Sales territories are groups of accounts that share certain similarities, allowing sales teams to specialize. This specialization can lead to a more repeatable and efficient sales process. Historically, geography often defined sales territories because sales were conducted in person. However, as digital sales gain prominence, the approach to defining sales territories is evolving. Understanding and effectively managing sales capacity is crucial to driving organizational growth and achieving sales goals.
This blog will explore why sales territories are necessary, different types of territories, and steps to create them, enriched with real-world examples and expert insights.
What is a Sales Territory?
A sales territory is a defined market segment for which a salesperson or a sales team is responsible. In simple terms, territories divide your target market into smaller segments that reps can better manage. For example, back in the day, one person would be assigned to the top half of the west coast of the USA while another would be manning the bottom half.
The territories you define can be based on various parameters like location, company size, industry, product line, channel partners, etc. This can also be useful when working on account-based marketing campaigns.
For example:
● A software company selling to SMBs across the US can split the country into Northeast, Midwest, South, and West sales territories. Reps based in each territory will handle that area.
● An enterprise software company may divide its market by industry verticals. One rep handles all education/non-profit accounts; another handles healthcare accounts, and so on.
The primary goal is to create manageable sections that allow sales teams to focus their efforts and resources effectively. These territories can be defined by geography, industry, customer type, product type, or a combination of these factors.
That said, geography doesn’t matter as much in digital sales as it used to. If you are selling a service performed by people like a circus or even heavy machinery, geography will play a role since you might wish to go and pitch your product. The same applies to an expensive product or service. However, geography won't matter much if a software or course can be sold, bought, used, and serviced anywhere.
We'll explore different types of sales territories later in this guide.
But why do we need sales territories?
Implementing sales territories provides immense strategic value for SaaS organizations. Well-defined territories lead to optimal sales coverage, increased efficiency, and higher productivity.
Let’s understand why sales territories are essential for everyone involved in the transaction:
1. Customer Perspective
From the customer’s perspective, sales territories ensure they receive in-person service from sales representatives knowledgeable about specific, specialized products. Customers benefit from having a dedicated point of contact who understands their unique needs and can provide tailored solutions. Studies show that personalized service in sales territories can improve customer satisfaction by up to 20%.
2. Company Perspective
From the company’s perspective, sales territories help build competence within specific product categories or markets, leading to better predictability and coverage. This structured approach allows companies to allocate resources efficiently, track performance accurately, and adapt to market changes swiftly. Sales capacity planning involves predicting future hiring needs and balancing recruitment, ramp-up times, and churn. Effective territory planning can enhance overall sales team efficiency by 40%.
3. Salesperson Perspective
Clearly defined territories mean less overlap and conflict for salespeople, leading to higher motivation and productivity. Sales territories also provide a clear framework for sales compensation and career development. A well-designed sales territory plan can boost salesperson productivity by up to 25%.
Additional considerations in sales territory planning
- Frequency of Territory Updates
Regular updates to sales territories are essential to reflect changes in the market and business priorities. Market conditions, customer needs, and competitive landscapes can evolve, necessitating adjustments to sales territories. For example, if a company expands into new geographic regions or introduces new products, it may need to reallocate resources and adjust territories accordingly.
Finding the right balance between stability and flexibility is crucial. Frequent changes can disrupt sales activities and impact performance, while infrequent updates may lead to missed opportunities and inefficiencies. According to Spotio, updating territories quarterly can help maintain alignment with market dynamics and maximize sales effectiveness.
- Impact on Compensation Structures
The design of sales territories can significantly impact sales compensation structures. Transparent and fair compensation plans motivate sales teams and align their efforts with company goals. Changes to territories can affect how sales representatives are compensated, potentially leading to adjustments in commission structures, bonuses, and performance metrics.
Ensuring that compensation plans remain competitive and attractive, even as territories evolve, is essential. Companies should regularly review and adjust compensation structures to reflect territory changes and maintain alignment with overall business objectives. Data from Xactly indicates that aligning compensation with territory performance can lead to a 15% increase in sales results.
- Trade-offs in Territory Planning
Every approach to sales territory planning involves trade-offs. Static territories offer stability but may lack flexibility, while dynamic territories provide adaptability but can be complex to manage. Companies must evaluate their specific needs, market conditions, and business objectives to determine the best approach for their sales teams.
Trade-offs include balancing the need for specialized expertise with the desire for a more flexible and responsive sales strategy. Companies should consider each approach's potential benefits and drawbacks and make informed decisions based on their unique circumstances.
Types of Sales Territories for SaaS Companies
Sales territories for SaaS companies can be defined in multiple ways depending on the nature of your business, products, and buyers.
Let’s explore the most common SaaS sales territory structures with real-world examples:
1. Geographical Territories
Geographical territories have been a traditional approach where sales regions are defined based on physical locations. This method is still relevant for physical and high-value digital products requiring face-to-face interaction. For instance, a company selling agricultural equipment may divide its territories based on states or regions, ensuring sales representatives can visit farms and build strong relationships with farmers. Similarly, pharmaceutical companies often define territories based on healthcare regions, allowing sales reps to develop in-depth knowledge of local healthcare providers and regulations. A study by HubSpot shows that geographical territories can help reduce travel costs by 20%.
