Territory Design – the Gateway to Increased Sales Productivity
Sales and revenue leaders invest significant resources to increase sales force productivity via performance management, training programs and the sales compensation program, but often invest too little in sales territory design and optimization. Sales organizations that thoughtfully design and optimize sales territories can realize 10%-20% increases in sales productivity.
What Does It Take to Design the Right Territories?
Effective territory design includes a number of key elements:
- Sales strategy: Is the goal to increase share among existing customers, acquire new customers or both?
- Support roles: Gone are the days of the lone wolf field salesperson. Today’s engagement models usually involve lead generation and qualifying resources, field and inside sales pairing, product and technical overlay specialists, and customer success and renewal roles. The makeup of the “team” has direct influence on the territory design.
- Workload: Too often, companies burden sales people with too much territory to cover. This often results in drive-by selling—unfocused, reactive effort. Instead, sales leaders should base territories and account loads on salesperson workload estimates which account for the design of the sales team.
The approach to analyzing and designing the best territories should consider several important factors:
- Account selection models: Most sales organizations cannot effectively cover all accounts in their market. Account selection models effectively evaluate current revenue, account level growth opportunity, cost to serve and geographic location to prioritize eligible accounts.
- Sales time studies: Documenting how a sales organization spends time is the best way to optimize territory design. Key sales time activities include prospecting, engaged selling, sales completion, administrative and travel time. Sales time studies should also differentiate between sales time associated with high-value call points versus low-value call points.
- Sales capacity models: Based on the time study as well as efficiency adjustments, sales organizations benefit from a reality-based capacity model to identify the workload for an average territory.
- Territory balancing indices: Indices are a powerful tool in balancing territories using variables such as account revenue, account potential and travel time. The most important variables are selected, and each variable is weighted according to importance.
- Mapping software: Software is perhaps the least important element, but can easily allow a sales organization to visually validate, adjust for geographical constraints and calculate travel time.
Overall Best Practices In Sales Territory Design
Optimally sized sales organizations and well-balanced territories can yield 10%-20% increases in sales productivity and may even generate cost savings. These best practices will help.
Territory design and optimization should be an annual process. If territories are not adjusted periodically, sales organizations can encounter situations where growth is constrained in up to 20%-30% of territories. This phenomenon results from the fact that sellers in large territories have to spend too much time maintaining the business that is already built. To compound the issue, sellers in larger territories are usually the best sellers.
To free the best sellers from maintenance selling, sales leaders should holistically evaluate territories as part of a defined planning process and shift workload from high workload to low workload territories. This will ensure all territories have an opportunity to grow.
As with all organizational change, territory changes can create confusion for customers. Following a proven change management process and implementing an effective communication and transition strategy will allow customers to understand the rationale and also embrace the changes. Balanced territories usually translate to better service from sales representatives, and therefore, happier customers. By providing better service, a sales organization can expect to increase business with current customers and more easily win new customers.
Using analytics and benchmarking, sales leaders must regularly evaluate deployment decisions to drive results:
- Well-balanced territories that yield greater productivity and cost savings
- Workloads that balance hunting vs. prospecting
- Accurate investments in both new and established markets
Intuitive Sizing and Deployment
Intuitive sizing and deployment will maximize profit contributed by sales organization. Your business can see revenue lift opportunities increase by 20% while cost reduction and reallocation increase by 10%-15%. You can achieve these increases by following these steps:
- Size: Understand account base and value vs. cost of coverage to maximize field force contribution
- Build: Create “theoretically optimal” alignments, avoiding “too large to mine” and “too small to be economic” territories
- Finalize: Run iterations, considering business priorities, potential, true or meaningful account disruptions. Finalize alignments, incorporating management knowledge
- Implement: Implement changes and communicate to the sales force
Data Unveils Strategies That Increase Your ROI and Simplify Complexities Within Your Territories
Alexander Group conducts ongoing productivity and deployment research to curate market practices, establish benchmarks and obtain useful metrics to inform territory management decisions and processes. Four key strategies are reflected in the data and findings:
1. Invest in automated tools for stronger ROI through faster cycle times
Companies that invest in automated tools reap strong ROI through faster cycle times.
- 15 Days: Companies that use a third-party automated tool more quickly complete the design phase
- 35 Days: Companies that use a third-party automated tool more quickly complete the planning phase
- 20 Fewer Design days: Companies that curate 50%+ of territory design inputs automatically
Automation drives operational efficiency. Automated tools offer instantaneous collection and analysis of territory inputs, decrease design errors and require less human capital to complete manual work. Many companies are investing the time and resources to develop a “clean” master database to feed more automated processes.
2. Create a partially centralized territory management process to improve cycle times
Partially centralized corporate teams define the processes and business rules for territory management, while allowing field teams to modify corporate’s definitions to support local needs.
- 35 Days: partially centralized companies more quickly complete planning, design and implementation phases
- 9 Days: partially centralized companies more quickly resolve territory/account assignment escalations
- 5 Days: partially centralized companies more quickly finalize quota adjustments associated with off-cycle adjustments
Partially centralized companies provide business rules, such as coverage blueprints, account load maximums and segment breakpoints to guide rationalized and consistent territory design. These business rules act as guardrails to ensure the field’s design aligns with the company’s global execution strategy.
3. Less is more: less complexity in the territory management process = faster cycle times
As companies grow and evolve, the methodology to design territories tends to become more complex. More inputs are used and the design algorithm becomes extremely convoluted, which prolongs the design process.
- 30 Days to complete planning when <= 4 functions/teams are involved in planning
- 60 Days to complete planning when >= 5 functions/teams are involved in planning
- 28 Days to complete design when <= 4 inputs are used to develop geographic territories
- 60 Days to complete design when >= 5 inputs are used to develop geographic territories
Best-in-class companies regularly reevaluate appropriate inputs to design territories. They also conduct correlation analysis to determine relationship strength between inputs and desired outcomes. This exercise generates a concise, but applicable, list of globally available inputs to design territories that drive consistency and efficiency.
4. Utilize metrics effectively to measure territory performance and health
Territory evaluation tends to be primarily on-cycle.
- 57% – Companies using dashboards to monitor territory performance/opportunity metrics
- 79% – Companies citing inadequate off-cycle/mid-year territory evaluation practices
A majority of companies cite that the biggest gap for territory management is having a robust set of metrics and dashboards to measure territory performance and health. Companies want to move from lgutfeel and field’s word on territory performance, to utilizing data and KPIs to guide decisions. It is absolutely critical to have comprehensive and accurate data to complete territory analysis.
Partner With Alexander Group to Optimize Your Territory Design Strategy
Alexander Group leverages proven methodologies, thorough research and many of the most successful organizations’ perspectives to guide territory design strategies. Contact us to speak with one of our Sizing and Territory Design leaders today.