An Introduction to Sales Territory Management

A company’s customer base may be divided into distinct groups known as sales territories. Effective sales territory management may result in cost reductions, an increase in overall sales, and better customer satisfaction.

The first step to implementing sales territory management is to group or segment the market or customer base. Depending on a company’s specific situation, a sales territory may be defined geographically according to cities or states. Sales territories might also be defined demographically or according to age. This might make sense for companies whose products cater to different age groups. Companies making products that are useful across industries may define territories according to industry groups.

Not all territories are created equal. Some territories can be a major revenue source for the company, while other territories have a great potential for bringing in sales at a future time. Still, other sales territories might waste time for a company because of low potential for current or future sales. The assessment of the quality of a sales territory begins with the assessment of each account.

The measure by which an account is assessed depends on the specific situation of the company. For example, if the measure is the size of sales, then the higher the revenue contribution of a specific account, the higher its assessed quality. Other factors that could impact account quality would be the potential for repeat business or the ability of an account to influence other accounts or refer new customers.

Once individual account quality is assessed, these can be aggregated under the territory in which an account belongs. These aggregated scores will reveal the quality of each of the defined sales territories. These territories may be grouped into low, medium, and high quality.

These groupings can then be used by a company in assigning resources to territories. In assigning sales reps to territories, it is important to match the skills of the sales rep to the territory they will be assigned to. For example, a sales territory containing large corporate accounts should ideally be given to a sales rep with a successful track record of closing big deals.

Once the sales territories have been defined, assessed, and assigned, the data will start to come in. Data, such as cost metrics and sales levels can now be used by managers to make better decisions that will increase the overall effectiveness of the sales team. For example, high revenue-generating sales territories can be nurtured and secured by assigning more sales resources to service customer needs in those territories. At the other end of the spectrum, a company may carefully budget expenses related to territories that reveal low quality.

The data coming in from each sales territory can be leveraged further by the use of technology. Feeding the data into a customer relationship management system allows for further processing where deeper insights might be gleaned by sales decision-makers.

Each sales territory might have as little as one sales representative assigned or have a sales team arranged in a hierarchy. Sales territory management creates a structure that increases internal efficiency since it clarifies the specific roles each sales team member has concerning customers. This makes it easier for managers to delegate and assign work as well as to trace accountabilities.