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Management of Sales Territories and Quotas
Management of Sales Territories and Quotas
Learning Objectives
To understand the concept of and reasons for sales territories To learn designing sales territories and assigning salespeople To know territory coverage, including routing, scheduling, and time management To understand objectives and types of sales quotas To learn the methods of setting sales quotas To get insight into setting and administration of sales quotas
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Sales Territories
A sales territory consists of existing and potential customers, assigned to a salesperson Most companies allot salespeople to geographic territories, consisting of current & prospective customers
salesperson
Make tentative territories Develop final territories Objective is to equalise sales potential of territories
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Routing
Routing is a travel plan used by a salesperson for making customer calls in a territory Benefits of or Reasons for routing: Reduction in travel time and cost
B B
C 5
C 4
C 3
C 2
Circular
Clover Leaf
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Scheduling
Scheduling is planning a salespersons visit time to customers. It deals with time allocation issue How to allocate salespersons time? 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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Sales Quotas
What are Sales Quotas? Sales quotas are sales goals or targets set by a company for its marketing / sales units for a time period Marketing / sales units are regions, branches, territories, salespeople, and intermediaries Generally, company sales budget is broken down to sales quotas for various marketing units Objectives of Sales Quotas To use quotas as performance standards or performance goals To control performance To motivate people by linking quotas to compensation plans To identify strengths and weaknesses of the company
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Types of Quotas
Organisations set many types of sales quotas: (1) sales volume, (2) financial, (3) activity, (4) combination Sales volume quotas For effective control, sales volume quota should be set for the smallest marketing units, such as salesperson, districts / branches, product items / brands Sales volume quotas can be stated in (a) rupees / dollars, (b) units, or (c) points Rupees / dollars sales volume quotas are appropriate when salespeople are required to sell many products
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Financial Quotas
Financial quotas control (a) gross margin or net profits, and (b) expenses of marketing units Gross-margin / Net-profit quotas Calculate gross margin by subtracting cost of goods sold (i.e. cost of manufacturing) from sales volume. Sales managers are not responsible for cost of manufacturing Net profit quotas are generally accepted by sales mangers as it is calculated by subtracting direct selling expenses from the gross margin Expense quotas In many companies, expense quotas are stated as a percentage of sales Expense quotas to be administered with flexibility, to make salespeople cost conscious, allowing reasonable expenses
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Activity Quotas
These are set when salespeople perform both selling and non-selling activities Objective is to direct salespeople to carry out important activities For effective implementation, activity quotas are combined with sales volume and financial quotas E.G. Calling on high potential customers, payment collection from defaulting customers
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Combination Quotas
Used when companies want to control salesforce performance on key selling and non-selling activities Focus on a few types of quotas, to avoid confusing salespeople. An example:
Type of Quota Quota Actual Percent Weight Quota (Importance)
90 3
5,00,000 4,50,000
Receivables (days)
New Customers (Nos)
45
04
50
05
89
125 Total
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1 6
178
125 573
Total point score=573/6=95.5 for a salesperson Typically use points as a common measure to resolve the problem of different measures used by various types of quotas
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1) Estimate next years total market demand, or industry sales forecast, using sales forecasting methods 2) Decide the companys estimated market share for next year 3) Companys next year sales forecast= (1) x (2) 4) Find each territorys percentage share out of the total company sales in the previous year 5) Territory sales quota = (3) x (4)
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Key Learnings
A sales territory consists of existing and prospective customers, assigned to a salesperson While assigning salespeople to territories, sales manager should consider relative ability of salespeople and salespersons effectiveness in the territory Management of territorial coverage includes routing, scheduling, and time-management tools. Routing is a travel plan used by a salesperson for making customer calls in a territory Scheduling is planning a salespersons visit time to customers, based on sales and profit potentials of customers
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