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Sales territory management is a critical component of sales success. It’s important to understand how the concept works, what it takes to implement it, and why you need to do so if your company wants sustainable growth.
For more effective follow-up, sales teams utilize sales territory management to allocate leads or accounts to individual salespeople depending on region, industry, product, or account size. This approach can only be implemented successfully if you define your client groups accurately, create adequate territory borders, designate appropriate team members, establish assignment rules, set measurable targets, and evaluate territory performance.
Six important stages may be summed up in a sales territory management implementation strategy. We go through each step in-depth here to help you through the process.
1. Make a list of your customer segments.
As you begin to execute your sales territory management plan for your sales organization, the first and most critical step is to establish your client segments. When it comes time to execute your plan, you’ll be able to make the best judgments on how to arrange them into territories if you do it this way.
Breaking down your leads and customers into groups with similar characteristics is the first step in defining your customer segments. Business-to-business (B2B) clients may be segmented in three ways. The processes are identical whether you’re selling directly to customers (rather than to other companies, as in a business-to-consumer, or B2C) model.
The following are the most prevalent client segment classifications:
Location-based segmentation
Geographic location, such as state, region, or nation, is one of the most popular and simple methods to segment clients. You may further split accounts into smaller areas, such as cities and ZIP codes, depending on the number of accounts.
You should allocate all sorts of firms within that geographic region to a single sales agent or a group of sales agents when employing location rules for more effective sales management. This approach is one of the easiest to adopt when controlling territories since it is linked to a map.
Freshsales displays contact location segmentation to assist users in quickly determining which area each contact belongs to.
Size-based segmentation
Another alternative is to divide your consumers into groups based on their size. This typically refers to the client’s yearly income or their annual expenditure with your company. Other size criteria, such as the number of locations, may make more sense in certain circumstances, but even those are often tied to the total magnitude of the money the client delivers to your organization.
Industry segmentation
The third method is to divide your consumers into groups depending on their kind of company or sector. Vertical territories are defined as those that encompass accounts within the same sort of company throughout all of your business activities rather than covering a geographic region. This also gives your personnel the opportunity to become subject matter experts in their field.
Strategy for Hybrid Segmentation
Hybrid territories are often created by sales companies that deal with huge numbers of leads and clients. Within the same geographic region, for example, you may have distinct salespeople covering small companies and enterprise sectors.
Sales firms with a broad client base might use hybrid segmentation to concentrate their sales reps’ efforts on comparable categories of customers within designated geographic boundaries. To identify and build numerous tiers of client categories, this sort of territory management requires extra setup effort. Nonetheless, it makes more sense for bigger sales teams working with a variety of company types in several regions.
In a user’s territory management dashboard, Workday displays numerous segmentations. (Image courtesy of Workday)
2. Define your spheres of influence
After you’ve identified the consumer groups that make the most sense for your company, divide them into territories, either geographical or not. Consider if allocating resources to a certain set of customers and prospects is feasible. For example, having just one client in a location or sector makes little sense unless it is a huge, multi-division organization that accounts for a significant amount of your income.
Creating territories without existing revenue-generating clients or a sufficient number of leads and prospects would just waste resources that may be put to greater use elsewhere. Additionally, you must determine if the aggregate estimated income from each market warrants the deployment of a dedicated salesman.
You may now build territories using a sales territory management application like Zoho CRM once you’ve identified your area parts. (Photo courtesy of Zoho)
When creating territories, there are a few things to keep in mind:
The Number of Current Accounts
Consider the number of existing client accounts and how they are handled when building a region. This will aid you in determining how to structure your territory such that they are all around the same size.
For example, depending on ZIP code, you may split geographic areas into groups of 30 to 40 accounts. Then, in order to fill each one, merge surrounding ZIP codes. You may also use the standard industrial classification (SIC) code to separate accounts in a geographic region.
Examine the number of accounts within a geographic region as well. The sales process is easier to handle when you have a balance of accounts. It assists you in distributing your team members evenly. There are a variety of reasons for a territory’s account density to fluctuate. Aim to develop regions that are manageable and have space to expand.
Consider not just how many accounts a salesperson should handle, but also how much time each account requires to effectively maintain. A sophisticated, high-revenue account, for example, may need several hours each week to monitor, but a smaller account may just require an hour or two per week or two.
Prospect Availability
In order to be sustainable, the regions you develop must have a sufficient presence of prospects in addition to present clients. While the exact ratio may vary depending on your sector, aim to establish territories with at least two to three times the number of prospective consumers as present customers. This will allow your salesmen to expand their region, resulting in more sales for your company.
Your company’s overall presence.
