Sales territory design & optimization guide

What is territory optimization?

Sales and sales operations design balanced areas so sales reps spend more time with customers and prospects and less time driving. Territory optimization is a data-driven process that factors in workload, sales potential, and resources to produce sales territories that maximize revenue while minimizing costs.

You can optimize territories manually, but if you have larger sales teams with reps selling multiple products to numerous verticals, you need territory mapping software with an optimizer tool. Using mapping software produces faster results.

Territory optimization is critical for maximizing revenue and maintaining a happy sales force. But aligning territories can be a long, complicated process involving multiple stakeholders, meetings, scenario planning, and approval processes. And sales leaders have day jobs, too, so often, it drops off their priority list.

The good news is that with territory mapping software, you compress the process by 95%. It is fast, intuitive, secure, and delivers the desired results for all stakeholders. Optimal sales territory alignments deliver an increase of up to 7% without headcount changes or new resources.

Types of territories

1. Geographic territory

The most common territory type is where a sales rep is assigned an area (typically consisting of ZIP codes, counties, or states), and they service all accounts within that boundary.

2. Account based

There may be a need to design territories on accounts in larger sales teams. An example is when an organization assigns a key or large account to one rep who owns that customer regardless of the location of their branches or offices.

Multiple sales teams may call on the same customers, necessitating an account-based design.

3. Hybrid

As the name suggests, an organization uses both geographic and account-based areas.

Why should I optimize my territory design?

Optimizing sales territories delivers an ongoing competitive advantage to sales organizations. In ever-changing market conditions, optimal regions can quickly fall behind their true sales potential. Sales team turnover, customer acquisitions, competitor activity, new market entrants, and new product launches are all factors that throw your perfect alignments out of kilter.

Realigning regularly ensures that areas are balanced and optimized to ensure you maximize sales potential. Balanced workloads result in happier sales teams who stay longer too.

1. Increase revenue by 7%

According to the Harvard Business Review, optimally aligned sales territories increase revenue by up to 7% without any other changes. It makes sense. Firstly, optimal territory design ensures sales reps have an equal workload and opportunity.

You eliminate gaps in coverage, and reps have enough service customers and prospects for new accounts. Happy customers are sticky customers meaning more share of wallet and referrals. Secondly, optimizing your territories boosts productivity, resulting in more time spent selling and closing deals.

2. Lower costs and cut travel time

You can eliminate unnecessary costs by rightsizing your salesforce. Overlapping sales territories affects customer service and results in higher costs, so optimizing alignments and reducing overlaps is a good practice. Slashing mileage and fuel costs is easy while you optimize resources.

3. Happier sales reps & 67% faster onboarding

Endless driving, long hours, and too many customers are a recipe for burnout. The flipside is an underworked sales rep. Both scenarios are common and lead to missed opportunities and lower morale. Many organizations experience turnover in sales teams of up to 20% annually. That is a significant drain on resources and finances.

New salespeople can take up to 18 months to achieve their full potential. Balancing areas on sales potential or workload can help.  Sales operations can quickly realign a sales territory with a lower workload for new starters, enabling them to onboard quicker and find their feet.

4. Better customer service with 30% less time on admin

You want your customers to feel good about your relationship. They're more likely to continue spending if they enjoy working with you and may even tell others about their experience. So a sales team that maximizes the time they spend with your highest-priority customers is your goal. You need to understand your sales rep's workload capacity to do this.

Real World Scenario

• A sales rep is assigned 200 accounts to manage. The accounts are graded A, B, and C.
• A accounts are the highest-priority customers, and there are 50 in total.
• The call frequency for A accounts is 12 times a year.
• The average travel time to a call is 30 minutes.
• The average time spent in a customer meeting is 60 minutes.

So the workload required for A accounts in a year is:

• # Calls = 600 ( 50 times 12)
• Travel time in hours is 300 hours (30 minutes X 600 calls)
• The meeting time is 600 hours (600 meetings X 60 mins)

That is 900 hours per year (assuming 30 selling hours per week, that is 30 weeks' workload). If you have a 50-week year with 30 hours of available selling time, your total capacity is 1,500 hours. In our example, A accounts will consume 60% of the rep's time. Will that leave enough time for B and C accounts? We've created a tool to help you analyze your sales rep capacity.

Ensure your sales territory optimization software includes a workload calculator to eliminate the heavy lifting and design perfectly balanced alignments in minutes.

Why do I need a sales optimization tool?

So, you're on board with the importance of territory optimization. You may have done it manually in your mapping software. It's worked for you in the past, so why do you need a tool that will automatically optimize your territories?

In short, using a tool like eSpatial's Territory Optimizer will give you better results in a fraction of the time. Manual processes involve a lot of trial and error. Optimizing just one sales region could take days. With Territory Optimizer, you can get balanced territories 92% faster.

Trying to divide territories fairly without the right tools is like trying to slice an apple pie evenly for hundreds of people by hand.

