What is Territory Management in Sales?

What is Territory Management in Sales?

Nikka Alejandro
What is Territory Management in Sales?

Sales territory management is more important than many may realize. It can boost your sales team’s morale, increase sales, provide a larger customer base and inspire team cohesion. So what is it and what do you need to focus on for efficient management of sales territories?

Territory management is a customer group or geographic area over which either an individual salesperson or a sales team has responsibility. These territories are usually defined based on geography, sales potential, its history or a combination of these factors. The ultimate aim of this division of areas is to maximize sales and profits and to allocate resources efficiently.

Sales Territory Management in simple terms is a methodology to control, optimize and improve territory alignment and structure of an organization’s sales resources and activities. This can include balancing and aligning territories so that sales personnel and resources are being used effectively to maximize the productivity of your sales team.

It is very important to create sales territories that are balanced. When a sales territory is out of balance, there are two things that can happen. If a territory is being under-serviced, the sales team or salesperson is spread too thinly and it leads to sub-optimal levels of activity. Those responsible for the territories will seek out too few leads, identify too little prospects and spend too little time with customers because they are overworked. This leads to customers going to competitors and you lose sales.

Over-servicing in a territory is where the sales team has too little work and too many team members to service a small area. This raises costs and prices overall which ultimately leads to reduced sales. Precious resources are also then not being utilized in more important areas. This can lead to under-servicing in other areas.

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Unbalanced territories can cause many problems. Some of these include the unfair distribution of sales potential amongst the sales force, distorted compensation amongst sales reps and, reps leaving the company to seek out better balance and compensation elsewhere.

One of the things people can do to form good sales territories is sales potential forecasting. This helps to determine sales targets and identifies areas that are worthy to allocate sparse resources to. Forecasting determines the number of prospects in an area and their combined (and individual) buying power.

There are three main reasons why sales management usually employs territories. It can be customer-related which increases market coverage and provides good customer service. This makes for higher sales figures and greater customer satisfaction.

The second reason can be related to the salespeople themselves. It increases enthusiasm and motivation in teams. It is great for effective performance evaluation and decreases employee turnover while providing reward potential for the amount of effort taken.

The last reason can be related to management. Control is enhanced with territory allocation and is great for promotion coordination. It provides the potential for staff incentives and better allocation of costs per territory.

Territory management can help spread out the workload for your sales team, allowing them to complete tasks more efficiently, build better customer relationships and increase the good-quality leads that they get. Just as important is the motivation it provides to your sales team if they feel like they are being productive and accomplishing a lot of the sales goals they set out to do.

Why is Sales Territory Management important?

1. Increase Sales & Reduce Cost

The primary task for any sales organization is to maximize the amount of time salespeople spend selling while ensuring that they sell the right products to the right customers.

Aligned territories will result in balanced workloads for sales personnel, providing them with greater earning potential, improved morale and career satisfaction.

This leads to higher motivation, lower staff turnover and most importantly, more sales. Territory mapping also provides route optimization capabilities which can reduce travel costs, improve fuel efficiency and increase the number of customers that field sales teams serve within their territory.

2. Measure Performance

When sales territory data is visualized using mapping software, there is a host of analytical tools to take advantage of including several different performance reporting options.

Mapping software enables data plotted on a map to be aggregated to get a consolidated view of performance. It’s possible to segment and filter data, isolating sales of above or below a specific value.

You can also overlay demographic and geographic data to identify insights in your market. Each member of a sales team can create reports and analyze their own territories and measure their current performance against quotas and targets. These reports can then be easily shared with colleagues and managers

3. Identify Hidden Insights

Data Visualization enables you to quickly optimize and visualize the data from your CRM and spreadsheets.

An interactive map allows the discovery of hidden insights and patterns not possible in spreadsheets such as over- or under-served territories. Seeing a territory in a variety of different perspectives allows you to see not only the bigger picture but also more granular detail.

For example, zooming in to see greater detail based on different market characteristics such as customer types, or assigned sales professionals. What are the external factors that are influencing the performance of your sales team?

4. Delegate Work Through Hierarchies

Using territorial hierarchies enables more flexibility over data visibility, collaboration and delegation between managers and teams. Each member of your sales department, from sales rep to regional manager can quickly see and manage the territory they have responsibility for.

For example, a sales rep may only see their own territory in a city suburb, the Regional Manager can see all of his sales team’s territories in a city, while the National Sales Manager can see all the territories in the country.

5. Increase Collaboration & Sharing Within Your Team

For sales teams located remotely, seamless collaboration is very important. Cloud-based solutions can allow these teams to collaborate on the definition of their territories from any location, the office or the field in real-time.

For example, members of a nationwide sales team can add their own data – latest sales or leads – to a territory on a daily basis, thus creating a complete, up-to-date holistic view of their territory.

Poor Sales Territory Management can lead to unbalanced territories, which can be a headache for sales teams.

If a salesperson’s territory is too large or if their workload is too heavy, they cannot effectively cover all customers and prospects. Conversely, a salesperson whose territory is small or not populated enough has too little work and can end up wasting their potential on low priority clients, leading to under-utilized sales resources and an unmotivated workforce.

You and your sales team can’t be everywhere at all times. This is one of the many reasons why sales territory management is so important.

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Nikka Alejandro

Nikka Alejandro