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Establishing Sales Territories

Apr 1, 1998 12:00 PM, Alan Kruglak

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Race horses project a rare combination of power and grace. The most valuable ones have agility and speed-they're the runners that win the trophies. Good sales representatives are like winning horses-they're in short supply, and the ones who know the systems integration industry are rarer. They have a rare ability to accept and absorb rejection without taking it personally. They have an uncommon gift for communication, knowing what to say and when to say it.

Outstanding salespeople differ in at least one way from winning horses-winning salespeople choose their employers. To attract salespeople, you have to create the right environment, a company that meets their needs and allows them to prosper. If you fail to provide the right working environment, they will leave for the greener pastures of another firm, maybe even a competitor. Although compensation is important, there is more to maintaining a winning sales team than providing the opportunity to make a good living.

The most important step to building the right stable and attracting the best sales talent is to create concrete territories. Company owners succumb to a number of myths regarding territories, including, the belief that territories make salespeople inefficient and lazy; if we keep our network wide open, everybody will be motivated to pursue every prospect.

There are several problems with this myth, including loss of accountability (if an account is lost, no one is held responsible). Also, non-cooperation among sales reps is a possible result. There was a one-year period in my former company where we had two groups of sales reps calling on the same target market. The animosity created between the warring groups of salespeople was counter-productive. Some staff actually locked their desk drawers, the result of paranoia that other reps would steal their leads. Defining territories facilitates cooperation and creates a collaborative environment that improves productivity and enhances sales. Lastly, animosity among prospects may occur. Without territories, all of your reps will call on the same most promising prospects, creating distrust and animosity among potential clients.

Another misconception involves the belief that if a sales rep has an outstanding month, then assign new prospects and hot leads to those who fell behind in their quotas, a process often referred to as planned earnings. If one of your racehorses wins too many races, you'll limit his opportunity to win in the future and put your money behind a horse that isn't doing well.

Another myth involves the mentality that a business is too small for territories, and a market is so big that sales reps will never cross paths. This line of reasoning assumes a firm will never grow. When we had five people in the entire company, I never imagined we'd grow to a staff of 180. Your best people will go after the best prizes, and their paths will cross.

Territories are important. They provide accountability, promote entrepreneurial spirit and reduce turnover. Competition eats away at your accounts, and internal competition creates a hostile corporate environment.

If you are trying to establish territories for the first time, you will experience two conflicting issues-the ease of administration of territories and the difficulty of making the change. Whether you are creating territories geographically or by industry SIC code, the successful establishment of territories follows several rules. Each territory must contain enough business prospects to allow a sales rep to earn a good living. Moreover, in any territory plan, the overriding rule to protect a rep's secured area is to make them responsible for any development within their defined territory.

What do you do when a rep from another territory has an existing relationship with a decision-maker or architect associated with a project in another rep's assigned territory?Maintain your territory plan, and suggest that the two reps work together on projects, splitting or sharing the commission. It's not a management mandate, but merely a suggestion. Most reps will prefer this route because they'll know that working with each other (and splitting commissions) is a two-way street. This informal policy builds cooperation among the reps and maintains the objectives of your territory plan-to assign responsibility and accountability.

In developing a territory plan, the primary goal is to maximize sales and push accountability down to the sales rep's level. For many companies, using geography is the easiest way to implement a successful plan. The ideal geography-based plan should comply with a couple of conditions. The geographical area should be contiguous to make it easier for the rep to cover, translating into less travel time and more time with prospects and clients. If possible, reps should live in their assigned territories. Although not an absolute requirement, it makes sense. The more familiar they are with their territory, the better they will know it, and the better the results. A territory plan based upon a specific industry is implemented when the requirements of an industry are so specialized that it makes sense to have one rep assigned to the niche on a full-time basis. An example is the federal government, which has unique purchasing needs and requires specialized sales skills.

A company with multiple sites may be assigned as a territory to a specific sales rep. This makes sense when the account has multiple sites; decisions are centralized, and the client is willing to enter a buying agreement for future purchases.

Outside of the sales compensation plan, the creation of secured territories (islands of responsibility, accountability and ownership) is the most important step to attracting (and keeping) the best sales talent. Territories are a first step; there are other sales management methods that need to be applied to create an efficient, highly-desirable sales environment. These will be discussed in a future issue of S&VC.

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