As companies prepare to hire salespeople, they need to make decisions around Sales Territories. Sales territories are usually established for two primary purposes: (1) to foster penetration of a defined market, and (2) to prevent wasted resources, i.e., multiple salespeople investing time, effort, and company resources in pursuing the same accounts.
There are an infinite number of ways to define sales territories. Several of the most common are listed below.
- Geography: This includes defining territories by country, region, state, county, city, zip code, etc.
- Vertical Market: Examples of vertical markets include Manufacturing, Health Care, Financial Services, etc. Large vertical markets such as Manufacturing may be divided into sub-markets such as Discrete Manufacturing, Process Manufacturing, etc.
- Named Account: Accounts are assigned by company name. Large accounts may be further subdivided by geography, division, business unit, etc.
Most companies do not have enough salespeople to accomplish any significant geographic market penetration. Besides, the most effective way for most salespeople to prospect is by asking for referrals (How to Develop a Prospecting Plan). Since referrals can cross geographies and vertical markets, the most effective means of territory assignment for most companies is by Named Account.
In the Named Account model, the decision as to whether or not a salesperson is given “ownership” of an account is usually determined by the size of the account, the number of divisions, the depth to which the salesperson has penetrated the account, the level (titles) of specific individuals with whom the salesperson has relationships, and whether any other salespeople have relationships in the account that can be leveraged to good effect. If assignment of the account to one salesperson is not clearly warranted, management has a number of options they can consider. These include (1) assigning multiple salespeople to separate divisions or business units; (2) declaring a “jump ball”, where salespeople compete for the account’s business; and (3) creating a “team” approach where prospecting activities, sales, and compensation are shared by two or more salespeople.