Sales territory management – why it is important

Posted in Sales techniques and processes.

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 maximise sales and profits, and to allocate resources efficiently.

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 losing 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 utillized in more important areas. This can lead to under-servicing in other areas.

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 releated to management. Control is enhanced with territory allocation and is great for promotion coordination. It provides potential for staff incentives and better allocation of costs per territory.

What do you need to take into consideration when establishing territories?

  • Type of product or product line you have
  • Competition in territories
  • Channels of distribution and the transport system
  • Workload of the salesperson and the nature of the assignment or job
  • Sales potential and servicing requirements of territory – territories with limited potential can serve as a training ground for new sales reps
  • Performance of a particular salesperson – this will determine if they get more or less challenging territories

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.