Territory management is changing. Some of the shifts – reassignment and relocation – are customary for salespeople. Yet new technologies and the pressure to maintain an efficient bottom line create faster change and a need to manage salespeople in the field more efficiently. And then there’s the change in the very definition of territories. Some companies are dropping the old geographic divisions of sales responsibilities, shifting to industry and product-line segmentation of their markets. This new way of organizing sales reflects the shift to national marketing and team selling for major accounts. Even when top salespeople serve major accounts nationally, however, the old geographic divisions may still matter. Customers reached by alternate distribution channels and franchises may still be put in territory “buckets.” And the frequent and direct contacts that must be made with retailers are often still organized by local territories. So some old rules still apply, albeit in new forms.

Keep In Step

Territory management is still basic to many companies’ overall business plans. The plan sets target sales and profit margins at least annually. By breaking these down into product lines and territories or by customer segments, the overall goal still becomes the sum of individual territory goals.

If goals are not met at the territory level, they will not be met at the company level. Wherever a territory falls short of plan, something is wrong, either in the territory or the plan itself. Where goals exceed plan, perhaps the company has underestimated an opportunity for improving sales and should quickly shift resources into this region.

Territory assignments often need to be changed even if results are generally within plan. Markets change, salespeople leave or arrive. And experienced salespeople improve in their market knowledge and selling skills.

That argues for expanding responsibility, but not at the cost of losing vital customer relationships. It can be tricky to balance both goals, but that’s what the smart manager does.

“Things get knocked out of whack” even in a good territory plan, says Jim Brown, vice president of Metron Inc., which performs territory reassignment work for some of the nation’s top companies. Brown says that sales managers need to be alert to all these changes and take advantage of them. He also points out that sales assignments are looked at as frequently as every six months or as rarely as once a year. Most companies make reassignments about once a year, which he recommends as a good general benchmark.

But special factors should accelerate a review of territory assignments, Brown argues. An acquisition of a new product line or a change in marketing strategy should be followed immediately by a re-examination of how salespeople are assigned. Ideally, the new look begins even before a product or strategy shift is finally decided on.

And young firms in fast-growing markets should look at their assignments more frequently than once a year. Things go “out of whack” faster in booming new markets. One primary objective of any territory assignment plan should be to balance the sales load evenly among salespeople. Surprising growth in some markets can stretch salespeople beyond their practical capacities to tap all prospects.

The steps in a territory reallocation effort are straightforward. Management identifies and locates current customers and near-term prospects. Management then specifies a call plan for each customer segment, setting the number and types of contact – in person, by mail, telephone or e-mail – that should be made with each type of customer.

Setting the call plan may be altered by new communication technologies. If it is possible to substitute electronic communication with a customer for in-person contact, now is the time to identify that opportunity and integrate it into the call plan.

Brown sees such changes happening, but not having a dramatic impact on Metron’s territory assignment work. Most of the new sales technologies improve the speed or information content of earlier technologies. It is usually a case of a better machine replacing an older machine, rather than outdating a person. For example, the Internet can substitute for phone, mail and faxes. Video technologies may eventually replace some in-person contacts, but are limited now to special uses.

New technologies can also enable use of alternate sales channels to reach consumers directly. When this happens, it is part of a strategy change and best addressed above the level of sales management.

While considering technology in the territory plan, remember that the guts of a good plan is still managing personal contacts. With one goal to minimize the “windshield time” a top salesperson spends driving around, rather than actually seeing prospects, Brown says another would be to make sure each salesperson gets prospects that match their time and abilities. Minimizing drive time is chiefly a mathematical exercise, so Metron uses a proprietary software, TerrAlign, to perform that part of the job. The program calculates the best set of territory assignments for each salesperson, given the geographical locations of customers and salespeople.

Companies can run an optimization program for a small district, multistate region or entire national sales force. The larger the area considered, the bigger the dollars and more complex the math. That is a powerful reason for using a computer program for this part of the problem. Metron’s software takes less than a minute to minimize “windshield time” for a local force and about four hours to reallocate a major national sales force.

For a local territory realignment, a manager could do the same thing as the computer software but not as thoroughly or as quickly. To realign a national sales force, there’s just no sense going back to the abacus method used earlier in this century. This is especially true when managers want to change assumptions and adjust results to reflect nonquantifiable factors. And because territory assignments involve so many personal factors, managers must change assumptions continually.

Avoiding Pain and Saving Time

Figuring out the math of territory assignments means balancing workloads and minimizing travel time and costs. With TerrAlign, that is the easiest part of the job, Brown says. For a firm with 1,000 salespeople and 200 managers, Metron recently redesigned territory assignments in five working days. The company had all the data in its overall sales plan ready, so the job was straightforward. A smaller reorganization involving 44 territories and six managers was completed in less than two days.

But, Brown says, it is frequently more complicated than that. Computer programs cannot take into account human factors – who wants to move and who wants to stay put. TerrAlign thus reports the recommended territory plan and shows what will be required to meet it. The consultants at Metron go over these results with sales managers who know their people and have to implement the plan. Adjustments, based on customer relationships or unique skills of certain salespeople, can then be taken into account.

The formal planning process is still necessary. Without it, Brown says, a good reassignment plan may be simply “too painful” for a company to implement on its own. And it takes too long. Without outside consultants and their specialized tools, Brown estimates many companies spend up to three months doing their territory changes.

In a rapidly shifting market, three months is about as long as any plan will last.

