An effective sales territory plan means greater productivity and motivation for your sales team and more profit for your business.
How you, as a territory manager, create a strategic sales territory is far from a one-size-fits-all. It requires a deep insight into your customer and sales team. Your sales territory should be a physical representation of how your customers respond best to your sales reps. You need to understand both well, then, to create a sales territory that works best for your company.
However, the work required to create the right sales territory is well worth the effort. In one survey of 100 organizations, those with an effective territory design had a 14% higher sales objective achievement on average. The same study found that ineffective companies had 15% lower success than the average.
If you already have a sales territory in place and are still not hitting the goals you would like, it’s worth taking a look into redesigning. Research by Harvard Business Review found that businesses showed a sales increase of up to 7% by redesigning their territories. Don't be afraid to take a step back and reconsider your territory if it does not measure up to your expectations. It probably means you’re leaving money on the table if you choose to ignore them.
Here is what you need to know about defining productive territories to increase sales.
What is Sales Territories?
First, though, what exactly is a sales territory?
A sales territory divides up your customer base amongst your sales team. Geography is a common way to divide up sales territory. One survey found that 30% of respondents used geography to create a sales territory.
You can use more than geography to split up your sales team, though. Some other ways to assign territories include:
- Account types
- Audience segments
- Referral source
- Product type
How you define your territory depends heavily on your business. It may not make sense for you to divide up your regions geographically. For example, if your salespeople spend almost no time in physical meetings, but more through phone and email, you probably don't need to work geographically. An exception to this will be if you need to work in different time zones that require your salespeople to communicate at different times.
Why You Need Well- Balanced Territories
Balance is key to creating the right sales territories, and it is delicate. Stray too far one way or the other, and it could spell doom for your sales team. To get the most from your sales team for the most significant profit, you need well-balanced territories.
Sales territories run into most of their troubles when they are either over- or underserved.
An overserved territory dedicates more sales reps to an area than there are real prospects. Your salespeople will have nothing to do and likely won't be able to meet their quotas. In addition, other territories will probably suffer because of the increased cost to maintain the overserved territory.
Most businesses fall into this trap with 72% of agencies admitting they commit a disproportionate amount of resources to high-profile clients. This can be a costly mistake for your company, though. HubSpot found that nearly half of the companies that they surveyed reported a loss of at least 11% through client over-servicing.
An underserved territory, on the other hand, will also create problems for your company. You will lose out on potential sales when your sales can’t properly take on their leads in an area. Sales reps will be too tempted to take on too much, which will leave your customers dissatisfied.
It can also be costly to your business. Accounts that are closer together lowers cost both in resources and your sales rep’s time.
A well-balanced territory, though, means that your sales reps can spend more time making sales and less time feeling demoralized by the lack of fairness. They will be motivated to compete with each other instead of comparing their situations.
Steps for Creating an Effective Sales Territory
While you may know that a balanced sales territory means more for you and your business, you may be at a loss as to how to create the right sales territory. Although it might seem easy to recreate another business' sales territory, what works best for one company might not work for you. Instead, you need to take the time to understand your customer and the sales process.
Here’s what you need to know to create the best territory that works effectively for your company:
Get All the Customer Data You Can
To understand how to divide up your sales territory, you need to take some time getting to know your ideal customer and who you want to reach. You need to know more about your customer to get the information you need.
Take a look at the customers, prospects, and leads that you already have. Divide your customers up into three groups:
- Your top-tier customers, who require the least amount of effort to get a sale.
- Your second-tier customers. These require some work but are worth the effort.
- Your third-tier customers. These require a lot of work, maybe more than they are worth.
Laying out these customers into groups, you can make sure that you are targeting more customers like the first- tier customers. You want to analyze your top customers to find the common characteristics between them.
Some questions you might want to consider are: do they typically convert online or in-person? This can let you know exactly how you want your sales reps to be spending their time. How long do they usually take to convert? Understanding your sales cycle will also help direct your sales tactics.
You will want to note more than where they are located to get the right territories. Some additional questions to consider:
- What is their pain points, and why are they drawn to your product or service?
- Which of your products and services is doing best?
- What events lead to a customer purchasing from you?
- Conversely, what events seem to discourage them from purchasing?
- What is your conversion rate?
The goal is to find trends in the market and amongst your customer base. Once you identify underlying themes, you can start to create a better sales territory that can serve their needs.
