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How to Strategically Divide Your Sales Territories

One of the essential pillars of a successful business is a robust and organized sales territory strategy. Studies show that effective territory management can increase overall sales, improve customer coverage, and reduce costs.

Territory planning requires careful thought and consideration because it's crucial to get it right the first time around.

Constant changes in territory division hurt salespeople's productivity and take a toll on employee morale. From the client's perspective, frequent changes in account managers lead to unstable relationships.

What Is a Sales Territory?

A sales territory is the regional, industry, or account type assigned to a specific salesperson or sales team. A sales territory owner is responsible for prospecting into their customer base and meeting their territory quota.

For a territory plan that works from day one, follow these five steps.

Sales Territory Planning 101

1) Define Your Market

To effectively set up territories, sales leaders must first understand the environment of their business. There are numerous ways for a business to define a market. Factors could include geography, size, and consumer demographics, among others.

Know what is unique to your business and prioritize based on what your climate demands. A solidified market will lead to lowered costs, increased sales, and a foundation for setting up effective sales territories.

2) Assess Account Quality

After a target market is determined, sales leaders need to evaluate the value of each account. The measurement could be either quantitative or qualitative depending on the product or service the business offers. For example, a beverage company might rank the value of their accounts by net profitability while a company that relies heavily on customer recommendations could focus on accounts that are more likely to provide a referral for their company.

By identifying the value of each account, you can prioritize accordingly in your sales territory planning. If you are looking for a way to assess your organizations’ clients, click here to calculate your custom information. Here is a quick example of what your calculations would look like:

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3) Assess Territory Quality

After assessing the quality of each account, it is important to rank territories. As with the accounts’ values, this process is subjective based on different business needs and priorities. If your business sells products across industries, your territories could be divided and quantified by those industries. Determining what sales territory supports which areas of the sales funnel will also help you score territories into high, medium, and low value.

To get a better picture of territory value, include your sales team in these discussions. After all, no one knows the territories better than the reps who work within them each day. That way, you can assign the appropriate reps to maximize the potential of each territory.

4) Assess Rep Strengths

The next step towards effective territory management may be the most important of all. After determining the quality of each sales territory, it is crucial that you assign reps with the applicable skills to develop and optimize each set of accounts. For example, a territory that is defined by large enterprise deals needs to be handled by a rep who has experience closing big deals. By strategically assigning qualified reps to accounts, you will empower your reps and ensure the client receives the best possible service.

Here is an example of how to calculate your rep’s performance. Click here to find out who is the strongest performer in your organization.

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5) Review and Consolidate

The four steps outlined above prepare a business to put a sales territory plan into action. The last thing a business needs to do is a final diagnosis of costs associated with each territory. Analyzing cost metrics -- for example, comparing ideal versus actual number of visits and mileage per rep in each territory -- will help managers zero in on specific inefficiencies in the system. 

After you have reviewed your plan, consolidate it. By following these five steps, your business will be on its way to having a more satisfied workforce, as well as increased customer growth and profits.

If you would like help on establishing your territories, download this free Territory Management Template Toolkit.

free download: hire a world-class sales team

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