Harvard Business Review says sales territory design increases revenue by 2-7%, without any changes to resources or strategy. Despite this information, many reps are handed a sales territory based on the simplest of criteria. Yet creating good territories is critical to success. The good news is it is now easier than ever. This article walks you through 4 steps to increase revenue with sales territory design.
1) Account Segmentation Analysis
It all starts with who your sales teams should be talking to in the first place. Prioritizing accounts is a pre-requisite for sales territory design. At a minimum, your team needs to know your ideal customer profile. This profile must be common across sales, marketing, and product.
The demo pictured below tiers accounts based on adjustable metrics.
In this second view below, we are displaying account potential vs their prioritization score. This can be used to focus on the top tier accounts.
2) Territory Design Metrics
During the first 8 weeks of Covid, 82% of companies adjusted sellers pay. This implies a huge change in the health of territories. To create healthy territories, you should consider several factors, usually 3-5 on the list below.
- Number of accounts by customer and/or prospect that a rep can handle. Do not rely solely on a gut feel for this. Validate with surveys and actual CRM data.
- Mix by vertical – what is a healthy balance of verticals within a territory? Or should some reps be over-weighted in one vertical?
- Size of prospect. This does not mean just revenue. Also consider number of locations or employees within a company who can use your service.
- Where is the buying decision made? At a headquarters or at the sub-locations? This can dictate who they should call on and the location to be assigned.
- Personas. Should your territories be based on the # of contacts/titles the sales team calls on?
- Tier of account or account score. This can be based on the fit, and whether they have engaged with your marketing or website.
In the demo below, we used percentage of A tier accounts to help build territories. It shows an example of revenue potential and number of accounts by territory.
To determine the right list of metrics, interview top sellers. Conduct sales rep time surveys, and data analysis to spot trends. And once you have a preliminary list, have the team review a sample territory.
3) Getting the Right Account to the Right Rep
By now, you should have accounts scored and a handle on how territories should be built. But which rep should get which territory? In other words, do the best reps get the territories with most potential? Or most revenue? With geography less of an issue, should industry be the key criteria or number of accounts?
Using the metrics of a good rep will help you match the right rep to the right territory. Other considerations include which rep should be assigned a territory that is currently open. Do you eventually plan to hire a rep for the open territory? If so, be transparent with the rep who may be temporarily assigned to it.
In the above example, number of accounts, revenue at the county level and vertical information was used. To optimize design, we held workshops with sales to build each territory at the county level.
If you have different sales channels, you will need to repeat all three steps for each. In other words, an ideal customer profile is different for each channel. Which means the territory criteria is different as well.
When you complete this step, you are now ready to assign territories to reps. As clients have told us, this is the part of the project where things get real.
4) Flexibility & Governance
Pre-Covid if you created territories once a year you were best in class. Now you need a near continuous ability to have accounts, reps and territories modified monthly.
Luckily, sales knowledge, market intel and a good data architecture make it affordable to have flexible territories. Pre COVID-19, the pace of change was already rapid. It was driven by buying behavior, rep turnover, computing power, connectivity, digital trends & mobility. Going forward you also need to handle changes due to the virus, economy, and other emerging technologies.
To meet the challenge, think in terms of how we define digitization. Setting up a process to extract useful information from data. Then distributing it to those who can use it to make great decisions.
This is not analysts creating excel sheets and reps clicking on filters or pivot tables. It is capabilities and dashboards in your CRM that reps use to call on the right accounts. It means each of your managers and reps can see their territories. They can create account plans and prioritize who to work with week in week out. It is a process to monitor use and share best practices to increase adoption.
Step 4 ensures you keep up with changes and are always aligned to the market opportunity. Putting it all together will deliver benefits that ripple across the entire go to market strategy:
- Clear definition of each channel’s route to revenue.
- Improved ability to set quotas.
- Improved ability to hire the good reps by showing them the territories they can take over.
- Higher retention of your best reps.
- Matching the size of your sales org to the annual market opportunity.
- When turnover happens, being able to quickly assign and move reps to the best territories.
- More accurate territories, more accurate forecasting, and an improved the ability to plan for the future.