Page 105 - DMGT507_SALES AND PROMOTIONS MANAGEMENT

Unit 5: Organising Sales Effort

5.2.1 Reasons for Setting Sales Territories Notes

A company can develop and use sales territories for various reasons. Some of the reasons are as
follows:
1. To obtain entire coverage of the market
2. To establish a salesperson’s responsibility
3. To evaluate performance

4. To improve customer relations
5. To reduce sales expenses
6. To allow better matching of salesperson to customer
7. To benefit salespeople and the company

5.2.2 Procedure for Setting up Sales Territories

In setting up or designing sales territories, these four steps must be followed:
1. Selecting a basic geographical control unit

2. Determining sales potentials in control unit
3. Combining control units into tentative territories
4. Adjusting for coverage difficulty and reallocating tentative territories.
The two basic approaches commonly used for designing sales territories are discussed below.

Market Build-up Approach

In this approach, an estimation of the present and potential products/services demand is made
by looking at how the market is built up, who are its present/potential users, how much do they
consume and at what frequency.

In this approach, information from trade directories, state publications, etc. is consolidated and
then aggregated to understand an all India market potential for the product.

Example: If the market potential for a new deluxe car in Maharashtra is 1,00,000, Gujarat
is 60,000 and Rajasthan is 50,000, it shows that the total market potential is of 2,10,000 cars in the
country. This leads to an estimation of total sales calls required per area and number of
salespersons required. Sales territories are then formed in such a manner that the sales potential
and work load is distributed among areas.

The Workload Approach

This approach is designed by WJ Talley on the basis of the workload performed by salespersons.
The following steps should be considered important when using the above approach:

1. Customers are grouped into class size according to the sales volume.
2. Optimum call frequencies for each class of customers are estimated.
3. Present and potential customers are then located geographically and arranged volume-
wise and value-wise.

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