According to an article in Management Science, sales productivity costs American companies more than $500 billion a year. I believe that sales territory misalignment is to blame for at least part of that cost.
Most sales managers I know would agree. They would also agree that optimizing sales territories is one of the most difficult tasks they face.
Part of the difficulty stems from the overwhelming number of moving puzzle pieces. When thinking about territories, you must consider how to balance workloads among reps, how to improve customer service, how to increase motivation by providing the right incentives, and how to increase sales.
You ask yourself questions like, “Is the size of our sales force right for our business?” “Are the right accounts assigned to the right reps?” and “Do I have a handle on which accounts are weak, and which are strong?”
Just when you think you have all the answers and have finally mastered territory design, something changes. Your customers change. Your competition changes. Or, your sales force changes.
Territory optimization isn’t a “one and done” deal. If you don’t react to even small changes by realigning territories, you can experience missed opportunities—and revenue.
But according to research done at Northwestern University’s Kellogg School of Business, some companies are unwilling to realign because they feel they don’t have the right data. Fortunately, you can remove guesswork:
- Spend sales dollars wisely. Use data to assess the sales potential of territories and customers;
- Increase motivation and reduce turnover. Balance territories to provide equal incentives to all sales reps; and
- Boost efficiency. Design territories to maximize coverage and save money.
Don’t wait for a big change to realign your territories. Make territory optimization a part of your regular strategy and you’ll put money in your pocket, not on the table.