06 - Management of Sales Territories & Quotas

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    SALES AND DISTRIBUTIONMANAGEMENT

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    06Managementof

    Sales TerritoriesandQuotas

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    Sales Territory A sales territory comprises a group of customers or

    a geographical area assigned to a salesperson. The territory may or may not have geographical

    boundaries.

    A salesperson is assigned to a geographical area

    containing present and potential customers.

    The total market of most companies is usually toolarge to manage efficiently.

    In technical selling style, geographical

    considerations are ignored and sales personnel are

    assigned entire classes of customers, regardless oftheir locations.

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    Sales Territory

    Why do some firms change

    territory assignments

    as often as their socks?

    What are the repercussions

    of such

    fickle-mindedness?

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    Reasons for establishing Sales Territories

    Better market coverage

    Effective use of sales force Convenient way to evaluate the performance of a

    salesperson

    Enhance employee morale

    Understand and serve customers in a better way

    Develop loyalty

    Develop specific marketing programmes for the

    specific territory

    Develop trade promotion strategy

    Cost control

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    Reasons for not setting-up Sales Territories

    The sales territory designing may not be

    possible in the following:

    New companies

    Small companies Where customers are geographically

    dispersed

    Some organisations may need industry

    specific groups

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    Assigning Sales Territories Know the market

    Score the potential opportunity

    Draw the borders

    Involve the sales team

    Minimize future changes but plan for them

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    Designing Sales Territory

    1.Select the basic geographicControl units

    2.Decide on the criteria for

    allocation

    3.Determine basic territories

    4.Assign sales force to new

    territories

    5.Revising sales territories

    Factors influencing Themodification Of

    a territory

    Merger

    Market consolidation

    Split in division

    Sales force T/O

    Customer relocation

    Product life cycle

    change

    Product line change

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    Designing Sales Territory

    1. Select the basic geographic control units

    While designing territories, the first step is to

    select a geographical control unit as a territorial

    base.

    A typical territory may compromise several

    individual units

    2. Decide on the criteria for allocation

    Management should determine the location and

    potential of both present and prospective

    customers within each selected control unit. To get information, the company can make use

    of lot of data which is easily available.

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    Designing Sales Territory3. Determine basic territories

    Methods of determining the territory are

    Build up method

    Breakdown method

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    Buildup method

    Management

    must

    determine

    Desirable call

    pattern

    (call frequency)

    Total calls

    needed In each

    control group

    Workload capacity

    Tentatively set

    territorial lines by

    combining control units

    until total calls needed= total calls possible

    Modify territories

    as needed

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    Breakdown method

    Management

    must determine

    Company sales

    potential

    Sales potential

    In each control

    unit

    Sales volume

    expected from

    each

    salesperson

    Tentative territorial

    boundary lines by

    combining control

    units until total

    sales potential =

    expected sales volume

    Territorial

    modificationsAs needed

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    Designing Sales TerritoryRouting the sales force

    Routing is the managerial activity that

    establishes a formal pattern for sales reps to

    follow as they as they go through their territories

    Territory shapes

    Circle

    Wedge

    Cloverleaf

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    Designing Sales Territory

    4. Assigning salespeople to territories

    Sales representatives age, selling skill,

    experience, initiative, creativity etc. has to be

    taken into account while allotting the territory

    Many companies design territories of unequal

    sizes to take care of this aspect

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    Assigning Salespeople to TerritoriesSales Manager should consider two criteria

    Relative ability of salespeople, based on key

    evaluation factors Product knowledge

    Market knowledge

    Past sales performance

    Communication Selling skills

    Salespersons Effectiveness in a Territory

    Decided by comparing social, cultural and

    physical characteristics of the salesperson withthose of the territory

    Objective is to match salesperson to the territory.

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    Management of Territorial Coverage

    Planning efficient routes forsalespeople

    Scheduling salespeoples time

    Using time-management tools

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    RoutingRouting is a travel plan used by a salesperson for

    making customer calls in a territory.

    Benefits of routing

    Reduction in travel time and cost

    Improvement in territory coverage

    Importance of routing depends on the application

    Nature of the product

    Type of jobs of salespeople

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    Procedure for setting up a Routing Plan

    Identify current and prospective customers

    Classify each customer into high, medium or lowsales potential

    Decide call frequency for each class of customers

    Build route plan around locations of high potential

    customers

    B

    Circular

    B

    Clover Leaf

    Base

    (B)

    C

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    C

    1

    C

    4

    C

    3

    C

    2

    Straight line / Hopscotch

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    h d l

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    SchedulingScheduling is planning a salespersons visit time to

    customers.

    Sales Manager communicates to salesperson

    major activities and time allocation for each

    activity

    Salesperson records actual time spent on various

    activities for 2 weeks

    Sales Manager and salesperson discuss and

    decide how to increase time spent on major

    activities

    Companies specify call norms for current customers,

    based on sales and profit potentials and also for

    prospective customers.

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    Time Management Tools

    Laptop computers and cellular phones

    Inside salespeople provide clericalsupport, technical support and support

    for prospecting and qualifying

    Outside salespeople can then spend more timegetting orders & building relationships with

    major customers.

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    Sales Quota

    A sales quota is the sales goal setfor the product line, companydivision or sales representative.

    It is primarily a managerial devicefor defining and stimulating salesefforts.

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    Assignment Territory Management

    Rajesh is the star salesperson in a company.

    His quota for the year is Rs 10 crore. Each sale he makes

    averages at about Rs 1 crore. Rajesh knows that he spends nearly 0.1 day for each

    opportunity in the prospecting stage of the selling process and

    that only 10% of those opportunities are worth pursuing and

    qualifying.

    He spends about 2 days qualifying every opportunity,

    understanding requirements and developing the opportunity.

    He ends up qualifying only about 60% of the opportunities and

    eliminates the others from his funnel.

    He spends about 5 days in developing his solution and

    presenting these to the customer.

    He is put on the shortlist for about 70% of these opportunities. Finally he spends about 3 days closing each opportunity. This

    includes revising proposals, negotiating and answering anycustomer concerns.

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    Assignment Territory Management

    He has a reasonably high win ratio since 85% of theopportunities he works on closing are actually won.

    There are typically fewer than 220 working days in a year. Rajesh had wanted to take vacation for 7 days, had planned on

    attending training in new products (requires 5 days). He neededto spend time supporting current customers and handlingadministrative tasks (requires 10 days).

    Based on the way he manages his activities in selling, he finds

    that he will not have enough time to manage his territory.

    Questions How many days does Rajesh need to achieve his sales quota?

    If he takes vacation for 7 days, goes for training for 5 days and

    also spends 10 days in administrative tasks, what should he doto achieve his sales quota so that he still saves some time? You may assume the qualifying time is reduced to 1.5 days for

    each opportunity, 4 days for developing the solution and 2 daysin closing the opportunity.

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    Assignment Territory Management

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