Complete Guide to Effective Sales Territory Management

April 12, 2023
Diya Mathur
Diya Mathur
Diya Mathur
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Table Of Contents

Preface:

Are you in sales? 

Take a moment and think about the conversations you have had about sales ROI and growth. 

More often than not, leaders will talk about broader themes like larger company goals or resources. Top-down approaches are understandable. But, here’s something you should know! Harvard Business Review reports that territory design can increase revenue by 2 to 7 percent without making a single change to the company’s overall resources or strategy. 

Even so, most companies fail to harness this potential. The reasons? 

Read this article to know more about sales territories and how to manage them!

Introduction:

Let’s face it. If you’re a sales manager, sales territory management is not your favorite thing to do!

Sales coaching tips can help address the challenges associated with territory design in sales operations. Typically viewed as a laborious and time-consuming task, territory design is often perceived by sales reps as a random allocation without regard for relationships or local circumstances. By implementing effective sales coaching strategies, such as considering relationship dynamics and local conditions, the perception of territory design as a mere lottery can be transformed.

However, things are changing with more data-driven approaches now coming to the fore. Recently, the value in territory design has urged many growth leaders to tap into this missed opportunity. 

But first, let’s dive a little deeper into what sales territories are and how sales territory management is a different ball game altogether.

What is a Sales Territory:

To put it simply- 

A Sales Territory refers to a specific geographic area or market that is assigned to a salesperson or team to sell a company's products or services.

The purpose of dividing the market into territories is to make the sales process more efficient and effective by allowing salespeople to apply sales concepts and techniques, focusing their efforts on a specific group of customers in a particular region. This approach allows them to develop relationships with these customers, understand their needs, and tailor their sales approach using relevant sales concepts and techniques to meet those needs.

Sales territories are typically based on factors such as geography, customer demographics, market size, and sales potential. 

Types Of Sales Territories

On the basis of Geographical area

Here are some types of sales territories on the basis of geographical area

Regional territories

These territories are defined by states, provinces, or regions. They are typically used by companies that have a broad customer base across multiple states or regions.

Local territories

These territories are defined by smaller geographical areas such as cities, towns, or neighborhoods. They are often used by businesses that have a local customer base and need to focus on serving a specific community.

National territories

These territories cover the entire country and are often used by large companies with a national presence. National territories can be divided into smaller regions or zones for easier management.

International territories

These territories cover multiple countries or regions and are used by companies with a global presence. They may require special considerations such as language barriers, cultural differences, and international laws and regulations.

Urban and rural territories

These territories are divided based on the density of the population. Urban territories may have higher populations and more potential customers, while rural territories may cover larger areas with fewer customers.

High-potential territories

These territories are defined based on the potential for growth and profitability. They may be areas with high population growth, new emerging markets, or areas with a high concentration of the target customer base.

On the basis of Customer types

The following are the different types of sales territories based on customer types:

Geographic territories

Sales territories are divided based on geographic locations, and the customers are grouped according to their physical location. This type of territory is useful when the customer base is widespread across different regions.

Demographic territories

Sales territories are divided based on demographic factors such as age, income, gender, education, and occupation. This type of territory is useful when the customer base has different characteristics that affect their buying behavior.

Industry-based territories

Sales territories are divided based on the type of industry or business that the customers are in. This type of territory is useful when the customer base is composed of different industries, and sales representatives require specialized knowledge to effectively sell to them.

Account-based territories

Sales territories are divided based on specific accounts or customers. This type of territory is useful when the customer base is composed of large clients that require dedicated attention and a personalized approach.

Product-based territories

Sales territories are divided based on specific products or product lines. This type of territory is useful when the customer base has different needs and preferences for various products, and sales representatives require specialized knowledge to effectively sell each product.

On the basis of Product types

Here are some types of sales territories based on product types:

Product Line Territory

A product line territory is focused on selling a specific product or product line. For example, a salesperson might be responsible for selling only laptops or printers within a specific geographic region.

Vertical Market Territory

A vertical market territory is focused on selling to a specific industry or market segment. For example, a salesperson might be responsible for selling medical equipment to hospitals and healthcare providers in a specific region.

Customer Type Territory

A customer-type territory is focused on selling to a specific type of customer. For example, a salesperson might be responsible for selling to government agencies or educational institutions in a specific region.

Solution-based Territory

A solution-based territory is focused on selling a complete solution to a customer's problem or need. For example, a salesperson might be responsible for selling a complete IT solution to a company, including hardware, software, and services.

Channel-based Territory

A channel-based territory is focused on selling through a specific channel or distribution network. For example, a salesperson might be responsible for selling to retail stores or e-commerce platforms in a specific region.

What is Sales Territory Management

Merely assigning territories does not mean that they are automatically optimized. There are a whole bunch of challenges lined up: data silos, outdated systems, and manual processes among others. 

Sales Territory Management is the process of optimizing sales territories to maximize revenue.

This includes dividing a company's sales region into smaller territories, assigning sales representatives to these territories, and then managing the sales process in each territory to increase profitability. 

Multiple studies have time and again pointed out that sales territory management can-

  • Lead to a 15 percent increase in revenue as a result of increased penetration and expanding the customer base
  • A 20 percent boost in sales productivity because reps are happy with their assigned territories 
  • Automation can help in reducing the time it takes to plan territories by 75 percent and make it easier for sales ops to attempt this strenuous task
  • Reduce attrition and save money in terms of rep replacement cost

On the flip side, companies can also address bottlenecks in their current territory design approach including- 

  1. Missed quotas
  2. Lower revenues
  3. Poor employee performance
  4. Low motivation 
  5. Sales rep turnover 

Effective sales territory management is essential for any company looking to grow its business, increase sales, and maximize profits. Utilizing tools such as a sophisticated sales commission calculator can further enhance your sales team's understanding of their earnings potential.

