new members of a sales force, or as less-demanding settings for senior members.Salespeople can be assigned to more challenging territories in accordance with their performance. A more appropriate objective in many cases may be adequately challenging territories, formed by taking into consideration coverage difficulty, salespersons' varying abilities, and territorial sales potentials. The coverage objective is related to territory potential, since the latter will no be fully realized unless salespeople call on customers with the appropriate frequency. Adequate coverage is necessary for the firm to be able to achieve and defend a sizable market share in the face of vigorous competition. Ideally, coverage should be both effective and efficient: effective so that no significant sales opportunity in the territory remains unexploited, and efficient in that neither money nor time is wasted Another important consideration in establishing territories is the sales representative's workload and nature of the job. A person whose job is to prospect and sell can make more calls in a given day than a representative who must service each account (take inventories, write reorders, train personnel in products, and so forth). A prospecting salesperson can handle a larger territory assignment than a person who must provide full service for each account. The type of product can dictate territorial size as well. The more selective the product, the larger the territory. Other factors affecting territorial configuration and size are the selling and organizing abilities of the sales representatives, the type of competition faced by the company, the desired intensity of market coverage, the stage of development a particular market has reached, the channels of distribution available, and the types of transportation used. Bases for Territories The objectives and criteria for sales territory formation are directly related to the bases used in creating the territories. The actual division of a firm's customer base into individual territories can be achieved by means of several methods, depending on which of four alternative types of bases is most important: geography, potential, servicing requirements, and workload. These bases are described below. Geography. The establisliment of geographic territories—the most frequently used basis—is simple because it tends to adopt existing geopolitical boundaries such as states, counties, or cities. The major advantage of the geographic approach is the ready availability of secondary data from such sources as the U.S. Bureau of the Census, A.C. Nielsen's Retail Index, or Sales & Marketing Management magazine Buyer Power Index. In terms of the sales opportunities existing for a particular kind of product, however, strictly geographically based territories tend to become quited arbitrary. The use of trading areas can help overcome this problem. Trading areas mirro natural traffic and shopping flows to and from hub cities. They differ from one product category to the next. Some of the companies using trading areas lose some of their realism by arbitrarily adjusting their outlines to fit existing political boundaries. This is done primarily to use available statistical data. Potential. The potential approach refers to splitting up a finn's customer base according to sales potential. It would seem to provide equality of opportunity an Among these aspects are the servicing requirements of current and prospective future accounts. management has to estimate the sales potential for the entire company. A refinement of this approach classifies all accounts according to their annual potentials.thus bring out the best in salespeople. So. the customer base constituting these potentials could differ from one territory to another. competitive activity. They are serviced regularly. a firm may give every territory manager two hundred accounts to service and prescribe an average frequency of ten calls per day. This raises complex issues of equity in workload and compensation. B accounts are solid. the approach ignores the differences in coverage difficulty. To contrast two possible extremes. whereas another might be asked to work with 500 accounts doing $1000 worth of business annually. Next. one salesperson might have a single customer worth $500. C accounts are marginal and may warrant only quarterly visits. This would mean that twenty territories would be formed. B.000 a year. It not only considers individual account potentials and servicing requirements in creating territories. account locations. and competitive intensity are among the factors that require modification of the equal-potential principle. Sales management has further determined that each salesperson can handle a personal sales potential of $500. workload. Depending upon the account mix. it fails to account for the . This would mean that all accounts are visited once durinn a month's twenty working days. and so forth. other aspects related to each individual territory must be considered too. The fourth sales territory base. while potential has to be taken into account. First. The sales potentials of all the territories should be identical. Servicing Requirements. Although this procedure is simple.000. his or her urban counterpart may easily accomplish ten or even fifteen visits daily. A single urban area is likely to represent several sales territories. but are also most vulnerable to competitive efforts. typically by applying an expected market share percentage to the projected market potential. servicing requirements will differ from one territory to the next unless adjustments are made to achieve and equitable distribution. This average sales potential is divided into the organization's overall sales potential to arrive at the number of territories needed. The procedure is relatively simple. goes one step further. and C accounts based on their annual volumes and established call frequencies. Workload.000 each. steady business. it has to determine what sales potential will be appropriate for the average salesperson. The best known of these classifications distinguishes between A. However. Topography. Some companies try to attain equlty by assigning finite numbers of accounts