Consider your company presence in an area to see whether it’s feasible. You don’t need a physical presence in every region. Even so, it’s critical to consider how you’ll communicate with prospects and satisfy the requirements of your consumers in the territory you’re in charge of.
Your company’s presence might sometimes simply be defined as a salesman who manages accounts and finds new clients in a certain region. In a separate scenario, having a physical presence in a certain region makes sense in order to cater to your clients and solve any problems they may have.
Consider the following factors to see whether your company’s presence can help your customers:
- Prospect and lead generation: Determine if your existing level of presence will allow you to develop your company in a certain location.
- Dealing with sales consultations: Determine if sales consultations may be conducted online or whether face-to-face product demonstrations are required for the items and services you’re delivering in a certain region.
- Product and service delivery: Determine if a physical warehouse or storage facility is necessary, or whether your logistics capabilities can function without one.
- After-sales service support: Consider if you need someone to be physically there to resolve any prospective customer complaints.
3. Assign Members of the Sales Team to the Correct Positions
After you’ve defined your territory, assign them to salespeople and managers who will be responsible for day-to-day sales and prospecting. One of the most important objectives is to deploy the appropriate people in the right places, which generally means allocating them to areas that match their specialty or geographic location. This benefits your company by allowing your employees and customers to have a positive overall experience, which leads to greater sales.
Make sure salespeople receive the leadership and assistance they need in addition to being assigned to the appropriate areas. This implies you should choose a sales manager who will be responsible for providing the responsibility, sales training, and resources required to effectively manage a territory and supervise the sales people’s performance.
Consider the following options for allocating team members when you put your team together:
Reps should be assigned based on their level of expertise.
Assigning sales agents to a territory based on their competence is one of the most successful strategies to manage territories. Assigning salespeople to territories based on their talents and expertise allows them to readily connect to prospects and customers in their region, improving their capacity to form relationships that lead to sales.
Reps should be assigned based on their location.
Your field sales staff will often be allocated to areas depending on their geographic location. This reduces travel expenses and improves representatives’ ability to contact prospects and customers on a regular basis. The physical location may not matter if you have an inside sales staff that mostly reacts to leads generated online. However, you should consider allocating representatives depending on the source of the lead, keeping consumers of similar sorts together.
4. Create rules for assigning territories
Use a customer relationship management (CRM) solution to distribute incoming leads and deals to individual representatives depending on the criteria you’ve set once you’ve built your territory and assigned sales team members. This removes the time-consuming manual procedure of routing leads to the appropriate salespeople, allowing the system to keep everyone organized. You may also build up rules to shift leads and transactions from one area to another when conditions change.
Because we believe Freshsales is the greatest territory management software, we’ll utilize it to demonstrate the particular processes required. It can provide comprehensive assignment rules that may be used to automatically route clients and new leads to the right sales team members.
If you’re using another CRM, the particular settings may vary, but you can typically follow these procedures and make modifications as needed.
Locate the Territory Settings
The territory feature is normally found in your admin settings. From adding users to billing, clicking this brings up all of the typical options you need to set up the CRM. Select the “Territories” icon in Freshsales’ “General Settings,” where you can define rules to automatically distribute accounts and new leads to certain territory representatives.
In most cases, the territory administration tool may be found on the general settings page.
Establish a New Territory
You’ll see a list of any territories you’ve previously made and the opportunity to create a new one once you’re in the Territories settings. For more assistance, Freshsales offers direct connections to relevant resources. To create a new territory, click the “Create Territory” button.
Remember to identify these regions depending on the consumer categories and groupings you established before. Your territories will represent the places where your salespeople are allocated to handle client accounts if you chose to segment your customers geographically. You’ll note, for example, that we’ve divided the territory into three sections, each depending on the state where the clients are situated.
You can quickly build a new territory or identify existing ones in a CRM solution like Freshsales by looking for the Territory tab.
Choose a name for your territory.
You’ll be able to set up the territory depending on the parameters you’ve selected when you pick “Create Territory.” To begin, give the area a name and a short description. These will aid in keeping your team organized, particularly as your sales organization expands and additional territories are added.
Most CRMs allow users to easily designate territories and offer a brief explanation of what they are about.
Define the boundaries of the territory
Whether it’s a location, an industry, or a size, each territory should have its own set of requirements. These are the rules that allocate fresh prospects to a territory as soon as they are discovered. You may, for example, allocate any prospect with a certain ZIP code to the zone you labeled “01-NY North,” while others are assigned to “02-NY West.”
Reps should be assigned.
It’s time to designate the individual rep who will be responsible for handling new prospects detected in the same region once you’ve named your territory and defined criteria for processing new prospects discovered in the same area. This is the person in charge of following up on the account and monitoring activity in a CRM.
