Businesses define sales territories as the grouping of clients into geographical, demographic, and/or other quantifiable metrics such as sales potential and ordering history. In a 2018 survey conducted by SMA (Sales Management Association), 76% of companies assign territories by geography.
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Whatever methods are used in such sales territory mapping, these groupings are then assigned to individual sales persons or teams in the most cost-effective and productive way. How your business chooses to organise its sales territory management strategy will have a far-reaching impact on both your business costs and your sales volumes.
Simply comparing sales against the size of territories and the number of sales that they have historically been produced does not provide a full picture. Business owners need access to other more detailed metrics if they are to make the best use of their territory management and salesforce. According to statistics cited by McKinsey, leading businesses that have implemented best practices have realized one-time improvements of between 20% and 30% with further annual increases of 5% to 10% being achieved. Similarly, research conducted by PK Sinha, Sally E. Lorimer, and Andris A. Zoltners in the Harvard Business Review showed sales increases of up to 7% purely through territory redesign.
The problem with the above type of sales territory management system is that different sales territories treated with the same distribution of resources are likely to lead to the under or over servicing of clients in some groupings. Basing the groupings of territories on this sales plan example causes problems within the sales force. These may include too little or too much work being allocated to some individuals or sales teams. This, in turn, results in under or over servicing of the customers within those sales territories, which will be costing your business money in the following areas.
No matter what type of business intelligence you employ in gathering your data, an overworked and under-optimized sales force will be costing your business. Sales personnel that are expected to operate in such an environment will be chasing too few leads and spending too much time doing so. This will result in your existing customers becoming neglected and potentially buying elsewhere.
A study of more than 400 PR professionals by Ginger Research in association with the PRCA, shows that nearly one in five agencies (17 per cent) are overservicing every single account. Only eight per cent of agencies never overservice – which means it's a problem that impacts nine in ten of agencies – and 80 per cent believe it is a growing concern. All sales activity carries a cost, so over-servicing clients is a sure-fire way to waste your business’ valuable money. Apart from raising costs, such an approach will indirectly reduce other potential sales through what are essentially wasted resources. According to statistics produced by HubSpot, nearly half of the agencies that they surveyed reported a loss of 11% or more through client over-servicing.
Through failing to implement tried and tested sales territorial management best practices, you will create an unfair distribution of the businesses sales. In an environment where individuals are often rewarded on results, this is unlikely to end well and often results in the loss of talented and loyal sales personnel.
By adopting territory management best practices, you will achieve balanced workloads, and balance the sales potential of your sales force. Other methods of sales territory optimization include the creation of compact territories and adopting restructuring methods that have the minimum disruptive impact on your sales team.
In a survey of over 12,000 sales operatives taken from 90 businesses, McKinsey discovered that only 40% demonstrated the use of best practices. An even more revealing statistic was that no more than 60% of top-quartile companies were doing the same. While every business is unique in its requirements, most can utilise proven strategies when it comes to creating a sales plan. Some of the key factors to consider in implementing territorial best practices for your sales plan are:
Through the implementation of an industry standard software system that is tailored to your specific sales management processes, you can source the critical data that your sales team needs. From sales territory mapping and sales potential forecasting to demand forecasting and comprehensive sales reports, they can all be right at your fingertips with the push of a button.
Through adopting industry-standard sales territory management practices that utilise a proprietary sales territory management system, you will have a tighter control on the balanced and fair distribution of your businesses potential sales. This strategy will cut down on both under and over-servicing of your customers, which equates to increased sales and acts to reduce the actual costs per sale.
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