The Territory Optimization Revolution
January 27, 2016
All companies are seeking the perfect combination of elements to deliver the highest salesforce effectiveness. A critical element that is relatively new is territory optimization, and we will examine the case for this in this article.
Usain Bolt holds the world record for the 100m at 9.54 seconds. However, if you combine the best performance times for each of his 100m races, you get a time closer to 9.3 seconds. Usain is no slouch at each aspect, but in his own words he becomes a ‘beast’ after 60 meters. If you put the Best Start, Best Drive (0-30m), Best Stride (30-60m) and Best Lift (60-100m) together, you will get a time that leaves Usain trailing and beaten by 2.5 meters.
In the same way, salesforce effectiveness is made up of different elements – the right go-to-market strategy, salesforce organization design, role definition and candidate selection, the right incentive design, and the right sales processes. You can improve performance through deployment of the right technology and process design. In order to maximize performance at the 100m, athletes train and diet – you will find that some do it through drugs, but that is like lying to the customer. It comes back to bite you in the end.
Importance of Territory Optimization
The territory optimization and alignment element of salesforce effectiveness is vital for three reasons. Firstly, it puts the customer and salesperson dynamic at the heart of your decision making. Secondly, it forces companies to think about how territory, quota, role, and incentive design fit together to develop an efficient, motivated salesforce. Finally, deployment of an automated solution generates improved sales performance.
Salesperson Placed at the Heart
A territory optimization initiative happens either on an annual basis to ensure optimal alignment with the customer or when strategy shifts dictate. The customer is vital in this process, but so is the salesperson. The customer map/profile changes throughout the year. Customers grow, go out of business, or diversify. If you apply your account/customer segmentation rules assiduously, a realignment will be required. Other companies undertake a territory optimization exercise for one or more of the following reasons:
- A change in the go-to-market strategy.
- Addition of new products to the portfolio.
- Poor or excessive customer coverage if territories are too small, leading to missed revenue.
- Excessive costs due to inefficient travel routing.
- Duplication of effort amongst the salesforce.
- High salesforce turnover caused by demotivation from inequitable territories.
Companies in this position with a clear, coordinated approach to the challenge, start with the customer – clear segmentation, account planning, a contact schedule, and mapping roles accordingly. This creates some of the criteria required to generate a new alignment.
Placing the customer-salesperson dynamic at the heart of your strategy is not necessarily a new concept, but the customer is going to have a negative experience if the salesperson is demotivated. There has, perhaps, been insufficient focus on the salesperson. So, aligning the sales organization with the customer map and go-to-market strategy is critical.
Integrate the Elements
Improving each element of salesforce effectiveness can increase performance overall, but this causal map shows that improving all elements are interrelated. Addressing them all will have a more synergistic impact.
A number of sectors have needed to review their go-to-market strategy. The Life Sciences sector is one where many organizations have reviewed the whole support system as they shift from a product driven strategy to an account driven strategy based on geographies. We have worked with a number of organizations that have placed a territory alignment strategy at the heart of the new approach:
- Account segmentation based on size, complexity and profitability which then drives a contact schedule – how many visits a month does the client need, for how long, and who by. The quality of the relationship with key budget holders and influencers is critical.
- Organization design creates a new set of roles – relationship managers, product specialists, regional sales managers, direct sales.
- Incentive design reinforces the behaviors required of each role and how you want them to work together.
- Quotas are derived from broader company growth targets and individual bottom-up account assessment.
- Critically, territory optimization ensures that the challenge for each role is equitable.
Putting the elements together successfully creates a strong salesperson-customer relationship.
Deploying an automated territory optimization solution in itself creates savings and upside. Many solutions are limited to sales territory management which can support the annual review process, but some are capable of delivering the more structural input required for strategic review. Automated solutions will typically generate an initial design based on the criteria selection. This is then amended by management taking into account more subtle factors (e.g. availability of staff).
The benefits include improved salesforce performance as territory alignment is improved and made more equitable, increased revenue by up to 25%, reduced salesforce turnover, reduced time spent in the sales planning process, reduced time in making yearly account management changes, and ensuring accurate account allocation in CRM. ROI from an automated system can be as little as 3 months, but 12-18 months is most often quoted.
Like a world class sprinter, salesforce effectiveness is dependent on getting each of the elements right and in harmony with the challenge ahead.
We have identified three important concepts to consider as you evaluate how to drive greater sales performance at your organization – put the customer-salesperson dynamic at the heart of territory planning, integrate territory optimization with the other salesforce effectiveness elements, and deploy an automated solution.
To learn more about how your organization can be better prepared and drive greater sales results, contact us today.
Download: Territory & Quota Best Practices and Market Trends