Metron uses new communications technologies to speed up the planning process. In addition to TerrAlign, the consultants conduct their planning reviews electronically. For example, in a recent assignment for an East Coast-based firm with national offices, Metron shipped a laptop overnight to Seattle with the realignment plan. Sales managers there could review the plan and suggest changes. A manager who wanted to see how the plan would look with several adjustments could thus rework it on a computer screen in his office. Without that ability, “it would have taken two days of travel” to accomplish the same thing, says Brown.

That is Metron’s basic point. They are selling speed, accuracy and best results for a process that every selling firm goes through one way or another. Pharmaceutical giant Pfizer says it improved sales and reduced costs enough to repay Metron’s costs 20 times over.

A “Deployment Model”

The old territory problems are not only being solved faster with computers, they are being altered in fundamental ways – and in the language used to describe them.

“Some people don’t even say territory management anymore,” jokes Tom Tice, a principal sales consultant with William M. Mercer. The term sounds like a “horse and buggy” phrase that conflicts with new techniques of assigning responsibilities to cover important markets.

Craig Ulrich of Mercer calls the new techniques “a change in deployment models.” The geographical division of markets is being replaced by an “industry or industry/product matrix.” That means companies assign top salespeople to cover a particular customer industry. That assignment may be for all of the selling firm’s products or just one product line (the “industry/product matrix”).

Ulrich agrees with Jim Brown that the reasons for this shift have only a little to do with the improved reach of new technologies. The basic reasons are that customers are looking for more value from their suppliers and demanding more sophisticated selling.

More value in a business-to-business sale or a sale through a wholesale/retail outlet means the salesperson is not just selling a product, but a whole set of services and expectations. These include prompt delivery, choice, quality, service and promotion for consumer products. While no single field salesperson can tie together all of these value components, senior salespeople, heading selling teams, can.

Ulrich calls this nongeographic approach “customer segment coverage” or “customer franchise management.”

Even when major selling relationships are managed in this new way, however, geographic divisions can still be important. “You still need the feet on the street,” Ulrich notes, when dealing with retailers. He cites consumer electronics as one important instance where calling on dealers, checking returns and other customer service functions still need regular attention by direct contacts.

Where the Buggy Still Works

So Tice’s “horse and buggy” territories must still be assigned to perform direct selling correctly. But the type of selling function will affect the size of territories and their collection into regions managed by sales managers.

Tice notes that the concept of territories began when a sole proprietor who did his own selling began to contract out the sales function to reach more customers and save management time. Two, three, four or more salespeople were added until the proprietor found managing them too difficult – typically at eight to ten salespeople. Then the sales manager was born. That is the “life cycle” of the territory and region, Tice says.

Even today, in the age of electronic selling, teams and deployment models, the same considerations still determine territories. The aim is to reach as many customers and prospects as possible, economically, while conserving top managers’ time.

“The old rule of thumb used to be one manager could control eight salespeople,” Tice says. That rule is being stretched in some cases. The pressure comes from efforts to eliminate middle management and to downsize corporations to efficient staffing levels, he points out. Sometimes this can be done. “The span of control may be 30 to 1” in some companies, Tice estimates. That means one manager controlling or supervising 30 salespeople.

The new communications technology makes that broader “span of control” feasible – if all that a sales manager does is send instructions and collect information. But Tice cautions that is not all many managers do. “Managers must manage,” he emphasizes. In many cases, that means coaching and accompanying salespeople on calls to check customer reactions, beef up the sellers’ representation, or answer technical questions about the product or the selling firm.

Where this sort of direct selling and hands-on management must still be done, the old rule of thumb is still closest to best practice. Salespeople must make frequent direct calls and managers must maintain close and personal contact with salespeople. The old geography lessons still hold here: Territories and assignments must minimize the time wasted in getting around.

Hybrid Models

Increasingly, in many industries, the industry approach is being combined with geographic assignments. This hybrid approach to segmenting customers blends the sophistication and commitment of team selling with the direct contacts that geographic territories make possible.

In hybrid systems, top accounts get a national team that visits less often but maintains constant contact by the best electronic tools. The big sales calls are, in effect, conferences among senior managers of both the buyer and the seller – everyone who is involved in using, making, selling and advertising the product.

The big calls are followed up and reinforced by more frequent contacts at a more junior level. These are the traditional calls to check on status, confirm customer satisfaction or fix any problems that occur. They also give the selling firm a personal look at how its products are being used or marketed by the buyer. Tice calls this “channel touching” for wholesale buyers and “customer touching” for ultimate product consumers. He says it remains essential for many of his clients.

In some cases, the “touching” function is basically a customer service job. This is not a senior selling position and, in many companies, has not been considered a part of selling at all, but of product service.

In major companies, a team of senior salespeople follows the industry or industry/product model. Customer service specialists are assigned geographically, with great emphasis on making them as efficient as possible in contacting as many customers as frequently as possible.

The best communications tools tie these direct service people to headquarters so that customer complaints or questions can get prompt responses. These same tools may enable salespeople to be managed loosely by relatively few managers – what Tice calls a “wide span of control” – because their jobs are relatively straightforward.

The critical skills of such junior service people will involve attention to customer needs. A compensation plan that provides incentives for account performance may be better than excessive management advice. The sales manager’s role may be intense in the early phases of a service salesperson’s career – training in sales, service, customer and selling company skills. But the ongoing management role lessens as the service salesperson works with customers.

The tricky part of managing these hybrids of national and local selling is not the old territory assignment or sales force tracking challenge. It is working within a team where the lines of responsibility run in several directions at once: up, down and crosswise. The territory then becomes a maze that no computer can navigate. Only resourceful and flexible sales professionals can figure out this new territorial geography.