You may add all of your sales team members who are handling accounts in a territory at this point. A territory could be allocated to an account manager, sales administrator, sales manager, and customer support representative, for example. Everyone you add here will have automatic access to the territory’s particular leads, contacts, and accounts.
Most essential, determine who is in control of each territory’s salespeople and managers.
5. Establish Measurable Territory Objectives
Create sales targets for each territory, representing both income and sales activity, once you’ve built your territories and assigned the necessary employees to them. This makes it easier to keep your staff engaged and responsible for their results. It also enables you to assess the efficacy of your overall sales strategy as well as your area sales plan, which will be detailed in the last stage.
Using the reporting tools in your CRM software is the most effective approach to creating objectives and keeping track of your team’s success. Sales objectives may help inspire your team, increase sales performance, and give a meaningful method to assess the effectiveness of your individual and team efforts.
Goals you may establish as part of your territory management plan include the following:
Revenue Objectives
Revenue Objectives are one of the most common and are easy to understand. They are generally one of the easier goals to measure. Many sales teams also use sales targets for individual accounts, but for the purpose of territory management, think about goals in terms of the overall territory.
Activity Objectives
Another aspect to consider is tracking Activity Objectives. You can set a goal of how many customer appointments a sales rep should have each day, or how many prospecting calls they should make. These goals can be especially helpful in new territories where it is harder to determine the expected revenue.
New Customer Objectives
The generation of new clients is the third sort of aim you should think about. This is a results-oriented objective that rewards salespeople for sticking to the sales process. It’s a different approach to evaluating success in new regions when there isn’t a lot of sales history to compare to.
One of the most effective ways to drive your sales agents to achieve their objectives is to reward them when they achieve them, such as via performance-based remuneration. See which commission tracking software works best for your company in our article on the best commission tracking software.
6. Evaluate the performance of your sales territory
It’s time to define key performance indicators when you’ve identified precise objectives you wish to attain (KPIs). They assess your company’s performance in the numerous markets it serves and judges whether the plan you’ve implemented is effective.
Goals vs. KPIs: Goals and KPIs are often used interchangeably. Goals, on the other hand, are the results you want to achieve, but KPIs are the indicators you use to track your progress.
Here are some indicators you may track to see whether your area sales management approach is working for your company:
Revenue Performance & Growth
Determine the total amount of income your company needs to produce based on your sales history. Examine how each of your territories has performed over time and verify that each is growing—whether monthly, quarterly or annually. When it comes to revenue growth, there is no standard percentage since it varies per company, and it is up to you to determine how aggressive or cautious you want your revenue KPI to be.
New Business Prospects
Closely tied with your goal of finding customers, a KPI that’s easy to measure is the increase in the number of New Business Prospects within a territory—whether these involve new clients or new opportunities given by your existing clients. Apart from evaluating the performance of your agents in servicing existing clients, consider KPIs to meet in terms of generating new business opportunities from the territories they are handling.
Forecasting Sales Accuracy
Another KPI to think about is the accuracy of your sales forecasts in your sales territory management software. Territory management tools are often integrated as a core CRM feature, giving powerful analytics and sales forecasting capabilities. Creating sales predictions includes integrating previous sales data, pipeline potential, and current customer revenues.
Combining real-time analytics and forecasting tools—and comparing them against one another—is one approach to assessing whether you’re on course to meet your KPIs. (Image courtesy of Spotio)
Another approach to check whether you’re on track to reach your KPIs is to have a well-organized sales funnel. (Image courtesy of Spotio)
Most Commonly Asked Questions (FAQs)
When should I start managing my sales territories?
Customer segmentation by geography or industry is generally a solid strategy for any firm that sells outside its immediate local market. Create a few territories, even if they are virtual if your sales staff has grown beyond one or two salespeople or one location. This prevents your staff from duplicating work and provides responsibility lines.
How do I determine which client categories are the most effective?
This is a question that is dependent on your company and the sorts of customers you have. However, if you find yourself selling to comparable businesses on a regular basis, it’s a good idea to put them together. Similarly, if you notice that many of your leads or customers are geographically related, try splitting them into territory-based regions.
What is the limit of a territory’s size?
There is no universal guideline that applies to all businesses. In general, an individual salesman should be able to effectively handle a territory. That is to say, expectations are more important than size. A smaller region makes sense if you anticipate someone to develop a territory by 100%. That is certainly a greater region if you anticipate them to make eight customer visits every day.
Conclusion
Sales territory management, when implemented correctly, may help your company’s sales operations run more smoothly. It also reduces uncertainty about who is accountable for new leads by establishing responsibility for client segments among your salespeople. Create sales territories with the aid of this guide to help you meet your sales goals and develop more new business.