Benefits of Sales Territory Management

Benefits of Sales Territory Management

When optimized, territory design can ease process pain and create opportunities to realize revenue goals by efficiently utilizing sales resources. Some of the benefits include...

Improved sales performance

By properly managing sales territories, sales representatives can focus on specific areas, which can lead to more effective sales efforts and higher sales performance.

Increased customer satisfaction

With well-managed territories, sales reps can provide better customer service, establish stronger relationships with clients, and provide more personalized attention to their needs.

Better allocation of resources

By allocating resources to territories based on their potential, businesses can better manage their budgets and allocate their resources more effectively.

Reduced costs

By consolidating sales efforts into specific territories, companies can reduce the cost of travel, marketing, and other expenses associated with sales.

Enhanced data analysis

Territory management can help businesses gather more detailed information about their sales performance in different regions, allowing for better data analysis and decision-making.

Improved collaboration

By dividing sales teams into specific territories, companies can encourage collaboration and teamwork among team members, leading to better communication and more effective sales strategies.

Overall, sales territory management can help businesses increase sales revenue, reduce costs, and improve their customer relationships, ultimately leading to greater profitability and success.

8 Steps To Create A Winning Sales Territory Plan

If you have decided to optimize your territories, here’s a short list of questions you can refer to get started-

  • Which locations generate the most leads?
  • Do you have the capacity and resources to serve these territories?
  • Are key buyers located in your chosen territories?
  • Have sales increased in any new territories you targeted?
  • Is there any potential in under-served territories?
  • Are there any territories that you have previously overlooked that may provide opportunities now?
  • What resources do your reps need?
  • How many reps should you assign in each territory?
  • How are your competitors performing in your selected territories? What is their market share?

Creating a winning sales territory plan requires careful planning and execution. Here are some steps to follow:

Define your target market

Identify the specific geographic area or customer segments you want to target with your sales efforts.

Conduct market research

Gather information on your target market, including demographics, industry trends, and competitors. This information can help you develop a better understanding of your potential customers and their needs.

Set sales goals

Establish specific, measurable goals for your sales team, such as revenue targets, customer acquisition targets, product-specific goals, or MBO in sales.

Allocate resources

Determine the resources needed to achieve your sales goals, including sales personnel, marketing materials, and technology tools.

Develop a sales strategy

Create a strategy that outlines how your sales team will reach its goals. This may involve identifying key sales channels, developing marketing campaigns, or implementing sales training programs.

Assign territories

Divide your target market into sales territories and assign them to your sales team. Make sure each territory has a clear focus and adequate resources to achieve its goals.

Set performance metrics

Establish metrics to measure the performance of your sales team and territories. This can include sales volume, customer satisfaction, and market share.

Monitor and adjust

Monitor your sales performance and adjust your strategy as needed to ensure you are meeting your sales goals. Use data to inform your decisions and make adjustments as necessary.

Sales Territory Management Best Practices: 

Data-driven Insights

Reps often feel that territory design is unfair, and they may be right! It is imperative for territories to be objectively assigned. How can that be achieved? Data!

Data-driven territory assignment is the way to go, and most growth leaders are opting for it to stay ahead of the competition. The aim here is to be comprehensive. To collect as much data as is needed for creating a plan that works. The data that you are feeding your CRM needs to be gap-free and have all the relevant information. Remember, the end goal is to have a data set large enough to be turned into actionable insights. When collected and analyzed properly, data can- 

  • Give insights into rep capacity and workload
  • Provide a better understanding of quota achievement
  • Deliver fair compensation to reps 
  • Boost morale and motivate reps to perform better

Automation

A good Automation tool will help you break the silos of legacy systems by collecting your data from multiple sources (spreadsheets or any other homegrown systems) and streamlining it into a single source of information. This macroscopic viewpoint makes your data usable, helping you create more accurate territory maps and make better business decisions. 

With all the relevant data in one place, sales ops can proceed to analyze it more deeply and give holistic insights. Things that simply weren’t possible with static spreadsheets like identifying problem areas in real-time are possible with an automated system. 

Collaboration

Territories cannot be optimized until local conditions are taken into account. Field sales managers can be encouraged to become an integral part of the territory alignment process, so as to get better insights into local markets and relationships. 

It is also important to understand that territories need not be clubbed geographically. There are multiple variables around which territories can be clubbed. Decisions like these are better informed when different teams are roped in. 

Collaboration, therefore, decentralizes and enriches the territory design process.

Conclusion

Over the years, it is becoming increasingly clear that SPM is not just a preference but a priority for most sales leaders to gain the agility and accuracy needed to thrive in today’s business environment. While territory design is a very small step in any company’s larger SPM goals, it can be a useful instrument in increasing revenue.

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Author

Diya Mathur

Diya is a Product Marketing Associate and content writer specializing in Incentive Compensation Automation. Diya has honed her ability to bridge the gap between intricate software functionalities and accessible, reader-friendly content. Her articles are a testament to her dedication to breaking down intricate SaaS solutions into digestible insights that cater to both tech-savvy professionals and those new to the software landscape.