CHAPTER FIVECHAPTER FIVE

Territory Management

TERRITORYTERRITORY

A territory geographically defined area assigned to a sales person present customers potential customers

SALES FORCE SALES FORCE PRODUCTIVITYPRODUCTIVITY

A crisis-- In the last ten years, selling

costs have risen almost twice as fast as average sales volume per salesperson

HOW SALESPEOPLE HOW SALESPEOPLE SPEND THEIR TIMESPEND THEIR TIME

Face-to-Face Selling = 30% Telephone Selling = 21% Waiting / Travelling = 20% Administrative Duties = 17% Service Activities = 12%

SALES FORCE SALES FORCE PRODUCTIVITYPRODUCTIVITY

How can we improve productivity? Focus on high volume

accounts Focus on selling time

MINIMUM ACCOUNT MINIMUM ACCOUNT SIZESIZE

Don’t pursue accounts that are unprofitable!!

COST PER CALLCOST PER CALL

Cost per call is a function of number of calls per day number of days available to

make calls direct selling expenses

Direct Selling Expenses # Calls per day X # Days to

Sell

COST PER CALLCOST PER CALL

Example (see Table 5.1; page 230)

Total Direct Expenses = $90,250

205 days to sell; average 3 calls per day

Cost per call = $90,250 / 205 x 3 = $146.75

BREAK EVEN SALES BREAK EVEN SALES VOLUMEVOLUME

The sales volume necessary to cover direct selling expenses

Breakeven Volume is a function of: Cost per call Number of calls to close Sales costs as a percentage of

sales

BREAK EVEN SALES BREAK EVEN SALES VOLUMEVOLUME

Cost Per call X # of Calls to Close

Sales costs as a % of Sales

BREAK EVEN SALES BREAK EVEN SALES VOLUMEVOLUME

See Table 5-2; page 231Electronics Industry--Cost per call = $133.30--Number of calls to close = 3.9--Sales Costs as a % of sales = 12.0Breakeven volume = $133.30 x 3.9 / .12 = $4,332.25

TERRITORY TERRITORY IMPLICATIONSIMPLICATIONS

Perform a customer by customer analysis!

Assess selling strategy

ALLOCATION OF ALLOCATION OF SELLING EFFORTSELLING EFFORT

Consider the time we spend with customers!

Single Factor Models Portfolio Models Decision Models

SINGLE FACTOR SINGLE FACTOR MODELSMODELS

Easy to develop and use Classify accounts into categories based

on one factor, such as market potential Assign all accounts in the same

category the same number of sales calls Decisions are made on the basis of one

factor. Differences among accounts are not taken into consideration

SINGLE FACTOR SINGLE FACTOR MODELMODEL

CATEGORY AVG SALESCALLS-1998

AVG SALESCALLS-1999

A 25 32

B 23 24

C 20 16

D 16 8

PORTFOLIO MODELSPORTFOLIO MODELS

Accounts are classified into categories of similar attractiveness for receiving sales call investment.

Selling effort is allocated so that the more attractive accounts receive more selling effort.

ACCOUNT ACCOUNT ATTRACTIVENESSATTRACTIVENESS

Account Opportunity The account’s need for and

ability to purchase the product High / Low

Competitive Position The strength of the relationship

between the firm and the account Strong / Weak

PORTFOLIO MODEL PORTFOLIO MODEL SEGMENTSSEGMENTS

Strong Competitive Position/High Account Opportunity

“Core Accounts” Accounts are very attractive due to

strong competitive position Accounts should receive a heavy

investment of selling effort to maintain/improve competitive position

PORTFOLIO MODEL PORTFOLIO MODEL SEGMENTSSEGMENTS

Weak Competitive Position/High Account Opportunity

“Growth Accounts” Accounts are potentially attractive

due to high opportunity Additional analysis required to

identify accounts where competitive position can be improved. Target these accounts

PORTFOLIO MODEL PORTFOLIO MODEL SEGMENTSSEGMENTS

Strong Competitive Position/Low Account Opportunity

“Drag Accounts” Accounts moderately attractive;

future opportunities are limited Accounts should receive an effort

sufficient to maintain current position

PORTFOLIO MODEL PORTFOLIO MODEL SEGMENTSSEGMENTS

Weak Competitive Position/Low Account Opportunity

“Problem Accounts” Accounts very unattractive Accounts should receive a minimal

of selling effort. Less costly forms of marketing might be considered (telemarketing, direct mail) and/or the elimination of account coverage

PORTFOLIO MODEL PORTFOLIO MODEL EXAMPLEEXAMPLE

HI AO / STRONG CPAvg Calls 1998: 6 .1Avg Sales: $8,615Num ber: 49

HI AO / W EAK CPAvg Calls 1998: 3 .5Avg Sales: $247Num ber 35

LO AO / STRONG CPAvg Calls 1998: 5.8Avg Sales: $2,990Num ber: 20

LO AO / W EAK CPAvg Calls 1998: 3.3Avg Sales: $130Num ber: 56

DECISION MODELSDECISION MODELS

Examine accounts on an individual basis

Allocate sales calls to accounts that promise the highest sales returns

The objective is to achieve the highest level of sales and to increase sales calls until marginal costs equal marginal returns

DECISION MODEL DECISION MODEL EXAMPLEEXAMPLE

# PEOPLE MGLPROFIT

MGL SALESCOSTS

100 $85,000 $75,000

101 $80,000 $75,000

102 $75,000 $75,000

103 $70,000 $75,000

MANAGING MANAGING TERRITORY TERRITORY PROFITABILITYPROFITABILITY

Allocation of Effort Mix of Products Sold Price Concessions

ROUTE MANAGEMENTROUTE MANAGEMENT

Route should be circular Route should never cross itself Don’t use same route to go to

and from a client Customers in neighboring

areas should be visited in sequence

TIME MANAGEMENTTIME MANAGEMENT

Telephone interruptions Drop in visitors Crises Meetings Lack of objectives Indecision/procrastination Poor communications

TIME MANAGEMENTTIME MANAGEMENT

Get control of your time! Set goals and objectives Set priorities Develop a daily “to do” list Focus on the most important

tasks

MANAGEMENT’S MANAGEMENT’S ROLEROLE

Close Supervision Hands-off Management Management

Recommendations

FROM THE INTERNETFROM THE INTERNET

The granddaddy of time management sites:

http://www.relibrary.com/10tm1.htm

FROM THE INTERNETFROM THE INTERNET

See what a consultant says about improving sales force productivity at: http://www.brickerinc.com/netgain.htm

FROM YOUR TEXTFROM YOUR TEXT

Read everything in chapter five except pages 238 to 240 (Sales

Funnel Method) pages 242 to 245 (Largest

Angle Method)