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What Is Sales Territory Planning?

Thomas Wilimitis | Content Strategist | February 16, 2024

Selling in a business setting isn’t a free-for-all where anything goes. A sales strategy where every seller within a company is free to chase the entire market of existing and potential customers would quickly become confusing, be inefficient for sellers, and probably annoy customers who get called by multiple people from the same business. A sales territory plan creates guidelines and strategies so sales professionals know which potential customers they should—and can—pursue. This helps sellers focus their efforts more efficiently and specialize their approach.

What Is a Sales Territory?

A sales territory is a distinct segment of the customer market assigned to a sales team or group of sales teams. Territories are often categorized geographically by city, region, or country, but they can also be segmented by factors such as account size, industry, or the product or service being sold. Sales territories break up the entire pool of current and potential customers into more manageable groups for sellers to handle. They help sales organizations optimize market coverage and align with the broader goals of the business. They make it easier for sales teams to tailor their approach to fit a given segment of the market, leading to more effective selling and hopefully a greater number of deals won.

What Is Sales Territory Planning?

Sales territory planning is the process through which sales leaders define segments of the customer market and assign them to different teams. While geography is a common factor when creating territories, elements such as account size, industry, and the products sold are usually also part of the territory mix. For example, a person selling for a logistics service provider might get a territory of United States Mid-Atlantic manufacturers that need transportation and warehouse services. Establishing the structure of what factors will define a territory is the first step. The next step is assigning sales teams to each of the defined territories, and then likely setting quotas for what sales volume the team should be able to generate from that territory.

Market opportunity will factor into sales territory planning. Territory divisions and assignments will consider historical data around customer demand and profitability. For example, retail customers in the Pacific Northwest may have shown higher demand for a grocery product over the past three years than those in the Midwest, so more salespeople might be allocated to support that more profitable region. Or perhaps the company sees opportunity in that gap—an untapped Midwest market that merits greater sales investment. Those kind of decisions are where sales territory planning must intersect with broader business goals and strategies. Organizations need fresh data and trend analysis to create sales territories and then measure the results to determine if they have the most effective approach.

Sales Territory Planning FAQs

What is the biggest challenge of planning sales territories?
The most difficult part of sales territory planning is striking the right balance to drive the highest revenue. Organizations want to cover the entire market, but do you allocate more sales resources to the most profitable territories, or do you allocate more of your best sales talent to underperforming segments to capture an untapped market? Sales leaders must balance these factors and keep salespeople happy, giving them a territory in which they feel they can succeed.

How do you determine territory assignments for your salespeople?
How salespeople are assigned to a given territory should be determined by the organization’s broader business strategy. If net new growth is the objective, assigning high performing sellers or additional people to a promising, largely untapped territory could be best. If customer retention and upselling is the biggest ambition, putting the best sellers and more resources into existing high-value territories is the way to go.

How does selling differ by territory?
Based on how your organization segmented territories, the selling approach can vary drastically. Geography isn’t the only criteria for a territory. For example, if territories are based on potential customers’ company size or potential deal size, sales cycles will likely be longer due to multiple levels of approvals. Territories based on industry can also affect the sales experience, for example, selling into industries such as public sector or healthcare can require deep understanding of the regulations and compliance demands in those industries.

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