An effective sales territory strategy is one essential pillar of a successful business.
Creating a sales territory plan requires careful consideration and thought in order to get it right the first time, which is crucial. If there are constantly changes in territory division, it can make it hard for your sales team to be productive and affect employee morale. Frequent changes in account managers can cause instability in relationships from the client’s perspective and create a higher risk for them to stop using the service.
This post covers how to execute sales territory planning and management so that your team and customers are both considered. You will learn the best sales strategies for designing, aligning, and managing sales territories. But first, what exactly is a sales territory?
What is a Sales Territory?
A sales territory is a place where a salesperson or sales team is responsible for selling products or services. This can be a geographic region, business industry, or account type. The goal of a sales territory is to have a specific market that sales teams can focus on and deliver resources to so that they can efficiently close deals.
The success of your sales team depends on their ability to understand, plan, and manage sales territories. Your representatives need to have a good understanding of the customer segments they are responsible for and the framework of your team’s territories. You will only be successful in using this strategy to close deals if everyone on your team is on board.
The way you set up, delineate, and assign the areas you work in can have a huge effect on your organization’s sales productivity and profitability.
To create a successful sales territory plan, you need to start with a good territory design, followed by good management of that territory, and finally, aligning the sales goals with the territory. Here are some tips on how to do them correctly.
What Is Sales Territory Planning?
A sales territory is typically defined as a specific geographic area, a set of defined accounts, or an industry sector that a salesperson or sales team focuses on. The number and type of salespeople in each territory is heavily influenced by the complexity of the product or service on offer, as well as the scale and scope of the sales territories.
The definition of sales territory planning isn’t new, but the way people are thinking about it now may be a revelation for some. Sales managers are experienced in finding ways to divide their sales team in a way that increases their chances of success. The way people can now go about it is changing significantly. It was common in the past to define territories based on how far sales reps could reasonably travel in a day or week. In other words, the budget might have been based on what a sales manager had used in the past, but updated annually. It was common for territory planning to involve a lot of cutting and pasting in Word docs or Excel spreadsheets. However, these methods result in the creation of sales territories based on what the company needs rather than what the customer or prospective customer needs. This can cause some sales territories to be too serviced and others to be not serviced enough. If the business doesn’t take advantage of opportunities, it won’t be successful.
A lack of understanding of where the most significant opportunities are, whether there has been historical sales and marketing activity, how successful this has been, and what drivers are likely to drive opportunity and revenue over the coming 12 months is often missing when designing a sales territory.
Why Organizations Need a Sales Territory Strategy
You can be successful in your organization by continuing to do what you have been doing and continuously strive to reach the goals you have set. Although it may not have been necessary in the past, the current pressure for more success and the expectations of managers and other stakeholders necessitates a more systematic approach to planning sales territories, sales targets, and incentive models. While a “big data” approach has many benefits, it may not be the best solution for territory planning.
This approach provides value to any sales team by helping them reduce the amount of time spent on administrative tasks, and by helping them increase the accuracy of their sales pipeline.
Systematically Target Specific Sectors, Regions, Opportunities, and Customers
Sales territory planning involves thinking about who your best prospects and customers are and why this is the case. This helps you plan your sales for the upcoming year. You can then use this research to determine where these prospects are located, which companies and personas are most likely to buy, and what issues and drivers might compel them to buy.
Align Your Sales and Marketing Functions with Your Prospects
The sales and marketing teams often have a love/hate relationship. Sales wants marketing to bring in leads and create campaigns that will help them succeed. Both marketing and sales need clarity from each other in order to work together efficiently.
A good sales territory plan can help improve sales productivity.
A marketing function can help sales teams by identifying which groups are most likely to make a purchase in the near future, and what motivates them to do so.
A good sales territory planning solution can help you turn these insights into sales territories that will help your business succeed.
Set Realistic Targets, Review Your Progress, and Refine Your Strategy
The sales territory planning process allows you to set targets based on opportunity and customer propensity to act. Setting ambitious yet achievable goals can help businesses stand out from their competitors by attracting and keeping salespeople who understand their industry, customers, and issues and how their products can help address those needs. Salespeople want to achieve success in order to increase their earnings and help their company prosper.
