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The ultimate guide to sales territory planning: Strategies for success

Data-driven territory planning helps SaaS companies manage their markets efficiently and grow the business faster. Learn how to do both in this guide.
David Sukhraj
Planning
19 min
Table of contents
What is territory planning, and why does it matter?
Key steps in territory planning
How to implement your territory plan: A step-by-step guide
Challenges in territory planning
Best practices for effective territory planning
Chart your course to sales success with Drivetrain
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Summary

SaaS companies must divide their market into manageable sections to improve customer relationships, increase sales, and enhance market penetration. This guide details strategies for effective territory planning, including market analysis, territory division, and resource allocation. It also explains the importance of data and how to use analytics for sales territory planning.

Imagine being on a treasure hunt without a map. You're wandering around, hoping that you'll stumble upon something that gives you a clue to where your treasure is hidden. When the riches you seek is new customers, what you need is a detailed treasure map for your business. And you can get one with territory planning.  

Territory planning is about creating a strategy for your sales and marketing activities based on data that gives you insight into market potential. It helps you allocate resources based on specific geographic areas, industries, or customer segments.

Territories divide your market into manageable sections to maximize profitability. With effective territory planning, you can better manage customer relationships, increase sales, improve market penetration, and enhance customer satisfaction.

This guide explores territory planning strategies to help you meet and exceed your sales targets. We will look at the steps involved in creating an effective territory plan using the latest tools and best practices for data-driven decision-making.

What is territory planning, and why does it matter?

Sales territory planning divides the potential market, also known as the Total Addressable Market (TAM), into manageable segments. Generally, it’s based on geographic areas. However, you can also define territories based on verticals, account size, industry, product or service type, and customer segments. Ultimately, the right size for a sales territory is the size that can be effectively targeted and managed by your sales team. 

The primary goal of territory planning is to ensure that sales resources are allocated efficiently. It involves analyzing market data, identifying target customers, and making local adjustments to create a detailed plan to align sales efforts with business objectives.

Sales territory planning helps managers direct resources and its sales teams toward high-value customer segments and geographies. With effective territory planning, each salesperson will be able to dedicate more time and effort to nurturing relationships with significant profit potential. 

By aligning territories with business objectives and customer needs, businesses can maximize efficiency, increase revenue, and gain a competitive advantage in the market.

Benefits of sales territory planning

Every company needs territory planning depending on its growth stage. In the early days, when a company’s operations are relatively simple, direct interactions with the sales team helps with small-scale planning. 

However, as the company begins to grow, it becomes important to focus on expanding the customer base and covering more markets. The sales operations become more complex. To achieve the desired growth, sales leaders will have to start allocating more resources to manage customer relationships in order to prevent overlap of efforts while ensuring potential markets are adequately addressed. 

Effective territory planning offers the following benefits:

  1. Increased sales efficiency: Well-defined territories allow sales reps to focus on building customer relationships, increasing productivity, and enhancing efficiency.
  2. Enhanced customer satisfaction: By targeting the right accounts with the right sales resources, you can provide more personalized service. This helps build stronger relationships, leading to higher customer satisfaction and loyalty.
  3. Higher sales performance: Territory planning helps you identify underperforming territories. You can take corrective measures such as better performance tracking, goal setting, and accountability.
  4. Maximized market coverage: With clear boundaries set for each territory, businesses can ensure that all potential markets are effectively covered. This ensures that no opportunities are left unexplored.
  5. Improved data-driven decision-making: With the use of technology, territory planning can be done based on market data and analytics to make more informed decisions.

What are the critical objectives in territory planning?

Territory planning is a twofold process focused on:

  1. Targeting the right accounts by focusing on the most valuable and relevant accounts. Data helps identify profitable customer segments, and analytics is useful for meeting their needs.
  2. Matching the right people to the right customer segments. You must consider the skills, experience, and capacity of your sales reps.