Each slice must include an even amount of fruit (and you never get to see that). That is only possible if you have unlimited time (and the pie has preservatives). A territory optimizer with a workload balance is a no-brainer.

Sales territories before applying a workload index

Sales territories after applying a workload index

eSpatial's Territory Optimizer in action

Now that you know the benefits of using a Territory Optimizer, let's look at how it works in your sales territory planning process.

Creating a sales territory alignment from scratch

When creating a manual sales alignment, sometimes you'll have to build a new set of territories. To get started, log in to eSpatial. You can sign up for a free seven-day trial if you don't have an account. Once in eSpatial, click the "Territories" tab at the top of the screen to navigate to Territory Manager.

Select "Create Manually" and choose either ZIP Code Tabulation Areas or US counties as your regional dataset. Click complete. Once in Territory Manager, you can upload your datasets using the Add Data button.

After you've uploaded your data, click "Optimize Territories" and adjust the settings in the new window. We recommend optimizing based on sales potential to ensure an even distribution of sales opportunities.

Once you've hit complete, eSpatial will create a draft set of optimized territories. From here, you can customize them so they fit your sales strategy. For detailed instructions, visit our how-to guide.

Ongoing sales territory management

You can use eSpatial to realign, balance, and optimize alignments if you have active territories. Adding or merging regions is simple. So too, if you want to transfer accounts between reps.

Data-driven future planning

Territory mapping allows you to create data-driven decisions and strategically approach scenario planning.

Real World Scenario

You need to present a growth plan to your leadership team. You want to consider three growth rate scenarios as part of your presentation. 10%, 20%, and 30% sales team (and territory) growth based on forecasted revenue projections. With eSpatial, scenario planning is easy. You can create three optimized alignments and use the comparison tool to analyze the impact of your proposals. Sharing live interactive maps means your stakeholders can interact and give feedback on the fly. Decisions accelerate, and engagement is boosted.

Day-to-day operations

Well-balanced territories can help you maintain a happier sales team. But even in the best scenario, you'll still have turnover. In some sales organizations, this can be close to 20%. If you have 100 sales reps, you'll need to replace 20 of them per year. That's a lot of territory adjustments. You won't need to re-adjust your sales territories every time — sometimes, you get lucky and can hire a new rep quickly.

Territory Optimizer makes it fast and easy when you need to tweak things. For example, you could filter to a region and rightsize from five territories to four. That way, you could provide temporary coverage for a vacant territory. You may discover that the workload is still manageable with fewer reps, making it a permanent change.

Best practices

1. Optimize automatically and use a workload index

Leverage the power of an algorithm and modern solutions to optimize territories and achieve more accuracy automatically.

Use a workload index to ensure you balance territories on effort.

2. Conduct a what-if analysis

Scenario planning is critical. It involves you testing a number of options on alignment design.

Below is an example of a comparison. The left side shows the territory before changes are applied. The right side shows the adjusted territory.

Often the algorithm delivers 95% of the result you need. The addition of feedback from your sales managers and key stakeholders offers the human input needed to finetune alignments. Your ability to share scenarios, get feedback and fine-tune changes the game.

3. Use territory centers

Placing your reps in an ideal location is another important factor in territory optimization. Territory centers offer you a guide. There are two types of territory centers.

1. A geographic center. Is the actual center of your territory.
2. A weighted center. Bases the center on the area of the highest concentration of accounts. It is an optimal center ensuring the minimal effort required to service the highest number of accounts.

The example below shows a weighted center for each territory as a red circle with a solid red dot.

4. Incorporate account exceptions

Building on your scenario planning, it is good practice to incorporate account exceptions. You always strive to minimize disruption to customers and salespeople. You don't want to damage key relationships by transferring accounts. So you need to ability to realign territories but "lock in" accounts, ensuring relationships are retained.

The image below shows account exceptions; the accounts from Territory 6 are brown. Note that there are brown (territory 6 accounts) in territory 4.

You should consider "holdbacks" as you transfer accounts. For example, you may have a transition period of a quarter where both reps manage an account to ensure a smooth handover. Then the account is transferred at the end of the transition period.

If you are moving zip codes and accounts, it is also important to ensure HR is involved in the process to avoid conflicts relating to quotas and commission structures. Higher sensitivity is inevitable if you are downsizing your structure.

Ownership changes can result in pushback, which is avoidable with smoother communication.

Who needs sales territory mapping software?

We've talked a lot about territory planning from the perspective of a sales organization or sales operations manager. It's a critical piece of the puzzle for those companies. But others benefit from territory mapping software, including:

1. Service teams

Speed and efficiency are critical to delighting your customers in the service business. Creating an optimized territory plan ensures you have enough resources to cover customers in each area. That means you can provide the best service and hit your service level agreements (SLAs).

2. Franchises

Franchises with multiple locations need franchise territories. Creating demographic maps with sales analytics can help uncover new areas ripe for new sites. And showing an attractive new region can help seal the deal with a prospective franchisee.

If you'd like to learn more about sales territory optimization, set up a call with one of our mapping experts.