For ages, companies have perceived countries as a collection of different markets or regions. These territories start large from the outset, and a young company just getting its feet wet might have two sales representatives that split the United States into two areas, east and west, divided down the middle.
As the company gains more experience and grows, additional agents are added to the mix and territories grow smaller and more specific. Using the previous example, the two halves of the country could be split into states. This could be further broken down into ZIP codes or even neighborhoods.
At some level, creating and managing territories becomes more complex. Companies begin to look at a variety of factors to determine how many reps are need to cover specific areas. Additionally, reps may need more in-depth levels of support from product and industry specialists. As sales teams look to effectively reach highly specific markets, territory management becomes a significant challenge.
As a recent whitepaper from CSO Insights notes, tools such as incentive compensation management (ICM) and sales performance management (SPM) software can help aid the development of regions and better manage these various territories. Upward of 60 percent of businesses use software solutions as a means of setting and managing territory sizes, according to a Varicent report.
Furthermore, that is the case regardless of company size. For example, approximately 65 percent of organizations that make less than $50 million annually use this approach. At the other end of the spectrum, the same percentage of companies generating upward of $1 billion annually leverage computer software as well.
However, many companies still use archaic and generic solutions such as Microsoft Excel spreadsheets to manage territories. This can greatly impact management capabilities across the board, both in terms of functional operations and this software just being generally difficult and laborious to work with.
"Still, two-thirds of these firms continue to manage territories and commissions using spreadsheets, limiting their ability to gauge plan impacts and flexibility in implementing changes," the white paper adds. "But there appear to be other, more significant problems for these firms. Voluntary turnover is 31 percent and involuntary an additional 14 percent for a total of 45 percent annual turnover! Of course, this high level of turnover also means near-constant reassigning of accounts and team members, which is problematic since doing so is rated effortful to difficult."
Dedicated ICM and SPM solutions can greatly improve operations and the ability of companies to manage territories.