To control costs of sales, target the right accounts and opportunities and maximize revenue, companies have to actively manage the size and structure of their sales territories. This is a complex process, and most organizations struggle to design and execute strategies that truly drive sales potential.
Let’s start with the typical territory management process, which involves three major steps:
Territory Process Framework
Design & Set
Step 1: Workload & Capacity Planning
Step 2: Territory Analysis & Optimization
Update & Communicate
Step 1: Review and Update Territories
Step 2: Rollout to Field
Step 1: Monitor Performance
Step 2: Manage Updates
Territory design activities may take place infrequently, possibly every two – three years, and can involve wholesale changes to sales roles, sales force sizing, and territory alignments. Rollout activities occur more frequently, typically annually, involving deployment of full redesigns, or alternatively, annual reviews and adjustments of account alignments.
The process of managing your territories is an ongoing activity.
This may be the result of organizational changes that take place between redesign activities, adding or removing accounts, shifting accounts across territories to balance workload, etc.
There are also interrelationships with other business processes, like quota and compensation management, that can be impacted when managing updates to your territories. These relationships can make the ongoing management of territories a complex process.
Here’s a glance into the most common territory management problems I spotted in the sales organizations I have worked with.
Challenge no.1: Sales Territory Design
Before entering a market, companies have to define the total addressable market (TAM), which includes existing customers and prospects. Sales operations, in collaboration with marketing, should create a territory coverage model that segments the TAM into tiers of customers, opportunities, cost, revenue, and sales roles. SiriusDecisions recommends that the territory design process begins with determining the sales workload needed, as well as the capacity available, for each tier of the coverage model.
Large sales organizations have massive numbers of customers and prospects. Their biggest challenge is deciding when to warrant a redesign. Territory design often requires unique skills, reference data unavailable within the organization, and specialized tools and techniques. This can result in disruption across the field if not managed correctly. Since the process is relatively infrequent, many companies seek outside advice in managing it.
Challenge no. 2: Territory Rollout
Companies need effective communication platforms for territory adjustments.
Sales operations adjust territories at least annually and usually include input from first line managers, who bring local knowledge to the table. When making adjustments to territories, they consider workload, relationships, and even sales rep characteristics such as tenure and experience. This is done following both wholesale territory design, as well as during reviews of territories. In most companies, this is an annual process that precedes the annual quota setting process.
In reality, these adjustments activities are often manual, labor-intensive, and prone to error and debate. It’s not something that first line managers look forward to doing, so timelines often slip. Some companies don’t have a formal process in place, and instead, they rely on individual requests.
The most successful companies I have seen do this based on an established annual rhythm, timelines, and responsibilities. Besides clear guidance to the sales force, they use tools that facilitate the inevitable back-and-forth between sales ops and the field.
Another challenge for sales operations is the delayed and inaccurate communication of territory assignments once the territories have been set. This can cause confusion, contention, or worse, loss of account coverage, impacting revenue.
It is absolutely critical to clearly communicate territories to the field in a timely way, ensuring that each individual has visibility of his/her own area of responsibility. There should also be processes in place to question discrepancies and close out issues.
Challenge no. 3: Territory Monitoring and Analysis
Territory monitoring is about more than sales compensation.
It needs to include information about activities that are expected (calls, leads, opportunities) and also about historical performance. Ideally, managers should be able to assess overall performance at a glance and easily dig into performance of individual territories.
Targeting the right accounts is essential to ensure that the business runs smoothly. Part of territory monitoring and analysis is identifying top performing accounts and allocating resources accordingly. Effective territory management requires constant adjustement and prioritization based on observations from the field.
In reality, many sales organizations lack the resources and know-how they need for territory monitoring. Without efficient processes in place, they are not able to uncover areas with workload imbalances, potential disparity, and imbalance in opportunity. The lack of real-time insights deters leaders from making decisions based more on facts and less on gut instinct.
Challenge no. 4: Managing Updates
Automating the process of managing incremental changes on an ongoing basis in an efficient and non-labor intensive manner is a challenge for most organizations — probably the biggest of all. These changes can range in scope from moving individual accounts from territory to territory, to collapsing territories and supporting organizational changes that may fall in the way. This requires the ability to collect change requests, model and understand the impact of changes, and then automate the changes seamlessly.
What makes this process complex is it happens within a compensation plan period, which may seriously impact the way people are paid. Often, quotas are set based on territory alignments, so baseline sales and quotas need to be prorated and moved along with the account. If quotas are not set at the appropriate level/account, there should be rules for making these adjustments. This process is often manual, very time-consuming, and prone to second-guessing by the field.
It is imperative that organizations have clearly established rules for ongoing management – some companies freeze alignments, while others allow defined parameters such as timing (e.g. monthly only). What’s important is to have clear parameters and rules for reviewing and approving changes.
All these challenges impact sales performance and prevent leaders from leveraging the benefits of territory management. When done right, territory management can enable organizations to target the right customers and deploy salespeople to maximize market potential. It can also help salespeople to get fair territory assignments and consistent performance data. This visibility into sales results and into future opportunities helps them understand current trends, the market landscape, and prevent emerging issues.
Sales Territory Management – A Guided Tour
To help sales leaders get better results, we designed this paper as a guided tour that provides a framework for territory management. Download it and turn territory management into your competitive advantage!