Sales Incentive Programs

As more and more markets became buyer markets and the entrepreneurial problem became one of solving the shortage of customers rather than that of goods, the sales concept became the dominant idea guiding marketing. The sales concept maintains that a company cannot expect its products to get picked up automatically by customers. That\'s where the role of sales incentive programs comes in. The company has to consciously push its products. Aggressive advertising, high-power personal selling, large scale sales promotion, heavy price discounts and strong publicity and public relations are the normal tools used by organizations that rely on this concept. In actual practice, these organizations do not enjoy the best customer patronage.

For sales incentive programs to be effective, it is very important to design sales territories. A sales territory is a geographical grouping of customers and prospects. Accordingly, designing sales territories in effect means the division of the total marketing area into a number of territories with the objective of servicing the territory effectively, economically and profitably. Two methods are commonly employed in designing sales territories: the equal workload method and the equal potential method.

Equal workload method aims at equalizing the workload of all salesmen. The territories are formulated so that they are equal in workload rather than in potential. The workload is considered in terms of the time required for the salesman to service all the accounts in his territory. On the other hand, equal potential method starts on the basis that the productivity of a salesman varies depending on the potential of the territory.

Proper designing of sales territories brings several benefits to the firm. It facilitates effective planning, as well as control of marketing operations since a properly designed sales territory is a more homogeneous area. Market data is more meaningful when collected and applied at the territory level. Moreover, when the total area is broken up into a number of well-designed territories, control of the marketing effort and evaluation of performance become easier.