What Is Sales Territory Planning?
A sales territory allocates business amongst your sales reps. Sales territory planning is the process of dividing your territories to disperse regions to each member of your sales team to make sure your customers are served equally.
Geography is a common way to divide up sales territory, but how you define your regions depends heavily on your business. It may not make sense for you to divide up your regions geographically. Some other ways to assign territories include:
- Account types
- Audience segments
- Referral source
- Products purchased
- Industry
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 various times.
The work required to create the right sales territory is well worth the effort. Research indicates that organizations with effective territory design had a 14% higher sales objective achievement on average, while ineffective companies had 15% lower success than the average. Businesses that redesigned territories showed sales increases of up to 7%.
Benefits of Proper Sales Territory Planning
Sales territory planning can be a painstaking process that requires leaders to carefully calculate their metrics, customer personas, deal sizes, costs, and sales reps’ strengths and weaknesses. However, strategic planning is one of the most effective ways to lead, encourage efficiency, and boost profits.
Benefits include:
- Increase revenue by redistributing sales effort more equally and strategically
- Increase profits by using a reduced sales force to target high-potential areas
- Organize the workload evenly across sales territories
- Boost client satisfaction through responsive and consistent coverage
- Reduce client fatigue and outreach redundancies
- Balance revenue potential across territories
- Reduce travel time and expenses
Your Step-by-Step Guide for Defining a Sales Territory
Step 1: Get Back to Basics With Customer Data
First and foremost, dividing sales territories should reflect your customer base. Understand your ideal customer and who you want to reach by dividing customers into three groups:
- Top-tier customers (require least effort for sales)
- Second-tier customers (need some work but worth the effort)
- Third-tier customers (might need more than they’re worth)
Lay out these customers in groups to ensure you target more customers like the first-tier group. Analyze them to find common characteristics.
Consider these questions:
- What are their pain points?
- Which products/services perform best?
- What events lead to purchasing?
- What discourages purchasing?
- What is your conversion rate?
The goal is finding trends in the market and within your customer base.
Step 2: Analyze Your Sales Team
Once you understand your customer, examine your sales team to ensure reps’ skills match territory needs. Use a SWOT analysis:
S = Strengths
Assess what areas your sales team does well:
- Does your team excel in demos or phone/email?
- How much internal knowledge do they have?
- What advantage does your team have over competitors?
- What assets can you leverage?
W = Weaknesses
Know your weaknesses to build growth areas:
- What does your business lack?
- Where does competition outperform you?
- Are there pipeline bottlenecks?
- Where are resources limited?
Understand individual rep shortcomings. A new salesperson may lack experience with enterprise clients, while another might struggle with technology and do better with in-person clients.
O = Opportunities
Keep one eye on the future:
- Are there untapped or underserved markets?
- Are there areas with fewer competitors or growing demand?
- Opportunities for positive press or goodwill?
T = Threats
Look at potential dangers:
- Where is competition fierce?
- New industry standards requiring more resources?
- Negative media or lack of goodwill?
Threats can reveal unrecognized growth opportunities.
Step 3: Set Goals for Your Team and Establish Quotas
Identify exactly what your goals are to build your territory and track performance. Goals should be SMART:
- Specific
- Measurable
- Achievable
- Relevant
- Time-based
Goals should reflect general company aspirations in concrete, manageable steps. Create goals for both your team and individual reps.
Break down your overall goal into specifics:
- How many opportunities does your team need to achieve the goal?
- Which regions are best to focus on?
- Which products will be most profitable?
Go over previous period data to see what metric-driven goals are realistic for your sales team and assign quotas accordingly.
Step 4: Form Strategies to Meet Your Goals
Create territories based on current customers, opportunities, and threats. Match your sales rep to the right territory. Your job is enabling your sales team to succeed.
SWOT allows you to assess where your team needs help. Consider:
- What does your organization need?
- How can you leverage current successes?
- How will you generate new leads?
- Which sales reps have needed information and experience?
