Page 182 - DMGT205_SALES_MANAGEMENT

Sales Management

Notes 11.13 Objectives and Criteria for Territory Formation

Proper territory formation is important as:
1. It affects the sales force morale and performance. Results may be measured by sales volume,
market share, or profits. The job of a sales manager is to form optimum number of territories
and their configuration. In case of insufficient territories' sales will suffer for lack of coverage.
If too many territories are formed the account will be fragmented as sales people may not
get sufficient sales from their respective territories and a higher labour turnover may result.

2. Another objective is the equalisation of territory potential. This is to provide equal
opportunities for the sales person since territories differ in many aspects including the
potential and they become big or small accordingly. Travelling requirement and coverage
is another problem. Added to this, is the fact that the current potential of a territory cannot
be assessed at a particular given time.
In many cases territories having different potential are treated as potential territories and they
may be made training grounds for new salesmen and more productive territories may be given
to senior sales people. Therefore, while forming territories factors like territories with different
sales potential, sales ability or performance index of the salesman and factors like coverage
difficulty in territories should be considered.
Another factor is the frequency of calls. If there are lesser calls or frequency is less than sales
opportunities are lost and with excess calls time and money are wasted.
Sales representatives work load must also be considered - if he is prospecting and selling then he
has to make more calls whereas a person who is servicing the accounts (investors, write orders,
trained personnel in products) will make lesser calls.
The type of product can dictate territorial size as well. The more selective the product the larger
the territory. Other factors are organisational abilities

!
Caution Expense quotas are related to selling costs within reasonable limits. Some
companies set quotas for expenses linked to different levels of sales attained by their sales
force. Salespeople may receive an expense budget that is a percentage of the territory's
sales volume. The salesperson must spend only this amount as expenditure.

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Case Study RAJ Tyres

aj Tyres is a company involved in the import and marketing of car tyres
manufactured in the Far East. Raj Tyres established the business in 1990 when a
Rfriend living in Singapore told of the supply of tyres from that area which
substantially undercut European prices. Although tyres from the Far East were not as long
lasting as European (average 20,000 miles compared with 30,000), they were produced in
accordance with high standards which meant that problems like weak spots, cracks and
leaks were less serious than with European tyres.
Raj Tyres believed that a viable target market existed for the sale of these tyres in India. He
was of the opinion that a substantial number of people were primarily interested in the
purchase price of tyres. This price-sensitive target market could roughly be described as
Contd...

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