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Double Sales Productivity with Optimized Sales Territories

Sep 11, 2008
You've got great sales skills. You can hire the best people. You are a fantastic mentor. Your company is growing due to your attention on your sales system. You know that small changes in your sales system can have huge impacts. Sales skills, process, and morale all need to be optimized for maximum revenue production. But all your hard work will fall apart, or at least be less effective, if you're working with unbalanced territories.

Who needs sales territories?
Franchising If you are franchising your business - or buying into a franchise - you likely want to determine if territories are "protected", meaning that one franchisee can't market into another franchisee's territories. If protected territories are part of your business model, you clearly need those territories defined in a systematic, fair and consistent way. And there are legal implications if they aren't done right.

Sales Leaders If you are a sales manager with many sales people hitting the same general market, you probably don't want Jim and Jane both calling on the same accounts. This is especially true for sales people in the field. Competition is generally a good thing, but morale suffers if sales people are at each others' throats. Balancing territories - so that each sales rep has the same "opportunity" allows them to compete without you having to break up fights.

Senior Management If you are a CEO or VP of Sales, you need to maximize revenue. If your sales territories are not optimized, you may be faced with significant gaps in coverage. That's missed revenue opportunities.

Problems With Using Unbalanced Territories or "Winging It"
If you are still reading this, you probably fall into one of four categories:

1) "We just created our territories a few years ago. We don't need to update them." Had any turn over in sales execs or customers? Any of your markets changing? Add any new product lines? Unless your business truly is stagnant, sales territories rarely retain validity for more than a year.

2) "We just pull a radius whenever we need to define a territory." Radius maps are an inexpensive way for setting up an initial territory, but they do have a huge problem. Think about a box full of ping-pong balls. What's in between all those balls? Space. That's the same thing you'll get with radius-based territories - lots of space, and potential customers you'll never serve.

3) "We just make them up as we go!" I assume I don't have to go into detail on the problems with this approach.

4) "We examine our sales territories constantly, either using internal software or with professional outsourcing." Congratulations and go to the head of the class and stop reading!

How To Create Balanced Territories
Ok, so how do you go about defining sales territories? It all starts with your business model. Do not - I repeat, do not - think you can go out and buy software or hire a mapping company without a business strategy in mind.

First, pick your market and the number of territories you think you need. For example, maybe your overall market is "Chicago" and you have 15 reps. Well, that means 15 territories. Or maybe your market is "the state of Florida" and you need 15,000 prospects per territory. Depending on your customer profile, that translates into the number of territories you need.

Next, you need to decide if you just want to adjust existing territories or start from scratch. It might surprise you to learn that it is actually much, much more difficult to adjust existing territories rather than to start over. You can think of it like painting a room. If you start in one corner and work your way toward the exit, that's usually most efficient and effective. But if you paint a patch here, paint a patch there, keep the existing color here, skip over a section there... well, you eventually paint yourself into a corner.

Third, define your customer profile. Get help if you need to, but you must have some data to support some type of ideal profile. Do you cater to rich, middle-aged males? Middle income families? Businesses with fewer than 100 employees? Three-legged donkeys who love pizza? Take a first pass at this before turning to a software package or a mapping service bureau for refinement.

Fourth is all about geography. Do you want to define territories as groups of counties? ZIP Codes? Something else? ZIP Codes are commonly used, but not without pitfalls. What if a ZIP Code crosses a major highway - do you want to split it? What happens if you base them on ZIP Codes and the USPS changes ZIP Codes? Defining by major roads is great, but few software packages or mapping service bureaus can handle that.

Finally, what output do you need? For example, do you just need a single wall map? Do you need reports listing prospects in each territory? Field maps with detailed roads for your reps to follow? Legal definitions written out? Do the maps have to look good or be purely functional? Don't forget that this output may have uses beyond the sales team. This question of output is critical because no software package does it all and there are only a few mapping service bureaus that do it all.

Should We Outsource or Buy Software?
With the above questions answered, you now turn to the question of how to complete the project. Software

If your territories change daily or weekly, you may want to invest in software and staffing to do it yourself. Some desktop mapping software (like Microsoft's MapPoint) are only a few hundred dollars and pretty easy to use. The downside is that they use old data and the output options are limited (especially if you want nice looking maps). And someone on your staff still has to do the work to manually build each territory.

There are some software packages that specialize in territory creation and can even automate the balancing. They range from a few thousand dollars to tens of thousands and have some great algorithms for optimizations. But they suffer from some of the same limitations as their cheaper cousins: the map output is not great, some of them can't use ZIP Codes as building blocks and have other geography limitations. Plus, they are harder to learn so they still require your staff time.

The main reason you'd want to go with your own software is if you either have rapidly changing territories or you really feel psychologically that you need to retain that control.

Finding a dedicated mapping service bureau to help, has some advantages and some downsides. Downsides first. You have to pay them every time your territories change and if they change frequently, that can get expensive. Your control over the result is indirect: you can define the criteria but then they do the work (though the best providers work very closely with you to define your criteria).

The advantages are that you leave the work to the professionals so you can focus on your own business. Plus, the accuracy and quality and beauty of the results will likely be better than anything you could do yourself. If "third party validation" is an important part of your franchising model, then outsourcing is the only way to go. Plus, a strong mapping services company will work very closely with you, including advice and critical junctures, so you would be paying as much for a process as for a result. Pricing varies based on your criteria, starting at $2000.
About the Author
The author, Darrin Clement, works with Maponics, which focuses on ZIP Code maps, carrier route maps, and other map products for businesses to create sales territory maps. You can find out more at www.maponics.com .
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