As a sales or sales operations leader, you obsess about building and sustaining a competitive advantage. Minor changes to territory alignments can give you an edge. Just realigning and optimizing sales territories unlocks up to 12% revenue growth. But you need the right decision-making tools and frameworks to be successful.
What sales operations leaders say are their critical decisions
- To know why there are imbalances in territories.
- To understand how a weighted index like workload affects territory optimization and design.
- Analyze under-performing and over-performing sales territories and why.
- Analyze which sales territories to close.
- To assess which sales territories to merge or consolidate.
- What are our most valuable customers?
- What does each customer segment value most?
- What is the sales potential of a customer segment?
- How do we adjust our sales process to meet our customer's needs?
Otherwise known as the 80/20 rule, Pareto's law is a common phenomenon in nature and business. From a customer segmentation perspective. Are you targeting the 20% of the customers who can deliver 80% of your sales potential? The bottom 30% of your customers can actively destroy value. You know the principle of Pareto's Law, but are your sales territories delivering? Are your sales reps applying the 80/20 rule when planning and executing the sales strategy?
So, if you cover the 20% ideal customers, you unlock 80% of the value.
How do you identify the ideal target segments?
Leverage your sales data
You should mine your CRM or sales data management system for common characteristics of high-profit customer segments.
- Customer segments - are there identifiable target verticals?
- Customer sales data - are some customer segments more likely to spend than others?
- Customer identifiable traits/criteria. For example, a medical device company might focus on the numbers of out-patients in a hospital to indicate higher spending customers.
- Margin analyses / financial characteristics. Are some customers more profitable than others? Do they demand fewer resources and less service?
- CRM data on activity levels and time taken to service accounts. Your sales reps can record the time it takes for each step of their sales process, like sales meetings, proposal writing, and negotiating. You can aggregate the level of investment in the time needed to grow accounts. And focus on those with lower time investment requirements.
- External data (census, industry bodies, research houses). Some industries are rich in research data that you can leverage to identify high-profit segments.
- Assess value potential based on your knowledge of top customers. Involve your field managers and representatives to ensure your estimates are accurate.
Next, use your CRM data to understand
- Deal wins and losses.
- Sales cycles.
- Key decision-makers.
- Roles in decisions.
- The quality of leads and conversion rates.
You gain an extra level of understanding of those high-value market segments.
Remember, there is a limitation to all data sources. They cannot predict the future. So, all estimates are best guesses, but although imperfect, they are powerful.
The sales territory alignment process
You are in great shape. You have sales analytics and customer segmentation completed—next; it's time to perfect your territory designs.
Why align sales territories?
There are numerous reasons sales operations and leadership realign sales territories. Here are some of the top reasons:
- You haven't updated your alignments in a year.
- You are hiring and locating a new sales team.
- You are expanding, downsizing, or restructuring an existing sales team.
- You need to combine multiple sales teams, for example, during a merger or acquisition process.
- Your customer's footprint has changed.
- Your customer's needs have changed.
- Your product portfolio changes. You have culled existing products or expanded your product range.
- Your competitive landscape changes. Let's be honest this is a constant.
- You have updated your Sales process.
Optimizing sales territory alignments is proven to increase revenue by up to 12% without changing your resources.
Your alignment goal is to match your sales team workload or utilization with the specific sales activities that drive revenue growth. That's good for business and customers as you maximize service levels. And it is great for your sales team. They know they can manage their workloads effectively while maximizing their sales potential.
Profitable selling time
Profitable selling time is your sales team's highest-value time. An underutilized sales rep may spend too much time on unprofitable selling activities, like calling too frequently on the same customers. They want to fill their day, but you want them to fill their day with profitable selling time for the organization. When you align territories for sales potential, you maximize profitable selling time.
The opposite is true too. Your sales rep with too many customers will not maximize profitable selling time. So that time wasted results in lost revenue.
Sales potential can be a stronger predictor of territory sales than a salesperson's efforts or skills. It exceeds all other predictors. You may have experienced a phenomenon first-hand where a vacant territory with high sales potential has higher sales than other territories with poor sales potential.
