6 min read

The essentials of sales territory planning

Sandy Mervak

Product Marketing Manager - Solutions

Sales territory planning is a critical component of a business's sales operation. How is it done, and why is it so important?

Every successful enterprise begins the year with ambitions to grow. But so often, growth comes with added costs — more sellers, more training, more technology. Where do you start weighing market opportunity against the real-world constraints of your sales force? How do you ensure that you are capturing as much market opportunity as possible given finite resources? 

Sales territory planning is one of the most important components of an organization’s go-to-market strategy. Too often, facing enormous time pressure before the start of a new period, sales leaders overlook their territory planning and design as a catalyst for growth. Without using sales territory planning best practices, it’s all too easy for organizations to apply simple, cookie-cutter logic to the process of carving out territories, resulting in poor alignment with strategic goals — and poor results. 

What is sales territory planning? 

Sales territory planning is the process of grouping together accounts and prospects, and then assigning them to sales resources in a way that helps maximize sales productivity and drive sales growth over time.  

There are many factors to consider when building sales territories. These could include historical results such as revenue and bookings, firmographic attributes such as company size and industry, as well as seller attributes such as role tenure, past performance, and product specialization. 

Regardless of how organizations build territory hierarchies, it is critical to optimize sales territory plans in a way that is seen as fair to sellers, while eliminating coverage gaps and allowing the organization to make informed personnel decisions. This is easier said than done. 

Territory planning is all about balance 

Many sales organizations have a number of rules (and exceptions) for how they carve up the market. There is no one-size-fits-all formula for this; territory definitions are based on the unique market characteristics and strategic objectives of the organization.  

There are many considerations that can go into an organization’s territory definitions — account characteristics (qualitative and quantitative), industries, geolocation, and more. Multiple sales roles and channels also need to be considered. Couple these variables with advanced analytics such as ideal customer profiles and buyer intent signals, and quantifying territories and associated quotas can become quite complex. 

Complexity increases as the rules for these definitions get ranked in a hierarchy. Which rules apply when, and how do you prioritize each definition? And there are always exceptions that need to be managed.  

With so many ways to slice and dice the market, trying to balance and optimize territory structures also requires making important choices and trade-offs. Should you seek to build territories that are balanced based on size of accounts, geography, product, industry, or a combination of these? What’s the right combination of rules? Often, territory rules get defined based on historical precedent or leadership’s past experience. This opens the door for suboptimal market coverage and adds pressure on sellers. 

Territory design and the sales team 

Let’s turn for a minute toward the practical side of territory planning. Once the plan is finalized, ideally in concert with sales quota planning, the first group of people that it affects are sellers. Territories and quotas have a direct and tangible impact on the day-to-day work and motivation for sellers, so sales leaders face enormous pressure to get them right, the first time.  

The sales environment has also changed dramatically as more employees work remotely or in hybrid roles. Buyers may be limited in their ability to host in-person visits, and sellers may be required to do less travel. Territories that were previously based on geography or region may be less relevant. New structures may need to be built that are more focused on buyer intent. Ideally, this data is a combination of historical information about the customer and third-party sourced information about the buyer’s current (and possibly evolving) circumstances. 

Common sales territory planning challenges 

There’s often no single answer to why territories underperform (or what to do to fix the problem), but there are common challenges that many organizations share: 

  • Complexity of rules and hierarchy definitions 
  • Multiple selling methods like direct vs. indirect, overlays, channels, etc. 
  • Limited visibility into territory performance and coverage gaps. 
  • Limited ability to model changes, such as how your territories should be designed. How do you know when changes need to be made – or what those changes need to be? 
  • Rapidly evolving market conditions, like territories set at the beginning of the year becoming highly flawed by the end of the year. 
  • Change management, because territories are very important to sellers. Changes need to be properly communicated (especially at the beginning of the fiscal year). 

These certainly aren’t the only challenges faced during sales territory planning, but the list scratches the surface of why an effective territory planning platform is crucial to success. 

Evaluating territory success 

Just as designing territories involves bringing together several different factors, there are also several considerations to be balanced when evaluating the success of territories. One of these is people. Are salespeople happy with their territories? Are enough of them meeting quota? Are the best sellers staying focused on our highest-potential customers?  

Another of these is on alignment with strategic growth or revenue goals. Are any of your current markets under-served? If so, are you only in need of more reps, or do you need to consider different types of reps or specialist roles?  

Another major consideration might be managing costs. Are some territories more profitable than others? 

Although these questions often take some time to explore, relying on data from several functions across the organization, they are not well suited to spontaneous analysis in spreadsheets. A comprehensive sales performance management solution with territory planning capabilities can help.  

Sales territory planning step-by-step 

Although there is no one-size-fits-all approach to sales territory planning, there are several steps and best practices that more mature organizations follow in their planning process: 

  • Segmentation: Identify high-yield categories of customers and prospects to increase sales revenue and retain existing accounts. 
  • Model market condition scenarios: View total market revenue “what-if” scenario results using calculated relative account value and adjustment options. 
  • Sales coverage planning: Consider the ratio of account assignments where salespeople can make their quota while effectively providing the optimal service to accounts and prospects. 
  • Territory allocation: Define territories based on location, accounts, products, sales potential, and any number of other factors. 
  • Territory assignment: Associate sales reps and overlays to territories based on best fit and highest revenue potential. 
  • Sales performance analysis: Measure sales progress over a period of time. This analysis allows teams to identify weaknesses in sales strategy and make changes to improve results in the next period. 

Advanced sales territory planning software 

What’s next for sales and sales operations leaders looking to improve sales territory planning within their organizations? First, understand what data is needed, how to access it, and how to keep it updated throughout the planning process. Next, evaluate internal processes and capabilities. Where does the team need more support or more data to make more informed decisions? Is there anything the planning process is lacking to create, manage or re-balance intelligent sales territories, such as customer intent insights or the ability to model “what-if” scenarios to better identify the right territories for the right teams? With these answers in mind, it’s time to consider advanced territory planning and management software to unleash new levels of growth and higher sales performance. 

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