Hi, and welcome to the second module of this course. In this module, we will address sales territory management. We will discuss why sales territories are created and two approaches used to develop a sales territory. I think most of us realize that having territories is a smart thing to do in sales management. It doesn't take much sense to have a sales force running willingly calling on customers, possibly duplicating efforts, and missing key opportunities. But did you know that sales territories can boost your sales team morale, they can increase sales, and they can provide more balanced customer coverage? So, the business of sales territories has a very solid business justification. Territory management is a customer group or a geographic area over which either an individual salesperson or a sales team has responsibility. These territories are usually defined on geography, sales potential, its history or in some cases a combination of these factors. These factors: geography, sales potential, and history are called territory criteria, and are used to define the boundaries of a territory. The goal of territory management is to maximize sales and profits, and allocate resources efficiently. The really big concern in creating sales territories is the idea of balance. That is, that the workload and responsibilities are evenly divided among the sales force. When a sales territory is out of balance, there are two things that can happen. If a sales territory is being under serviced, that is too few sales people, the sales team or the salesperson is spread too thinly and leads to sub-optimal levels of activities. Those responsible for the territories will seek out too few leads, identify too little prospects, and spend too little time with customers because they're overworked. This leads to customers going to competitors and you are losing sales. The other kind of problem is the opposite, over-servicing in a territory, and this is where the sales team has too little work and too many sales team members to serve as a small area. This raises your costs and prices overall, which ultimately leads to reduced sales. Precious resources are also then not being utilized in more important areas. This can lead to under-servicing in those areas. This causes many problems. Some of these include, the unfair distribution of sales potential among the sales force, distorted compensation among the sales reps, and reps leaving the company to seek out better balancing compensation elsewhere. What is the result of this? Sales force morale plummets and sales decline. Now, this kind of problem can be prevented with effective sales territory management. One of the things essential to forming sales territories is the topic we covered earlier sales forecasting. Forecasting determines the number of prospects in an area, and they're combined and individual buying power. This information helps a sales manager understand his or her market, and identifies areas that are worthy to allocate sparse resources too. So, let's begin.
