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8 Models for Winning Territory Management

My last post explored “7 Key Factors of Effective Territory Design & Territory Management”—in addition to worst practices to avoid. This post shares the advantages and disadvantages of eight available territory design models.

What Is Territory Design & Territory Management? 

Territories signify the area where a quota-carrying team or individual sources results. Whereas a single person might own a smaller area, several individuals—or even a manager and team—may collectively handle a larger one.

A territory’s boundaries are determined by different characteristics, such as geography, industry, product or customer type, sales potential, historical performance and more. We’ll dive into the pros and cons of each characteristic in the next section.

Territory management involves creating and overseeing (fair) coverage of relevant areas to produce revenue as efficiently as possible. It encompasses defining and assigning territories to owners, while balancing a business’ needs for new business creation and existing client relationships that grow in value over time. 

8 Types of Territories

Before you can craft a blueprint for territory management success, you need to understand what kinds of territories are out there. Following are eight types of territories.

In a 2018 survey conducted by SMA (Sales Management Association), 76% of companies assigned territories by geography. 

#1) Location

Historically, territories tended to have established geographical shapes. Reps might have known that they owned particular cities, regions, states, or zip codes—or even that their territory began south of one particular landmark and ended north of another, with a river or mountains on one side and an ocean on the other. 

Advantages

Disadvantages

  • This method for territory creation is very straightforward.
  • Duplication is unlikely.
  • Decreasing travel time may increase selling time.
  • Geo-based territories present a strong local advantage, and when relevant, decrease language barriers.
  • Geography and account concentration don’t correspond, opening the door for unfair sizing and uneven revenue opportunity. 
  • Geo-based territories can prevent sales reps from developing and/or maximizing industry or product specialization.

#2) Size stratification

Sized territories divvy up total potential revenue opportunity, whether by opportunity or company size. Examples include Fortune 500 or 1,000 companies, customer revenue, and number of employees.

Advantages

Disadvantages

  • Sales reps can prioritize target accounts that most align with their skill sets.
  • Teams develop specialization in products and industries.
  • Resource-intensive orchestration across shared geographies is required.

#3) Industry or market-based

Vertical allocation grants territories based on industries, such as pharmaceuticals, financial services, high tech, and more. 

Advantages

Disadvantages

  • Sales reps become intimately familiar with customer needs, which helps them provide better service and sets them up for success.
  • Management can be allocated to various markets depending on speciality and priority.
  • Geographic duplication in areas where multiple industries exist.
  • Related cost increases.
  • Some companies span several industries.

#4) Social or relational proximity

Pre-existing relationships shape this method of territory creation.

Advantages

Disadvantages

  • Sales cycles begin farther down-funnel.
  • Geographical duplication is common and expensive.

#5) Product types 

In this territory management model, territories are grouped by individual products or product groups.

Advantages

Disadvantages

  • Team members cultivate product expertise.
  • Management has an easier time guiding sales efforts. 
  • Duplicated efforts within the same geographies and customers are costly.
  • Significant orchestration across duplicated regions is necessary.

#6) Customer type 

When territories are divided by prospects and customers, they use a customer type model.

Advantages

Disadvantages

  • Focusing team members on hunting or farming maximizes their skills.
  • Geographical and industry overlap has to be effectively managed.

#7) Historical performance

Territories can be crafted from a company’s prior sales results. 

Advantages

Disadvantages

  • Data-driven approach
  • Past success doesn’t necessarily indicate future performance.

#8) Hybrid ** RECOMMENDED **

Hybrid territory management combines multiple approaches from above. 

Advantages

Disadvantages

  • Highly flexible
  • Matches territories with team members’ best skill sets
  • Highly complex
  • Requires software and clean, end-to-end data
  • Initial setup is longer

How to Improve Revenue with Territory Management

According to McKinsey, organizations that institutionalize territory management best practices realize one-time revenue improvements of between 20% and 30%—and later annual increases of 5% to 10%. Such best practices include incorporating continuous (weekly or bi-weekly) collaboration between all revenue leaders, not just stales owners, and focusing conversations on data-driven, actionable insights. You can learn more about these topics in my last post: “7 Key Factors of Effective Territory Design & Territory Management

Sources

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