A sales territory is a geographical area containing present and potential customers who can be effectively and economically served by a single salesman, branch dealer or distributor.
Factors Affecting the Size of Sales Territory
The size of sales territory is affected by many factors. Some of these are discussed below:
1. Nature of the Product
The nature of the product may be industrial, consumer or consumer durables, or perishable
The salesman of products of daily use is required to make regular and many contacts with customers.
Hence, their sales territories will be small.
The sales territory for industrial goods or consumer durables may be larger in size.
2. Nature of the Sales Job
Some salesman act as order getters, whereas others have to create demand, or publicize their products.
As such, the sales territory of these demand creator salesmen will be larger.
Related: 23 Key Benefits and Importance of Establishing Sales Territory.
3. Demand for the Product
Generally, the size of the sales territory will be small when the demand for the product is quite good and larger.
4. Market Potentialities
Where the market potentialities are much encouraging for big sales, the size of the territory may be kept small so as to put more effort into finding customers.
5. Channel of Distribution
When the goods are sold to wholesalers, the size of the territory may be big.
On the other hand, if the goods are sold to retailers, the sales territory may be small.
But if goods are sold directly to consumers the areas of sales territory will be smaller.
Related: 8 Major Reasons for Not Establishing Sales Territories.
6. Stage of Market Development
New firms generally have big sales territories, so that salesmen can easily get sales orders and a sufficient number.
But the size of the sales territories can be reduced as the firm gains its market share gradually.
Thus, the control over expenses can be established.
7. State of Competition
Where the state of competition is acute, the salesman will be required to put more intense efforts to get orders and to maintain customers.
In such a case, the size of the territory should be small.
But if the managers feel that intense efforts will not be sufficient to face competition and sale is not going to increase, then the size of the sales territory can be increased so as to reduce the selling expenses.
8. Abilities of Salesman
When the firm has experienced, efficient and well-trained salesman, the size of the sales territory may be larger in competition to new and untrained salesmen.
Related: 14 Limitations or Problems in Setting Sales Quota.
9. Managerial Policies
The management policies whether to operate in a large area or to allocate the sales territories in a reasonable size will also decide the size of the territories.
A firm that wants to expand its market with intense selling efforts can form small sales territories. 13 Factors Influencing the Designing of Sales Territory.
10. Density of Population
Wher the density of the population is thick, the firm can have smaller sales territories.
11. Selling Costs
The selling cost is met by the sales proceeds of the sales territories.
And in managing territories fixed and variable costs are borne by a firm.
Generally, the size of the sales territory should be such which can recover its cost and expenses.
Related: 20 Importance of The Study of Business Environment.
12. Promotion System
The state of the marketing communication system of the firm also affects the size of the sales territories.
If the firm uses all types of sales promotional tools, it can form larger sales territories for its salesman.
Due to sufficient advertising, sales campaigns, sales promotion, and publicity activities, the salesmen can easily sell the goods even in large sales territories.
13. Government Policies
Some times, state governments impose some regulations and controls over the movement of goods from one state to another or from one district to another.
Such restrictions may influence the size of the sales territories.
14. Economic Conditions Prevailing in the Country
When a country is experiencing some recessionary trends in all parts, the general price level may be stable, and the demand for products may below.
In such situations, a firm can assign small sales territories to its salesman to make selling efforts intensive.
Related: 19 Factors Influencing Entrepreneurship Development.
15. Ethnic Factors
It is noted that the people of a particular caste, creed, and community may reside in a particular geographical area.
They may have special types of traditions, language, lifecycle, needs, eating habits, different attire and different demands.
Hence, these factors may also affect the size of sales territories.
16. Transport and Communication Facilities
Where the transport and communication facilities in a territory are cheap, fast and efficient, the size of the sales territories may be larges.
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Thus, now you know what the factors affecting the size of sales territory.
Related:
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- 18 Requirements of Good Sales Compensation Plan (Explained)
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