Page 181 - DMGT205_SALES_MANAGEMENT

Unit 11: Controlling the Sales Effort

Companies whose MSAs are too large to serve as a basic geographical control of units deal Notes
directly with large number of customers in urban areas and commonly assign two or more sales
persons to the same MSA. In such cases, companies use either minor political division of cities or
a cluster of continuous census tracts as control units.

Trading Areas

Trading areas are based upon the natural flow of trade. The trading area recognises that consumers,
retailers and wholesalers pay scant attention to political boundaries in deciding where to buy.
Consumer, for example, regards convenience and the merchandise selection available as key
factor in deciding where to shop.
It is difficult to define trading areas, as they vary from product to product, for example, normal
work clothes can be purchased from even a town shop but dress clothing requires shops in big
cities or areas. Trading areas for products purchased frequently and routinely are much smaller
in size and consequently more numerous than those of luxury items.

Sizes and shapes of trading areas even fluctuate seasonally just like climate. Some companies
however identify trading areas for their own products.

States

These are geographical units where state territorisation is justifiable. One is when the sales force
is covering the market extensively rather than intensively, other situation can be when a company
is seeking national distribution.
The main difficulty in using it as a control unit is that it is a political rather than economic
division.

Combining Control Units into Tentative Territories

The next step is combining units into 'tentative' sales territories so as to obtain a first
'approximation' of sales territories by combining Continuous Control Unit into tentative
territories, each containing approximately the same sales potential.
At this point number of territories are decided assuming that all sales personnel are of average
ability. Basically the percentage of total sales potential that the average sales person should
realise is estimated. In this estimation the past sales experiences help to determine the number
of territories. In effect, the planner estimates the sales productivity per sales personnel unit and
divides it into the total estimated sales potential and the number of sales personnel units and
territories required. For example, management estimates that an average sales person should
realise 25 lakhs of total sales potential of 250 thousand – ten territories and ten units (25,00,000/
2,50,000) of sales personnel are required.
After this estimation and calculation, similar Control Units are combined into tentative territories
of roughly equal sales potential.

Procedure for Developing Territories

While developing territories a procedure has to be followed and objectives are considered such
as work load and opportunity equalisation. There are many approaches and these are quantitative
in nature. The process begins with a certain unit of aggregation or base and involves certain
points if adjustments are to be made.

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