Sales Management Advice

Considerations In Territory Realignment

Written by Amy Bax for Gaebler Ventures

Sales territories grow as a company grows. These territories may eventually become misaligned and disproportionate, creating a need for territory realignment. If this is the case, here are a few benefits and things to consider when going about realigning your sales territories.

As companies grow, so will their sales territories.

If you have a sales force that travels to directly represent your company within a region, you know that as you grow and increase customers, these territories may become misaligned and disproportionate.

Some sales people may be overwhelmed with a large number of customers that require a lot of attention, whereas others may feel they have very little to do because they only have a few regular customers and not many other good prospects within their region. Because this easily happens as your company grows, it is a good idea to consider realigning territories to better serve your potential and current customers.

Below is a list of benefits and things to consider regarding sales territory realignment.

Benefits of Sales Territory Realignment

There are many benefits of realigning sales territories.

First, there is the enhancement of customer coverage, which is one of the main concerns a company will have. By not covering a territory properly, sales people may be missing out on account opportunities.

Also, if coverage is enhanced and opportunities are not missed, customers will become more satisfied and an increase in sales may occur.

Because territories are misaligned, compensation and rewards from sales contests may also be misallocated. If one person has a larger or "better" (more potential) territory, they will easily make more money than someone who has the opposite.

So, compensation is being given based on the territory, not the performance of the sales person. This problem may affect motivation in the long run; a sales rep in a low profit territory, as much effort as they put in, will still not yield the same sales figures as another in a highly profitable territory.

Without seeing adequate rewards from effort, motivation will decrease and negative consequences will occur. So, more realistically realigning territories could help to increase motivation through competition for sales awards and bonuses.

Another factor affecting motivation is the possibility of one sales rep being overworked, and not being able to handle an entire sales territory alone. Along with a decrease in motivation, customer service will also suffer.

Customers may feel they are not getting the attention or assistance that they deserve and need, which may cause them to start looking at what competitors have to offer. Low sales motivation can only hinder the performance of sales reps and the company.

A Caution with Sales Territory Realignment

Now that the territories have been realigned, it's important to realize the effects of this occurrence on company morale. The main concern they will probably have is that they will lose profitable customers/territories to someone else.

This is easy to understand because they have worked hard to secure accounts, build relationships, maintain certain sales figures/commissions etc. and now have to give up or share that hard work with another sales rep. This is why it is important to get the sales reps "on board" with the realignment before it happens. An explanation of why it is best for them and the company is essential.

Having the managers ask for their input/suggestions on the proposed realignment will help them feel like they were part of the decision and gain their support for it. At this time, the company can also address any concerns the sales force may have. By doing this, sales reps are able to see how the shrinking or expanding of their territory will help them more effectively serve customers which will eventually lead to higher sales margins for each sales rep.

The sales rep's cooperation with the realignment is necessary for a smooth execution of realignment. Possibly compensating sales reps for their assistance in the realignment process would keep motivation from decreasing. In this case, incentives would be used to drive efforts, leading to a positive increase in performance, and inevitably motivation.

An example of this would be setting up a compensation plan for sales reps with changing territories to introduce clients to the sales rep that is taking over, making it a smoother transition for the customer. For a determined amount of time, the former rep could act as a mentor and both the former and the new sales rep could receive commissions from the sales earned from the customer until the new sales rep is fully established.

Amy Bax is interested in providing innovative informational resources to entrepreneurs. She is currently an MBA student at the University of Missouri - Columbia.

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What's your experience with sales territory realignment? We welcome your comments, questions and any advice you are willing to share with others.

  • David Pinals posted on 8/11/2009
    David Pinals
    Amy, this is a great article. I particularly like your comments on linking territory alignments back to sales compensation. This is a key item to consider when realigning territories. It is also important to carefully select the alignment metric that is used in evaluating your territories.

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