If your sales reps aren’t meeting goals, there may be a simple culprit: sales territory design.
Many sales organizations understand the value of designing an effective sales territory, but they sometimes forget to consider it until the sales teams are already struggling.
Here’s what you need to know to make sure you design a sales territory that works for your team and business.
What is Sales Territory Design?
Sales territory design is the strategic process of how a company divides its potential customers and sales opportunities into territories, which are then assigned to sales reps or teams to achieve sales targets and goals.
The goal is to create a territory design that is balanced, manageable, fair, and aligned with the company’s overall sales strategy.
Note: It’s an important component within sales performance management.
Importance of Sales Territory Design
Sales territory design is important because it affects your sales reps’ abiilty to achieve sales quotas.
When territories are unbalanced, there are fewer selling opportunities, reps are less motivated, and performance suffers. If a territory is too small, you may have reps cutting prices. If a territory is too large, your rep may miss other opportunities.
Not to mention, along with sales coverage, capacity, quota planning, and territory mapping, territory design helps companies achieve their revenue targets.
Note: All future elements within sales performance management build upon sales territory design.
Why Sales Territory Design Can Be Complicated
Sales territory design is complicated because the process and the decisions around it impact your entire sales organization.
For sales operations, it’s considered a manual and time-consuming process.
For sales reps, sales territories can feel like they’reassigned without an understanding of relationships, accounts, or local selling conditions.
These false assumptions in the territory sales design process can cascade down the Sales Performance Management (SPM) chain and result in missed quotas, lower revenue, decreased margins, poor employee performance, low morale, and sales rep turnover.
But when done correctly, sales territory design can have compounding benefits of growth that companies can’t ignore.
Benefits of Sales Territory Design
Here are some of the primary benefits that come when sales territory design is done right.
Increase Revenue
Easily identify new opportunities to increase account penetration and expand the customer base.
Sales Productivity
Less travel time equals more selling time. Better alignment with sales opportunities makes for optimal resource coverage.
Reduce Costs
Create travel-efficient designs that reduce travel costs, while increasing time in front of the customer.
Sales Ops Time
Automate the process to reduce the necessary time to align and optimize territories from weeks to days. You can experience a reduction in the time it takes to plan territory alignment.
Reduce Attrition
The perception of unfair territory distribution negatively impacts sales team morale and leads to poor performance and increased turnover.
Questions to Ask while Designing a Sales Territory
Designing a sales territory doesn’t need to be difficult. Here are a few things you should ask yourself during the process to make it easier:
- Do you know the companies that make up your ideal customer profile?
- Are the key buyer personas located in the chosen territory?
- What’s your competitors’ market share or dominance in the territory?
- Are your partners there and already selling on your behalf?
- What’s the skill set of your sales reps?
- Do you have the coverage and capacity needed to service the territory?
- What parameter is best suited to create a territory based on your ICP and sales team skill set? (Geography, accounts, industry mix, etc.).
These questions highlight not only the data requirements for effective territory design, but also the need for collaboration within the process.
Steps of the Sales Territory Designing Process
Designing a sales territory is a process that balances data, strategy, and real-world input. These are steps you should take to design an effective sales territory.
1. Load Your Data
Every strong territory design starts with clean, comprehensive data. Before you can draw a single boundary, you need to load all relevant information into your territory management solution, whether that be your CRM or a dedicated territory planning tool.
The data you pull in should include:
- Your existing customer and prospect records
- Historical sales performance (by account and region)
- Firmographic data (industry, company size, revenue, etc.)
- Third-party, geographic market data
Just remember, the quality of your sales territory design is only as good as the data behind it. If you use bad data to create it, then you’ll design a bad territory.
Note: Geospatial is also helpful because it gives you a visual layer to understand how accounts group together, where travel time creates inefficiencies, and where untapped whitespace exists.
2. Identify Territory Characteristics
With your data loaded, the next step is to study what makes your best territory design perform the way that it does. To do this, look across your current or historical territory structure and identify the common traits of your top-performing regions.
Ask yourself what a "good" territory design looks like in terms of account mix, potential revenue, industry concentration, or geographic density.
You essentially want to determine the profile of an ideal territory that is currently working well and figure out how to replicate the process.
Some key characteristics to think about are:
- Account potential (the estimated revenue opportunity within a territory)
- Workload (how many accounts or activities a rep can realistically handle)
- The ratio of existing customers to net-new prospects
3. Create and Map Your Territories
Now you can start building. Use the characteristics you identified above as your design criteria, and apply them while designing the new sales territory.
The goal is to design territories where every rep has a comparable shot at success.
4. Model the Territory Options
Designing sales territories also requires scenario planning to be effective.
Before you commit to a territory structure, model multiple territory options and stress-test each one. To do this, run “what-if” scenarios:
- What happens if you split a high-density metro territory into two?
- What does quota attainment look like if you shift 20 accounts from one rep to another?
- How does adding a new headcount change the balance across the region?
Modeling for questions like these will help you see the downstream impact of your decisions before they hit the field.
5. Get Input From the Team
Your data, if accurate, and modeling will get you about 80% of the way there. The final 20%, however, comes from the people closest to the ground: your field managers.
Don’troll out any official sales territory design without sharing your proposed plan with managers and asking for feedback.
They know informatioat your data doesn’t.
For instance, they’ll know about accounts that are already in mid-negotiation throughout the territory, geographic quirks that impact boundaries and travel times, and which reps have the best strengths for a specific area.
Note: Getting buy-in at this stage also smooths adoption. If your reps feel the process was transparent and that their managers had a voice in the outcome, they’ll be far more likely to embrace new or adjusted territory assignments.
Tips for Designing a Sales Territory
Now that you know how to design a sales territory, let’s take a look at a few tips that can help you have even more success.
1. Use Data-Driven Insights
Data has become a primary differentiator in strategic territory design.
It can provide access to real-time information that increases the precision, transparency, accuracy, and strategic value of the sales territory design to the sales organization.
Using your data can also help you analyze factors such as drive time, agent skill level, and client relationships, which can be included in design models to enhance the productivity of the sales team.
2. Automate Process
Automation decreases the time it takes to design sales territories from weeks to days. It can also encourage the development of multiple sales territory models in less time.
By needing less time to build territories, sales leadership and sales operations can focus on the business targets and model scenarios to see the impact in real time. This leads to a fairer and more productive territory design.
3. Increase Collaboration
A territory doesn’t only need to be based on geography. The decision to pivot or create new territories based on multiple variables can be informed by input from different teams (customer success, product, and marketing teams).
In some cases, this should be required because local sales field knowledge can improve the fairness of territory design.
How Xactly Helps You with Sales Territory Design
Xactly’s sales territory mapping software makes it easy for sales organizations to balance territories with an interactive map-based view.
This helps revenue operations and sales leadership teams to move from raw data to optimized territory structures in a fraction of the time it takes with traditional methods.
The platform pulls in CRM data, market data, and firmographic signals to give you a complete picture of your territory opportunity before you draw a single boundary.
Use Xactly for Your Sales Territory Design
Sales planning software helps organizations easily and accurately balance rep capacity and workload, increase quota attainment, deliver fair rewards, and boost morale.
If you’re interested in learning more about how Xactly’s sales territory design solution can help you do the same
