Establishing Sales Territories
Apr 1, 1998 12:00 PM,
Race horses project a rare combination of power and grace. The mostvaluable ones have agility and speed-they’re the runners that win thetrophies. Good sales representatives are like winning horses-they’re inshort supply, and the ones who know the systems integration industry arerarer. They have a rare ability to accept and absorb rejection withouttaking it personally. They have an uncommon gift for communication, knowingwhat to say and when to say it.
Outstanding salespeople differ in at least one way from winninghorses-winning salespeople choose their employers. To attract salespeople,you have to create the right environment, a company that meets their needsand allows them to prosper. If you fail to provide the right workingenvironment, they will leave for the greener pastures of another firm,maybe even a competitor. Although compensation is important, there is moreto maintaining a winning sales team than providing the opportunity to makea good living.
The most important step to building the right stable and attracting thebest sales talent is to create concrete territories. Company owners succumbto a number of myths regarding territories, including, the belief thatterritories make salespeople inefficient and lazy; if we keep our networkwide open, everybody will be motivated to pursue every prospect.
There are several problems with this myth, including loss of accountability(if an account is lost, no one is held responsible). Also, non-cooperationamong sales reps is a possible result. There was a one-year period in myformer company where we had two groups of sales reps calling on the sametarget market. The animosity created between the warring groups ofsalespeople was counter-productive. Some staff actually locked their deskdrawers, the result of paranoia that other reps would steal their leads.Defining territories facilitates cooperation and creates a collaborativeenvironment that improves productivity and enhances sales. Lastly,animosity among prospects may occur. Without territories, all of your repswill call on the same most promising prospects, creating distrust andanimosity among potential clients.
Another misconception involves the belief that if a sales rep has anoutstanding month, then assign new prospects and hot leads to those whofell behind in their quotas, a process often referred to as plannedearnings. If one of your racehorses wins too many races, you’ll limit hisopportunity to win in the future and put your money behind a horse thatisn’t doing well.
Another myth involves the mentality that a business is too small forterritories, and a market is so big that sales reps will never cross paths.This line of reasoning assumes a firm will never grow. When we had fivepeople in the entire company, I never imagined we’d grow to a staff of 180.Your best people will go after the best prizes, and their paths will cross.
Territories are important. They provide accountability, promoteentrepreneurial spirit and reduce turnover. Competition eats away at youraccounts, and internal competition creates a hostile corporate environment.
If you are trying to establish territories for the first time, you willexperience two conflicting issues-the ease of administration of territoriesand the difficulty of making the change. Whether you are creatingterritories geographically or by industry SIC code, the successfulestablishment of territories follows several rules. Each territory mustcontain enough business prospects to allow a sales rep to earn a goodliving. Moreover, in any territory plan, the overriding rule to protect arep’s secured area is to make them responsible for any development withintheir defined territory.
What do you do when a rep from another territory has an existingrelationship with a decision-maker or architect associated with a projectin another rep’s assigned territory?Maintain your territory plan, andsuggest that the two reps work together on projects, splitting or sharingthe commission. It’s not a management mandate, but merely a suggestion.Most reps will prefer this route because they’ll know that working witheach other (and splitting commissions) is a two-way street. This informalpolicy builds cooperation among the reps and maintains the objectives ofyour territory plan-to assign responsibility and accountability.
In developing a territory plan, the primary goal is to maximize sales andpush accountability down to the sales rep’s level. For many companies,using geography is the easiest way to implement a successful plan. Theideal geography-based plan should comply with a couple of conditions. Thegeographical area should be contiguous to make it easier for the rep tocover, translating into less travel time and more time with prospects andclients. If possible, reps should live in their assigned territories.Although not an absolute requirement, it makes sense. The more familiarthey are with their territory, the better they will know it, and the betterthe results. A territory plan based upon a specific industry is implementedwhen the requirements of an industry are so specialized that it makes senseto have one rep assigned to the niche on a full-time basis. An example isthe federal government, which has unique purchasing needs and requiresspecialized sales skills.
A company with multiple sites may be assigned as a territory to a specificsales rep. This makes sense when the account has multiple sites; decisionsare centralized, and the client is willing to enter a buying agreement forfuture purchases.
Outside of the sales compensation plan, the creation of secured territories(islands of responsibility, accountability and ownership) is the mostimportant step to attracting (and keeping) the best sales talent.Territories are a first step; there are other sales management methods thatneed to be applied to create an efficient, highly-desirable salesenvironment. These will be discussed in a future issue of S&VC.