Part Two: Territory and Quota Planning

We’re continuing on our series aimed at outlining the five areas of sales performance management (SPM) and ways you can improve your company’s SPM strategies using all the tools at your disposal.  The second step to SPM success is focused on territory and quota planning.

territory and quota planningMany of you are knee-deep in territory, quota, and incentive analysis, working your way into that moment of clarity when next year’s plan is finally crystallized and approved. Whether this lasts days, weeks, or even months, it’s a process fraught with anticipation. We sympathize.

While territory planning and quota setting are bridges to be crossed every year, the repetition doesn’t make them any easier to implement. But, just as effective hiring and on-boarding practices are crucial in the SPM process, territory and quota planning guides the basic direction of your sales team. You’re assigning how and by whom the revenue will be brought in, which will in turn affect the team’s performance and whether or not it meets the potential revenue and growth objectives of your entire company.

Potential is the operating word. If you identify the potential of your customer base as well as that of your agents — and match them accordingly — it becomes much more possible to achieve your company’s revenue target. Not surprisingly, this comprises a significant concern for many CSOs according to the 2013 Sales Performance Optimization Study published by Accenture.

Know your customers
Customers mean territory. There are endless ways of defining a territory, but simply put, it’s the potential and existing customers assigned to a salesperson. While geographical location has long been the customer attribute of choice, industry verticals, business size, and targeted product result in different, possibly more strategic, classifications. Whatever definition you use, it needs to fit your company’s strategy.

Ultimately, you will use objective market data to help you make your determination. Historic or current, these metrics are offered by sales intelligence service providers. According to a recent Sales Performance Optimization Survey Benchmark, 58% of its respondents reported using this kind of service. Sales intelligence systems, on the other hand, can mine key customer and prospect data from internal systems, but these tools are largely underutilized (78% reported not using services of this kind, according to the same survey). This information will inform you of the buying power of your potential accounts and help you segment them into manageable chunks.

Know your agents
On the other hand, your expectations of your reps’ performance must be realistic. Recognizing the hierarchy of selling ability within your team, you must align quotas with each individual’s capability. If not, you risk losing out on sales generated by territory (not to mention discouraging both high performers and new salespeople.) This balancing act represents one of the biggest pitfalls a sales manager can face: misaligned sales territories. Poorly aligned territories can cost between 2 to 7% of sales, as reported by Andris Zoltners and Sally Lorimer in their paper Sales Territory Alignment: An Overlooked Productivity Tool (Kellogg Graduate School of Management).

Putting it all together
Once you’ve assessed all the data, you need to formulate your plan. If you’re still using spreadsheets to track and collate your information, you risk overlooking, or worse, leaking potential revenue. In addition, the method is cumbersome, especially when the information is being shared among others. By utilizing territory and quota planning technology into your overall SPM system, you can streamline the process greatly and take advantage of the increased insight that comes as a result. It’s been shown that sales quota and territory management software that refines business practices for territory sizing and balancing can add over 5% in sales from existing resources, according to Gartner research.

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