Don’t let overlapping sales territories cause frustration for your customers and sales team. Ensure your team understands how to leverage the power of regional boundaries — not only does it help allocate resources effectively, but it also helps you better understand each prospective customer’s needs.
So what is a sales territory exactly, and how does it work? Keep reading for everything you need to know.
Key Takeaways
- A sales territory defines the geographic area and/or range or scope of each customer account.
- Establishing a sales territory plan helps companies strategically divide resources and sales efforts while targeting individual segments or customer types.
- Sales territories promote increased efficiency, improved targeting, and profitability by using representatives’ time better.
- Sales territories can be divided into four primary types: geographic, product, customer, and combination.
- Successful sales territory alignment involves careful planning, research, and execution.
- Maintaining sales territories requires monitoring customer needs to ensure reps have the necessary skills for each assigned area or segment.
Definition of Sales Territory
A sales territory is the geographic area or customer group your sales rep or sales team handles. It’s the area of a given market that a sales rep is responsible for. This can be based on geographic area, product type, customer segment, or industry.
Sales territories allow you to divide your resources strategically to focus on producing leads and closing deals in specific areas or with particular client demographics. Each sales territory has its own assigned sales representative or sales team, and sales territory planning ensures that resources are spread properly across your sales force. Sales territory management supports ongoing effective sales performance.
Benefits of Establishing a Sales Territory
Establishing a sales territory can be beneficial for both you and your customers. By strategically dividing resources and sales efforts through a sales territory plan, you can more effectively target your marketing efforts, close more deals, and increase profitability.
Customers benefit from having a dedicated representative who understands their needs and can provide tailored solutions. Proper use of sales territories is a win-win scenario for everyone involved.
Increased Efficiency
Sales territories increase the efficiency of your sales force. By assigning well-defined areas to individual sales reps or defined sales teams, you can ensure that resources are used appropriately and encourage reps to proactively target leads in their own sales territory. This way, reps have control over how they manage their time and budget more effectively.
They also ensure that representatives are properly equipped to address customer needs and provide tailored solutions in their assigned areas or segments. Representatives are not wasting time by traveling unnecessary distances or trying to understand the needs of all clients.
Improved Targeting
Having a clearly defined sales territory also allows you to segment customer profiles into different categories and target particular segments more effectively. This benefits your resources and customer needs by encouraging sales reps to better understand their audience.
As a result, representatives can be assigned specific campaigns or services tailored for customers in their assigned sales territory, giving them an advantage over generic mass-marketing efforts that do not produce desired lead conversions. Developing sales territories can also help your sales team understand their audience segments better and further improve targeting.
Increased Profitability
Sales territories are a great way for companies to increase their profitability by strategically dividing market areas or customer types. This provides an opportunity to maximize sales potential and return on investments while better serving customers. They help create more effective sales strategies, improve returns, and make better use of representatives’ time.
Types of Sales Territories
Sales territories can be divided into four primary types: geographic, product, customer, and combination. Learn more about them below.
Geographic
Geographic sales territories are the most common type. They break down geographical areas, such as cities, states, and regions, based on their respective needs and expectations. Such divisions allow representatives to focus solely on potential customers within those areas while understanding the cultural aspects that affect the customer decision-making process.
If sales reps must travel, geographic sales territories save both time and cost. The size of each sales territory can vary from a few blocks to an entire state.
Product
Product sales territories focus on the specific types of products or services offered within a market. Representatives in this type of sales territory are tasked with finding potential customers who may be interested in certain products and pricing. This helps you understand different customer needs so they can better match them up with their offerings and tailor marketing strategies.
This works well if you have a variety of products at different price points, or offer both B2C and B2B services. It is also useful if you have products that require salespeople to have a lot of technical knowledge specific to the good or service involved.
Customer
Customer sales territories focus on a specific customer segment or industry. This is particularly beneficial for B2B companies whose customers are complex but easily identifiable and segregated into categories according to their needs.
This type of sales territory enables reps to target potential leads while understanding the specific expectations of each customer segment. Customers may also be separated by size, such as small business versus enterprise.
Combination
Combination sales territories focus on both geographical areas and customer segments. This type of sales territory is ideal if you want to target specific regions and use different customer segments such as age, gender, or occupation. For example, a cosmetics company might create a sales territory in a specific state, then segment the population into women aged 20 to 35 to reach their target audience with relevant campaigns or services.
Again, your sales territory plan might include any of these or more than one, depending on your industry, products/services, and geographical focus. A company with a small geographic focus may not need geographical territories, while one focusing on a specific product might not need product territories.
Challenges With Sales Territories
Sales territories come with their own set of challenges as well. If you don’t engage in proper sales territory management, reps may find themselves overworked and unable to attend to customer needs in specific areas or segments. This can lead to frustrated customers who do not receive the necessary attention they need and go elsewhere.
Additionally, there is the potential for sales representatives to become distracted, especially if tasked with handling more than one sales territory at a time, resulting in missed opportunities and dropped leads. Territories need appropriate staffing levels to work well, and your sales team has to be able to work separately and coordinate.
Setting Up Territories
Setting up a successful sales territory plan requires careful planning, research, and execution. You must carefully evaluate customer needs and segment them according to your specific requirements for reps to accurately target potential leads in the given area or segment. Managers should also consider geographical distance and convenience for customers and sales representatives when divvying up territories.
Establishing proper sales territories also requires careful consideration to make sure reps have enough time for each assigned sales territory, and that the proper customer segments are targeted within those areas or segments. You must also be aware of any challenges associated with sales territories, such as a shortage of experienced staff on your sales team. Each sales rep must be assigned with their background, aptitudes, and experience in mind and provided with appropriate training.
Finally, you must understand your business to decide what you need in your sales territory plan. Sales territory planning is a complicated process that takes time but will pay off over time.
Maintaining Territories
Maintaining sales territories is a continuous process. You should continuously monitor customer needs and adjust their approach as needed to ensure your reps have the skills and know-how required for each assigned area or segment. You may also need to shift or realign territories if there is an influx of customers within a different geographical area or allot additional resources to help representatives attend to customer needs better.
An important part of sales territory management is understanding market trends, so sales reps and sales teams can proactively target leads before competitors do while taking advantage of the available resources.
It’s up to managers and supervisors to keep track of how successful reps are within given territories, hold meetings with sales teams regularly regarding changes or updates, and assign new tasks when necessary. This lets you keep up with sales territory management and sales data and continue to improve.
Wrapping Up
So what is a sales territory? It’s the geographical area or customer group assigned to a salesperson or sales team. It’s a key part of any organization’s success. By understanding what a sales territory is, how it works, and the advantages it provides for both companies and customers alike, you can effectively manage your resources and sales team to maximize conversion rates while better serving your clients.
Sales territory alignment involves careful planning and research to be successful. With regular monitoring of market trends, as well as assigning reps who have been properly trained in each given area, you will be sure to increase efficiency and profitability.
Gabriel Ramirez is a seasoned sales professional whose dedication to developing effective messaging has set him apart in the industry. His unique background as a father of four has given him a deep understanding of what motivates people and how to connect with them on a personal level to get a deal done. Gabriel also enjoys reading books on personal development and spending time with his family.