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7 Key Factors of Effective Territory Design & Territory Management

Access our free executive guide, “A Framework for Territory Management,” to learn more about this revenue-critical topic. 

 

Organizations can squander at least 10% of sales opportunities by poorly managing territories. Or they can lift sales 2 to 7% with better, technology-enabled territory design—without changing strategy or adding resources.

This blog dives into how to orchestrate revenue performance with a data-based, insights driven-approach to best-in-class territory design and territory management. 

  • Quota Management vs. Territory Management
  • 4 Signs You Need Better Territory Design & Territory Management
  • 9 Other Symptoms That Your Territories Need A Revamp
  • 10 Benefits of Effective Territory Management
  • 7 Key Factors of Territory Design
  • How Sales Performance Management Boosts Revenue

Quota Management vs. Territory Design

Quotas are targets that territory owners need to reach in a specific, time-bound period. Targets can represent dollar figures or a certain number of products that need to be sold, and time periods are generally set in months, quarters, or a year. When employees reach different performance milestones toward their quota goal, they earn compensation.

Quota management signifies the process to set realistic quotas—in other words, targets that teams can achieve with a bit of hard work. The basic rule of thumb is: when quota carriers attain quota, their employers should also meet revenue goals.

As you can probably tell, managing territories and quotas are super-interrelated. For example, it’s possible for territories to make even the exact same quota targets unequal, if the territories represent different revenue potential. Following are three other ways that quota management and territory design can work together.

      1. Focus. Territories focus quota attainment efforts on a certain region, product, customer type, or industry.
      2. Planning and forecasting precision. Territories and quotas directly impact the accuracy of your sales planning and forecasting.

        3. Street cred. All of the above impact your and your team’s tenure and reputation, in your company and among your peers.

Pro Tip: When thinking about territory management, make sure you don’t commit the fatal error of applying the practice only to sales. While quotas and territories have traditionally been assigned to salespeople, it’s increasingly common for a full revenue team to co-own territories, especially important ones. That full revenue team might include lead generators, digital marketers, sales development reps, account execs, industry and product specialists, renewal coordinators, and customer success managers. 

Said differently, other folks on the revenue team play significant roles in accelerating revenue. Quota design and territory management thrive within the orchestrated and programmatic efforts of a team of marketers, salespeople, and customer success professionals.

4 Signs That You Need Better Territory Design & Territory Management

Following is a list of common, undesirable outcomes when territories aren’t managed effectively.

  1. Revenue flops. Employees who don’t believe in their territory, or understand how it was created, don’t try as hard to attain their goal. Sales goals that are too high, misunderstood, unfair, or perceived as such can lower sales results.
  2. Morale sucks and a lack of productivity. Territory mismanagement creates a culture of resentment, which sends productivity and performance spiraling downward. 
  3. High turnover costs. Unhappy employees generally look to work elsewhere, and turnover spikes onboarding costs. It takes about three times someone’s salary to find a new hire, and a year on average for new hires to fully onboard.
  4. Unethical behaviors. Mismanaged territories and quotas, whether actually unfair or just perceived as such, can encourage overly aggressive and sometimes unethical behavior. 

Needless to say, this is not the way you want to run a team, much less a company. Companies ineffective at territory design performed 15% lower in sales objective achievement compared to the average. 

9 Other Symptoms That Your Territories Need A Revamp

How can you tell that your territory management practices need to be brought into the modern age?

  1. You’re using Excel. Data and insights are only good if you can do something productive with them. Because Excel is riddled with errors, actionable insights are pretty much impossible to gain.
  2. Your team consistently misses its target. If symptoms exist, you probably need a cure.
  3. Your reps target low-potential accounts. This likely means your team’s territories are too small.
  4. Your team ignores good leads. Their territories may be too large.
  5. Complaints about unfair territories are common. People are wired to complain, so this point is relevant only if complaining is extra high.
  6. Morale is super low. We’re referring here to substantive morale anomalies that last.
  7. It’s hard to hire new folks. If word on the street says your team’s territories aren’t fair, people won’t want to join the team.
  8. Employee turnover is high, especially of top performers. Excellent hires want to work somewhere excellent, where they can maximize pay for performance.
  9. Marketing and customer success don’t have revenue commitments. Ever wonder why sales is the only revenue team with territories and quotas? Today’s latest hottest best practices challenge this traditional status quo.

Now let’s understand how we fix this mess. 

10 Benefits of Effective Territory Design & Territory Management 

What happens when you’re using effective territory design and territory management? 