Step 5: Review and Track Results
Territory management requires continual assessment to measure progress. Regular checks gauge how effective your territory planning is.
In your review, consider:
- Is there a significant difference in sales between territories?
- Does one rep struggle to keep up 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, it might require reassessment of sales territories.
Do You Need to Restructure Your Territories?
Balance is key to creating right sales territories. Territories run into most troubles when they are either over- or underserved.
Why You Need Balanced Territories
An overserved territory dedicates more sales reps to an area than there are real prospects. Your salespeople won’t meet quotas, and other territories suffer from increased costs.
Research shows 72% of agencies admitted they commit a disproportionate amount of resources to high-profile clients. HubSpot found that nearly half of the companies surveyed reported a loss of at least 11% through client over-servicing.
An underserved territory loses potential sales when reps can’t properly handle leads. A well-balanced territory means reps spend more time making sales rather than feeling demoralized by unfairness.
Critical Times to Restructure Your Territories
Key times for realignment include:
- Change in products or services offered — New products may require more coverage
- Expansion of sales team — More salespeople mean more coverage needed
- Economic downturns — Adjustment needed to remain efficient
- Significant market changes — Territory balance naturally declines over time
Making territory analysis a regular routine ensures your sales territory plan remains effective and profitable.
Tips to Successfully Readjust Your Sales Territories
Reassess Your Capacity and Resources
Your current number of sales reps and available resources might differ from your last plan. Look realistically at how many reps you have to cover areas and what resources help them reach goals.
Utilize Data Insights
Your sales data provides valuable insights. Gather and use internal and third-party data essential to territory realignment. Look at metrics such as:
- Number of accounts per rep
- Lead distribution
- Geographical location of customers and prospects
- Current revenue per territory
- Revenue potential
- Location of sales reps
- Market data on industry changes
Keep Your Ideal Customer Profile in Mind
Your sales reps need to know what customer types are best to approach. This makes them efficient and ensures customers are profitable.
When readjusting territories, keep ideal customer profiles in mind. Geographic areas may now have different concentrations of target prospects.
Set New Goals and Benchmarks for Your New Territories
Consider the problems you want to solve and opportunities that changed. This guides territory restructuring and enables you to set new goals and benchmarks.
For restructuring success, determine if changes help meet business goals sooner rather than later.
Automate Your Territory Mapping
The right tools convert information into something meaningful and practical. Territory mapping software helps you:
- Perform analysis on existing territories to pinpoint improvements
- Look at potential territory maps as you redraw them
- Compare different territory models
- Share the new plan with sales reps
Automated mapping tools provide optimized sales territory maps based on available information to help your company remain competitive and profitable.
Effectively Communicate New Territory Changes
Your strategic work becomes lost without ensuring everyone understands the changes. Your team’s buy-in is incredibly important.
Company culture impacts overall success. How your sales team feels about your brand, support, and product excitement all affect quota achievement and sales goals.
If changes occur due to layoffs or economic downturns, your sales team might already suffer from low morale. How you communicate and frame changes can instill hope and enthusiasm or cause resistance and worry.
Make sure the new territories, what changed, new sales goals, and new roles are clearly communicated. Be transparent about why territories were restructured and steps taken. Explain how changes help your sales team reach more prospects and manage reasonable workloads.
Create the Right Sales Territory Plan for Your Business
Your sales territory plan is as unique as your company. However, the right steps help identify the best strategies to create territories serving your sales team and company most efficiently and effectively.
Companies taking time to analyze data, understand customer bases, and create effective territory plans are rewarded with lower overhead, better productivity, and happier customers. Businesses that don’t face waste, disgruntled sales teams, and higher customer abandonment.
Restructuring is necessary as you scale your team or face market changes. Territory readjustment ensures your sales team remains efficient and productive while aligned with sales goals regardless of current capacity and resources.
By following best practices outlined, utilizing automation tools, and communicating with your team, you save time and ensure everyone understands changes, resulting in a competitive, effective, and profitable sales team under any circumstances.
