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