Page 186 - DMGT205_SALES_MANAGEMENT

Sales Management

Notes Reasons for Revising Territories

When a company first forms territories it is not in a position to know everything. As it gets to
know the customers, the types of accounts and the dynamics of business activity it has to bring
about changes.
Revision of territories takes place due to different reasons.
Customer Related Reasons: Revision of a territory may take place due to shift in customers
business which may be geographic or technical in nature or which may be related to the firm's
product policies. More aggressive domestic or international competition may also necessitate
change.
Sales Person Related Reasons: Revisions can start with physical or psychological changes. Sales
person with advanced age may not have the energy to cope with the pressure required. Family
problems of a sales person may necessitate changes. A sales person may also be frustrated due
to inadequate challenges or due to monetary reasons. A change may be required due to any of
these factors.
Management Misjudgement: These could be the underestimating of a sales potential of a territory.
Underestimating the territory is more common than overestimating the territory. If the territory
is large then a sales person just skims the territory rather than working thoroughly. If the sales
are overestimated then territories formed are small or undersized.
Realignment also becomes necessary when new product lines are introduced as companies
product mix may become too large or the product may reach the maturity stage. All these factors
lead to change in territories.

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Caselet Evaluation System of a Company
A a number of products at different prices with different profit margins.
consumer durable company which is operating in several territories was selling

Previously the company was setting quotas for the salesman and were only interested in
the volume of sales made by the salesmen. Later the company realised that if proper
allocation of time is given to different products with different profit margins then the
company could be benefited in a better manner. The company felt that by considering the
net profit quota (Where different products contribute to varying levels of profit) sales
persons can optimally balance their time between high & low profit yielding products.
Therefore they changed their evaluation system and evaluated their salesmen on the net
profit quota as well.
Following is a table where two salesmen have to be compared on the ratio of sales volume
to net profit.

Compare the two salesman A & B on the following criteria.
Prod. Sales price Profit Margin Volume of Volume of
Per unit Sales by A Sales by B
X 300/- 210/-(70%) 2000 6000
X 200/- 80/- (40%) 3000 2000
2. 100/- 20/- (20%) 8000 1000

Contd...

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