part iii sales force structure management resource: designing territories
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Part IIIPart III
SALES FORCE SALES FORCE STRUCTURESTRUCTURE
Part IIIPart III
SALES FORCE SALES FORCE STRUCTURESTRUCTURE
Management Resource: Designing Territories
Figure MR6-1: Unbalanced Territories for a Cosmetics CompanyFigure MR6-1: Unbalanced Territories for a Cosmetics Company
0.2
0.4
0.6
0.8
1.2
1.4
1.6
1.8
2.0
1.0
Work
load
-15%
+15%
1 20 40 60 100
120
140
160
180
200
Territories Sorted by Workload
Ideal Territory Workload
Actual Territory Workload
Workload Across Sales Territories
Territory Design:Territory Design: Unbalanced Unbalanced TerritoriesTerritories
Territory Design:Territory Design: Why Sales Why Sales IncreaseIncrease
500 750 1000 1250 1500
90
130
170
250
Sales Potential in Territory ($000)
Sale
s in
Terr
i tory
($000)
Sales lost by reducing size of large territories is more than offset by sales gained by increasing small territories.
Sales Gained
Sales Lost
NOTE: Each dot on the graph represents one territoryNOTE: Each dot on the graph represents one territory
Figure MR6-2: Reasons for a Major Territory Figure MR6-2: Reasons for a Major Territory RealignmentRealignment
A change in sales force size
A change in sales force structure
Mergers and acquisitions
Shifts in market opportunities
Demographic shifts
New Products
Need to shake things up
Territory Design:Territory Design: Reasons for RealignmentReasons for Realignment
Figure MR6-3: Territory Design ProcessFigure MR6-3: Territory Design Process
11 Select geographicSelect geographiccontrol unitscontrol units
22 Decide onDecide onalignment objectivesalignment objectives
33 ChooseChoosestarting pointsstarting points
44 Combine controlCombine controlunits adjacent tounits adjacent tostarting pointsstarting points
55 Make finalMake finaladjustmentsadjustments
66 Assign salespeopleAssign salespeopleto new territoriesto new territories
MergersMergers Division consolidationDivision consolidation Division splitDivision split Sales force turnoverSales force turnover Plant relocationsPlant relocations Product line changesProduct line changes
Territory Design:Territory Design: Process Process
Revise territoryRevise territoryBoundariesBoundariesto balanceto balanceworkload and workload and potentialpotential
Events triggeringEvents triggeringsales territorysales territoryadjustments:adjustments:
What are triggering events?
The Buildup Method -- Six Steps (9-1)
1. Select control units Census tracts -- good for dividing cities
Counties - convenient and data readily available
2. Choose starting points Salesperson’s home
Large customer - cut transportation cost
Big city - convenient for services
Territory Design:Territory Design:Process StepsProcess Steps
Territory Design:Territory Design:Process Steps Process Steps (Cont.)(Cont.)
3. Determine Allocation Criteria Territory balance -- effect on morale
Customer balance - distribute commission
Potential balance - share business growth
Size balance - reduce transportation costs
4. Combine Adjacent Control Unit (9-3)
5. Compare Sales Territories Mountains, roads, population center locations?
6. Assign people to Sales Territories
Table MR6-1: Geographic Control Units Used in Territory Table MR6-1: Geographic Control Units Used in Territory DesignDesign
Countries Cities
States or provinces Zip codes
Counties Census tracts
Metropolitan areas Customers
Territory Design:Territory Design:Common Geographic Control Common Geographic Control UnitsUnits
Territory Design:Territory Design: Sample Alignment MetricsSample Alignment MetricsPharmaceuticals:Pharmaceuticals: Doctor Specialty Counts Patient Volumes Epidemiology Data Influential Doctors Teaching Institutions Managed Care Org. Surgical Procedures Total Hospital Beds
Health and Beauty Health and Beauty Aids:Aids:
Retail Outlets Store All Commodity
Volume Call Activity Requirements
Office Products:Office Products: Number of White Collar
Workers Office and Distribution
Locations Headquarter Locations Number of Accounts Customer Types
Diagnostic Equipment:Diagnostic Equipment: Testing Volume Installed Machines Contract Information
Building Materials:Building Materials: Housing Starts # of Architects, Builders,
Contractors Projected Population Growth
The numbers in each county arepopulation figures and area measure of potential.