As a sales operations or sales lead, eliminating sales potential differences between sales territories can have significant payoffs. It can improve sales team morale (as they are all equal). It affects retention and turnover positively. And for sales managers, it allows for greater scrutiny of sales effort and skills. That impacts coaching and development. When you eliminate territories that "reward the seller," you can assess sales reps better and reward those who deserve it most.
Data drives intelligent territory alignments
Sales analytics is the bedrock of great sales territory design. Using the data, you can design, analyze, compare and tweak alignments better. It, in turn, supports the goals of maximizing sales productivity and customer coverage.
Some recommended approaches
Use a workload index to achieve balanced alignments.
A work index is a great tool to ensure an even distribution of effort amongst your sales reps. Your goal is to maximize profitable selling and minimize inefficient practices. Calculate your ideal workload based on your sales strategy and goals. Use an average of 32 hours of profitable selling time per week as a baseline. Understanding call durations and call frequencies (maximizing face-to-face selling time with your ideal customers) is your starting point. Territory alignment software with travel time is essential. Let the sophisticated algorithms do your heavy work and calculate the average drive time.
Optimize your sales alignments first, then share your suggested scenarios with your sales managers
The technology produces an optimized outcome and will get you 95% of the desired result. But local knowledge from sales managers and sales reps fine-tunes your alignments, allowing for account exceptions. Some critical customer relationships override analytic logic. It makes sense for some reps to service customers with locations in multiple territories.
Submit your revised alignments to your approval process
Share your realignments with your sales team with details of their:
- Sales potential
- Assess different sales and workloads to ensure that you are maximizing profitable selling time.
- Assess changes' impact on customers and reps to ensure that you don't negatively impact customer relationships. You can adjust with account exceptions to minimize disruption.
- Identify potential sales locations and how your scenarios exploit the potential.
- Analyze the impact each scenario has on travel time, fuel costs, and service levels.
How do you calculate profitable selling time?
Data can help you calculate your organization's profitable selling time for some industries. In the absence of industry data, many organizations have several approaches.
Sales managers are close to the action. You have oversight on selling activities. Many have personal experience of the time involved in critical selling activities, like preparing presentations or proposals. You can assess the meeting time differences for small and large organizations. And create a strong "picture" of the time needed to service customers.
Using your CRM data, you can measure the number of sales interactions involved in your Sales Process. You can analyze sales call activity plans versus achievement. By cross-referencing actual sales with sales activity levels, you can estimate the time required to service customers and the average revenue by customer type. You are not seeking perfection. Minor adjustments based on your assessments can significantly impact large sales teams.
Workflow management rules
Here are some guidelines or best practices to think about as you build your sales territory alignment workflows:
- What is the minimum profitable selling time required for each territory?
- What workload makes a viable territory?
- What is an acceptable sales potential average for planning?
- What are the building blocks for your geographies, state, county, zip, or accounts-based (often referred to as points-based)?
- What customers require coverage by multiple sales team members?
- What level of disruption (movement of accounts amongst reps) is workable without affecting customer relationships?
- When are account exceptions required, and how do you approve them?
Comparing scenarios – spotting imperfections
As you analyze your alignments, look for some telltale imperfections:
- Do you see fluctuations in sales rep performance for salespeople in similar roles?
- Do you see mismatches in the numbers of accounts or prospects?
- Are some sales territories rewarding the sales rep? Are some reps achieving revenue targets but have weak selling skills?
- Do you see a higher than the expected turnover of new hires?
There are millions of viable mathematical alternative alignments. You can produce your optimal alignments and share and compare them with key stakeholders. Using a tool like eSpatial with sophisticated algorithms eliminates the heavy lifting for sales and operations teams.
We recommend you produce optimized territories first before sharing them with sales managers. Your sales managers will enhance your data-driven designs with their real-world knowledge. And make refinements. You can work through multiple scenarios and analyze the impacts by comparing them to your target workload or sales-potential goals.
After this engagement process, you are ready to roll out the new alignments to the sales team. You increase buy-in from the field by involving key managers with sales operations. And improve overall adoption throughout your rollout phase.
Align annually as a minimum
An annual realignment process can yield significant sales productivity gains as you work in dynamic markets. We consider it best practice to analyze your alignments at least once a year. Your goal is to optimize territories for the upcoming year.