McBride Electric Corporation, headquartered in Detroit, was a large producer of electrical equipment and accessories. Established in 1910, McBride grew steadily and became one of the major U.S. suppliers of electrical products. McBride sold some of its products direct to a few large accounts, but most of the product line was sold through a nationwide network of distributors. The thirty-five person field sales force, working out of eight district offices, was assigned territories that had been established along county lines. In recent years, it had become increasingly clear that a need existed for redesigning the sales territories.
Sales personnel had been assigned responsibility for covering a varying number of counties in a way that gave each as close to one thirty-fifth of the total number of distributive outlets as possible. Management had adopted this procedure for establishing sales territories because of a desire to assure equal sales opportunity for each salesperson. Management had also been convinced that this procedure would facilitate comparisons among salespeople’s performances.
With the expansion of McBride’s business, there was no modification in the design of the sales territories. Some salespeople, as a result, found themselves with so much sales potential in their territories that it was impossible for them to provide adequate sales coverage. Although this situation had come to management’s attention several years ago, essentially nothing had been done to improve territorial design. Management, however, had submitted a revision plan to the sales force a few years ago. This plan, which would have resulted in increasing the size of some territories and decreasing the size of others, caused so much friction among the sales staff that management backed off in the interest of maintaining high sales force morale.
Recent analysis showed that this situation was becoming increasingly serious. Investigation into the coverage of representative territories revealed that salespeople were concentrating on the easy-to-sell, high-volume accounts and were neglecting numerous good prospects. Consequently, many potential orders were going unwritten. Thus, McBride’s competitors were gaining accounts that, under normal circumstances, the company should have secured. Furthermore, most territories were receiving uneven sales coverage.
Several factors had combined to create this situation. The nature of competition had changed substantially from area to area. In some territories, previously competitive environments became a salesperson’s dream as competition disappeared for one reason or another. In other territories, ones where competitors in the past had been weak, other competitors had become firmly rooted, thereby making it necessary for McBride sales personnel to cover those areas more intensively and more frequently to just maintain a token share of the business. Therefore, some areas in certain territories received virtually no coverage by the McBride sales staff. Besides shifts in the strength of competition, economic conditions had changed from territory to territory making certain once-desirable territories considerably less profitable for the salespeople to cover. These market influences indicated that management should expand some territories and shrink others.
The vice-president of sales and the sales manager agreed that the situation had gotten out of hand. They both believed that the present territorial setup needed reviewing and possible revision to improve sales efficiency and sales control. They also agreed that more appropriate territorial design could help to minimize the friction among sales personnel that would, in all likelihood, appear when management announced its intention to revise sales territories. Both executives had further agreed that the two criteria for an improved territorial design pattern would be (1) lower selling costs and (2) increased sales volume.
Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.