and establishing average call frequencies. An accounts are cultivated aggressively and may receive weekly or even more frequent calls: they represent the mainstay of the business. However. A rural salesperson may only be able to carry out two or three sales calls a day. perhaps at monthly intervals. but also reflects differences in coverage difficulty caused by topographical features. whereas a rural state may not offer enough potential for even a single sales representative. all of which would have identical sales potentials of 5500. Assume that a firm has estimated its total sales potential at $10 million for a given year. For instance. customer density. Other firms design territories to fit products or product lines. With this approach additional territories are created as long as the marginal profit generated exceeds the cost of servicing them. to be formed. If a company can determine this kind of information. hamper the method applicability since it requires a cost accounting system capable of determining sale costs. This vital rapport occurs more readily if the sales representative's personal charactertistics correspond closely those of key contacts at major accounts. The result is the number of territories. Assigning Salespeople to Territories The same salesperson can succeed in one territory and fail in another — with the same amount of effort. The method then sets an average sales figure per salesperson that is subs quently divided into the overall sales forecast. a salesperson has to relate well to the majority of the company's customers it contains. Administrative difficulties. In high-technology companies in which highly specialized product knowledge is essential. there may only be one or two persons available who understand the complexities involved. To succeed in a given territory. account mixes can be created to satisfy the dual goals of adequat sales challenge and adequate customer coverage. These differing outcomes may result from differing account mixes. The breakdown method proceeds in the opposite direction. It is best to have these product specialists cover substantial areas if pursuit of a limited number of customers and prospects. This can lead to a self-fulfilling prophecy. which is in turn derived from projection of the total market potential and an estimate of the company's likely share of it. profits can be maximized by increasing the number of territories up to the point of negative returns. The method. It starts with the overall sales forecast for the entire company. Such an approach may prove satisfactory lor industrial goods pro ducers that desire selective distribution. . however.different servicing requirements of the various account categories and neglects new account development. sutlers from severe conceptual paradox: Instead of viewing sales as a result of saleslorce effort. This method is favored by man consumer goods manufacturers looking for intensive distribution. Sales managers should attempt to make salesperson and contact characteristics to the extent possible. however. They are often matched by a sparsity of accounts involving this kind of highly specialized technology. the number of members in the sales organization are determined by the expected overall sales. frequencies and determining how many calls a salesperson can reasonably be expected to make. and then forecasting sales accordingly. After classifying them according to desirable can. Methods of Designing Territories The buildup method of designing territories involves combining enough pieces of a company's overall market to create units that offer sufficient sales challenge. Than use this approach. and profits associated with various levels of input. actual and potential customers have to be identified and the individual sales volumes assessed. The incremental method is conceptually the most appealing. however. demoralizing to the salesforce. thus reversing the logic of territorialization. Some companies. Since outstanding salespeople may not be adequately challenged if assigned to the territories with the highest potentials. Its use is dependent on the availability of adequate cost data. may even redesign territories to fit entrenched salespeople. differences in those potentials should be reflected in different sales quotas. on the other hand. To avoid demoralizing individuals assigned to territories with low potentials. this means that top performers are given the best territories. If individual desires and preferences are reflected in assignments. Where the focus is on profits. and frequently harmful to profits and sales volume. is higlily disruptive to steady customer relationships. The ideal practice is to assign each salesperson to that territory where the person's relative contribution to the company's profits will be highest. Building business requires continuity of effort. Frequent territory turnover. whereas beginners get the weakest. salespeople will be positively motivated to achieve higher performance levels.Success is further achieved if territorial assignments are kept stable over time so that salespeople closely identify with their territories. . territories with unequal potentials are assigned according to the perceived abilities of different sales personnel. higher profits may result from placing them in second-tier territories. Generally. but a rigid application of this method will not necessarily maximize profits. bent on avoiding transfers at all costs. This approach redirects managerial thinking from a volume orientation to a profit orientation. The top-down method allows new members of the sales organization to work their way up or older members to phase into retirement. The first concern here should be sales volume and market share goals in the territory. The success of territory management hinges upon the analytical skills that the salespersons m charge possess or. or quarterly. The final component of the planning phase deals with tactical issues. medium. and small) is then assigned an appropriate call frequency. Tlte volume of business obtained from the territory during the planning period is affected by the frequency with which the sales representative calls on the various accounts. Familiarity