Revenue Operations

Territory Planning: Strategies & Tactics

Territory planning has a special place in my heart because it was the first significant project I took on after accepting my first operations position. I was fortunate to have an excellent mentor, a known prospect population, and stable market conditions.


Since then, I’ve managed territory planning for organizations that had fluid use cases and target audiences. Niche applications while a product was being developed also presented some interesting challenges.


Much like compensation planning, territory planning must align with strategic objectives above all else. This article will cover why companies split territories by different attributes and how to design territories.

The Strategy

Introducing territories to an organization is tricky. If not adequately thought through, people may not be able to make a patch productive through no fault of their own, and your company runs the risk of losing talented employees.


Done well, territories can help salespeople focus on the highest-value prospects, introduce fair account distribution, and encourage specialization when appropriate.


Some sales managers view territories as a necessary evil. I think they’re a great tool to help organizations scale gracefully.


There are many considerations to weigh before dividing up accounts.

  • Are there product limitations that make the product unviable for specific markets/industries?
  • Which account profiles are salespeople currently the most successful with?
  • Will you have people in the field?
  • How big is your total target population?
  • How many accounts does a salesperson need access to in order to consistently make quota?
  • How will dividing accounts impact salesperson behavior?


Once you identify a strategy, it’s critical to verify your assumption with data before implementing any changes. We’ll get into that more in the tactical section. For now, let’s look at when and why you may want to create territories by different segments.

The Benefits and Drawbacks of Geographical Territories

Dividing accounts by geography is the most classic approach to territory divisions, and for a good reason! Before technology made it possible to meet with people via video conference around the globe without leaving your house (or changing out of PJs), it was convenient to limit territories to an area within driving distance of the salesperson’s house. 


Today, there are still practical reasons to consider geographic segmentation for territories. Time zones, languages, and cultural differences are all part of the puzzle. For example, we divided our inside sales team by region because some people embraced getting in and out of the office early, and others based in Seattle couldn’t drag themselves out of bed before 7 AM, which is a problem when you’re assigned to the East Coast. 


We’ve even put certain personality types in certain regions. Apologetic and polite work well in the Midwest, and direct and snappy works best on the East Coast. Swap the two, and prospects get annoyed.


Pros

  • Works well for remote, in-person sellers
  • A good way to match selling styles with regional cultures
  • Clear territory definitions
  • Easy to split states and even cities for multiple reps


Cons

  • Product limitations/features may require specialization in industries that aren’t evenly distributed throughout a geography
  • Uneven account distribution will be a source of contention
  • If dead space isn’t paired with a metropolitan market, you’re setting up sales to fail (don’t make a territory out of the Dakotas and expect a salesperson to succeed)



The Benefits and Drawbacks of Vertical Territories

When you think about territory division, research your historical sales and the associated company profiles. If you see patterns emerging, review whether it’s because the salesperson has a background in the industry or if it’s because of a product limitation.


I’ve worked in early startups that went live with a minimum viable product that only provided a lot of value in four use cases and three industries. These industries were not evenly distributed throughout the country, making it impractical to design territories based on major markets. We had to make sure a territory had at least one major market with a share of these verticals.


As the product continued to be developed and gained key features, the pool of eligible markets grew. 


Pros

  • Familiarity with specialized buyer profiles
  • Industry-specific terminology becomes second nature
  • The selling process can be tailored to industry-specific processes
  • The salesperson acquires a depth of knowledge about specific applications of the product that they may not otherwise develop


Cons

  • Industry tunnel-vision will make selling to new use cases difficult
  • Companies are not distributed equally across geographies
  • Layering multiple segments may result in too few accounts for a given salesperson to support themselves

The Benefits and Drawbacks of Company Size Territories

There are a few reasons people may consider aligning territories by company size:

  • Different product lines are better suited to different company sizes
  • A product’s current limitations make it more attractive to a certain market
  • A product may be priced out of the range of smaller companies
  • A product may require expertise that doesn’t usually exist until a company reaches a certain stage of maturity
  • A set of products may be sold together in a way that makes single enterprise accounts extremely profitable


If you’re considering territories segmented by company size because a few large accounts have been extremely profitable for your company, a named account strategy may make sense. However, it’s important to look at your viable market after removing the account. If the remaining targets don’t support a fully ramped salesperson, don’t make it a stand-alone territory.


