Designing the Perfect Territory
Sales executives focus on getting better "per-rep" (and therefore, total sales force) results for the least amount of cost in salaries, commissions, and travel. While most are leveraging wise investments in CRM and sales performance management (SPM) solutions, what many companies have overlooked is that what any given rep can produce, even leveraging these tools, is highly dependent on his or her territory.
The next strategic weapon
With efforts geared toward maximizing results for the entire sales force, sales executives often look at why successful reps are successful and then try to replicate best practices. In many cases, however, successful reps are successful because of the territories they have. A rich territory leads to a rich sales rep. A better objective is to provide each territory and, therefore, each rep with the amount of work and/or opportunity that maximizes the rep's selling time. This leads to equitable, or balanced, territories and the ability to really know if reps are successful because of their skills and hard work or because they drew the lucky patches.
Companies that get the most from their entire sales forces shrink the overloaded territories that often make average reps look like all-stars (and cost the company both market share and commission accelerators at the same time). They also add to the barren territories that leave good reps frustrated and spending their extra time, which you are paying for, finding other jobs.
By optimizing territories-balancing the workload or opportunity across all territories while keeping them geographically compact to minimize drive time-sales forces benefit from more manageable territories, more motivated representatives, increased market share and revenue, and reduced expenses. These days, driving time between opportunities is not just wasted time; it is a significant expense.
Territory design best practices
- Balance territories on metrics similar to the ones used to pay sales commissions. If you are going to pay your reps to sell a particular product line or target new customers, then design and balance your territories based on that same variable.
- Build territories from the ground up. By starting at the highest level and going down, companies reduce their options to build the best territories at each level. It also leads to managers having to decide if they should have half a rep more or less than they can support for the trivial purpose of maintaining outdated district boundaries. By building from the ground up, you size each territory properly, allowing you to group with others to create equitable districts and regions.
- Build territories around customers, not sales reps. In a perfect world, you never lose a good rep or a good customer. However, the reality is that customers stay customers longer than reps stay employed. Therefore, build territories around your customers, and if hiring a new rep, try to hire one living in that area.
- Base quotas on opportunity from each territory. While territory optimization will work toward providing each territory with the same amount of opportunity, not all territories will be exactly equal. If one territory has 80 percent of the amount of opportunity in comparison to the average, give it 80 percent of the quota-that's equitable.
- Involve field managers in the territory alignment process. Field managers know their patch, the customers, and the reps, and they are ultimately responsible for hitting a number. Bringing them into the process will increase their buy-in and make it possible for them to better handle any push back from reps when the reps' territories change. The ability for everyone to see, geographically and quantifiably, how and why the final design ended up as it did will make any realignment easier.
By optimizing your territories, your field force will be able to service accounts and work opportunities without leaving deals on the table for competitors or wasting valuable resources simply because there isn't enough work in a particular territory. Your reps will be motivated with fair quotas and equitable territories, and your cost of commissions will be more predictable. You will be able to achieve more without spending more.
About the Author
Ken Kramer (firstname.lastname@example.org) has over 15 years of sales optimization (GIS, CRM and ICM) experience. He is currently the director of product marketing for TerrAlign, a sales resource optimization provider. For more information, go to www.terralign.com.
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