How to Implement Sales Territory Management in 5 Steps

Sales territory management is a process sales teams use to assign leads or accounts to specific salespeople based on geography, industry, product, or account size. This eliminates overlap between sales reps and clarifies who is responsible for specific opportunities. Territories are managed by assigning segmented prospects to individual team members who are given specific goals.

If you’re considering implementing territory management, a contact relationship management (CRM) app is a valuable tool to help streamline your efforts. We recommend Freshworks CRM based on its ability to create territories and assign leads based on your sales process. Freshworks CRM offers plans starting at $19 per user, per month, which you can try out for free for 30 days.

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Here are five steps you can use to perform territory management in your sales organization:

1. Decide How Customer Segments Are Defined

The first and most important thing you need to do as you begin to implement a sales territory management strategy for your sales organization is to define your customer segments. By doing so, you’ll be able to make the best decisions about how to group them into territories when it is time to implement your strategy.

Defining your customer segments involves breaking down your leads and customers into groups with similar characteristics. There are three general ways to segment business-to-business (B2B) customers. Keep in mind that if you sell directly to consumers (instead of to other businesses, otherwise known as a business-to-consumer, or B2C model), the steps are similar.

Territory management settings in Freshworks CRM

The most common customer segment groupings are as follows:

Segment by Location

One of the most obvious ways to segment your customers is by geographic location. For example, you might have a territory for a given state or a region. Depending on the number of accounts, you may even divide them into smaller territories like cities, or even by ZIP codes. When using location rules for more efficient sales management, you will assign all types of companies within that geographic area to a sales rep, regardless of the size or type of account.

As this method is tied to a map, it is one of the most straightforward strategies to implement. However, you may find that this method results in an uneven concentration of accounts in a particular geographic area. If that is the case, it may be better subdividing a specific area or using another type of segment that better fits your specific customers.

Segment by Size

Another option is to break your customers into segments by size. This most often means the amount of annual revenue of the client company or their annual spend with your business. In some cases, it might make sense to use other size measurements, like the number of locations or the number of employees, but even those are generally related to the overall size of the customer.

For example, you would assign reps to handle similarly sized businesses, grouped together in a segment. You might have a territory for small businesses, mid-sized businesses, large corporations, and enterprise customers. This allows your sales team to focus on the unique challenges, needs, and budgets faced by businesses of different sizes, giving you the opportunity to let individual sales reps focus on the accounts they are most skilled at handling.

Segment by Industry

The third option is to segment your customers based on the type of business or industry they are in. These are known as vertical territories because instead of covering a geographic area (horizontal), they cover accounts within the same type of business.

You might create one segment for educational institutions, one for governments, one for healthcare providers, and one for retailers. This also allows your team to become subject matter experts in their specific industry.

Hybrid Segmentation Strategy

Sales organizations that deal with larger numbers of leads and accounts often combine various criteria to create hybrid territories. For instance, you may have different reps handle small businesses and enterprise segments within the same geographic area. Similarly, you might have education, government, small business, and healthcare segments overlapping various locations, and have each handled by different reps.

Hybrid segmentation allows sales organizations with a diverse customer base to focus their sales rep’s efforts on similar types of customers within defined geographic areas. This type of territory management requires more setup work to define and create multiple layers of customer segments, but makes sense for larger sales teams that deal with multiple types of businesses across different locations.

2. Create Your Territories

Now that you’ve created the customer segments that make the most sense for your business, you can group them into territories, either geographic or otherwise. As you do this, consider the viability of dedicating resources to a group of customers and prospects. For example, it doesn’t make sense to have only one customer in a location or industry, unless it is a large, multidivision enterprise that represents a large portion of your revenue.

Creating territories without current revenue-generating customers and an adequate number of leads and prospects will simply end up draining resources that could be better used elsewhere. In addition, you need to evaluate the overall expected revenue that you’ll generate from each territory, and whether it justifies the assignment of a dedicated salesperson.

There are several factors to consider as you create territories:

Consideration 1: The Number of Current Accounts

When creating a territory, consider the number of your current customer accounts and how they are managed. This will help you determine how to shape your territories to make sure they are similar in size. For example, you might divide geographic territories into groups of 30 to 40 accounts based on ZIP code, and combine neighboring ZIP codes in order to fill each one. Alternatively, you might divide accounts in a geographic territory by standard industrial classification (SIC) code.

You may also want to look at the size of accounts within a given geographic area. Creating a balance of accounts can make the sales process more manageable for your sales team, and help you create a more even distribution of your team members. While there are sometimes reasons for a territory to vary in account density, you want to create territories that are able to be adequately managed and have room to grow.

Consider not only the number of accounts a certain sales rep should manage, but how much time each account takes to manage properly. For example, a complex, high-revenue account may take several hours per week to manage, but a smaller account might only need an hour every week or two.

