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Stop Winging Your Sales Territory Management: Make a Plan

April 8, 2020

territory management

A lot of factors contribute to whether or not a sales rep hits their quota. 

Aspects like experience, the willingness of the customer, and of course, the sales territory they cover, can all impact the success of a sales rep. 

Of those components, the only one that can be controlled internally by management is the sales territory designated to that rep. Even if sales operations puts extensive effort into designating them properly and things are running smoothly at the moment, managers and reps also need a sales territory management plan to ensure each sector is operating in a way that serves customers and provides opportunities for sales reps.

These strategies are meant to create a mutually beneficial selling experience for both the buyer and the seller. Sales territory management ensures that businesses have high revenue potential, and that the customer has a pleasant buying experience. 

Sales territory management plan 

Establishing and managing sales territories requires constant evaluation of three main areas: current open accounts, the territories themselves, and your sales reps.

When you have a good grasp on those three factors, you can define the territories, set goals, and execute the plan. It’s important that the territories be set in a balanced manner that opens opportunities for sales reps and gives customers a positive experience.  

When going about creating a sales territory management plan, here are some steps that’ll ensure success. 

1. Evaluate accounts

To effectively manage territories, you need to first understand the customers within them. 

No buyer journey is going to look identical, but certain aspects of accounts can be somewhat similar. Even if the industry or size of two businesses is completely different, they might be looking for the same solution. Or maybe they contribute the same amount of revenue to the seller or the cost of acquisition is the same. 

Potential revenue and costs associated with the account are the two key factors that are looked at when evaluating current accounts. A customer can bring a business a lot of revenue, but it’s only valuable after cost is taken into account, and things like travel, time spent on the account, and marketing can add up.

Once each account’s net profit is calculated, which is the true indicator of value to your business, you can prioritize those that provide the most revenue potential. These prioritized accounts can sometimes be considered a sales territory of their own.

After the territory based on revenue potential is established, sales reps will dig deeper into each of them, take a look at the factors that distinguish them, and try to find similar accounts based on those findings. This will grow the sales territory and offer the chance for more revenue potential. 

Let’s go over an example.

Fake Company 500 is analyzing three accounts: Account A, Account B, and Account C. Here’s a breakdown of the revenue and costs associated with each account, which are necessary insights when creating sales territories. 

Account Revenue Expense Net Profit
Account A $65,000 $18,000 $47,000
Account B $60,00 $10,000 $50,000
Account C $55,000 $4,000 $51,000

At first glance, Account A might seem like it offers the most value to the business based on the revenue it contributes. However, once selling expenses are taken into account, you can see that Account B and Account C should both be prioritized over Account A. Smaller accounts, like B and C, tend to require less management, making them cheaper and more efficient to sell to. 

This account analysis tells Fake Company 500 that they should not only prioritize Accounts B and C in a territory of their own, but also dig into what makes them different from Account A. It could be their industry, business size, the product they bought - no matter what it may be, this analysis can be taken a step further to expand the territory. 

2. Evaluate territories

Territory assessment takes a look at how well each territory does in regards to the sales funnel. 

Assessing territories requires the evaluation of three key sales metrics: leads generated in that territory, how many of those leads converted to opportunities, and how many of those opportunities resulted in a new account.

In this case, the final metric to determine the true potential of a territory is the conversion rate, which is essentially a percentage that represents sales success. To calculate the conversion rate, divide the number of new accounts by the number of leads. 

Let’s look at an example of a territory assessment with our old friend Fake Company 500. 

Fake Company 500 is going to assess three territories: East, West, and Central. The sales department is going to take a look at leads, opportunities, new accounts, and the most important part, conversion rate. 

Territory Leads Opps New accounts Conversion rate
East 20 9 4 20%
West 32 18 6 18.8%
Central 18 10 3 16.67%

From this territory assessment, we can see that the Eastern territory has the strongest sales funnel, even though the Western territory started with the most leads. 

What to do after a territory assessment is not nearly as straightforward as account assessment. There are a number of reasons a territory can have a weak sales pipeline, and some of them are completely out of the control of the sales reps. A team can be doing their job perfectly, and a customer can still exit the pipeline without buying for any reason at all.

With that, there are a number of actions a manager or sales rep can take to optimize the area after seeing the results of a territory assessment.

Sales reps can be relocated to another territory to take advantage of available opportunities there, or you can undergo further analysis to uncover why the territory is underperforming. Taking a look at metrics specific to your sales pipeline will be incredibly helpful here (length of the sales cycle, pipeline value, pipeline coverage, etc.). 

