Sales Leaders spend significant resources to increase sales force productivity via performance management, training programs, and sales compensation plan changes, 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.
Effective territory design includes a number of key elements:
- 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.
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 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.
Sales leaders across all industries can’t afford to overlook the potential of territory design and optimization – the gateway to increased sales productivity.
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About the Author
Craig Ackerman is a principal in the Atlanta office and the leader of the firm’s Medical Device practice. Areas of focus in his consulting work include market segmentation, customer coverage models, sales process effectiveness, sales job design, quota setting and incentive compensation design. Craig works with sales organizations to develop actionable go-to-market strategies across many industries, including medical devices, biotechnology, financial services and high technology.