  1. Gooooooaaaal. How much do you love it when your team wins? Territories function to help a company do just that. They ensure coverage by showing employees where to focus as they produce the required results.
  2. Growth. Done right, territories drive company growth—whether you’re expanding into new areas, launching new products, or adding headcount.
  3. Roles & responsibilities defined for success. Territories give clear-cut boundaries of which team members serve which prospective or existing customers.
  4. Motivation. By creating ownership across your team, you prevent deals from falling through the cracks, and boost morale with achievable goals and high earning potential. Effective coverage, balanced territories, and reduced travel costs are all additional side effects of territories that are well crafted and managed.
  5. Fairness. Done well, territory management ensures every territory owner can meet quota. That means matching territories with the right owners. If a rep has worked in Financial Services most of her career, she probably should own that industry. Similarly, reps living in California generally don’t have territories on the East Coast.
  6. Focus. Speaking of fairness, territories focus quota attainment efforts on a certain region, product, customer type, or industry.
  7. Precision. Territories directly impact the accuracy of your sales planning and forecasting.
  8. Prevent under-servicing. Tired salespeople, lead generation managers, and renewal specialists do your company no good. Well-constructed sales territories prevent your revenue team from producing and chasing too many leads, and neglecting a roster of customers that’s too large.
  9. Sidestep over-servicing, too. Territories that are too specific, just like quotas that are too small, put your team at risk of spending too many resources on serving prospects and customers. One survey from Ginger Research showed only eight percent of 400 agencies never over-serviced their clients, and those that did wasted 11%. Regardless of the exact percentage, over-servicing drives your cost of sales up, and your effectiveness down.
  10. Change your go-to-market strategy and/or restructure effectively. Change management doesn’t have its reputation without good reason. Territories are fantastic tools to maintain market coverage, accurately size your teams, and correctly allocated resources during seasons of change.

All of the above impact your and your team’s tenure and your company’s street cred, in your industry and among your peers. It’s also low-hanging fruit in the industry: A McKinsey & Company survey of 12,000 sales people at 90 businesses revealed that only 40% used territory management best practices. 

7 Key Factors of Territory Design & Territory Management

  1. Sequence correctly. Effective territory management looks different for companies in an established marketplace versus a greenfield. As Michael DeLeonardis explained in 5 Sales Planning Rules to Break Immediately, you have to take your organization and target market’s maturity into account, and support your approach with intelligent, machine learning-enhanced tools to ensure you have the right reps in the right roles.

    Startups operating in greenfield situations should first decide targets, then quotas, territories, and capacity in that order. Established organizations know what size territories they need to hit to reach the next growth stage—so they can begin with targets, then capacity, quotas, and finally, territories.
  2. Work backwards to set activity goals. Enhance decision making by leveraging AI to predict key metrics including ideal ramp times and seasonality in sales.
  3. Merge multiple layers of information about territories. Inputs may include drive time, mileage, road information, and more. Be sure to represent the information graphically. Territories that are optimized for travel efficiency can reduce costs up to 15 percent!
  4. Calculate top down and bottom up models. Top down models may not give enough weight to a sales team’s historic data and proven abilities, while too heavily prioritizing the board’s sometimes unrealistic expectations.
  5. Model a waterfall. Waterfall modeling sets your target goal at the highest level, then passes the model down each level of the dimension hierarchy. Each level can make confidential adjustments before passing the model along. This methodology works particularly well when planning is decentralized, incorporating input from regional and business line leaders. 
  6. One is not done. Create iterative snapshots of your plans, and model important “what-if” scenarios and monthly forecasts. Make sure you analyze side-by-side comparisons across your teams.
  7. Learn with the machines. Deep learning built into state-of-the-art tools can dramatically uplevel the accuracy of your territories, quotas, and overall forecasts and plans. For example, sales intelligence will tell you if too many deals rolled over from last year, and your pipeline is too soft. Organizations using sales territory mapping software increase sales goal achievement 30%.

That’s a great framework for better territory design and territory management! 

How Sales Performance Management (SPM) Boosts Revenue

Rethinking how you plan, forecast, design, and manage territories is the new normal for today’s leading revenue leaders. And doing so can pay off. According to McKinsey, organizations that institutionalize the best practices we’ve just discussed realized one-time revenue improvements of between 20% and 30%—and later annual increases of 5% to 10%. 

Territory Management is one of five key pillars for effective revenue orchestration. Others include quota management, sales forecasting, sales planning, and capacity planning. Once you orchestrate revenue, you’re ready to motivate and incent your entire revenue organization (sales, product, marketing, client success) to operate in tandem to accelerate revenue performance. These three pillars are part of every effective SPM strategy.

Download our free guide to better territory design and territory management here: “A Framework for Territory Management.”

 

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