Kentucky Counties, Major Cities, and Population Centers
TENNESSEE
VIRGINIA
WESTVIRGINIA
INDIANA
ILLINOIS
OHIO
Figure MR6-4: Kentucky Counties, Major Cities, and Population Figure MR6-4: Kentucky Counties, Major Cities, and Population CentersCenters
Territory Design:Territory Design: Kentucky Kentucky
Figure MR6-5: Three Kentucky Sales TerritoriesFigure MR6-5: Three Kentucky Sales Territories
Territory Design:Territory Design:Three Kentucky TerritoriesThree Kentucky Territories
Three Kentucky Sales Territories
TENNESSEE
VIRGINIA
WEST
VIRGINIA
INDIANA
ILLINOIS
OHIOMajor super highwaysTerritory borders
Territory 3Territory 2
Territory 1
Table MR6-2: Comparing Three Kentucky Sales Table MR6-2: Comparing Three Kentucky Sales TerritoriesTerritories
Territory Design:Territory Design:Comparing Three Kentucky Comparing Three Kentucky TerritoriesTerritories
TerritoryTerritory
Potential as Potential as Measured by Measured by PopulationPopulation
Number of Number of CountiesCounties
1 1,124,897 47
2 1,129,290 27
3 1,131,137 43
Figure MR6-4: Dividing a Large TerritoryFigure MR6-4: Dividing a Large Territory
Territory Design:Territory Design:Dividing a Large TerritoryDividing a Large Territory
Conway was recently promoted to southeastern regional manager, overseeing four area salespeople. Part of his promotion was a transfer to Atlanta from Dallas. The southeastern region was the poorest performing region in the country.
Prior to his move to Atlanta, Conway spent a month studying the southeastern region: its past performance, sales potential, and staff. After much consideration, he decided that the problem was in the territory alignment. The business climate was changing, but the territories were not changing with them. For example, there was one salesperson based in charlotte, North Carolina to cover Kentucky, South Carolina, and the burgeoning business in North Carolina. Conway felt that he needed one salesperson to cover North Carolina exclusively, and move south Carolina and Kentucky to other territories.
Territory Design:Territory Design:What Would You Do?What Would You Do?
Conway concluded that he should realign three of the four salespeople and hire three new salespeople. Now he just had to convince company management of the soundness of his plan and get his three salespeople, none of whom would have to move, to buy in. He knew that management would be concerned about added costs in a poorly performing area, and that his salespeople would worry that their compensation potential would be threatened.
As a first-time manager, he was torn on how he should approach the situation. Should he call a meeting with management, or submit a proposal? And, should he seek the salespeople’s opinions, so they feel that they were part of the decision process? If so, should he do this before or after his meeting with management? What do you think?
Territory Design:Territory Design:What Would You Do? What Would You Do? (Cont.)(Cont.)
1. Why do companies redesign territories?
2. In this role play, what were the reasons for redesigning territories?
3. What problems are likely to arise when territories are redesigned?
4. Which salespeople are most likely to be resistant to change?
Territory Design:Territory Design:In-class Exercise T-1In-class Exercise T-1
5. What mistakes were made in territory realignment?
6. What options are available?
7. Should the company give in to Hughes and not change his territory?
8. What if seven other people in the district come to you asking for the same deal as Hughes? What do you tell them?
Territory Design:Territory Design:In-class Exercise T-1 In-class Exercise T-1 (Cont.)(Cont.)
Candidate-Territory Fit:Candidate-Territory Fit:Obese Candidate 2.57*Non-Obese Candidate 3.85
Preference for not placing Candidate:Preference for not placing Candidate:Obese Candidate 40%Non-Obese Candidate 10%
* The higher the mean, the more fit for the assignment (out * The higher the mean, the more fit for the assignment (out of 7)of 7)
Territory Design:Territory Design:Territory Assignment Study Territory Assignment Study ResultsResults