For any business that works out in the field, setting up sales territories for representatives to operate within is essential. To develop a territory management system where representatives are not competing against each other, the consumer is happy, and goals are met, there needs to be criteria set for how different territories will be created and operate.
Unfortunately, setting up efficient territories is not as simple as drawing squares on a map, or dividing up potential customers among your field team. In order to get the very best from your field team, consider developing a territorial system with their input—field teams will be more inclined to carry out a strategy that they helped to construct, and keeping up morale is essential in the field.
So where should you begin when drawing up sales territories? That depends on the area of business you plan to focus on. Field teams come in all sizes and disciplines, and the criteria used to develop your sales territories should reflect that. Regardless of the final objective, utilizing the following methods will provide a solid foundation to build your territories upon.
1. The Market Potential Method
Unforeseen obstacles and a lack of potential are two of the most difficult things for field representatives to overcome. When expectations that are set for the team do not take these factors into consideration, it may appear that the field team is underperforming when in fact they are reaching the potential that the area offers.
The Market Potential Method aims to avoid these missteps, taking into consideration existing competition and market saturation when determining goals for field reps. The method relies on three steps: Determining market potential, taking into consideration obstacles and competition, and then basing a level of possible penetration off of those figures. Done correctly, this method provides a very good estimate of representative potential in the field.
2. The Historic Method
For businesses restructuring territories, or developing their first system in a high-competition market, the historic method provides a great way to work off of prior experiences and results. Depending on their focus, managers should look at either sales or penetration from the previous period, and take into account industry growth to determine the new potential in markets. For those businesses developing their first plan, building off of the data from competitors, and then factoring in their market share is a practical way to set realistic goals for field representatives.
3. The Full-Time Equivalent Method (FTE)
For businesses with many representatives, the FTE method allows managers to determine a rough estimate of what sales or penetration should look like for each representative. The first step is to determine a break-even point for each of the representatives—this is where the return from their work is equal to the cost of having them in the field. Multiplying this number by the amount of representatives who are equivalent to full-time employees, and then adding in the desired profit margin will result in a figure that most representatives should be able to reach.
While all of the above methods are fantastic ways to begin formulating a territorial plan, utilizing all three and checking for consistencies between them will give businesses owners an even more accurate figure to use as a goal for their representatives. Keeping field teams and consumers happy will reflect directly onto your bottom line, so utilize the above strategies, and make sure that your strategy is a sound one before implementing it.
