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Balancing Sales Territories

# 45 October 2015

Occasionally we encounter sales organisations, where the territories are so large for some of the sales people, that they do not have the time to approach all their customers, even though the business potential is good. Simultaneously, there are other sales persons with plenty of free capacity and not enough potential in their territories. These sales organisations don’t use their resources in an optimal way, and they turn their back on solid business opportunities.
We define a sales territory as the set of existing and potential customers for which a sales person is responsible. Most commonly, customers are grouped by geographical area, or those in a specific industry, or a combination of both.

The solution is to balance the sales territories. This means that you align the sales territories so that there is a better balance of work (and potential) between the sales people. This is not so much driven by a desire to be “fair” as it is to ensure that the company is maximising its sales potential.

Often you can find imbalances when companies add new sales people. Among the experienced sales people there is usually a reluctance to let go of any good customers, leading to new sales people ending up with customers whom no one else wanted. Sometimes this reluctance has its ground in the design of the sales compensation system, where letting go of a customer will have an effect on the paycheck. Sometimes it is based on the emotional and incorrect concept that the customer “belongs” to the sales person. This is wrong! The customer belongs to the company.
It’s a good idea to review and adjust the sales territories at least annually, while deciding the sales peoples’ budgets. If you do this regularly, as a standard practice, it will also become less an issue for sales people when customers are transferred

We have encountered a company which uses an inventive approach. This company lets the sales people handle the customer allocation on a continuous basis. If a customer had not been approached in six months, any sales person could apply for taking over that customer. This information could easily be found in the sales automation system. After a formal decision by the sales manager, the customer would be transferred to the new sales person. With this allocation process, the company ensured that an active and interested sales person was approaching the customer.