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Friday, May 14, 2010

Sales Territories

A protégé called and asked for my ideas on organizing sales territories. It was a false alarm as her bosses already had a plan, and it was a lot worse than their previous setup.

Traditionally, we divide sales territories by lines of business, geography, or method of presentation (size of customer). All three methods are creating increasing liabilities in an internet connected world with public reputations.

Segregating lines of business – Every company I know is trying to reload their customers to purchase a broader range of their offerings. Upselling and cross-selling are usually less expensive than creating new accounts, and a broader reliance on our products creates a more stable customer.

Geography – Numbers runners have their own city blocks for weekly collections. That started before 1900. Concern about the cost of long distance calls and travel for multimillion dollar sales is antiquated. Today, I have customers on three continents and have had a succession of national territories. Remember that story of the prospect going to someone else because they didn’t like the rep?

Method of presentation – Let’s figure out the presentation that creates the most highest margin accounts and integrate that presentation to every channel we can. Then cannibalize it every quarter.

Key Accounts – Every time I have seen one sales representative responsible for a customer, the customer is well served when the rep is flourishing, poorly served when the rep declines. Getting key account responsibility usually marks the beginning of decline. We band together in organizations to provide better service. Why do we keep that advantage from our customers? Top competitors won’t.

The truth is, setting sales territories is an attempt to control the sales force and the customers. It is not an optimal use of time for management. I had one manager take away several million dollars in completed sales saying he was “load balancing the team.” Many of those sales were subsequently repudiated.

Setting customer responsibilities should be done by the same people responsible for purchasing from your organization – the customers.

We can’t have faceless reps any more. Each rep needs to develop a public competency that will appeal to their customers and attract prospects. That starts with knowing everyone who buys in your accounts and making it easy for your existing accounts and future accounts to find you. That might include social media, but it starts with basic sales shoe leather tradecraft. Doc Searls, who started “Markets are conversations,” a decade ago, has a brilliant post today that reputations are not brands.

The purpose of arranging sales responsibilities is to maximize sales and margins. That means delivering the best experience to customers and prospects. When it is done right, it is blatantly obvious to everyone who cares.

Can I get an Amen?


Unknown said...

Amen! Personal integrity and shoe leather still count. Thanks, Dick.

Unknown said...


I'll give you an Amen with conditions.

The conditions are: what type of sale is it? For simplicity, I'd divide sales into perhaps four buckets: Transaction Sales, Relationship Sales, 'Over the Transom Sales', and Referral Sales. So, how with a territory work for each?

Transaction Sales: since the buyer doesn't really care who takes the order (or how it is taken - in person, over the phone or via internet), it does not matter if the physical territory of the sales person is assigned or prospected.

Relationship Sales: Relationships are difficult to transition - it's often a chemistry thing, so assigned territories will not work well for existing relationships and a territory with out-of-region exceptions are ungainly and confusing (read that as other sales folks in your firm calling on your existing customer). The good sales rep will focus on the areas that yield the customers without intervention.

Over the Transom Sales: These happenstance sales of customers dropping by, calling in, sending an order via web site or internet form, or any of the other passive sales with no interaction by the sales person other than to fill the order - these sales are random geographically and it is awkward to spin off some of the commission to the first touch if they are governed by a sales region.

Referral Sales: Imagine the click you would hear if you tried to shunt off a referral to another sales rep - it would go something like this:" I'm Joe Blow, referred by Sue Smith, to speak with Benny Bigalow about the purchase of Super Widget." "Hi Joe, I'm Nancy Jones and I can help you with that purchase." "Well Nancy, Sue strongly recommended Joe, so I'd like to reach him." Sorry Joe, company policy says I serve 'CLICK', Joe? Joe? Far fetched but it illustrates the point for sales are indirectly generated.

Dick's point about the reasoning behind assigning territories hits it on the head - a company better serves the customer is they complete the sale, not attempt to control them. As for the sales folks, they go to the sale and everyone benefits as a result.

For firms trying to cut up the country (world) to balance out the results (or to create robust & rich territories for use as rewards), my advice is - don't be foolish by introducing something artificial into the sales equation. The leaders should be thinking about perfecting an internal communications network that will support the sales force and prevent the embarrassment of a sales call on an existing or almost landed customer.

So, Dick - Amen brother!