Gary Schwartz
Whether you are looking at rep or manager performance, market share, shifts in customer dynamics, customer retention and several other relevant business measures, a strong linkage can be drawn to territory design.
The methodology used to design territories is paramount to success on multiple levels. First, we have to look at if we are adequately covering the opportunity within our geographic footprint. How do we ensure we are focused to the right opportunities and not wasting valuable time chasing windmills? Second, since we understand our current customers and the related revenue opportunity, we should be able to draw some conclusions on what our revenue goals should be. Third, we must have a consistent methodology of quota assignment to be able to affectively gauge performance at a rep and manager level.
What does a good territory look like? It depends on who you talk to. Before I jump into specifics lets look at some symptoms of poor territory design:
The Bone Collector: We all know this rep. They have been there forever and are typically viewed as a high performer. Hopefully that is the case. However, we need to look at the performance through a different lens. How many of the accounts in their current base were originally won by the rep – or were the accounts inherited through rep attrition? Are they your best rep or have they simply been there the longest and accumulated the most opportunity. Sure they sell a lot each year; but how much do they lose? Many times we walk in and find million dollar producers with territory potential of $2 million. Shouldn’t you have a strategy to realize the remaining $1 million in revenue potential? It is human nature for reps to want to aggregate as much opportunity as possible. It really isn’t the fault of the rep but rather the fault of a system that is flawed. As business owners/leaders we must ensure that we are not leaving opportunity on the table.Without consistent inspection of the territories a company’s opportunity can get shifted to a few reps leaving the rest to die on the vine without much in the way of current account opportunities.
High Rep Turnover: It is an easy trap to fall into. Over time we tend to have accounts migrate out of their assigned territory to other reps. Perhaps you do not trust the neophyte rep to handle a particular account or maybe a rep left and you do not have ready backfill for the territory. The most relevant determining factor of new rep success is the status of the territory. Are there current users with opportunity in the near term or have we allowed the other reps on the team to harvest all of the low hanging fruit? If you have an issue with rep turnover, ask yourself what kind of opportunity are you providing the new reps to work.
Lost Customers: Most dealers have a customer retention rate of 85 percent. If your retention rate is lower, you may have a problem. Obviously, your territory structure speaks to the way your reps cover your current accounts and prospect accounts. If you have too many current accounts assigned to one rep, they can easily ‘manage their income’ without 1) calling on new accounts or 2) covering all existing accounts. This coverage breakdown can lead to lost customers.
Rating Performance: Top performers make the most of the opportunities that are given: you can’t hit the walk-off home run if you are not up to bat. Unless you have balanced opportunities within your sales teams it makes it impossible to determine who are the players and who is getting played. Case in point: Sales rep 1 is viewed as a top performer. He has achieved $950K on a budget of $700K. Sales rep 2 is currently on a performance plan for selling $300K on a budget of $480K. Obviously, logic would indicate that rep 1 is doing a better job for the company – until you look a little deeper. If you examine territory upgrade potential in relation to performance you can get a better picture of performance. How would you feel about rep 1 if he had a territory upgrade potential of $1.2M? That would mean that the rep actually missed out on $250K in opportunities effectively shrinking the business. How would you feel about rep 2 if she only had $200K in territory upgrade potential? This rep effectively covered the base accounts and won $100K in new business. This is not to say that every rep on the team should have the same quota. Rather, they should have similar ratios of opportunity to quota.
The Cloud of Geography: The top attribute of good territory design is placing the correct focus on the correct accounts. This should not be confused with covering EVERY business within a territory. Frankly, there are accounts that hold no opportunity and should not be covered. That is really where we have a disconnect with a geographic territory design. It is a blanket approach that does not provide the correct focus to the accounts that hold opportunity. Often we walk past opportunity within accounts to spend time calling on accounts that are worthless and a waste of time. Having a defined listing of quality targets solves this problem.
Your approach to territory design is critical to your ongoing success and that of your teams. Make sure to balance expectations of productivity in a territory with the upgrade potential in the territory. Segment your territories based on a consistent percentage of current accounts with upgrade potential and a targeted list of competitive accounts. Remember, if the average dealership retains 85 percent of their customers there is only 15 percent up for grabs. Having good territory design will help you gain your fair share of the 15 percent that is in play while making sure that you are covering your current accounts as well.
About the author: Gary Schwartz is a sales consultant with Strategy Development and has over 14 years of broad-based experience in the business technology and outsourcing space. Gary was a senior manager with IKON Office Solutions, and later RICOH in sales, finance, and operational roles. In his first year as Area Director of Sales, Gary led a salesforce of 7 managers and 60 reps to 18 percent revenue growth with a focus to sales process and employee development. As a Strategic Account Sales Manager, Gary was charged with driving IKON’s MDS and Managed Services business. Gary began his tenure with IKON as an Area Director of Financial Operations. In addition to his expertise in sales process and leadership, Gary is well versed in the financial, leasing and marketing aspects of the business.
