Combining Control Units into Tentative Territories

The planner next combines units into tentative sales territories. This is only a tentative arrangement because, as explained later, subsequent adjustments must be made for relative coverage difficulty. At this stage, the planner assumes that no significant differences in the physical or other characteristics of individual control units exist. The purpose is to obtain a “first approximation” of sales territories, by combining contiguous control units into tentative territories, each containing approximately the same sales potential.

At this point, however, the planner decides the number of territories, and this, assuming that all sales personnel are of average ability, is identical to deciding sales force size. Basically, the planner estimates the percentage of total sales potential that the average salesperson should realize. Analysis of past sales experience helps in making this estimate, which, once made, is used to determine the number of territories. In effect the planner estimates the sales productivity per sales personnel unit and divides it into the total estimated sales potential, thus arriving at the number of sales personnel units-and territories- required. Assume that management estimates that an average salesperson should realize $2,500,000 of a total sales potential of $25 million-ten territories and ten units ($25,000,000/ $2,500,000) of sales personnel are required. When these estimates and this calculation have been made, contiguous control units are combined into tentative territories of roughly equal sales potential. To simplify this step, sales potentials for control units are expressed as percentages of total sales potential. In the example, then, control units are grouped into ten tentative territories, each containing, about 10 percent of the sales potential. Throughout this grouping process, the planner combines only control units contiguous to each other; individual control units are not split into different territories, even if this results in tentative territories with different total sales potentials.

Territory shape: The planner now considers territory shape. The shape of a -” territory affects both selling expenses and ease of sales coverage. In addition, if the shape of a territory permits the salesperson to minimize time on the road, shape contributes to sales force morale. Three shapes are in wide use the wedge, the circle, and the clover leaf (see Figure 24.1).

The wedge is appropriate for territories containing both urban and nonurban areas. It radiates out from densely populated urban center. Wedges, of course, can be in many sizes (up to just under 360 degrees). Travel time among adjoining wedges can be equalized by balancing urban and nonurban calls.

The circle is appropriate when accounts and prospects are evenly distributed throughout the area. The salesperson assigned to the circular-shaped territory is based at some point near the center, making for greater uniformity in frequency of calls on customers and prospects. This also makes the salesperson nearer to more of the customers than is possible with a wedge- shaped territory.

The clover leaf is desirable when accounts are located randomly through a territory. Careful planning of call schedules results in each cloverleaf being a week’s work, making it possible for the salesperson to be home weekends. Home base for the salesperson assigned to the territory is near the center. Clover-leaf territories are more common among industrial marketers than they are among consumer marketers and among companies cultivating the market extensively rather than intensively.

Figure 24.1 Shapes of Sales Territories in Wide Use:

Adjusting for Differences in Coverage Difficulty and Redistricting Tentative Territories

The final step is to redistrict the tentative territories through adjusting for coverage difficulty. The tentative territories each contain approximately the same sales potential, but, almost certainly, territories with nearly equal sales potentials require different selling efforts and, in turn, selling expense totals. Now it is time to remove the unrealistic assumption that no differences in the characteristics of geographical control units exist. Significant differences in physical and other characteristics make providing sales coverage more difficult for some control units than for others. Certain large cities, for instance, have greater sales potentials for most products than some states, but the time required to contact customers and prospects in cities is much less, and the same is true of selling expenses. The optimum territorial arrangement is reached when incremental sales per dollar of selling expenditures are equated among all territories.2 In working to- ward this ideal, both sales potential and coverage difficulty are taken into ac- count. And, as

G. Hauk writes, “it is only coincidental if equal potential territories achieve the optimum.’” As the planner adjusts for differences in coverage difficulty, control units are taken away from some tentative territories and added to others. The final territorial arrangement almost certainly is one in which different territories contain different sales potentials.

H.R. Wellmitn, “The Distribution of Selling Effort Among Geographic Areas,” Joumal of Maruting, 3, no. 3 (January 1939), pp. 225-41 3J.G. Hauk, “Research in Personal Selling,” in G. Schwartz (ed.), ScWnce in Maruting(New York: john Wiley. 1965), p. 238,

Redistricting to adjust for coverage difficulty (that is, differences in workloads) is a seven-step procedure:

Determine number: location, and size of customers and prospects in each tentative territory. Customers are identified and located through sales records; prospects through trade directories, subscription lists to trade publications, classified directories, and credit-reporting agencies. Size is measured in terms of sales potential.

Estimate time required: for each sales call. This varies from account to account and from prospect to prospect, so customers and prospects are classified into groups, estimating an average time per call for each group. Time and duty analyses of sales personnel are used to check these estimates.

Determine length: of time between calls that is the amount of time required to travel from one customer to the next. This varies among regions depending on the density of customers and prospects and the condition of roads and transportation facilities. Particular attention is paid to physical characteristics. Large rivers, lakes, mountains, and other barriers to travel make natural and necessary territorial boundaries. The numbers of places where a large mountain range can be crossed by automobile are limited and often considerable time is consumed in the crossing. The same is true of large rivers, lakes, bays, and so forth. Transportation facilities are as important as physical characteristics. If travel is by automobile, territories are planned so that driving is mainly on primary, all- weather roads, with minimum cross-tracking. If public transportation facilities such as commercial airlines are used, territories are planned with an eye on locations of air terminals. The planner interrelates and balances differences in sales potential, physical geographical characteristics, and transportation facilities and routes. After sketching in on a map the tentative territorial division according to roughly equal sales potentials, the planner makes adjustments after superimposing maps showing topographic and transportation features.

Decide call frequencies: within certain control units, some or all customer and prospect classes require call frequencies that differ from those in other control units. Differences in the strength of competition require variations in call frequency rates. Similarly, call frequency rates are influenced by the market acceptance of the product line within control units. Cost studies on minimum profitable order sizes also provide input to the decision on call frequencies.

Calculate the Number: of calls’ possible within a given period. This is a matter of simple arithmetic. To determine the number of calls per day in a certain control unit, the average amount of time required for each call is added to the average time between calls and divided into the number of working hours in the day. Adjustments are made when call lengths vary for different classes of customers and prospects.

Adjust the Number: of calls’ possible during a given period by the desired call frequencies for the different classes of customers and prospects. This results in an estimate for the total work load represented by the control units in each tentative territory. Further adjustments are made to assure that the work load in any territory is not larger than the allowable maximum and that selling expenses are within budget limits. The planner shifts control it’s among different tentative territories, adding units to some by taking them away from adjacent territories. Each shift brings the territorial arrangement closer to the optimum- that is, closer to one in which incremental sales per dollar of selling expenditures are equated among all territories.

Finally, check out the adjusted territories: with sales personnel who work or who have worked in each area, and make further adjustments as required. Personnel familiar with customer service requirements, competitive conditions, and the topography, roads, and travel conditions may point out weak- nesses not obvious to the planner.