewing resumes and cover letters, conducting phone
interviews, and administering skills assessments.

SELECTION

• The selection process involves choosing the best candidates from the pool of qualified candidates.
This may involve conducting in-person interviews, reference checks, and background checks.
• When selecting salespeople, companies should consider a number of factors, including:
• Sales skills and experience: Companies should look for salespeople with the necessary skills and
experience to sell their products or services.
• Communication and interpersonal skills: Salespeople need to be able to communicate effectively and
build relationships with customers.
• Motivation and drive: Salespeople need to be motivated and driven to succeed.
• A good fit for the company culture: Companies should look for salespeople who are a good fit for
their company culture.

TRAINING OF SALES FORCE

• Training is essential for any salesforce. By providing salespeople with the necessary training,
companies can help them to improve their skills and knowledge, and to become more effective in
their roles.
• Benefits of sales force training

Assistant Professor Archana M, MBA, AIET, Bengaluru 562110

 Sales and Retail Management (22MBAMM304)

• There are a number of benefits to sales force training, including:

• Increased sales: Training can help salespeople to improve their sales skills and knowledge, which can
lead to increased sales.
• Improved customer satisfaction: Training can help salespeople to better understand and meet the
needs of their customers, which can lead to improved customer satisfaction.
• Reduced turnover: Salespeople who are well-trained are more likely to be satisfied with their jobs
and to stay with the company, which can reduce turnover costs.
• Improved company culture: Training can help to create a more positive and productive company
culture, which can benefit both salespeople and customers.

TYPES OF SALES FORCE TRAINING

• There are a number of different types of sales force training, including:

• Product or service training: This type of training helps salespeople to learn about the company's
products or services so that they can sell them effectively.
• Sales skills training: This type of training helps salespeople to develop their sales skills, such as
prospecting, qualifying leads, presenting, and negotiating.
• Customer relationship management (CRM) training: This type of training helps salespeople to use
CRM software to manage their customer relationships more effectively.
• Soft skills training: This type of training helps salespeople to develop soft skills, such as
communication, interpersonal skills, and problem-solving skills.

METHODS OF SALES FORCE TRAINING

• There are a number of different methods of sales force training, including:

• Classroom training: This type of training is typically conducted in a classroom setting by a qualified
instructor.
• On-the-job training: This type of training involves shadowing or working with an experienced
salesperson.
• Online training: This type of training is delivered online through courses, modules, and simulations.
• Blended training: This type of training combines classroom training, on-the-job training, and online
training.

Assistant Professor Archana M, MBA, AIET, Bengaluru 562110