Establishing or designing sales territory is very important for many reasons. Ordinarily, it is not practical to plan, direct and evaluate salespeople’s performances without having sales territories.
The total market for most firms is simply too large to be managed effectively without a territory structure.
Once such a structure is established, management can then plan the other functions- such as sales forecasting and sales budgeting in an easy way.
Benefits and Importance of Establishing Sales Territory
Certain objects, reasons or benefits of establishing or designing sales territories are discussed below:
1. Maximizes Sales and Profits
Companies form sales territories mainly to maximize sales and profits.
Sales territories make this goal more achievable because they reduce it to reasonable proportions.
Individual salespeople then can make it their personal mission to improve territory yield.
2. Enhances Customer Coverage
When a sales territory is too large, potentially important customers are overlooked.
The salesman simply does not have enough time to call on all customers. Creating a sales territory is a way for management to control salespeople activities such that all customers are served in a more efficient manner.
The good sales territory design allows sales personnel to spend sufficient time with customers and prospects and minimizes time on the road.
This permits them to become thoroughly conversant with customers’ problems and requirements.
This also helps to make calls upon different classes of customers and prospects.
Bonus: 25 Aspects and Coverage for Appraisal of Project Proposals.
Customer service benefits are another result of proper territory design. Personalized customer service produces immense mutual satisfaction.
3. Matching Selling Efforts and Opportunities
The establishment of sales territories facilitates matching selling efforts with sales opportunities.
Sales personnel are assigned the responsibility for serving a particular grouping of customers and prospects and provide contact points with the markets.
Territorial assignments lend directions to the planning and control of sales operations.
4. Realistic Sales Planning
The realistic sales planning is done on a territory by territory basis.
Characteristics of customers and prospects vary from one sales territory to another, and sometimes even from one country to the next.
The territory is a more homogeneous unit than the market as a whole.
Related: 18 Important Aspects and Characteristics of Sales Territory (Explained).
5. Control of Sales Operations
Breaking down the total market into smaller units makes the control of sales operations more effective.
Assigning responsibility for achieving specific objectives to subordinate line executives and individual sales personnel brings selling efforts into alignment with sales opportunities.
Calling patterns can be adjusted to reflect differences in account potentials.
Improved sales control is achieved on a territory by territory basis.
6. Controlling Selling Expenses
Good sales territory design results in low selling expenses and high sales volumes.
Sales personnel spend fewer nights away from home, which reduces or eliminates many charges for lodging and food, at the same time, cutting travel miles reduces transportation expenses.
Related: 16 Best Ways to Find Potential Customers for Your Business (Complete List).
7. Help In Evaluation of Sales Personnel
Well designed sales territories assist management in evaluating sales personnel.
Through analyzing the sales territories, sales and cost responsibility to individual sales personnel can be pinpointed.
Thus, managers can evaluate each salesperson’s performance in their territory against sales quotas.
8. Contributes to High Morale
Territories can act as moral builders, motivating salespeople to give their best, since everything that happens in an individual’s territory is a direct reflection on him.
Salespeople feel able to shape their own destinies.
Individuals who experience this sense of entrepreneurship will be less inclined to move on the other employers.
Morale is improved when salespeople receive credit for the results.
Related: 5 Main Stages of Sales Management Process (Step by Step).
9. Promotes Productive Salesman
In general, good sales territory design results in productive salespeople whose efficiency serve satisfied customers.
Research indicates that organizations with properly designed sales territories have more productive salespeople – ultimately leading to greater sales volume, market share, profits, and even more satisfied customers for the entire sales organization.
10. Establishing a Salesman’s Responsibility
Salespeople act as business managers for their territories.
They are responsible for maintaining and generating sales volume.
Salespeople’s job tasks are clearly defined.
Bonus: 8 Major Reasons for Not Establishing Sales Territories.
They know where customers are located and how often they should be called upon.
They also know what performance goals they are expected to meet.
11. Improving Customer Relations
Customer goodwill will be improved when customers receive regular calls.
From the customer viewpoint, the salesperson is the company.
The customer looks to the salesperson, not to company officials when making purchases.
Over the years many salesmen build up goodwill relations with their customers through personalized service and calls in their territory.
Related: 6 Powerful Methods of Setting Sales Quota (Step by Step).
12. Better Matching of Salesman to Customer
Salespeople can be hired and trained to meet the requirements of the customers in a specific territory.
Indications are the greater the similarity between customers and the salesperson, the more likely the sales effort will be successful.
13. Help In Routing and Scheduling
Within their assigned sales territories, the salesman can make a better decision relating to their routing and scheduling so as to minimize travel time and maximize contact time.
They can learn how to manage their time.
14. Coordination of Personal Selling and Advertising
Personal selling or advertising alone cannot accomplish the entire selling task efficiently.
A synergistic effect (the 2+2=5 effect) can be obtained by blending these two.
Management may set up sales territories or revise existing territorial arrangements to improve the coordination of personal selling or advertising efforts. 11 functions of personal selling.
15. To Benefits Salesman and the Company
The proper sales territorial design must aid salespeople in carrying out the firm’s sales strategies.
Thus, the company can maximize its sales effort, while the salespeople can work in territories that afford them the opportunity to satisfy their personal needs, for example, a good salary.
16. Provides More Equitable Rewards
Sales territories also make it easy to evaluate individual performance and reward them appropriately.
Most sales compensation plans contain an incentive component tied to territory results.
Related: How do I Create a Sales Compensation Plan?.
17. Other Benefits
- Each territory promotes the efficiency and effectiveness of the sales effort.
- It helps to face domestic and international intensified competition in a territory.
- It can increase the reduced energy level of salespeople.
- Sales territories provide independent work areas to the salesman.
- Sales territory facilitates coordination in marketing functions.
- It helps develops fair competition among all salespersons.
- It facilitates competing with competitive institutions.
Thus, now you know the reasons, benefits and importance of establishing sales territory.
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