In these challenging economic times, Sales Leaders are being asked to do more with less. To achieve the same sales goals, but with fewer selling resources, less travel, less spending etc.

Therefore, optimizing your sales territory design and aligning your finite resources with the best sales opportunities is more important than ever before. The good news is, sales territory design is completely controllable and can be altered in line with your changing business needs.

When designing or revising sales territories, I recommend this three-step process:
1)    Start with the opportunity and work backwards
2)    Determine your coverage and touch strategy
3)    Design your sales territories

1) Start With The Opportunity & Work Backwards

Effective territory design starts with identifying your sales opportunity and working backwards. A sales opportunity analysis will identify where your sales are most likely to be generated from and what specific characteristics make a company more or less likely to buy your products.

These factors include industry/vertical, employee size, location, buying and consuming patterns. There may be certain geographic markets where you have a greater or weaker value proposition and competitive advantage.

At the highest level, your sales opportunities will fall into three categories: existing/renewal business, winback business and brand new business. Then, leveraging data and analytics, you need to drill down into more specific “buckets” of opportunity.

For example, you may uncover that your best opportunities lie with customers in financial services, with more than 500 employees located on the East Coast. Or, your best new business prospects could be very small real estate firms, with less than 20 employees in Florida and Georgia.

If you are a Sales Leader in charge of the United States sales region, trying to cover every possible company that may buy your product is simply not feasible or wise. Completing a detailed opportunity analysis is critical in identifying where your company should focus their attention and align their resources for the best return. And, it should also provide direction on where NOT to align resources.

2) Design a Coverage & Touch Strategy

Once you know where your opportunity is, consider what type of coverage and touch strategy is appropriate. The coverage strategy considers “how” and “how often”…. Whether the business requires face to face visits, telephone calls or a “self service” approach to best cover the opportunity. And, how often and how much time salespeople will need to touch customers.

Factors that will impact your coverage or touch strategy include: size and number of locations for target companies, complexity of your product or service, average deal size and type of sale- new business versus renewal business.

Your coverage strategy should be as specific and quantifiable as possible, so you can feed this information into your territory design models.

For example, you may determine that all active customers with 5000 or more employees and a spend of $25,000 or more will have a Field Rep assigned to them. After accessing your company’s CRM, you identify that there are 200 of these and they all reside in New England.

To maximize the opportunity, you want Field Reps to make 4 visits per year, that take 6 hours each in planning, driving, presentation and follow-up time. This set of customers will need about 4,800 hours devoted to them in the next year (200 customers X 4 visits X 6 hours = 4,800) Since there are roughly 2,080 work hours in a year, you would need approx. 2 Reps covering these accounts. (4,800 / 2080 = 2)

3) Design Your Territories

Now that you’ve completed your opportunity analysis and designed your coverage strategy, you’re ready to divide and create your sales territories. There are many options…

Geographic Distribution: Geographic or “geo” territories are designed by strategically grouping a set of zipcodes, DMAs or states together to form a defined territory.  For field sales reps, you can bring this design down to a science by leveraging mapping software such as Callidus or  Territory Mapper to plot out a maximum driving area you want reps to cover. This is often called a “radius” design.
•    Sales Reps can become experts in their geo territory and can leverage local information, local events and regional trends within their sales process and discussions with customers.
•    When firms have both Field Sales and Inside Sales teams, geographic designs help enable teaming between inside and outside personnel.

Vertical Specific: Vertical or industry focused territories are aligned based on grouping together customers and prospects that have the same or similar verticals or industries. Examples: Financial Services, Healthcare, Government. Your opportunity analysis should uncover whether this makes sense for your line of business. Adding dedicated groups will often add cost to you sales model, so you need to ensure you have the appropriate return on investment
•    With Reps who have expert knowledge on a vertical of industry, you should be able to sell more and better retain and service these customers.
•    A dedicated group may help you better compete and add to your unique value proposition.

Best Customers: Best Customer, Key Account or Strategic Account territories are often created for an established business that can identify the accounts that spend the most, have the most future sales opportunity and/or are very high profile, ex, “Google”. Many companies like to align their best, most experienced salespeople with their best customers. If you grow and retain OR lose just a few of these customers, it may have a significant impact on your business results.

Hunter & Farmer: The skills and work required to generate new business are very different than retaining and growing existing business. Therefore you may want to create new business specific often called Hunter territories and separate active customer or Farmer territories.
•    Hunter Reps focus 100% of their energy on bringing in new business for your firm without getting tied up in customer service and administrative work, often required to retain existing business. These Reps get in, close the business and move on to the next opportunity.
•    Farmer Reps are masters at relationship building. They are the face of your company and likely why your active customers are loyal to your product or service. These Reps focus on long term account management.

Campaign Specific: Every customer or prospect does not need to be part of an official sales territory. Instead you may want to leverage a campaign approach. In this scenario, you group types of customers or prospects together based on a set of criteria and ask salespeople to make contact with them during a set period of time with a specific message or offer.
•    The campaign approach allows you to test different types of offers or approaches and may work well when introducing new products or moving into new geographic areas.

Which one is for you? Some companies use just one type of territory design, while others use a combination of methods. The right territory design for your firm is the one that best aligns your resources with your opportunities, meets your budget requirements and supports your overall business plan and objectives.

Using Experts to Help

If you need help, there are companies that specialize in territory optimization and forecasting. Some of these include:

• ZS Associates
• TerrAllign
• InfoGrow

Doing It Yourself with a Business Information Service

Many companies already subscribe to a business information service that provides information on companies and contacts (often used for sales prospecting and research).  Using one of these services, you could export lists of companies, states and other data elements and complete analysis using Microsoft Excel.

If you are already subscribing to a business information service, this approach can help you get it done without spending any additional hard dollars.  If you don’t already subscribe to such a service, but are considering one to help with sales prospecting, then the ability to also use the service for territory optimization may provide the additional value that helps you justify the purchase.

Data and analytics are required in every step of territory optimization and for the final step of tying everything together to determine the ideal number of salespeople and territories required to maximize your sales opportunity.

I recommend partnering with your Marketing and Finance colleagues to build a formal “what if” model that allows you to plug in variables and test different outputs.

What You’ll Gain

By optimizing your sales territories; aligning your important selling resources with your best and most valuable opportunities, Sales Leaders will be able to “do more with less” and be more successful in growing sales, retaining customers and meeting profitability metrics.

Submitted By Marci Reynolds, Author of The Sales Operations Blog.  All Rights Reserved.

Tags: Sales, Sales Territory Management