Another factor to consider when deciding what to do after discovering a territory is underperforming is the current relationships you have with customers.

Because it costs more to acquire a new customer than to retain an existing one, depending on your current existing customer count, it might be more worth your time and money to focus on areas that are strictly performing well in the sales funnel.

However, if you are a new business still trying to build out a consistent customer base, this might not be an option. 

3. Evaluate sales reps

After the accounts and territories have been assessed, it’s time to take a closer look at your team.

Assigning sales reps to the territories where they can perform best is a key step in sales territory management. A sales rep’s placement will depend on their performance and experience, as well as the account and territory assessments. 

When evaluating sales reps, two assessments should take place: one for quantitative performance and another for qualitative performance.

The quantitative analysis compares the measurable performance of a sales rep against their goals and key performance indicators (KPIs). Here are a few metrics you should pay attention to when placing a sales rep in a territory: 

  • Number of accounts the rep has
  • Number of new contacts the rep has contributed
  • Conversion rate for leads to opportunities
  • Conversion rate for opportunities to new deals
  • Number of conversations had (phone calls, value demonstrations, etc.)
  • Annual contract value for their accounts

The qualitative analysis is about observing, rather than measuring. This stage of the sales rep assessment takes a look at the abstract qualities of the rep as a person, team member, and advisor for the customer, as opposed to their ability to reach measurable goals.

Here are some things to consider in this phase: 

  • Do they have a passion for helping people find solutions? 
  • Do they have the ability to communicate efficiently and listen to customers?
  • Are they always looking for ways to improve as a rep/person/team?
  • Do they have good intuition and problem solving skills?

It’s rare to find a salesperson that checks all of those qualitative boxes and can consistently hit every other KPI listed above. People excel in different areas, making certain sales reps better suited for particular territories. Understanding the strengths and weaknesses of each sales rep on your team will make it clear where to place them.

After the assessment of accounts, territories, and sales reps, you’ll be able to better define territories, improve your customers’ experiences, and see a profit yourself. 

4. Define sales territories

Thanks to your analyses, you have the information you need to properly define your sales territories and assign reps as you see fit.

Under no circumstances should you wing it. The way you define your territories, assign sales reps, and allocate resources is going to have a big impact on your bottom line, so it’s important that you define your sales territories strategically. 

The key to defining sales territories that create opportunities for sales reps is balance. This way, you can measure sales reps’ success based on talent and performance, not just the possible sales in their territory.

Balanced territories give reps equal opportunities to excel, and in turn, show you who your top performers are. Your account, territory, and sales rep analyses should make this step a whole lot easier. 

For example, if you overload a certain territory with too many reps, they won’t have enough to do, your selling spend will be wasted, and you could be missing opportunities in other areas. On the other hand, if you don’t assign enough reps to an area, they can take on too many accounts at once and become overwhelmed, resulting in underserved and unhappy customers. 

That being said, properly balancing sales territories is not always so straightforward. Here are some questions you should also ask yourself when defining territories and placing reps:

Do any of my sales reps have a relationship with a current account? 

If a sales rep has a good relationship with a current account, give them jurisdiction over it. That rep should have important and personal details of the customer memorized, making it that much easier to give them a customized and engaging buying experience. 

How much experience does each sales rep have?

Handing the responsibility of a big account to an inexperienced sales rep is a mistake. Give the background of a salesperson some consideration before assigning accounts.

A less experienced sales rep might do better selling to small businesses, and a seasoned rep should have no problem handling your biggest account. Of course, reps will gain more experience over time, so as your team changes, so should your territories. 

What will interactions with each customer look like? 

If a customer is sitting in a position close to the beginning of your sales pipeline, they might need to be contacted more often than a loyal customer. Play to the strengths of your sales reps here.

Also, take into account geographic location, and whether or not any of these accounts can be handled remotely, or if they will require in-person visits. 

With those answers and the results from your assessments in mind, define your sales territories and make them public to the team. However you decide to structure your territories, it’s crucial that you are clear on the following to ensure there is no confusion of overlap:

  • Geographic boundaries
  • Industry boundaries
  • Revenue boundaries
  • Product boundaries

Overlapping boundaries and responsibilities can cause confusion, so it’s best to get that all squared away from the start. 

5. Set sales territory goals

Now that you have defined territories and delegated them to your team of reps, you need to set goals for the team, territories, and individual sales reps. Your sales goals need an extra layer of methodology by setting both quantitative and qualitative goals. 