with customer characteristics is helpful when the salesperson selects the items from the firm's overall product mix to be emphasized within the territory. Sales records provide a reasonable indication of each account's total purchase volume in a certain product category. on the analytical assistance and support they receive from their superiors. This model is shown in Fig. starting with corporate objectives. Established and new accounts have servicing requirements that are based on both their past volume with the company and their unique needs and problems. and control. The analysis component deals with three key concerns: account load. It is made up of four components: analysis. strategies. including promotional pi icing and payment terms. New business targets should also be part of every territory plan. Routing refers to a salesperson's travel plan. Pricing policies. account potentials. The term "scheduling" refers to the sequencing of appointments or unannounced visits for maximum contact time. The latter is an issue of time management and involves routing and scheduling tasks. alternatively. which should be denved in a top-down manner. such as intensity of territory coverage and the minimization of nonproductive time. or the sequence of locations to be visited.A MODEL OF TERRITORY MANAGEMENT Having defined and explored the concept of territory management. Volume targets in and of themselves are of little value. 6-1. and servicing requirements. and tactics. such as weekly. and explored the scope of its activities. From this information. . profit objectives are essential to keeping territory performance on track. and C (large. They include both the introduction of new product lines with established accounts and the conversion of selected prospects into buyers. monthly. we can now design a model of the territory management cycle. The flow diagram of territory management activities necessarily begins with the planning phase because it governs the entire process. The territory manager next proceeds to map sales strategies. Considerable economies and sales results can be achieved by effective time planning. implementation. objectives. are also pan of the strategic approach to territory management. B. In order to optimize the calling pattern. It reflects the cyclical nature of territory management and highlights the three major responsibilities emphasized earlier when it was defined: planning. the accounts making up the territory have to be categorized according to their potentials. Each account type A. New business potentials must also be considered. The term "account load" refers to the number of actual and potential customers assigned to a given salesperson. Both routing and scheduling are concerned with time management. the territory manager can project account potential. Caretul study of a territory's data base enables the sales representative to proceed to the next step of the planning phase — the setting of objectives. or the share of an account's business that the firm can reasonably expect to attract. A wall chart using different colored pins to indicate potential and desired call frequen cies can be used. Without specific guidelines and instructions. Finally. They feel that this is "covering" the territory. he or she may not be able to spot a problem while it can still be resolved easily. The principles applied in connecting the customer locations on the map into routing plan are obvious. The process begins with account identification. This effort requires routing and scheduling programs and dealing with territory management problems. a travel pattern must be established that guarantees complete and predictable coverage of all accounts. Length of visits to customers. If done properly. must also be spelled out. sales personnel must now be routed. Climate may play role if areas are inaccessible during certain times of the year. Sales managers assist their salespeople by providing guidance and controls for territory management. sales management faces the challenge of making the system work successlully on a day-to-day basis. Too much control can limit creativity and result in losing a top performer. Where using an automobile is impractical.OPERATING THE TERRITORY MANAGEMENT SYSTEM Once territories have been established or revised to lit current needs and all members of the existing sales force have been assigned. Taking into account both daily call rates and the classification of the territory's customer base. some sales representatives simply go from one customer to the next making no distinction between how longer frequently they visit each. Routing Having established sales territories using one of the methods mentioned. as well as frequency. Most managers try to combine "hands-on" and "hands-off" approaches so that flexibility and results are maintained. Topographical features must be considered if these account locations are to be organized into an orderly succession of calls. Calling sequences must be laid out that satisly the dual objectives of minimizing travel time and maximizing frequency of visits. however. modes of public transportation and their departure frequencies have to be studied. Since daily or weekly routes tend to start and end in the same location (the salesperson's home or office). . if a sales manager is too relaxed about territory management. On the other hand. managers must decide which territory management approach works best for each salesperson. it may be important to retlect trading are boundaries in the route-planning effort. a definite pattern begins to emerge. routing ensures effective and efficient servicing of all accounts. Decisions have to be made concerning the geographic pattern of account coverage. The geographic locations on actual and potential customers have to be put on a detailed map of the territory. Travel distances between two calls should be minimized and backtracking on the same route and crisscrossing back and forth across territory should be avoided. 