Consideration 2: Prospect Availability

In addition to current customers, the territories you are creating need to have an adequate presence of prospects in order to be viable. While the specific ratio may vary based on your particular industry, consider building territories where there are at least two to three times as many potential prospects as existing customers. This will give your salespeople room to grow their territory, which leads to increased sales for your business.

Consideration 3: Overall Business Presence

For a territory to be viable, consider your business presence. You don’t have to have a brick-and-mortar location in every territory, but it is important to examine how you will interact with prospects as well as serve the needs of your customers. Sometimes this is the salesperson who handles accounts and generates new customers, but other times it makes sense to be sure you have the right type of presence to provide for your customers.

To evaluate whether your business presence can support your customers, ask yourself the following four questions:

• How will you generate new prospects and leads?
• How will you handle sales consultations?
• How will you deliver products and services?
• How will you provide support and service to your customers?

3. Assign Sales Team Members

After you’ve established your territories, assign coverage of those territories to salespeople and managers to handle the day-to-day sales and prospecting activities. One of the primary goals should be to get the right people in the right place to set everyone up for success. This will help your salespeople, your team, and your customers to have the best overall experience, which benefits your business by leading to more sales won and revenue generated.

In addition to assigning salespeople to the right territories, make sure they have the leadership and support they need. This means you should also designate a sales manager who can provide the accountability, training, and resources needed to successfully manage a territory and associated reps, and effectively move deals through the sales pipeline.

Let’s look at strategies for assigning team members to consider as you put your team in place:

Assign Reps Based on Expertise

One of the most effective ways to manage territories is to assign your sales reps based on their expertise. Associating salespeople based on their skills and experience means that they can easily relate to the prospects and customers in their territory and increases their ability to build relationships that lead to sales. This is especially beneficial if your sales process involves highly technical or scientific products, but is also beneficial for education or government segments.

Assign Reps Based on Location

Often, your field sales team will be assigned to territories based on their location in that territory. This saves on travel costs and increases the ability of the sales rep to engage with prospects and customers on a regular basis. If you have an inside sales force that primarily responds to leads generated online, the physical location may not matter, but you might consider assigning reps based on where the lead came from, keeping similar types of customers grouped together.

4. Create Territory Assignment Rules

Once you’ve created your territories and assigned sales team members, use a customer relationship management (CRM) tool to assign incoming leads and deals to specific reps based on the criteria you define. This eliminates the manual process of directing leads to the right sales reps and lets the CRM keep everyone organized. You can also set up rules to move leads and deals from one territory to another as circumstances change.

We’ve used Freshworks CRM to show you the specific steps needed since it has the ability to create robust assignment rules that you can use to have customers and new leads automatically routed to the right sales team members based on territories. While the specific settings may look different if you’re using another CRM, you can generally follow these steps and make changes where necessary.

Now we’ll explain the steps to create territory assignment rules in Freshworks CRM:

Find Territory Settings

In Freshworks CRM, you can access your admin settings via the gear-shaped icon at the bottom of the navigation on the left side of the screen. Clicking on this brings up all of the various settings you use to set up the CRM, from adding users to billing. Scrolling down to “General Settings” lets you select the “Territories” icon, which is where you can create rules to automatically assign accounts and new leads to specific territory reps.

Freshworks CRM general settings

Create a New Territory

Once you are in the Territories settings, you’ll see a list of any territories you’ve already created, and the option to create a new territory. Freshworks CRM also provides direct links to relevant help articles in case you’d like extra support. Click on the “Create Territory” button to set up a new territory.

Remember, as you create these territories, you should define them based on the customer segments and groupings you defined above. If you decided to segment your customers geographically, your territories will reflect the locations where your sales reps are assigned to manage customer accounts. For example, you’ll notice that we’ve created three territories, each based on the state where the customers are located.

Freshworks CRM territory settings

Name Your Territory

When you select “Create Territory,” you’ll be able to set up the territory based on the criteria you’ve established. Start by naming the territory and providing a brief description. These will help keep your team organized, especially as your sales organization grows and you add more territories.

If you are creating a large number of territories, you might consider including an identifier like a territory number as a part of the name. For example, if you have many geographic territories, you might label them “01-NY North,” “02-NY West,” “03-NY South,” and so on, helping you quickly refer to them later. This also helps when you use more than one type of territory, such as if you have geographic territories, but also have carved out specific industry verticals separately.

Defining territories in Freshworks CRM

Define Territory Rules

Specify the distinct criteria for each territory, whether it’s a location, industry, or size. These are the rules that will automatically assign new prospects to territories as they are identified. For example, you can specify that any prospect with a certain ZIP code should be assigned to the territory you named “01-NY North,” while others go to “02-NY West.”