Quantitative sales territory goals

Quantitative goals include your sales KPIs, and any other measurable metric your team finds crucial to the success of your business.

Here are some KPIs that sales reps use to measure the success of a territory, and some conclusions you can draw from them. 

  • Total revenue: income from business activities. Revenue is an indicator of how well a territory is performing financially. What else matters besides financial performance, you ask? Wins like new relationships, leads, and a positive net promoter score. Money is influential, but you’re going to need to focus on a lot more than that. 
  • Revenue per product: income from a specific solution your business offers. Revenue per product is an indicator of how well a specific solution is performing in that particular territory.
  • Revenue per new customer: income from new customers. This shows how crucial it is to invest time and money into tapping into new opportunities within a territory. 
  • Revenue per existing customers: income from existing customers. It’s essential to compare this metric against revenue per new customer to see which group contributes more. 
  • Net profit: final profit after the cost of selling has been accounted for. Revenue is important, but the cost of selling might be higher in some sales territories and overpower it. 
  • Year over year (YOY) growth: how well a territory performed compared to the fiscal period before. Depending on whether or not a territory saw growth, managers might want to allocate more resources, add more reps, or find a new approach to selling to that sector. 
  • Customer lifetime value (CLV): a prediction of how profitable a particular customer will be over the course of their relationship with your business. CLV is often compared to customer acquisition cost (CAC), which is the amount spent on getting a new customer in the funnel. If CAC cancels out CLV, the territory’s focus might shift from new customers to existing customers. 
  • Net promoter score (NPS): the willingness of a customer to recommend your solution to others, measured on a scale of 1-10. If the NPS for a particular territory is struggling, you might want to focus more on customer satisfaction techniques. 
  • Success of sales reps: the amount of sales reps hitting their quota. The number of reps assigned to the territory and opportunities available can impact this number. 

Qualitative sales territory goals

When creating and managing sales territories, there are some qualitative goals that should also be kept in mind. These are going to be intangible goals that are more long-term visions for the sales team and company overall. Here are some examples: 

  • Brand loyalty: when consumers buy a product because of the brand associated with it, rather than the product itself. Earning the loyalty of a customer is not only the result of offering a valuable product, but a relationship that’s beneficial for both parties.
  • Customer satisfaction: how happy your customers are with your product, service, and support. Understanding customer satisfaction levels is necessary when trying to find ways to improve any aspect of your business. 
  • Expansion into new territories: tapping into new markets, customer segments, or geographic areas speaks to the level of relevance your solution offers to the general population. 

When setting goals for each territory, look at historical data and forecast outcomes by completing a SWOT analysis. You will set goals against the quantitative metrics and qualitative objectives listed above for the business overall, but you should do the same for each territory to see how it's performing individually. 

When analyzing your strengths, weaknesses, opportunities, and threats, ask yourself the following questions:

  • What does your company do well?
  • Do you have a competitive advantage?
  • What is your company lacking?
  • What do your competitors do better?
  • Do you have an untapped market?
  • Is the demand for your solution growing?
  • Is your solution becoming obsolete?
  • Are new competitors entering the market?

6. Execute and evaluate

From there, all you have left to do is put your plan into action and evaluate its success. While this might seem as easy as delegating sales assignments and waiting for the numbers to roll in, it’s much more complicated than that.

Your sales team is constantly changing, and so should your sales territory management plan. It’s important to constantly be evaluating the plan to observe how it’s impacting sales. 

Here are some questions you should be asking yourself, and your team, when evaluating your sales territory management plan: 

  • Is a certain territory performing significantly better or worse?
  • Is there a big difference in success rates among territories?
  • In what areas are reps struggling, and where are they excelling?
  • Does a particular territory seem underserved? Overserved? 

If you notice that a rep or territory is underperforming, it’s crucial to get to the root of the problem and modify the sales territory management plan as necessary. 

Why you need a territory management plan

It would save businesses a lot of time if they simply told their sales reps to go out and sell. However, the chances of seeing continuous success and gaining the loyalty of customers would be slim if that were your approach. 

Creating sales territories and an associated management plan is necessary to build and fuel a winning sales team. Let’s go over some of the associated benefits.

More accurate targeting 

Having a single marketing message or value demonstration for your entire range of buyers will have your customer base shrinking by the second.

With different sales territories, you can create more targeted messages that appeal to that specific group. Learning their pain points and showcasing your business as the solution to those problems will make you stand out. 

Better relationship building

Every relationship needs nourishment, including professional ones. When a sales rep focuses solely on a particular territory, they create relationships with the customers within it.

