Heidi Thorne is an author and business speaker specializing in sales and marketing topics for coaches, consultants, and solopreneurs.
During challenging economic times and sales slumps, salespeople and small business owners often are tempted to venture quite far from their offices or homes in search of sales. Ironically, in good economic times, sales in far flung regions are also often pursued. The reasoning in that case is that the sales are there, go get 'em while the getting is good. Unfortunately, regardless of the motivation, spanning a sales territory beyond what is effective can destroy profit margins while building sales.
On the opposite end of the sales spectrum, reducing a sales territory to too small a region may reduce sales volumes to the point of not being able provide enough revenues to sustain a business.
Striking the right balance when setting and managing a territory is one of the most important sales techniques to master to sustain and grow revenues.
How Large Should a Sales Territory Be?
Technically, no sale is impossible if dollars, time and legal restrictions are not factors. But in the real world of money and manpower, many sales are impractical or improbable.
There are actually two major considerations when setting the boundaries of a territory:
- At what point does it become unprofitable to provide acceptable customer service?
- What number of calls will salespeople need to make within a specified reporting period (week, month, quarter or whatever time period is relevant) to achieve sales revenue goals? At what distance does it become impossible to achieve that call volume within that time frame?
Both of these questions require diligent tracking of costs, profit margins, sales and service activities. In the first year of a business, territory setting may include some trial and error. But after the first full fiscal year, enough data should be available to begin refining territories. This refining and review process should be done at least annually as changes occur in the business and marketplace.
Example: Pizza restaurants typically restrict their delivery zones (their sales territories) to within a few miles of their location. Why? Because beyond that point, delivery times can take too long, resulting in angry customers and cold pizza!
Clustering Sales Calls
One of the easiest ways to optimize sales territories is to cluster sales calls. Salespeople should plan to spend a morning, afternoon or day making calls on customers that are near each other. This obviously reduces the time necessary to meet several customers. But it also reduces travel costs for gasoline, vehicle wear, airfare, taxi fares, etc.
Essentially, these calls become a route. If a target customer doesn't happen to be available on the day scheduled for the remainder of the calls, that customer can be visited on the next scheduled route to that area. Do not make special calls to these prospects on other days! This derails the plans for those other days.
Many salespeople, managers and owners may be worried that they will appear as not being service oriented and may lose sales. The survival or success of the business never likely hinges on just one sale. As well, customers who demand or expect "drop everything" attention may be high maintenance on the customer service side of the sale and be unprofitable in the long run.
How Clustering Calls and the Calendar Trick Saved Me Two Weeks of Time Each Month
When I was in advertising sales, I covered the greater Chicago metropolitan area which spanned, literally, hundreds of square miles. Early on, in an effort to show how service oriented I was, I would phone and ask customers what time was convenient for us to meet. I would be trekking 25 miles to one suburb one day, only to be back in the same suburban area in a couple of days. Covering my territory took almost four weeks... and then I had to do all the paperwork on the weekends and evenings. I was exhausted!
Then I got wise... and got two weeks of my month back.
First, I started clustering my calls, restricting my call activity to those customers that were relatively close together. If they didn't happen to be available the day I was planning to be in the area, I attempted to visit them the next month.
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Next, while I was meeting with customers, I didn't leave their offices until I had the next appointment confirmed with them. This calendar trick helped them prepare for my visit so that our time together was more productive. I also emailed them the week prior to confirm. This prevented a lot (but not all, unfortunately) of the "he's not here" scenarios—Heidi Thorne
Should a Low Performing Sales Territory be Dropped?
What if after best efforts, a sales territory is in a slump? Should that region be dropped? Maybe, maybe not.
Determine if these factors may be the culprit:
- Changes in the Market. If the area has performed well in the past, evaluate if some changes are occurring in the territory. Do those changes represent a temporary or permanent change in demographic makeup or market demand? If a permanent shift, dropping or limiting service to the region should be considered.
- Sales Staff Issues. Is the salesperson assigned to the territory equipped to handle these customers? Is it too demanding? Does it require multiple sales reps? Frequent review of sales results and dialog with representatives can help determine if staffing changes need to be made to revive an underperforming region.
Limiting the Unlimited Territory of the Internet
The Internet has opened up the entire world as potential customers. Even though this presents the possibility of almost unlimited territories for sales, businesses still need to restrict their service areas due to a variety of logistical factors.
The first and most obvious factor limiting Internet sales territories is the physical movement of products. Not only can freight be prohibitively expensive, but customs and taxation issues can balloon the cost of international sales even further. Compounding the issue are commerce and product safety laws that vary from country to country, usually requiring legal counsel. Topping off the troubles are currency exchange rates which can destroy profit margins if sales are not priced properly.
While international sales are not impossible and can be very lucrative for some markets, a thorough cost versus benefit analysis should be done before attempting these sales. Stray Internet inquiries from international markets are not worth pursuing and, if possible, should be referred to friendly competitors who are in or frequently serve that country.
Some services and digital products do offer international sales possibilities if handled properly. For example, those who self-publish on Amazon's Kindle Direct Program have the opportunity to sell their works on the international stage and Amazon handles all the currency and commerce details.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2013 Heidi Thorne
Heidi Thorne (author) from Chicago Area on September 15, 2013:
Hi epbooks/Elizabeth! As corny as that sounds, the "I'll be in your area" strategy can work for both customers and salespeople. Thanks for chiming in, voting and sharing! Have a great week!
Elizabeth Parker from Las Vegas, NV on September 15, 2013:
I remember years ago when I worked for a chimney company, if we were going to be on a certain block in the area, they would use that in their pitch. "We're going to be on Main Street on Tuesday and Thursday, which day is better..." Great hub here and useful information! Voted up and shared.
Heidi Thorne (author) from Chicago Area on September 15, 2013:
Hello FlourishAnyway! Wow, being an HR investigator must have been a quite an adventure. :) Time is a salesperson's most precious resource. Unfortunately, it often gets spent quickly and ineffectively. Thanks for stopping by and adding your insight!
FlourishAnyway from USA on September 15, 2013:
The advice you provide here is spot-on. I used to be an HR Investigator serving Sales clients nationwide for a Fortune 500 consumer products company. Performance disputes were commonplace, especially with newer employees who believed it could not all be done. Being an effective salesperson is very much about optimizing your time.
Heidi Thorne (author) from Chicago Area on September 14, 2013:
Agreed, billybuc! Sales is not for the faint of heart. It is emotionally and often physically draining. However, I found when I changed my territory management strategy using some of the techniques I've shared here, it got a whole lot easier. Thanks for stopping by and Happy Weekend!
Bill Holland from Olympia, WA on September 14, 2013:
I was only a salesman once. I sold wine for two years and honestly, I hated it. Asking customers for sales and floor space and shelf space...it was all tedious and embarrassing to me. Having said that...great information here for anyone so inclined. :)
Have a great weekend Heidi!