Sales Territory Alignment: Grow Sales Without Adding Resources

By David Klein, 5 March 2003

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For many companies, the sales force is one of their most expensive human resource investments, with sales calls costing upwards of several hundred dollars. Companies have turned to Sales Force Automation (SFA) systems, Customer Relationship Management (CRM) systems, enhanced sales training and account management programs to gain more productivity from their sales force. While each of these initiatives has merit, many companies have found that a sales territory alignment initiative can increase productivity and sales at a relatively low cost.

Sales territories, by nature, are geographic in nature. When they are out of balance, some areas with high potential customers may be underserved while other areas are saturated. Too much effort may be expended against low potential customers. Sales and service people spend too much “windshield time” driving from sales call to sales call and don’t spend enough time seeing and listening to customers.

The result of these inefficiencies is that companies not only often leave millions of dollars on the table, they suffer from low morale and high turnover among sales people.

The Benefits of Sales Territory Alignment
Aligning sales territories is an important initiative and can lead to many benefits for a business. Good territory alignment will increase revenue and customer coverage, reduce travel time and associated costs, provide a competitive advantage, and foster equity and morale among sales people.

• Increased sales and customer coverage — When territories are properly aligned, issues of under- and over-capacity are reduced or eliminated. Each territory is created allowing the sales person to reach and spend time with the greatest number of high potential customers, thus increasing sales.
• Reduced travel time and associated expenses — Due to the geographic nature of sales territories, better alignment means less travel time to reach customers. Less time spent in the car means more time spent with customers, thus more time for selling. Other associated expenses such as fuel and automobile costs are reduced as well.
• Competitive advantage — This benefit of sales territory alignment is often overlooked. However, if you have better coverage in your territories, you can reach new opportunities faster than your competitors, again leading to increased sales.
• Equity and morale — Nothing can be more discouraging to a sales person than to see an associate milking a highly profitable territory while they’re stuck servicing an area with low potential. Properly aligned territories provide a more equitable distribution of accounts, level the playing field in terms of achieving rewards, and boost morale among sales people. In addition, sales people stay longer, thus lowering the costs associated with new hiring.

When to Align Sales Territories
Many companies conduct a yearly review of sales territories. The year’s performance may or may not lead to a change in the shape or makeup of the sales territories. However, a number of situations should compel you to embark on a sales territory alignment initiative, including:

• If your sales territories are based on historical data rather than potential for sales.
• If you have a new or changed sales team due to acquisition, merger, partnering or restructuring.
• If your company is launching a major strategic initiative and sales staffing is not matched to it.
• If your sales team has experienced significant changes over a short period of time.

Each of these situations is ripe with the potential for decreased productivity, missed customer opportunity, and confusion and competition among sales people. Sales territory alignment can help rectify all these situations.

How to Align Sales Territories
There are many software packages available to help you align territories. Some are simple and may lack the functionality required to align multi-tiered territories and account for complex relationships. Others can be sophisticated, expensive and non-intuitive. You may want to engage a firm with expertise in sales territory alignment that can advise on the territory alignment process and provide software and analysis services.

Most successful sales territory alignment initiatives follow a proven process similar to this:

• Analyze current territories, sales force composition, compensation plans, target markets, customer locations and market penetration.
• Assess existing territories to find underserved or saturated areas based on the number of customers and prospects in each territory, and analyze how easily they can be reached by your sales force.
• Determine the number of territories needed based on your criteria for realignment. Criteria can include equitable distribution of leads or workload, account assignment, number of sales people, travel time, location of distributors, and other variables relevant to your business.
• Rank and align territories, optimizing them at multiple levels. For example, territories that roll up into districts, districts into regions, and so on.

In addition, once territories are aligned, you will want to roll out the new territories to your sales force by providing detailed territory maps, either printed or online through your intranet. The maps can include the boundaries of territories, customer and prospect locations, market penetration levels and areas of high potential. Now you’ve given your sales force a much higher probability of success.

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Empower Geographics provides software, data and services to help businesses solve problems where location is key. www.empower.com.

David Klein is a marketing consultant to Empower Geographics. dklein@empower.com.

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