A targeted approach helps you concentrate on the most promising territories to drive higher revenue and ensure sustainable growth. The key factors you must consider include:

  • Team strengths: Assess your sales team's strengths and skills in various capacities, from relationship building to closing deals. Plan to strategically align each seller’s unique skills within specific territories. The team member chosen to manage a given territory should be the one best suited for that particular territory. 
  • Territory division: Dividing territories involves segmenting regions based on criteria such as geographic boundaries, industry verticals, or customer size. Clear division ensures appropriate resource allocations, prevents overlooking potential markets, and results in comprehensive market coverage.
  • Current customers: Analyzing your existing customer base provides insights into where your products or services are already well-received. Understanding customer distribution across territories helps you identify patterns and potential focus areas. Use the insights to make informed decisions about resource allocation, and prioritize efforts to retain and expand relationships with current customers.
  • Outbound efforts: Monitor the effectiveness of your outbound efforts, such as cold calls, emails, and marketing campaigns. Evaluate the response rates of these efforts within different territories. This will help you understand where your strategies are working and where adjustments are needed. This data-driven approach ensures that your sales team targets the most responsive and lucrative markets, enhancing overall sales performance.

In addition to the factors above, the importance of effective quota management cannot be understated. Quota management is inextricably linked to territory planning – the TAM must be sizable and substantial enough to ensure that sales territories offer all sellers a fair chance of meeting and exceeding their quotas.

Consider using a quota management tool to ensure an equitable distribution. This will drive higher performance, with all sales reps performing to their maximum potential. 

Balancing the opportunity across all territories ensures each contributes to business growth. Therefore, your territory planning for sales reps must be based on careful analysis and strategic segmentation. 

Territory can be based on factors such as employee headcount, revenue, customer size, or geographical boundaries. For instance, territories can be divided based on geographical regions to make travel and customer visits cost-effective. Alternatively, if segmentation is based on industry verticals, reps can concentrate on sectors where they have expertise and established relationships.

Key steps in territory planning

Effective sales territory planning is an ongoing process that requires strategic planning and continuous assessment. Following a structured process creates a clear roadmap for your team. Laying out their responsibilities helps them contribute to the company’s growth. 

Here are the key steps to follow for effective territory planning:

1. Analyzing your market

Thoroughly understand your customer base and market potential. Identify and analyze your current customers to gather insights into their buying behaviors, preferences, and needs. This analysis will help you segment your customers effectively, allowing you to tailor your strategies to different customer segments for better results.

You must segment the market in ways that align with your business goals and resources. Market segmentation can be based on:

  • Geography: Create geographical territories based on physical boundaries such as countries, states, or cities. It helps manage customers locally, reduces travel costs, and makes logistics more efficient. Reps from the region can focus on building stronger relationships through effective customer interactions, resulting in higher sales conversions.‍
  • Industry: Segment the market by industry verticals to allow sales reps to specialize in sectors. By understanding industry-specific needs and trends, sales teams can tailor their solutions. It helps establish stronger customer relationships and achieve higher sales efficiency.‍
  • Customer type: Divide the market by the customer type, such as large enterprises, small and medium-sized businesses (SMBs), or early-stage startups. You can tailor approaches and resources to suit their scales of operation, ensuring each customer segment receives the appropriate level of attention and is profitable.

Understanding market size metrics

The market size metrics model helps you understand the revenue potential of your market. The metrics help you make informed decisions about market segmentation and resource allocation.

According to the model:

  • Total Addressable Market (TAM) represents the total revenue potential of your product or service within a given market. It represents the maximum opportunity if you were to capture 100% of the market share.
  • Serviceable Available Market (SAM) is the portion of TAM your company can realistically serve through its distribution channels, resources, and capabilities. It helps set more achievable goals and focus efforts where they can be most effective.
  • Serviceable Obtainable Market (SOM) is the portion of SAM that your company can realistically capture within a given period. It considers factors such as competition, brand strength, market trends, and barriers to entry. SOM allows you to set realistic sales targets and devise practical strategies.

2. Defining territories

Based on the market analysis, create territories that align with your business goals and resources. 

Here are some critical criteria to consider:

  • Market potential: Assess each territory's potential revenue and customer base to ensure a fair distribution of opportunities.
  • Customer distribution: Evaluate the geographical spread and density of your existing and potential customers.
  • Competition: Analyze the competition within each territory to understand the level of market saturation and potential challenges.
  • Sales team expertise: Align territories with each sales rep's industry knowledge, language proficiency, and existing relationships.
  • Workload balance: Prevent employee burnout by distributing the workload after considering the number of accounts, expected travel time, and the complexity of customer needs.
  • Growth potential: Focus more on territories with high growth potential by identifying emerging markets, economic trends, brand presence, and product-market fit.