Geographical territories also offer several advantages. They simplify logistics, reduce travel costs, and provide a more focused approach to local marketing efforts. However, they can also present challenges, such as unequal distribution of potential customers or varying market potential across regions. Companies must regularly analyze market data and adjust territories to address these issues.One notable example is Amazon Web Services (AWS), which might sell to various sectors with differing needs. By defining sales territories based on industry, AWS can provide specialized services and solutions tailored to each sector's unique requirements.
2. Industry-Based Territories
Industry-based territories focus on sectors such as government, airlines, and telecom. This approach requires a deep understanding of industry-specific use cases and relationships. Sales teams become experts in the needs and challenges of their assigned industries, enabling them to offer highly relevant solutions. For example, a technology company might have dedicated sales teams for the healthcare, finance, and education sectors, each with tailored messaging and product offerings. Spotio highlights that industry-based territories can lead to a 25% increase in conversion rates due to specialized knowledge.Industry-based territories allow for a more targeted approach to sales. Sales representatives can speak the language of their industry, understand regulatory requirements, and build strong relationships with key stakeholders. This expertise can lead to higher conversion rates and increased customer loyalty. However, significant investment in training and development is required to ensure that sales teams are well-versed in industry-specific knowledge.
3. Customer Type Territories
Defining territories based on customer types involves segmenting the market by customer size, purchase behavior, or lifecycle stage. This method allows sales teams to tailor their strategies to the unique requirements of different customer segments, whether small businesses, large enterprises, or key accounts. For instance, a software company might assign sales teams to small, mid-sized, and large enterprises, each with distinct needs and buying processes. Small businesses require more straightforward solutions and cost-effective pricing, while large enterprises may need customized solutions and dedicated support.Customer-type territories enable sales teams to specialize in addressing each segment's unique challenges and opportunities. This specialization can improve the relevance of sales pitches, enhance customer satisfaction, and drive better results. However, it also requires careful segmentation and may lead to a more complex management structure.
4. Product Type Territories
Product-type territories assign sales teams to specific product lines or services. This approach is efficient for companies with diverse product portfolios. Sales teams can develop deep expertise in their assigned products, providing better support and driving higher sales. For example, a company that sells various types of industrial machinery might have separate sales teams for each product line, such as forklifts, cranes, and conveyor systems.
Product-type territories allow for a focused approach to product management and sales. Sales representatives can become experts in their assigned products, better understand customer needs, and offer more specialized solutions. However, this approach may require additional resources and coordination to ensure that sales efforts are aligned with overall business goals and that customers receive comprehensive support across product lines.
5. New Business vs Renewals Territories
An account can also be divided between new business reps focused on landing net new customers and renewal reps who manage ongoing subscription revenue.
New business requires more outbound prospecting while renewals need customer success skills. Separate territories prevent mixed focus.
6. Channel Sales Territories
If part of your sales goes through reseller partners, you can have dedicated partner account managers aligned to them.
For example, having an APAC channel partners territory manager who handles all partnerships in that region and works to grow revenue.
7. Named Accounts Territories
Larger SaaS firms often assign strategic accounts like Fortune 500 companies to specific reps who can customize solutions for them.
These named account territories get all the sales and marketing resources required to land massive deals.
As you can see, SaaS sales leaders have many options to define territories based on their unique situation and customer landscape.
How to Create an Effective Sales Territory Plan
Creating an optimal sales territory plan is crucial yet complex. There are many factors to consider and steps involved.
Let's go through a comprehensive, step-by-step process for designing a sales territory plan that drives growth:
Step 1: Define Your Objectives
Start by clearly defining the objectives of your sales territory plan. Are you looking to increase market coverage, improve customer satisfaction, or boost sales in a particular segment? Understanding your goals will guide the entire process.
Step 2: Analyze Market Data
Conduct a thorough analysis of your market data. This includes identifying potential customers, understanding market trends, and assessing the competition. Use data analytics tools to segment your market based on relevant criteria such as geography, industry, or customer type.
Step 3: Segment Your Market
Based on your market analysis, segment your market into manageable sections. Ensure each segment is large enough to justify dedicated resources but small enough to allow personalized attention. This segmentation will form the basis of your sales territories.
Step 4: Assign Sales Teams
Assign your sales teams to the defined territories. Consider factors such as team expertise, experience, and workload. Ensure each team has the necessary resources and training to succeed in their assigned territories.
Step 5: Set Goals and Metrics
Establish clear goals and metrics for each territory. These should align with your overall business objectives and provide a basis for performance evaluation. Regularly review and adjust these goals to reflect changes in the market and business priorities.
Step 6: Implement and Monitor
Implement your sales territory plan and continuously monitor its performance. Use CRM systems and other sales tools to track progress, identify issues, and make data-driven adjustments. Regular feedback from sales teams is crucial to refine and optimize your territories.
