Increasing efficiency is one of the most common goals behind sales territory optimizations, but also important to assess the effectiveness of the existing sales structure. A key question is whether your current sales structure is right for your company. Michael Büttcher, senior consultant for sales territory planning, discusses the most important planning approaches.

Companies tend to structure their delivery of products and services according to three main approaches: territory-, product- or customer-oriented.

Territory-oriented structures

Every merchant or service technician is assigned to a particular region in which he or she is responsible for the company's entire product portfolio. The clear-cut boundaries and sole responsibility of the assigned employee to a defined region promote good business relations.

Additional advantages of a territory-oriented structure include low travel costs, the ability to compare the performance of external sales force members and relatively straightforward planning of customer visits. In cases of products requiring significant explanation and consultancy and/or an extensive product portfolio, individual external sales force members tend to restrict their focus to a limited number of products. One of the main challenges to address with this structure concerns the variations in turnover potential and workload by region, customer density and accessibility. These parameters have to be taken into account when planning or optimizing a sales structure.

Product-oriented structures

Products requiring substantial consultation and in-depth knowledge from the sales consultant such as pharmaceuticals and medical technology lend themselves to a product-oriented organizational approach. This schema best allows for the support of custom-ers on an individual, as-needed basis. This can easily be organized according to the areas in which profits are concentrated. An additional advantage is that external sales force members can serve sales territories of varying sizes depending on the existing turnover potential for the company's products.

The disadvantages of this structure are equally apparent: Adequately managing the market requires a more complex sales structure. Travel times also tend to be longer than in the case of a territory-oriented structure. In some cases individual customers are served by multiple sales force representatives. Planning is more difficult, such as in the case of actions implemented across the entire product portfolio.

Customer-oriented structures

This customer-oriented structure usually develops gradually over the years as a result of the absence of territorial protection in the past.

The organization of companies according to branch or customer type helps with the maintenance and development of long-term customer relationships. In these cases, the specific needs of customers are precisely known. This type of structure is well suited to companies that provide labor-intensive, customer-specific products that require substantial customization. Customers are often widely dispersed in this type of structure.

However, customer service and especially customer acquisition are difficult to plan and implement with structures of this type. Objectively comparing the performance of external sales force members and calculating travel times are challenging. The number of daily customer visits is significantly less compared to the previously discussed structures.

Special and mixed structures

There are also many special and mixed organizational structures. Some of these structures favor key account customers or involve situations in which certain customers are served exclusively from a call center. If companies have sales territories that span national boundaries, they can organize these territories in basically the same way as their domestic territories.

In some cases, each external sales force member is assigned customers belonging to a specialized branch in addition to customers in a fixed geographic territory.This is done to fully utilize the particular knowledge and specialities of the sales force team members. This approach is thus a combination of the territory-oriented and customer-oriented structures and is often chosen in minimize changes to long-standing customer relationships. Only when a sales force member leaves the organization are his or her customers assigned to the sales force member otherwise responsible for that particular sales territory.

Most common planning goals

• Balanced workload and potential
• Clear and comprehensive territorial assignments
• Minimized driving time
• Better customer service
• Increases or reductions in sales team size

Most common restrictions

• Preserving existing customer-employee assignments
• Maintaining contract-secured territorial exclusivity
• Taking into account existing employee places of residence or business locations

How you can profit from our sales territory consultancy:

• Preparation and integration of various company data sources
• Determination of appropriate market and potential-related data
• Visualization and documentation of changes using geomarketing software
• Advice for setting coordinated goals
• Objective and neutral evaluations
• External perspective that promotes objectivity
• Development and comparison of market scenarios
• Creation of customized territory reports
• Moderation in the implementation of changes

Michael Büttcher is senior consultant for sales territory planning at GfK GeoMarketing

GfK GeoMarketing has carried out more than 2,000 sales territory restructurings since 1991 for companies from all branches of trade. We also provide customized coaching sessions that support our clients in the analysis, planning and optimization of sales territory structures. We employ a variety of planning tools and approaches that we've perfected through years of experience. GfK GeoMarketing also supports clients interested in expanding into new markets at home or abroad.

Contakt: m.buettcher(at)gfk-geomarketing.com

Additional tips and information can be found at www.gfk-geomarketing.com/planning.