Analyze Your Sales Team
Once you have a good understanding of your customer, it's time to an in-depth look at your sales team. This allows you to make sure you are assigning your sales reps to the proper territories, as well as guiding your decisions on education, resources, and perhaps future hires.
A SWOT analysis lets you take a good look at your team to help you create a strong territory plan. A breakdown of a SWOT analysis includes:
S = Strengths
Assess what areas your sales team does well. For example, does your team exceed in in-person demos, or perhaps phone and email? How much internal knowledge do you have? Do you have experienced reps who know the product well or content that provides valuable information to your prospective buyers, etc.? These are all strengths you need to consider.
You also want to take a broader look into what your company has to offer. What advantage does your company have over your competitors? Why are clients turning to you rather than them?
Also, take some time to consider your assets. Any capital or intellectual property will help you get ahead.
W = Weaknesses
This step can be a bit painful, but it’s essential to know your weaknesses to help build up your company and identify means of growth. What does your business lack? Where does your competition out-perform you, and why?
Also, take an honest look at your sales process. Is there a particular stage that customers seem to lose interest? Are there any bottlenecks or leaks in your pipeline you need to address?
Where are your resources limited? You need to create a territory that minimizes your weaknesses, but you have to understand them first.
O = Opportunities
Understanding the opportunities helps you plan for the future while defining territories. Are there any untapped or under-serviced markets? Where are there fewer competitors or growing demand?
Is there an opportunity for you to get positive press or build goodwill amongst your target audience? These can all encourage growth in your company.
T = Threats
On the other hand, you also need to look at potential threats to your company. For example, is there somewhere where competition is fierce? Is there a new industry or regulatory standards that may require more time and money from you?
How about negative media or a lack of goodwill? These are all factors that could be damaging to your territory.
The SWOT can take an overall look at your organization, but you can also assess them on an individual level amongst your sales reps.
A weak salesperson can be damaging to your whole team and company. Avoid the temptation to tailor their territory around them. The constant change in a territory as you try to make it fit the wrong salesperson could upset customers, and potential customers as their point of contact keeps changing.
Instead, identify your reps ahead of time to assign them correctly.
Set Goals for Your Team and Establish Quotas
Make the goals that you set clear and easy to track. A goal for your sales team should be SMART:
Create these goals on both the level of your team and individual reps. These goals will give you an idea of how well things are going and if something needs to be changed. A well-set goal will also motivate your sales reps and enhance productivity.
Break down your overall goal into specifics. This is where your first step is most useful. How many opportunities will your team need to achieve the goal? Which regions are best to focus on? Which products will be the most profitable?
Go over your data from previous periods to see what goals are realistic for your sales team and assign quotas to support these goals. Your CRM will allow you to do that.
Form Strategies to Meet Your Goals
This is where all of the information you acquired becomes practical. It’s in this step you put it all together to match your sales rep to the right territory.
As a territory manager or leader, your job is to enable your sales team to succeed. Your strategies ensure that everyone is on the same page and have the knowledge and tools to meet their quotas.
You can create a plan that helps your team target your lucrative segments and get maximum coverage. Assign your sales reps based on your assessment of their skills and match them according to the territory where it would work best. If your sales rep already has established relationships in a territory, for example, it would be wise to assign them there.
SWOT will allow you to assess where your team needs your help. For example, what does your organization need? Perhaps they need more education in the sales process or better content to give potential clients.
Take a look at your current successes. How can you leverage them? Perhaps you can ask for referrals, or use them as a case study. How will you generate new leads to meet your goals?
Are there external resources you can use to reach your goal? Which sales reps have the information and experience that you need to reach your goal?
These questions can shape your specific strategy to meet the goals you set.
Review and Track Results
Territory management is never truly done. It requires a continual assessment to measure progress. This assessment will help you gauge how effective your territory planning is and if it is working for your sales team.
In your review of the territory, there are some things to consider:
- Is there a significant difference in sales between your territories?
- Is there one rep that can barely keep up with leads, while another struggles to meet quota?
- Is there an underserved territory?
- What are the costs of each territory?
As your company changes, grows and offers different products and services, it might require a re-assessment of the sales territories. Continue to track results to make sure that you are getting everything you can out of your territories.
Luckily, we wrote another article on territory management to stay on top of your territories after you have defined them.
Create More Sales with Better Sales Territories
With the right data, you can create effective territories that motivate your sales and drive sales. Taking the time to understand your customer, sales process, and sales team help create a well-balanced and productive sales territory!
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