An effective sales plan also allows sales managers to track their progress on a regular basis. Sales managers can more effectively manage their sales territories by basing their plans on customer needs, rather than relying on intuition or gut feeling. This approach allows them to more accurately assess what is working and what is not. If they are progressing well and ahead of schedule, they can study the plan to see what is working and continue doing it. If sales are lagging, managers can investigate whether deals are progressing through the sales pipeline or if there is a shortage of leads and opportunities. Sales managers who have a good understanding of the opportunity available to them are more likely to be successful.
Effective Sales Territory Planning Allows You to Focus on Selling
Sales managers do not want to spend their time reviewing spreadsheets full of potential customers and their options. They certainly won’t sign on to expend time and energy understanding why they’re behind on their targets and how best to fix the problem. They would rather just be given a solution to implement.
The company’s priority is not making a profit, but rather supporting their sales teams so that the reps can be successful. Utilizing an effective CRM can help salespeople make the most of the approximately 200 selling days they have each year by ensuring their time is not wasted.
It is beneficial to have a sales territory plan that is rich in information at the start of every sales year so that your sales and marketing campaigns are as effective as possible. This means that your marketing efforts are more likely to be successful in terms of reaching your target customers and making sales.
Building a Sales Territory Plan
If you don’t design your sales territories with a plan, you’ll find that you’re using up your resources and budget without getting a good return on your investment. Sound familiar?
If you’re barely scraping by each quarter, struggling to bring in new business, you need to familiarize yourself with these sales territory planning rules.
Define your market.
To set up territories effectively, sales leaders must first understand the environment of their business. There are many ways that a business can define a market. There are many factors that can affect a company, such as its location, size, the demographics of its consumers, and the level of competition it faces. But starting with internal company factors is key.
Consider your company’s core values, goals, and revenue. What is the most profitable customer base for the business?
Identify a group your sales team could tap into that is similar to the group you have identified. Choose your most profitable customers and try to get more customers like them. These could become new territories for your business.
Identify what sets your business apart and make it a priority according to what your area requires. Focusing on a lucrative market segment as its own sales area will diminish overhead costs, amplify sales, and lessen customer churn.
Assess account quality.
Once you have pinpointed your ideal target market for your sales territory, you will need to appraise the worth of each account within that market. The type of measurement (quantitative or qualitative) will depend on the product or service your business offers.
A company might rank its accounts by net profitability. A company that relies heavily on customer recommendations could focus on accounts that are more likely to refer others to their company.
By finding out how much each account is worth, you can figure out which ones to prioritize in your sales territory planning. This ensures that your sales team is aware of which accounts are included in their quota metrics and can, therefore, give the appropriate amount of attention to these accounts.
Determine territory quality.
After assessing the quality of each account, you should determine how qualified the territory is as a whole. The process of categorizing accounts is subjective, based on the different needs and priorities of businesses.
The sales cycle, churn rate, and repeat purchases for a food & beverage territory differ from those of a health & beauty territory. There are many factors that could affect the quality of a sales territory. For example, the terrain, the population density, and the number of potential customers within the territory.
You may decide that the sales cycle is the biggest determinant of territory quality and use this factor to rank each one from highest to lowest. The time it takes to see a return on investment for the health and beauty territory could be shorter than for the food and beverage territory, meaning health and beauty is a higher quality territory.
Your sales team should be involved in discussions about territory value to get a better idea of what is valuable. After all, the reps who work within the territories each day know them best. You can assign the reps that will work best for each territory.
Understand your sales reps’ strengths.
The next, and possibly most important, step of effective territory management is to develop a plan. After you have determined the quality of each sales territory, you need to assign reps with the necessary skills to develop and improve each one.
An excellent way to assign sales territories would be to give a territory defined by large enterprise deals to a rep who has experience closing big deals.
Now, this doesn’t mean that as a sales leader, you should pick and choose which reps work in which territories. This step represents the opposite. Instead of putting reps in highly specialized roles that creates barriers between departments, you can cultivate an environment of continuous learning. Share ideas and practices between sales reps to ensure that each territory is getting the best possible service.
If you want your team to deliver an amazing buying experience for your clients, you should assign qualified reps to accounts.
Review your sales territory plan.
The four steps will help you plan how to best use your sales team in each territory, but you should also consider the costs associated with each territory. Analyzing cost metrics will help you as a sales leader identify specific inefficiencies in the system and solve them.
CAC can be used to identify which industries are most expensive to acquire customers in. You can generate a list of costs related to finding and completing each deal by using this method. You can compare CAC over time against competitors or industry standards to determine what a healthy CAC should be for a territory.
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