Remember to make iterative changes when it comes to sales territories to allow your sales reps time to adjust. You do not want to make knee-jerk changes that disrupt the working processes your sales teams follow.
Static vs. Dynamic Sales Territories
- Static Sales Territories
Static territories consist of a fixed set of accounts for a specified period. This approach provides stability and allows sales teams to build long-term customer relationships. However, it may need to be more responsive to market changes and evolving customer needs.
- Dynamic Sales Territories
Dynamic territories adjust based on market changes, customer intent, and sales performance. This approach is more flexible and can respond quickly to new opportunities or challenges. Companies like 6sense are known for their dynamic sales territories, constantly using advanced analytics to optimize territory assignments.
Detailed Real-world Examples and Case Studies
- AWS's Industry-Based Territories
Amazon Web Services (AWS) is a prime example of a company that uses industry-based sales territories. AWS segments its sales teams based on various industries, including healthcare, finance, and government. This approach allows AWS to tailor its solutions and sales strategies to each sector's needs and regulatory requirements.
By focusing on industry-specific sales territories, AWS can leverage its expertise and build strong relationships with key stakeholders in each sector. This specialization enhances AWS's ability to address complex industry challenges and drive successful customer outcomes.
- Salesforce's Dynamic Approach
Salesforce employs a dynamic approach to sales territory planning, using advanced analytics to optimize territory assignments. The company monitors market conditions, customer intent, and sales performance to adjust its territories in real-time.
Salesforce's dynamic approach allows it to respond quickly to market changes and seize new opportunities. By leveraging data and analytics, Salesforce can ensure that its sales teams are always focused on the most promising prospects and regions.
- 6sense's Use of Advanced Analytics
6sense is known for its innovative use of advanced analytics in sales territory planning. The company uses data-driven insights to define and adjust sales territories, enabling its teams to focus on high-potential opportunities and optimize their efforts.
6sense's approach highlights the importance of leveraging data and analytics to drive effective sales territory planning. Using advanced tools and techniques, 6sense can continuously refine its territories and achieve better results.
How Factors Helps Optimize Territories
Factors is an AI-powered Account intelligence & analytics platform that can help maximize the potential of sales territories:
1. Enriches Anonymous Traffic
Factors enriches anonymous website visitors and ad impressions with company data—revealing the company name, industry, location, and other attributes you can use to map accounts to matching sales territories.
2. Automatically Assigns Accounts to Territories
Once Factors discovers the right data, like the location, industry, account size, etc, it automatically assigns the accounts to the right reps based on the territory definitions in your CRM. You no longer have to manually assign a rep every time there’s a new lead in the system.
3. Alerts Reps About Territory Accounts
Factors helps you automatically alert users when there are new accounts identified. You can set up Factors to automatically message users on Slack informing them about the new account.
The best part is, Factors continuously monitors your website and other connect platforms for new leads. Your reps are alerted as soon as a new lead hits Factors (in real-time) so they can act upon the leads while they’re hot.
4. Provides 360-Degree Territory Account View
Factors unifies cross-channel account data to provide a 360-degree view of territory accounts—including web activity, ad impressions, intent data, CRM interactions etc.
5. Enables Data-Driven Territory Optimization
It analyzes territory performance across metrics like engagement, pipeline velocity, and more. This allows data-driven planning and optimization of territories.
With Factors, you can leverage previously untapped anonymous interactions to drive more territory leads. Continuous optimization of territories also becomes easier based on hard data vs guesswork.
Key Takeaways
- Sales territories optimize market coverage, sales efficiency, and account management for your team. Ways to define territories include geographic, industry, size, products, or channels.
- Steps for creating a territory plan include choosing territory types, mapping target accounts, estimating potential, setting goals, assigning territories, configuring lead routing, and tracking performance.
- When assigning territories, take rep strengths into account, involve reps in planning, make data-driven decisions, and limit frequent realignments.
- Specialized software provides visibility into sales territories and makes territory management efficient.
- Factors enriches anonymous traffic to assign accounts to territories. It also unifies data across channels for continuous optimization.
- Well-planned sales territories ensure your reps have reasonable workloads and can nurture the right accounts. Combined with the right technology, sales territories provide immense leverage to scale revenue growth.
Map Your Path to Sales Success with Sales Territories
Territories allow reps to go “all-in” on targeted accounts instead of spreading themselves thin. This results in higher win rates and accelerated revenue growth.
But territory success depends on getting the fundamentals right.
Choose appropriate territory characteristics based on your business model, products, and customers. Involve reps in co-creating territory plans that align with their strengths. Set up your CRM to automatically route inbound leads to the right reps. And continuously track and optimize territories based on hard data.
Factors plays a critical role here. It enriches anonymous website traffic to identify and assign accounts to matching sales territories automatically. Cross-channel analytics further fuel data-driven territory optimization.
With Factors, you can leverage previously untapped traffic to generate more territory leads on auto-pilot. It connects the dots across customer touchpoints to uncover revenue opportunities hidden within your data.
So if you're struggling with sub-optimal territory planning, take control of your revenue engine. Book a customized Factors demo today to see how it can help optimize your sales territories.
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