A sales territory refers to a group of existing and potential customers assigned to a salesperson, sales department, distributor, or dealer for a certain period. It is essentially a "customer group." A good sales territory is composed of consumers who have the ability and willingness to pay.

Factors to Consider When Designing a Sales Territory

  1. Sales territory objectives: The goals to be achieved must be clear and quantified as much as possible.
  2. Sales territory boundaries: Clearly define the boundaries to avoid duplication of work and business friction.
  3. Sales territory market potential: Understand where the market potential lies, its size, and how to leverage it to convert potential into actual sales and revenue.

Key point: Ensure salespeople have a fair share of market potential, income, and workload, and make them aware of this.

I. Process of Designing a Sales Territory

Figure 1: Steps in Sales Territory Design

1. Select Control Units Sales territories are typically divided by geographic area and trade area. The design of a sales territory must consider the salesperson's workload, which includes all the work required to cover the entire market, including all tasks necessary to achieve sales potential. Key questions to determine a salesperson's workload:

  1. How many customers in the territory need to be visited?
  2. On average, how many customer visits are needed to receive an order?
  3. What is the total number of sales visits required per month or year to cover the entire territory?
  4. How much sales visit time is needed per month or year?
  5. How much travel time is needed per month or year?
  6. What is the effective number of visits per customer?
  7. What is the appropriate interval between visits?
  8. How much time is spent on non-selling activities each day?
  9. How much time is spent waiting for customers?

Factors to Consider When Determining Each Salesperson's Workload

  • Nature of sales work: The nature of the sales job affects the form of sales visits.
  • Product characteristics: Different products require different sales visit patterns.
  • Market development stage: In the early stages of market development, larger sales territories can be designed to ensure sufficient sales potential.
  • Market coverage intensity: Companies with many distributors require smaller sales territories to increase market share.

Methods to determine workload: a) ABC analysis: Calculate the workload of the territory to determine the number of salespeople needed. See table below. b) Rectangle method: Classify customers into four categories as shown below.

2. Determine Basic Sales Territories (Assign Salespeople)

  1. Bottom-up approach: Combine small geographic units into larger territories. a) First, determine the location, number, and size of customers and prospects, then forecast sales potential. Next, classify customers based on different needs and characteristics, typically using ABC analysis. Additionally, companies can further classify each type of customer based on different products or markets. b) Design a reasonable visit pattern, considering the number of sales visits per month or year and the frequency of visits per customer. c) Calculate the number of customer visits per salesperson based on the number and frequency of visits. Assumption: A salesperson visits 6 customers per day, making 120 visits per month.
  • Large customers: 8 visits per month
  • Medium customers: 4 visits per month
  • Small customers: 2 visits per month Territories A, B, and C require 112, 108, and 110 visits respectively. Comparing with the salesperson's capacity of 120 visits, it is clear that three salespeople can fully cover these territories.

  1. Top-down approach: Divide the entire market into smaller sales territories. a) Determine the company's total sales volume. b) Determine the average sales volume per salesperson. c) Determine the number of sales territories: Total sales volume / Average sales per salesperson = Number of territories. d) Divide the sales territories based on the principle that each salesperson has equal sales potential.

  2. Arrange visit routes a) Designing visit routes is essentially a time allocation issue. Reasonable route planning can maximize the use of salespeople's time. b) Effective route design procedure:

c) Route types:

  • Straight line: Start from the company, visit all customers along the way, then return directly to the company via the same or another route.
  • Jumping: Start with the customer farthest from the company, then visit customers on the way back.
  • Circular: Start from the company, visit customers in a circular pattern, and return to the company at the end.
  • Cloverleaf: Similar to circular, but the territory is divided into a series of leaf-shaped areas, and the salesperson visits one leaf area at a time.
  • Territorial: Not a true route design technique but a time management technique to avoid duplicate visits.

Route forms may deviate due to market changes, so when a route form has been used for a period, it needs to be re-examined. These periodic checks can reveal the true state of the territory and allow for target adjustments.

d) Schedule daily visit routes After selecting a route form, schedule the daily visit routes for each salesperson based on the number of customers and visit frequency in the territory, and draw a daily route map. For example, in Territory A: 5 A-level customers (2 visits/week), 7 B-level customers (1 visit/week), and 22 C-level customers (0.5 visits/week). The daily customer visits can be scheduled as follows: Note: Daily sales time = Number of A-level customers * 1 + Number of B-level customers * 0.5 + Number of C-level customers * 0.3 When scheduling routes, consider the proximity of customers and the different visit times allocated to different levels of customers, and reasonably arrange the daily workload. Compared to the average sales time of 3.6 hours/day (= 8 hours * 45%), none of the above daily workloads exceed this.

3. Supervision of Sales Territories To monitor the performance of sales territories under different market conditions and promptly identify deviations in actual execution, an evaluation procedure should be established. The evaluation procedure should include the following elements: a. Frequency of checks. b. Identify problems and seek opportunities: Use periodic performance reports, compare sales/quota ratios, or use trend analysis to achieve this. c. Adjust activities: Link sales consultations, regional training, sales meetings, and other activities to sales results.

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