A Case for Sales Territories

A Case for Sales Territories 

John Patterson of National Cash Register (NCR) is credited with the creation of organized selling. In fact, the majority of the sales practices that he established in 1893 are still in operation today, including assigning quotas and creating territories. Sales territories are pre-defined accounts, areas or verticals assigned to sellers to develop and grow existing and new business to deliver revenue targets. Below is a business case for why the advantages of implementing geographic sales territories outweighs the disadvantages of same.

Advantages of Sales Territories

  • Better allocate resources and assign quotas based on market opportunity. If the addressable market in Seattle is $X, more effective resource allocation and planning decisions can be made related to office space, people, quotas, etc. Focused investments and resources produce better returns.
  • Build markets versus acquiring accounts. Sales territories enable companies to build markets in specific geographies (e.g., San Francisco). Not having territories means clients are highly distributed. Building markets creates a local presence and enables key relationships to be formed.
  • Capitalize on local and competitive knowledge. Sales territories enable sellers to build and capitalize on local market and competitive knowledge that helps them to create better strategy and execution. Every market and region is different. Sales territories allow sellers to account for those differences.
  • Create the option to segment accounts. Companies often segment sales territories into enterprise, mid-market and SMB, with different teams calling into different sized accounts within the same geographies. Because each segment makes decisions and buys differently, better performance is achieved through focus.
  • Decrease travel and increase selling. Instead of spending unproductive hours in airplanes and cars traveling to distant clients, sales people can maximize their selling time by building relationships and closing deals. Minimizing travel also significantly reduces the cost of sale.
  • Increase effectiveness of sales operations. Managing sales activities, including aligning partners and assigning leads is easier with sales territories. Sales operations is also able to gain deeper insights and trends within geographies and markets, including business climate, client needs, competitive threats, etc.
  • Reduce conflict across the sales team. When companies do not have clearly defined sales territories, the potential for conflict is great between sellers. What if two sellers are unknowing calling into different divisions of the same account? Who “owns” the account? Sales territories alleviate sales conflict and client confusion.

Disadvantages of Sales Territories

  • Ambitious sellers limited. Opponents of sales territories believe that geographic boundaries limit ambitious sellers by restricting who they can do business with and where. If a talented salesperson is assigned to a set of bad accounts or territory, good leaders should find an opportunity to utilize them in a different region or role.
  • Lack of specialization.  Sales territories often have multiple industries within each geography. Companies that offer industry-specific solutions (e.g., healthcare) need sellers with specialized knowledge. Most of these companies tend to base territories on a named account or industry/vertical basis versus geographies.
  • Personal referrals passed to other salespeople. If a seller receives a referral from someone outside their sales territory, they cannot work it. While the client or person giving the referral wants the seller to work the deal, they cannot. In these situations, sales leaders should review the quality and relevance of the referral for an exception.

All contents copyright © 2014, Josh Lowry. All rights reserved.

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