According to Harvard Business Review, “Research shows that optimizing sales territory design can increase sales by 2% to 7%, without any change in total resources or sales strategy.” However, a misaligned territory design can oftentimes be worse than no territory design at all. In the next paragraphs we will review the common mistakes that your competitors make when designing their territories. We will provide a foundation to begin gathering the necessary information to create an effective territory design.
Whether you are starting from scratch, redesigning your current model, or expanding last year’s model, the benefits of territory design mean that you are targeting the right customers at the right time, and assigning the right accounts to the right reps. Not to mention, you now know exactly who and where you need to hire in order to hit your number.
Traditionally, a “territory” has referred to a geographical region or area assigned to a team or rep. However, in modern times, you cannot afford to utilize a traditional model. Today’s cutting edge territory designs encompass many different perspectives. These include, but are not limited to, geography, sales potential, customer type, rep capabilities, salesforce capacity, and market movements. The vast majority of territory design flaws are less the result of what inputs you do use, and more the result of what inputs you don’t use. Read on for common errors in sales territory design.
Common Territory Design Flaws
1. A Sales Territory Design process without regard to Geography
As stated earlier, geography has been the status quo default for novice territory designers. As such, you are more likely to over-index than under-index on this factor. As the IoT continues to advance and customer buying patterns evolve, we expect to see less and less emphasis placed on geography as an input to territory design. However, for the time being, it would be an absolute miscalculation to not include the geographical perspective in your territory design.
2. Territory Design without regard to Sales Potential
To properly execute your sales territory design process, you need to isolate the value of each account. This measurement process can be based on both quantitative and qualitative factors, depending on the nature of your business. For example, product-heavy businesses would probably rank the value of their customers by forecasted demand levels, while a service company that depends on customer referrals would most likely place higher prioritization on customers that are more likely to refer them. At Segmentation Analytics, we use Account Segmentation as the primary means to identify sales potential.
3. Territory Design without regard to Customer Type
Customers are different and require different sales approaches. Too many of today’s territory designs ignore this fact and, as a result, do not realize the results that they could have achieved. By analyzing and grouping your customers into tiers (this could be by size, seasonal buying trends, etc.), you ensure that you are speaking your customers’ unique languages.
4. Territory Design without regard to Rep Capabilities
One of the most common factors that sub-par territory designs exclude is individual rep capability. Ideally, all your reps are A Players. However, that situation is rarely the case. Your territory design needs to reflect the fact that your talent is not spread equally across your reps.
5. Territory Design without regard to Salesforce Capacity
Above we mentioned individual rep capability, but it is equally important to think about your overall salesforce capability. By assigning too many customers and prospect accounts to reps, you directly diminish your customer count. As a result, your reps are overworked, and your customers are underserved. An effective territory design must include a measurement of salesforce capability.
6. Territory Design without regard to Market Movements
Another common mistake we see in territory designs are models that pay no respect to movement in the marketplace. These territory designs are static and unchanging. The easiest way to make a territory design ineffective is to create it in a vacuum – that is, to design a territory that cannot adapt to changes in the market, mergers, and changes in your salesforce. An effective sales territory design must be flexible and iterative.
This list of common mistakes in territory design is not exhaustive. The key here is that a generic, “one size fits all” model just does not cut it anymore. To win today, you need to consider multiple factors when designing your territories.