This essentially means that you need to understand your market – and the territories within it – well enough that you can pinpoint where the efforts of your sales team should be most concentrated. In the end, your territories should be designed in a way that you capitalize on the spaces in your market that are most likely to convert into the most revenue for your organization.
This will be the first article in a series where I will guide you through the major steps of a process that will allow you to optimize and align your sales territories in a way that will in reaching key goals.
Step 1: Understand Your Current Performance
It’s impossible to know which direction to take your sales territory design strategy in the future if you don’t know where it’s been in the past, or where it currently is in the present. This is the very first step in the process, and without a thorough analysis and understanding of your current performance, the rest of the steps are basically useless.
Some of the best practices when analyzing current performance are to track and measure against the following metrics:
- Customer win Rate. What percentage of opportunities are you closing in each territory? What could account for the differences, and how can you capitalize on them?
- Number of Leads and Opportunities – The quantity of leads that you are converting in specific territories can be a key indicator of how much demand your product or service is generating in that market. Furthermore, by analyzing the number of those leads that become opportunities, you can often get an even more accurate picture of how much overall market potential exists in that space for your organization.
- Average and Median Opportunity Age – By analyzing the amount of time that sales opportunities are open for differnet products, sales teams, reps and even geographies, you can more accurately understand the market potential. For example, this analysis can illustrate if a sales rep is claiming sales opportunities for the purpose of stats, or if he is actively taking that opportunity through the selling process towards an ultimate conversion. These indicate two very different things about market potential. Additionally, this analysis can also help significantly with financial forecasting.
- Existing Pipeline and Forecast. What type of revenue potential exists in your current pipeline? How much did you forecast? Do the two align? If not, it is easy to make some very quick discoveries about the market potential in those territories.
By spending the time to understand the current state of your market, you will be better prepared to amend or construct sales territories that accurately align effort with market potential.
Step 2: Analyze Existing Customer Spend
The next step in this process is to analyze the existing customer base. How do they spend? Why do they spend? When do they spend?
These customers should be segmented and analyzed according to key criteria. Several of the most common are:
- Number of Employees
- Number of Locations
- Credit Risk
Following your account segmentation, you need to analyze and determine which of the firmographic elements drives your customers to spend on your business. Reference historical customer billings to analyze the customer spend by segment. The main spend drivers could fall into any of the categories listed above (these are the most common) or a different one. Either way, the key is to find the trend in customer spending.
Once you have determined what motivates the overall customer spend, a framework for your ideal customer profile will manifest itself. Many organizations spend huge chunks of time pouring over their ideal customer profile. And don’t get me wrong, it will need to be perfected over time, but by performing the analysis suggested above you’ll have accomplished two key steps in understanding your ideal customer. This is a major step in the territory design process.