Pros

  • Accounts are organized in a way that makes sense for your product
  • If industries aren’t too limited, markets have fairly even account distribution


Cons

  • It’s easy to inadvertently box a salesperson out of a decent territory by removing the only viable accounts

More Considerations

Territories should be structured in a way that compliments your product and go-to-market strategy. When a product is young (and has issues that the development team hasn’t ironed out), your salespeople will need larger territories with more accounts to make a living. The easier it is to sell your product and the wider the appeal, the easier it is to segment territories without worrying that you’re designing a patch that will doom a salesperson to fail.

The Tactical

A great deal of the strategy behind territory structure is based on product knowledge. But, too often, that “knowledge” is biased, human observation.


You must dig into the data to verify or disprove any assumptions.

Analyze Your Sales To Date

Hopefully, your account data for customers is good. If it’s not, invest in an enrichment tool or intern to help you populate key fields such as industry, employee size, Fortune 500 ranking, and annual revenue.


Look at your customer distribution across industries and markets. If you have a wide industry pool, but your markets are limited it may be an issue of a salesperson only having the bandwidth to cover limited geography. If you have shallow industry diversity, organizing territories by geography may be tricky depending on the number of salespeople you want to hire and the number of eligible accounts needed to sustain a salesperson.

Enrich Your Database

Try to acquire all accounts that fit your Ideal Customer Profile (ICP) from an enrichment source. A known population is much easier to evaluate and divide and evaluate again. If that isn’t feasible, you can still use information in the Evaluate Your Market section below to move forward with territory planning.

Evaluate Your Markets

If you’re not concerned about industry or company size limitations, using a country’s GDP data is a great way to figure out population density. It’s a great way to stack rank your markets and identify areas that will be the first to support multiple salespeople.


Population density correlates to employment opportunities which correlate to business density.


If you’re at the point where you need to split territories and divide states or even cities, I would recommend using zip code over area code. Many enrichment tools list 800 numbers for accounts, which is useless when it comes to territory zonings. They’re much more likely to populate address information than other contact details. Area codes are also odd in that geography is often secondary to coverage. 


I’d also like to point out that routing contacts by area code is very problematic. Most of us keep our cell phone numbers even if we’re moving across state lines.


There are paid and free tools available online to draw maps and export zip codes like this one here.

Evaluate Your Sales Activity

Yes, I know that salespeople aren’t great about logging meetings or calls. However, they are incentivized to use opportunities. 


Look at the number of opportunities your sales team started throughout a year and how many they closed-won. Then look at total accounts touched by sales, what translated to opportunities, and what translated to sales. These conversion rates and volumes will give you a ballpark idea of how many accounts a salesperson will need today to meet their quota.


As your product evolves and is proven out in more markets, you can reevaluate your conversion points and potentially shrink your territories.

Honestly Evaluate Your Product

If your product is immature or intended for a niche, you’ll only be able to sell to a subset of accounts. This will limit what you can do with territories.


You can gather this data by asking a few questions on each opportunity or anonymously collecting data from the sales team. I would start with the salespeople who are successful and apply a grain of salt to the feedback in struggling territories. It could be that their territories were poorly designed, or it could be that they haven’t figured out the right approach with their target audience.


It’s awkward going to sales management and letting them know their product isn’t mature enough to support ten or twenty salespeople. I’ve been there. But trust me, it’s better to raise the issue than put salespeople in a position to fail.


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A big shout out to Allyson Clark for suggesting this new format! Stay tuned to get details on how to configure systems for territory routing.

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