These connections can result in a better experience for the individual customers and, therefore, consistent business and revenue for your company. 

Increased management capabilities 

Coordinating one large group can get messy. However, splitting up your entire sales range into separate territories makes management a whole lot easier.

You’ll have more managers, but they can focus their time and energy on a smaller group, offering a more personalized and effective leadership style. This way, goals for each territory can be kept separate and delegated to a smaller group, avoiding confusion. 

Sales territory management best practices

Creating and delegating sales territories to your reps was a lot of work, and you want it to stay intact and functional, right? Besides creating a sales territory management plan, there are a couple of best practices that should become a part of your routine. 

Keep current data

Stress the importance of having updated information, as it allows every single customer interaction to become more personalized and constructive.

Any and all communication with customers needs to be documented in a place that can be accessed by anyone on your team. Details that’ll end up being influential when selling to a customer, both personal and professional, need to be kept current and available to all sales representatives. 

Related: Keeping customer data current and up to date is easy with CRM software, because it acts as a central hub full of customer information for any internal party to pull up and use when working with a buyer. 

Create a contact rotation schedule

It’s crucial to regularly check in on prospects to make sure they have all of the information and resources they need to move forward in their buying journey. However, it’s also important to be careful to not overwhelm the customer. 

Part of creating a contact rotation schedule is determining the communication channel that works best for that territory and at which point in the buying process. Decide when and how often an account or territory needs a phone call, an in-person visit, or an email with a marketing promotion. 

Change with the seasons

Keep in mind the changing seasonal needs of your customers. Depending on the solution you offer, your customer base and needs of a certain territory might change during different times of the year.

Analyze your territories by looking at sales data over time. What are people buying, when are they buying it, and how much? Determine if your business has slow and busy seasons, and make changes to the territory’s goals and priority level if necessary.

Have a plan for handling territory conflict

Even if you do your best to create well-balanced territories with equal opportunities for each sales rep, you can’t please everyone. Being 100 percent fair when assigning territories is difficult, and situations might arise where a rep crosses the (imaginary) line into someone else’s space and jumps on their opportunities. 

It’s easier said than done, but keep the following in mind when assigning territories: 

  • Size: high performers should be getting a few big accounts, and new reps should be getting a large number of small accounts. The number of accounts will vary, but the revenue (and commission) potential should end up being equal. 
  • Location: make sure reps aren’t spending the majority of their time in the car driving or on a plane flying to the customer. Make selling the priority and biggest use of their time. 
  • Personal strengths: play to the strengths of each sales rep and give them more accounts where they will excel. 

Align with other departments

Your sales team is most certainly not the only one dealing with customers. It might not always be face to face, but the interaction will still be there.

Think about other people in your organization that’ll ultimately have an effect on sales functions. Make sure the goals of your sales, marketing, and customer service departments are distinguished and aligned for each territory. Find a way to collaborate regularly to give customers beneficial and consistent interactions. 

Never stop assessing

With any plan, nothing is set in stone. Whether it be the industry, economy, or organization, conditions are going to change.

To stay relevant and successful in your territory, make sure you’re measuring progress and modifying aspects of the plan if you aren’t getting the desired results. 

Think big picture

It’s easy to get lost in the ruckus of doling out sales territories, managing reps, and tracking goals. However, as a sales manager, you need to keep the big picture in mind.

Think of department and company visions, and ask yourself if your current actions within sales territory management are contributing. 

Map it out 

Sales territory management is a never-ending cycle of evaluating, implementing, assessing, and modifying. Yes, it’s a lot of work, and not seeing success right away can make it difficult to see the value in it.

However, once you get a firm grasp on your accounts, territories, and sales reps, and then crack the complicated code that is successful territory management, the benefits will follow.  

If your business operates out of a lot of different territories, it can get difficult to keep track of all their metrics. Learn how to create a sales dashboard for each sales territory that will keep you updated on key metrics of success.

Stop Winging Your Sales Territory Management: Make a Plan While the mindset of working together will get sales teams far, they still need to do it in separate territories. Creating a sales territory management plan is the key to enabling sales reps in closing deals and providing a positive customer experience. Learn how to evaluate your current situation to strategically create a plan that will help you get the most out of your territories.
Mary Clare Novak Mary Clare Novak is a Content Marketing Specialist at G2 based in Burlington, Vermont, where she is currently exploring topics related to sales and customer relationship management. In her free time, you can find her doing a crossword puzzle, listening to cover bands, or eating fish tacos. (she/her/hers)

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