Freshworks CRM can do this automatically using rules based on any of the data you have about an account in your CRM. It also supports multiple rules per territory, which is especially helpful if you are creating hybrid territories. For example, you may have defined your territories by both location and industry, and want to create rules to assign educational institutions in Michigan.

To do this, select “Add a Rule,” choose the variable you want to use to define the territory, and enter the information, like “Michigan,” for example. In our example, you would then add a second rule, and define “Industry” as “education.” Keep in mind that the territory rules you use in Freshworks CRM will automatically organize your existing contacts according to a territory, so be sure that you’re consistent in how you define them.

Creating assignment rules in Freshworks CRM

Assign to Reps

After you have named your territories and specified criteria for handling new prospects identified within the same area, it is time to assign the individual rep who will be responsible for handling it. In a CRM, this will be the person who will be responsible for following up on the account and tracking activities.

Freshworks CRM saves you from having to do this manually by automatically assigning incoming leads based on the territory rules you defined. It allows you to specify which users have access to these contacts, and which users they should be automatically assigned to. This allows you to keep your incoming leads and contacts organized by territory and ensures that the right sales reps are assigned to continue the sales process.

If you have multiple sales team members who manage accounts in a territory, you can add each of them here. For example, you might have an account manager, sales administrator, sales manager, and a customer service agent assigned to a particular territory.

Everyone you add here will automatically have access to the specific leads, contacts, and accounts that match this territory, helping keep everyone on the same page. This fosters transparency so nothing falls through the cracks.

How to assign sales reps in Freshworks CRM

5. Establish Territory Goals

After you have created your territories and have assigned the right people to each, create goals for each territory that reflect both revenue and sales activities. This will help you keep your sales organization motivated and accountable for their performance. It also allows you to measure the effectiveness of both your overall sales strategy and your territory sales plan.

While there are various ways to evaluate your sales on a territory basis, the most efficient way to set goals and keep track of your team’s performance is to use the reporting features in your CRM software. Sales goals help motivate your team, improve sales performance, and provide a meaningful way to measure the success of your efforts both as individuals and as a team.

Some example of goals you can set as part of your territory management strategy include:

Freshworks CRM reporting dashboard

Revenue Goals

Revenue goals are one of the most common and are easy to understand. They are generally one of the easier goals to measure. To create a revenue goal, you decide the total amount of revenue you expect to be generated in a territory for each period, whether that’s per month, per quarter, or per year. Many sales teams also use sales targets for individual accounts, but for the purpose of territory management, think about goals in terms of the overall territory.

Activity Goals

Another productive way to measure performance is to track activity goals. These measure the activities of your salespeople who generate new sales opportunities and move them through the process. For example, you might set a goal of how many customer appointments a sales rep should have each day or how many prospecting calls they should make. These goals can be especially helpful in new territories where it is harder to determine the expected revenue.

New Customer Goals

The third type of goal you should consider is the creation of new customers. Instead of measuring the revenue produced, you simply track the creation of new customers, regardless of how much they spend with you. This type of goal is results-oriented, rewarding sales reps for following the sales process, and is another helpful way of measuring performance in new territories without extensive sales history to measure against.

Frequently Asked Questions (FAQs)

When should I implement sales territory management?

Generally, segmenting your customers by location or industry is a good practice for any business that handles sales beyond their immediate local market. Once your sales team has grown beyond one or two representatives or expanded beyond one location, it makes sense to create a few territories, even if they are virtual at this point. This will make sure your team isn’t duplicating efforts and helps establish lines of responsibility and accountability.

How do I know which types of customer segments are best?

This question definitely depends on your business and your specific customer types. However, if you find that you are frequently selling to similar types of industries, it can make sense to group those together. In the same way, if you find that large amounts of your leads or customers are grouped geographically, you may want to consider dividing them up into location-based territories.

How large is too large for a territory?

Unfortunately, there’s no specific rule that works for every business. Generally, a territory should be able to be managed successfully by an individual salesperson. That means that the expectations matter more than the specific size. If you expect someone to grow a territory by 100%, a smaller territory certainly makes sense. If you expect them to make eight customer visits a day, that is likely going to be a much larger territory.

The Bottom Line: Sales Territory Management

Implementing territory management in your sales organization will help you focus your sales efforts and create a more streamlined sales process. It establishes accountability for customer segments and eliminates confusion about who is responsible for new leads. Using the steps in this article, you can create territories that help you accomplish your sales plan and generate more new business.

Freshworks CRM is a powerful CRM that includes territory management tools. Paid plans begin at $19 per user, per month, and include lead generation, contact management, and deal management tools. Freshworks CRM offers a 14-day free trial of all their plans, and you can start yours today by visiting their website online.

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