Sales territories are a cost-effective way for sales managers to strategically divide their sales force by assigning specific customer groups to individual reps based on customer demographics and geography.
By allocating different sales territories to individual reps, sales managers are able to maximize the productivity, and promote economies of scales in field sales. Although sales territories are integral in achieving peak efficiency within a company, formulating the correct dimensions for each individual sales territory can be difficult. It is important that you establish manageable and well-balanced territories to ensure effective usage of resources and time.
Sales territories are often defined by geographic location, sales history, competitive activities, customer names, and sales potential. When creating territories for your sales reps, it is the sale’s manager’s responsibility to determine the appropriate metrics to drive earnings. The metrics for each sales territory will directly impact the number of potential leads generated, and the ability for sales reps to meet their monthly quotas.
According to the researchers Andris A. Zoltners et al., sales can be increased by 2 - 7% through sales territory optimization – without using any other additional resources, or changing the current sales strategy of a business. Therefore, every sales manager should reanalyze their present sales territories to ensure that work is equally allocated to each sales rep, which as a result, maximizes the sale’s potential of the parent company.
Here are the Top 4 Benefits of Having Balanced Sales Territories
1. Increased Customer Satisfaction
Every interaction with a customer impacts their experience with the product or service your company is offering and directly correlates with customer satisfaction.
A good sales territory structure reduces travel time and costs, allowing your reps to spend less time on the road and more time interacting with their customers.
Have a closer look at your reps strengths and abilities to make sure they are servicing the “right” set of accounts. For example, a sales rep who has a history of success with closing large and high complex accounts should be involved in larger accounts, not small leads.
If reps are selling to customers they have experience in dealing with ("playing to their strengths"), they can present a stronger value proposition and foster strong relationships.
In the end, increased selling time as well as creating targeted sales rep and consumer relationships will result in higher customer satisfaction rates. This will encourage higher repurchase intentions, customer loyalty and positive word-of-mouth - all of which contribute to a strong customer base.
Remember, you will get 14 times more revenue from a ‘totally satisfied customer’ than from a ‘somewhat dissatisfied’ one (Study by InfoQuest).
2. Optimized Market Coverage
Poorly balanced sales territories lead to under and/or over servicing of customers. Salespeople tend to not spend enough time on good leads, and only focus on the ones that are located conveniently, easy to talk to, or that they've known the longest.
They might be spending the majority of their time on low-potential accounts, when their time could be better utilized on high-potential leads. By taking into account the quality of leads when balancing sales territories, you can improve market coverage and prevent cannibalization of customer accounts between your reps.
Having a balanced sales territory also ensures that the your market coverage is optimized. An optimized market coverage means you are operating at the maximum potential of the sales route, which decreases time spent on traveling, and increases the number of sales (Go into more depth later). Gaps in customer coverage can be also be detected more easily and sales reps can be reassigned accordingly.
In the event of market changes, rep turnover, acquisitions, mergers, product launches, etc. you will be prepared to react properly while maintaining stable customer relationships and securing optimal market coverage.
3. Increased Sales Productivity
Productivity is a never-ending issue. Each year, sales managers and reps are told to exceed the previous year's results using existing - or even less - resources.
One way you can boost the productivity of your reps is to cut down time they spend on the road while traveling to their customers. This reduces travel costs and increases the time your salespeople can actually spend on selling.
Sales teams often have low rates of converting leads to decisions - with 60% of opportunities leading to “no decision” (Study by CSO insight). A balanced territory structure will give your reps more time with their customers to learn more about their clients’ pain points. This will help reps add value to their buyer/seller conversations (personalize), meet their customer needs, and achieve a higher conversion rate.
A territory structure that offers optimal customer coverage will help your team to prioritize work, reduce travel time, and bolster “selling momentum”.
Additionally, sales managers can incentivize sales teams by implementing a fair compensation plan which does not under - or over - reward reps for factors they cannot control - such as whether or not they have a “good” territory. If you are interested in other ways how sales territories are beneficial to a company, check out this article: The Benefits of Good Sales Territory Management.
4. Recorded Sales Performance
Besides enabling, coaching, and motivating your salespeople, tracking sales performance is a major component of having a successful sales team.
Poorly balanced sales territories are likely to result in unfair compensation among your sales team. A rep with a “good” territory will have more high-opportunity accounts, while other reps must work harder for the same opportunities to hit their quotas. This happens because common metrics used for determining compensation tend to be determined more by geographical location - a factor that cannot be controlled by reps - than by a reps’ actual performance.
Balanced territories will equalize the performance metrics, and reflect “true” performance differences as they avert unfair conditions. A balanced sales territory produces a solid foundation for building fair compensation plans that promote sales and motivation among your reps.
Supervising your reps and ensuring that they stay productive is hard to manage on top of your own tasks. Fortunately, mapping applications for sales territory management provide reporting tools to collect data from your outside sales team so you can keep up with their performance.
For example, Badger Maps is a mapping application that allows your reps to create check-ins and meeting notes on-the-go, right after each customer visit. All check-in reports and notes are saved and added to a weekly report that allow you to track your reps’ progress with clients, leads, time spent selling, etc. Check-in reports provide customer details, important meeting notes and the time since your reps last visited their accounts. Use this data to understand each reps sales process and to give them advice on how they can increase productivity.
Ultimately, balancing your sales team's territories ensures optimal customer coverage among your market. With the right balance of workload and sales potential, your sales reps can be more efficient with their time, handling opportunities in their territory and focusing on most valuable clients.