Tools and technologies for territory analysis

Tools powered by advanced technologies significantly enhance your territory mapping efforts. Here are some of the most effective ones:

  • Geographic Information Systems (GIS) tools like ArcGIS and MapInfo allow you to visualize and analyze geographical data. They help plot customer locations, identify regional trends, and optimize routes.
  • Customer Relationship Management (CRM) Software like Salesforce and HubSpot offer built-in territory management features. They help track customer interactions, manage leads, and analyze sales performance by territory.
  • Sales Performance Management (SPM) tools like Xactly provide insights into sales metrics and compensation plans. They help set realistic quotas and monitor sales rep performance across different territories.
  • Data analytics platforms like Tableau and Power BI analyze large datasets and generate actionable insights. They help identify market trends, customer segments, and performance gaps.
  • Mobile and field sales applications like Geoointe and Badger Maps are designed for field sales teams. They offer route optimization, real-time data updates, and offline access to critical information.
  • Machine Learning (ML) algorithms help identify trends and conduct predictive analytics for territory planning. They help forecast sales trends, identify high-potential areas, and optimize resource allocation.
  • Revenue forecasting tools help sales managers create more reliable sales forecasts by identifying key drivers and bottlenecks in the  pipeline. They also help to evaluate the impacts of different strategies for optimizing revenue generation, costs, and profit.

3. Assigning sales resources

The success of your sales territory plan depends on how you match your sales reps to their respective territories. When assigning territories, consider aligning reps with industries or areas where they have demonstrated expertise. 

You must also consider the experience level of your sellers. More experienced reps might be better suited for high-potential or highly competitive territories that require advanced sales strategies and relationship-building skills. Conversely, new reps with less experience will need time to ramp up. They can do that faster to the extent you can match them with smaller or less challenging territories, which will build their skills and confidence.

Evaluate each territory's workload to match it against the capacity of your sales reps. Avoid overloading them with too many accounts or geographically dispersed customers, which can lead to burnout and lower performance. 

Use revenue planning software to allocate a manageable number of accounts and realistic targets. Doing so will allow you to visualize and adjust territories to ensure fair workloads across the team. And of course, soliciting feedback from your sales reps about their workloads and challenges will go a long way to creating a more efficient and productive sales force.

4. Setting goals and objectives

Establish specific, measurable, achievable, relevant, and time-bound (SMART) goals across all territories. Align territory objectives with your broader business goals, such as revenue growth, market expansion, or customer acquisition targets. This helps to ensure alignment of your sales teams and reinforces the company's strategic direction across all territories.

To be effective, territory planning must be based on data, not opinion. However, it still involves a degree of uncertainty. While data provides insights critical to the planning process, it’s simply not possible to know all the potential variables that could impact sales in a given territory. Given this, you may need to rework the sales territory plans when specific verticals do not perform as expected. 

This said, a proactive, data-driven approach enables you to more easily overcome  unexpected challenges and take advantage of emergent opportunities that align with your business goals. 

After you implement your territory plan, monitor its effectiveness on a continual basis so you remain attentive to market changes, and can adjust your plans as needed.

How to implement your territory plan: A step-by-step guide

Implementing a new territory plan can be challenging. Here are the critical steps for sales territory planning:

1. Prepare your team

Change can bring uncertainty, so you must address your team's concerns. Communicate the reasons behind the new territory plan and how it will help achieve the company's broader objectives. Address any worries your sales reps may have and provide support for an easy transition.

Explain how data is helping drive decisions and how the sales territory plans will be monitored. Make sure your team knows the plan is flexible, and that you will make any  necessary adjustments to meet goals. This will help ease anxiety and demonstrate your company's commitment to each team member’s success.

2. Execute the plan

Monitor progress by setting up regular checkpoints to evaluate the plan's performance against established KPIs. Conduct weekly or monthly reviews of sales metrics, customer feedback, and market trends. Collect feedback from sales reps to identify any immediate concerns, roadblocks, or opportunities that arise. You must remain flexible to reallocate resources or reconfigure territories if you find a particular territory is underperforming. Taking an iterative approach in the implementation of your territory plan helps fine-tune its inherent  strategy to ensure its continued alignment with the overall business goals.

