Chapter – 4

1. The procedure for designing the sales territories is as follows:

 First, the geographic control unit is to be selected. Here ‘district’ is the
control unit, which is small and has a possibility of finding market potential
 Next, in each control unit, location and market / sales potentials of
prospective customers are to be determined. For this, a market survey should
be done
 Decide basic territories by using build-up or break-down method. In this
case, as it is a new company, build-up method is appropriate
 Make tentative territories by grouping adjoining districts (which share their
borders) until yearly number of customer calls needed in those districts equal
workload (i.e. calls) per salesperson
 Develop final territories by adjusting (i.e. adding or subtracting) districts so
that workload of each salesperson is almost equal. Salespeople can also be
involved in this process
2. For assigning salespeople to territories, the criteria used are:
a. Relative abilities of salespeople are calculated by using evaluation factors like
communication and selling skills, product & market knowledge. High relative
ability salespeople are assigned high sales and profit potential districts or
customers.
b. Effectiveness of the salesperson in a territory is decided by comparing social,
cultural, and physical characteristics of the salesperson with those of the
territory
The objective is to match the salesperson to the territory, while assigning
salespeople to territories
3. The guidelines to the salesperson from Andhra Pradesh (A.P.) are as follows:
 First, find market potential of various districts in A.P. from secondary
sources, so as to focus on ‘A’ class cities
 Understand important activities like selling, payment collection, and
relationship building with important customers to help in concentrating on
important activities
 Carry out a quick market survey in ‘A’ class cities to identify high sales &
profit potential business customers and retailers
 Using above data, the salesperson can prepare “call plan”, by focusing on
key cities and customers. He can use the concepts of routing, scheduling, and
customer relationship management (CRM) in his operations
4. As a consultant, I would suggest the following to the company:
Sales volume quotas should consider not only sales but also the profitability of the
products sold. For that, sales volume quotas were set in ‘points’. The company should
assign 2 points for each MT of CEW tubes sold and 1 point for each MT of ERW
tubes sold. Salespeople would be given sales volume quotas in points – e.g. 300 points
per month. Salespeople can achieve their quota or target more easily by selling more
volume of CEW tubes, which are more profitable to the company. This would improve
the company’s profitability.
5. The company wants to combine three types of quotas – sales volume (in Rs), average
sales calls (in numbers) per day, and receivables (or payment collection in days). This
is shown with an example below:

Type of Quota Actual % Quota Weight % Quota x Weight

Quota
Sales 7,00,000 6,50,000 93 3 279
Volume
(Rs) per
month
Average 5 4 80 1 80
Sales Calls
(Nos) per
day
Receivables 35 30 114 2 228
(days)
6 587

The total point score = 587/6=98, taking assumed figures for a salesperson’s
performance evaluation, for a quota system

6. I would talk with my senior sales manager and inform him that present sales quotas
are incorrect, as these are based on wrong estimates of territory potential. I would
suggest to the company to adopt 2 or 3 methods of setting sales quotas and engage a
management consultant to relook at the territory market potential, company’s present
and expected market share. In addition to territory potential method, past sales
experience method could be used. Finally, the consultant should also consider the
views of salespeople and sales managers, before suggesting sales quotas for next year.
I will follow-up my discussions with a note to my senior sales managers, as this is an
important motivational point which would affect sales and profit performances.
7. Incentive scheme can not work if products are in short supply. For products which are
in short supply, the company should not include them in the incentive scheme. Other
products, which are not in short supply, can be included in the incentive scheme. I
would suggest this to my senior managers.