6-2. a cloverleaf pattern of four or more adjoining circular sequences can provide the desired intensity of coverage without sacrificing economy. this would mean that every account is visited once every four weeks. If size and diversity of the territory prevent its use. rather than a circular. Responsibility for route planning depends largely on the nature of the product and the account mix as well as on a company's managerial philosophy. In between these extremes is the possibility of the district sales manager deciding the calling sequence. At the other extreme. such as routes covered by a driver/delivery person in the tobacco and bakery products industries. The salesperson begins with a call on a customer located at that perimeter and then works back to the home base by calling on accounts located in the interior portion of the territory. In a four-leaf clover. These individual routes represent one week's list of calls to be made. traveling route. headquarters does all the routing—possibly with the help of computer models. follows more of a hub-andspoke. on the other hand. it is best to leave territory planning to the territory manager. Several spokes radiate from the hub (salesperson's residence). and the salesperson works back from there toward the hub in a zigzag manner. territory managers are left to their own devices in developing calling patterns. Salespeople understand their customers and territories. The three basic routing patterns are outlined in Fig. routing approaches that involve participation by salespeople are more likely to be successful than those imposed by sales managers. By contrast. At one extreme. if differentiated call frequencies are indicated by the account mix and sensitivity to changes in local market conditions is essential. Headquarters routing is typical and appropriate in product categories that require the regular servicing of large numbers of accounts at identical frequencies. and they know about travel conditions and customers' time demands. As a general rule. Salespeople will also be committed to the routing method if they have had a role in establishing it.This pattern is often achieved by identifying customer locations that are situated at the outer perimeter of the territory. Each calling sequence starts at the outer end of a spoke. This is known as the straight-line method of routing. A hopscotch pattern. . or even the time of the day. but rather direct. and the like. as well as according to the number of people involved. Well-managed sales organizations do not turn sales representatives loose in assigned sales territories. Note that only about half of a salesperson's time is spent selling. Waiting times on customer premises may also vary according to the time of year. Scheduling refers to the task ot allocating the salesperson's time asset. The success of scheduling is enhanced if appoint metns are set up ahead of time. Reasons for divergence should be investigated to sharpen future scheduling.Scheduling Whereas geographic and account potential considerations predominate in routing decisions. It scheduling a particular time unit's activities. or a month. Depending on the person or persons that must be seen at each customer's offices and the subjects that must be addressed during the meetings. These and additional time management suggestion will be covered in the next section. new business openings. it has to be used wisely. more or less time may be needed than in previous visits. waiting. . guide. and travel times involved with the specific accounts that form the agenda for the upcoming call sequence. Assessing Time Utilization Time management at the territorial level has as its objective the structuring of salesperson's scarce time resources in such a way as to maximize productive time and minimize wasted time. When there is no breathing room on a salesperson's schedule. Each territory manager's planned use of time should be compared with the time actually consumed during the week. Individual achievement levels depend on how well the territory manager utilizes time. a week. Travel time between accounts tends to be fairly stable unless conditions such as rush-hour traffic or road construction interfere. proper use of a salesperson's time hinges on careful scheduling. Building some buffer lime MHO the daily program permits flexibility to deal with unexpected events such as car trouble. This takes into account all the activities performed by the representative during a day.1-1 Time also has to be sel aside for planning and support activities. Although averages based or historical data and experience will provide approximations. TIME MANAGEMENT For many sales managers. time is a sales professional's most valuable resource. they have to be modified and adjusted to reflect the circumstances of the specific planning period. the day of the week. estimates have lo be developed for the customer contact. Apart from talent. To yield maximum benefit to both the salesperson and the company. managing their lime and that of their salespeople is one of their most crucial tasks. and supervise them in time management. Figures 6-3 and 6-4 show how salespeople and sale managers actually spend their lime. even a little emergency can make a simple challenge seem impossible. Customer contact effectiveness is greatly dependent upon the salesperson's preparation for each individual sales call. anticipating objections. order followup.To develop effective time management strategies. Time invested in planning presentations. They involve paperwork. however. as has been done in Fig. The most important use of a sales representative's time is customer contact such as face-to-face and telephone selling and servicing. . since they fail to produce benefits for anybody. Support activities represent an equally important function. For example. it is useful to classify alternative time uses with regard to their productivity. including sales reports. Whereas the above activities ought to be maximized—with particular emphasis on customer contact—the remaining two time uses of travel and waiting listed in Fig. most waiting time is wasted unless it can be used to elicit useful information on customer needs and practices or on industry trends. and developing appropriate answers for them is time well spent. 6-5 should be minimized. 6-5. It would be wrong. and professional development through self-study programs. to consider all other uses of time unproductive.