3. Monitor progress

Track the performance of your sales territories across each stage of the pipeline. The insights into the health of your sales strategy help evaluate the effectiveness of your territory plans. You can track performance using the following funnel perspectives:

Marketing funnel performance

The marketing funnel includes all efforts to create awareness and interest in your products or services. 

You can measure the marketing funnel’s performance through:

  • Brand awareness: Measure website traffic, social media reach, and impressions.
  • Campaign effectiveness: Track key performance indicators (KPIs) such as conversion rates, click-through rates, and return on investment (ROI).
  • Lead attribution: Identify which channels contribute most and result in lead conversion.

Inbound funnel performance

The inbound process focuses on attracting potential customers through content marketing, SEO, social media, and paid advertising. 

You can evaluate the performance of your inbound funnel through:

  • Lead generation metrics: Monitor leads generated through organic and paid channels. Assess the quality of these leads by measuring conversion rates.
  • Engagement metrics: Track how engaged your leads are with your content, such as blog views, email open rates, and social media interactions.
  • Lead nurturing: Measure the effectiveness of your campaigns by tracking the progression of leads into qualified opportunities.

Sales funnel performance

The sales funnel involves direct interactions with potential customers. 

Key metrics you can track in a sales funnel are:

  • Lead qualification: Track the percentage of leads that qualify as either marketing qualified leads (MQLs) or sales qualified leads (SQLs) based on how your pipeline is structured. 
  • Opportunity management: Monitor your pipeline coverage ratio and the movement of opportunities through the sales stages. This will help you identify any bottlenecks to make improvements.
  • Close rates: Measure the success rate of closing deals and how quickly you close them (your sales velocity). Compare it across territories and sales reps to identify high-performing areas and individuals.

Challenges in territory planning

Even with a well-planned strategy, there can be challenges in territory planning. Here are some common obstacles you might encounter:

  • Mismatched sales rep and territory: Each territory has unique characteristics, such as customer demographics, purchasing behavior, and market trends. If a sales rep is uncomfortable working in a particular territory, it will negatively impact productivity.
  • Unbalanced territories: Differences in territory quality arise from geography, the size and number of accounts, and market growth rates. Unequal workloads or unequal distribution of high-value accounts can lead to conflict among sales reps.
  • Underestimation of market complexity: Misjudging a market can lead to inadequate territory design and missed sales opportunities. Local expertise is needed to understand the numerous factors, including competition, customer preferences, and regional economic conditions.
  • Inaccurate data leading to poor territory design: Inaccurate or outdated data can compromise territory plans, resulting in inefficient resource allocation and poor sales performance.
  • Resistance in your sales team: If your sales team feels uncertain or threatened by new territory plans, you may face resistance. Inadequate communication, training, and resources make the transition tougher.
  • Ongoing territory management and adjustment: Effective territory management is an ongoing process. You need an agile framework that rapidly responds to market changes and tools that enable real-time territory management.

Best practices for effective territory planning

Data-centric strategies can address most of the challenges described above. CRM systems and data analytics tools are useful for resource allocation and optimal sales performance. 

Market research helps pinpoint new market segments, emerging trends, and untapped regions. Tailoring the approach to each customer segment leads to higher conversion rates and customer satisfaction. 

Evaluate historical sales data to identify common characteristics among your most profitable customers, such as industry, company size, and purchasing patterns. Regularly refine your ICP based on fresh data to ensure your sales efforts focus on high-potential prospects.

Chart your course to sales success with Drivetrain

Data related to various attributes such as industry, company size, revenue, and geographic location helps organize your territory planning. Tools like Drivetrain allow you to view performance metrics in ways that best suit your business needs.

Drivetrain centralizes all critical information, providing you with a single source of truth. It helps maintain transparency across your sales teams and speeds up decision-making. The easy integration with CRM enables you to pull real-time data for any territory. Drivetrain's variations for data availability and visibility make tracking performance and adjusting strategy easier.

See how Drivetrain can help you achieve your sales goals. Contact us for a demo.

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