One of the most overlooked levers of sales performance is territory design. According to Harvard Business Review optimizing territories can increase sales by 2 to 7% without any change in total resources or sales strategy. Good territory design improves quota attainment and rep retention, making it a key driver of sales productivity.
Optimizing territory design is especially important in difficult economic times. With the recent paradigm shift from “growth at all costs” to “sustainable growth,” companies are focusing on profitability and looking to get more out of their existing resources. Imagine what it would do to both the top and bottom line if each seller were 5% more productive simply by virtue of having better, high-value opportunities available to them?
The sad truth is that only 58% of companies today attain quota despite tremendous investment in incentive compensation, enablement, and other sales performance strategies and tools. When these approaches don’t improve attainment you can be fairly certain that the problem has been misdiagnosed. Consider that balanced territories form the foundation of the GTM plan. If territories are poorly designed, even the best designed incentive comp plan won’t enable sales reps to hit their numbers.
The Impact of Balanced Sales Territories
Well-designed territories have a big impact on quota attainment because they ensure that the right reps are focused on the right accounts. Distributing opportunities this way gives all your reps a fair shot at making their number. In addition to being more equitable, strategic territory design is even more relevant in this era of remote selling. When organizations move from purely geographic territories to more data-driven approaches, they can carve territories that directly align with company strategy. Depending on the company goals and customer profiles, there are many possible ways to balance territories to maximize productivity and equity.
Fair, equitable, and transparent territories keep sellers motivated and on-target. Sellers are notoriously competitive and extremely sensitive to their account portfolio. With the limited time that a rep has, they count on well-designed territories so they can focus time and effort on deals that will yield the highest returns.
Since a seller’s income is at stake, account moves and territory changes are especially touchy topics. Disputes about territories never end well. They are a distraction for both the Sales Rep and the Sales Manager that takes time away from selling. Without clear territory assignments and a record of who worked on what deal when, disputes are often solved by overcompensating commissions, eating away at a company’s margins.
In the worst cases, sellers churn because they don’t believe their territories are fair. Turnover has been a growing problem in recent years, costing companies millions in revenue. As noted in the HBR article, “Salespeople who have too little opportunity will quickly become discouraged, especially if they see other salespeople making lots of easy money milking territories with many large-opportunity accounts.”
Territory Planning Beyond Sales
Taking time to invest in territory planning for your entire revenue organization is a crucial but similarly overlooked activity. With the recent economic challenges, companies have embraced the notion that revenue through retention and upsells is infinitely more valuable than new logos. The emphasis on existing customers exposes shortcomings in the way that territories beyond Sales are allocated.
Many organizations only balance Sales territories and call it a day. But it is equally important to consider how all of the resources across the end-to-end revenue engine are organized, especially Customer Success (CS). Compared to the robust GTM planning and modeling for Sales, CS resources are often assigned in a less strategic way. Yet for your GTM plan to be successful your CS team also needs a well-designed portfolio of accounts. If not carved properly, this can create huge imbalances that ensure the organization misses its goals.
There are limitless ways to carve CS territories that will likely differ from how you carve your Sales territories. For example, two customer support managers (CSMs) may have the same number of accounts, but one has multiple large accounts with high support needs, making her overburdened and unable to adequately service those accounts, while another CSM’s accounts are smaller or less complex, making her often idle. Compare this to an approach where CSM workloads are balanced on factors that support the execution of an expansion strategy. This creates predictability for your team and a superior customer experience for your accounts.
An Investment in Territory Management
One of the best investments a company can make is to improve territory design for all of its revenue functions. Today there is an explosion of data available to help Ops teams make the best strategic territory decisions. That said, dividing and managing territories based on complex metrics can be challenging and intimidating, especially when relying on spreadsheets and time-consuming manual methods.
That’s why companies with large complex sales teams are turning to Territory Management Software for GTM planning and operations. Automation of common planning and management activities saves the Ops team valuable time that can now be spent on strategy. And it ensures that the company meets (or even exceeds) its revenue goals by automatically optimizing its territories based on the KPIs and metrics that matter the most to the business.
For more on how to create balanced territories, check out our ebook, The Ultimate Guide to Territory Balancing.