How Much Money are You Giving Away by Managing Sales Territories Badly?

If you have a sales force of bigger than a few reps, you have territories. They were first introduced to reduce confusion and help maximize sales productivity, and they still perform those roles. But today they can also be effective in saving travel costs, providing numbers for benchmarking, and a host of other tactical activities.Sales Territories However, most companies still handle territory management by feel – the manager does what he feels will work best. The boundaries of territories are not determined by the data – they’re determined by other things, like reps who demand bigger territories or new geographies, or by a history of churn in a territory, or by the arrival of new management.

These not-driven-by-data criteria should immediately signal trouble is afoot.

Gartner estimated that, on average, enterprises will miss the equivalent of 10 percent of total sales in lost opportunity revenue that could have been captured with improved processes for defining, assigning and managing territories, quotas and incentives and compensation plans – and you can bet that territory management accounts for a major part of that loss.

Getting territories balanced is critical for maximizing your sales force’s success, and balancing it correctly means using data to establish what those territories should be.

Without data – and a system to use it – territory definitions are subject to a host of forces, none of which is oriented toward the idea of maximizing revenue for the company. Most of them, when they come from the sales force, are oriented around maximizing revenue for a particular sales rep. For example, you may have aggressive sales people pushing for bigger territories or for the addition of more lucrative geographies to their existing territory. In one high-tech company I covered, a star sales person had her sales VP – and even the CEO – so cowed by the force of her personality she was given the entire west coast of the U.S. as a territory. For a tech company, that should have been multiple territories. And yes, she brought in the numbers, but she darn well ought to have, since most of the company’s best targets were headquartered on the Pacific coast. While she met her quota, she also sandbagged massively, pushing off deals into future quarters. She made her numbers, but she also ended up working about three weeks out of each quarter, having teed up future sales and then putting them on hold. Meanwhile, the company’s other sales reps were beating their brains in trying to attain quota. In this scenario, the business is suffering tremendously: it’s not realizing all the revenue it should from a lucrative geography, both in the current quarter and in future quarters (remember that a customer who’s ready to buy wants to buy today, not two months from now, and is likely to go looking for a new supplier if the buying process is slower than their expectations). The “star performer” is rigging the system so she can coast, while other reps are struggling and becoming resentful. The whole scenario is fraught with concerns over revenue, customer experience and sales force churn.

Approaching the situation with data in hand is the best way to confront it.

Redefinition of territories based on data makes sense: perhaps the star’s territory should shrink, and the hard-working reps elsewhere should get a chunk of her current territory? The goal should be the distribution of work (and results) evenly across the entire sales force and across the entire quarter.

Approaching the characters in this story with the data is also critical to defusing the situation.

Managers who can present a new territory strategy and explain that it’s the result of data analysis stand a far better chance of success than managers who don’t have the data available and have to justify changes with their guesses and assumptions. “Hey, don’t blame me for your territory changing – blame the data!” Ideally, territory redefinition should challenge the stars, provide new opportunities to good performers trapped in unproductive geographies, and lead to better results for the sales force as a whole. That’s data you already have – and it should be the ultimate verification of the effectiveness of your territory design. Want to see how technology can help you get the territory balance right? Check out our Guide to Sales Territory Planning and Quota Management.

By Chris Bucholtz | August 3rd, 2015 | Territory & Quota

About the Author: Chris Bucholtz

Chris Bucholtz

Chris Bucholtz is the content marketing director at CallidusCloud and writes on a host of topics, including sales, marketing and customer experience. The former editor of InsideCRM, his weekly column has run in CRM Buyer since 2009. When he's not pondering ways to acquire and keep customers, Chris is also an avid builder of scale model airplanes.