A sales territory is nowadays increasingly being defined by much more than geographic area, as companies become more aware of other factors they need to consider.
But at Tech4T one of the most common questions we get asked is ‘What exactly is a sales territory?’.
It may seem obvious, but many companies are unclear about what a sales territory is, and more importantly, how a territory is defined.
So we’re going to explain it in a simple way that will hopefully make it clear. We’ll first look at the traditional definition of a sales territory before explaining how they are increasingly being defined today.
The Traditional Definition
Traditionally a sales territory was simply a geographic area that a single salesperson or a sales team had responsibility for. It was essentially their ‘patch’ which they focused on exclusively when trying to generate sales for the company they worked for.
In most cases, the territory was defined along existing geographic lines – following established city or county or state boundaries – meaning that territories could often range in size hugely.
And commonly other salespeople or sales teams had responsibility for other sales territories, with sales results from each area compared to see which particular geographic locations were performing the best.
Due to the territories following established geographic boundaries, a salesperson or sales team could be responsible for an area hundreds (or even thousands) of miles in size, whilst another salesperson or team could have an area that was less than a tenth of the size.
This meant that there were often huge variations in the amount of time spent travelling between sales meetings and big differences in the sales achieved in different areas.
However, many companies today still define sales territories along established geographic lines, despite the great differences between locations. This is because it is simple to do; they just need to select existing areas with a known boundary (such as counties or states) and assign a salesperson or sales team to it.
But more and more businesses are now realising that there are many other considerations that need to be factored in when defining a sales territory.
How Sales Territories are being defined nowadays
Sales territories are nowadays increasingly being defined by much more than just geographic area, as companies become more aware of other factors they need to consider.
These factors largely fall into two main areas.
The first of these are logistical factors. This includes everything about the practicality of covering a particular area, such as how easy it is and how long it takes to travel between different locations within the territory. These factors not only determine how much productive time (time spent actually selling) a salesperson or team will actually have each day but also helps define the number of salespeople needed for a particular location.
All too often, salespeople are assigned sales territories that sound great in principle but mean they will spend most of their time travelling rather than selling their company’s products or services. This is obviously not ideal and can mean that sales opportunities are not followed up and revenue isn’t maximised as it should be.
The second important factor is sales potential. Companies are realising that just having a large geographic territory doesn’t necessarily mean that a high level of sales will follow, and in fact, large territories often mean there can be inefficiencies in their sales process (such as wasted time travelling between sales appointments).
So they are now looking to understand more about the composition of different locations in terms of characteristics such as those below:
- The number of target customers in the area – these could be consumers or businesses
- The types of industries in the proposed territory
- The competition that may already exist in the area
- The different customer types and profiles
- The purchase history of customers (and potential customers) in the area
- Travel links and ease of travelling between locations
These characteristics help companies understand what the actual sales potential a particular area really has, and this, in turn, helps them to define sales territories based on robust forecasts rather than simple geographic boundaries.
And sales territory mapping using location intelligence systems is increasingly being used by companies to understand the practicalities and potential of locations around their country and around the world.
For them, the benefits include maximising their sales potential, ensuring territories are effectively planned and equally shared amongst their sales teams, and minimising unproductive time.
So when it comes to defining your sales territory, try thinking outside the (geographic) box.