sales territories and quotas

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Management of Sales Territories and Quotas

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Page 1: Sales territories and quotas

Management of SalesTerritories and Quotas

Page 2: Sales territories and quotas

Sales TerritoriesA sales territory consists of existing and potential

customers, assigned to a salespersonMost companies allot salespeople to geographic

territories, consisting of current & prospective customers

Major Reasons / Benefits of Sales Territories

Increase market / customer coverageControl selling expenses and timeEnable better evaluation of salesforce performanceImprove customer relationshipsIncrease salesforce effectiveness

Page 3: Sales territories and quotas

Procedure for Designing Sales Territories

Ideal objective in territory design is to have equal opportunity

and equal sales workload for all sales territories.

Select a control unitFind location and potential of present and

prospective customers within control unitsDecide basic territories by using Build-up

method

Page 4: Sales territories and quotas

Procedure in Build-up Method

Decide customer call frequencies

Calculate total customer calls in each control

unit

Estimate workload capacity of a salesperson

Make tentative territories

Develop final territories

Objective is to equalize the workload of

salespeople

Page 5: Sales territories and quotas

SDM-Ch.4 5

Build up territoriesDistrict A District B

Customer Type

Call Frequency per month

No of Customers

No of calls per year

No of Customers

No of Calls per year

A 4 3 144 4 192

B 2 7 168 8 192

C 1 20 240 28 336

30 552 40 720

Assuming that a sales person is able to make 5 calls a day, and no of working days in a year are 250, then in a year he can make 1250 calls.

Page 6: Sales territories and quotas

Assigning Salespeople to Territories

Sales Manager should consider two criteria:(A)Relative ability of salespeopleBased on key evaluation factors:

(1) Product knowledge, (2) market knowledge, (3) past sales performance, (4) communication, (5) selling skills

(B) Salesperson’s Effectiveness in a TerritoryDecided by comparing social, cultural, and

physical characteristics of the salesperson with those of the territory

Objective is to match salesperson to the territory

Page 7: Sales territories and quotas

Management of Territorial Coverage

How salesperson should cover the

assigned sales territory

It includes three tasks for a sales manager:

• Planning efficient routes for salespeople

• Scheduling salespeople’s time

• Using time-management tools

Page 8: Sales territories and quotas

Routing

Routing is a travel plan used by a salesperson for making customer calls in a territory

Reasons for routing:• Reduction in travel time and cost• Improvement in territory coverage

Page 9: Sales territories and quotas

Procedure for Setting up a Routing Plan

Identify current and prospective customers on a territory map

Classify each customer into high, medium, or low sales potential

Decide call frequency for each class of customersBuild route plan around locations of high potential

customersComputerized mathematical models are developedCommonly used routing patterns are:

B

Circular

B

Clover Leaf

Base(B)

C5

C1

C4

C3

C2

Straight line / Hopscotch

Page 10: Sales territories and quotas

Scheduling

Scheduling is planning a salesperson’s visit time to customers. It deals with time allocation issue

How to allocate salesperson’s time?• Sales manager communicates to salesperson

major activities and time allocation for each activity

• How sales person should spend their time:

Tasks Time Spent (%)

Service Calls 15

Face to Face Selling 32

Waiting/ Travelling 21

Others 32

Page 11: Sales territories and quotas

SDM-Ch.4 11

Contd..• 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

Page 12: Sales territories and quotas

Time Management Tools

To help outside salespeople to manage their time efficiently and productively, the tools available are:

• High-tech equipment like laptop computers and cellular phones

• Inside salespeople to provide clerical support, technical support, and for prospecting, and qualifying, as they remain within the company

• Outside salespeople can then spend more time getting more orders & building relationships with major customers

Page 13: Sales territories and quotas

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

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

Page 14: Sales territories and quotas

Methods for Setting Sales Quotas

• Several methods are used for establishing sales quotas

• In practice, companies use more than one of the following methods to increase their confidence in sales quotasTotal market estimatesTerritory potentialPast sales experienceExecutive judgementSalespeople’s estimatesCompensation plan

Page 15: Sales territories and quotas

Insight into Setting & Administration of Sales QuotasSet realistic quotasUnderstand problems in setting quotasEnsure salespeople understand quotas

• By allowing salespeople to participate in the process

• By continuous feedback to salespeople on their performance compared to quotas

Have flexibility in administering quotas• Change quotas in cases of major changes in

market demand or company strategiesUse monthly or quarterly quotas for incentives

and annual quotas for performance evaluationSelect a few quotas that have relationships with

marketing environment and sales situations