Territory Management: Creating A Winning Battle Plan

Territory Management: Creating A Winning Battle Plan

As we march towards the start of a new year, the annual ritual of territory planning is upon us. Effective planning and management of sales territories can boost the sales team’s morale and increase sales. But since this process kicks in just once a year, most companies don’t have a well-defined operationalized process to plan the territories. In most small-mid size companies it is up to specific individuals who decide based upon guts and instincts, instead of data-based insights.

Here is my take on how to create a successful battle plan for defining and managing territories.

  1. Go-To-Market Strategy

There are numerous ways to define a territory using attributes such as Geography, Customer Segment, Customer Size, Demographics etc. To set up effective territories, sales leaders must first understand their business environment and their Go-To-Market (GTM) strategy for the year.

Knowing your GTM strategy and your business priorities are the first step towards defining the territories.

  1. Market Analysis and Segmentation

Before you can develop an effective sales territory plan, you need to take stock of your existing clients, prospects and leads. Start by grouping your customers and prospects based on location, industry vertical, purchase history, size, etc.

Not only must you know who your current and future customers are located, but you should also be able to answer the following questions about each group:

  • What are your customers buying? Are certain solutions, services, or products outperforming others?
  • Why are your customers buying?
  • Which causes prospects to not buy?
  • What is your conversion rate? Where do conversions tend to drop off?

Answering these questions will help you spot overarching trends in the market and better craft your territories.

  1. Evaluate Sales Reps

After the GTM strategy and market opportunities are analyzed, it is time to take a closer look at your team.

Assigning sales reps to the territories where they can perform best is key to effective territory management. Sales rep’s placement will depend on their performance and experience, as well as the account and territory assessments.

When evaluating sales reps, two assessments should take place: one for quantitative performance- the number of accounts the rep has, the number of new contacts the rep has contributed, the conversion rate for leads to opportunities, etc., and another for qualitative performance -Does the reps have the skills and ability to be successful with this group of customer? For instance, if the territory has customers who prefer in-person meetings, you should pick the sales rep who can be available for in-person meetings without requiring too much travel or budget.

  1. Define Territory Specific Targets

Whether you are mapping out a new territory management plan for the whole team or redefining a specific rep’s sales territory, it is always best to set clear and measurable goals specifically defined for that territory.

Distributing the company’s Targets/Quota evenly across all territories is often not the most effective way to manage the territory. In determining territory-specific targets, one should consider factors such as – pipeline (vault size), purchase history of customers, marketing initiatives planned for that territory, and market research on customer sentiment.

  1. Communicate

All the effort put in defining territory and targets will go waste if the sales rep is not onboard with the GTM strategy or the reasons why the target quota is attainable. It is important for sales management to have 1:1 communication with each sales rep to answer concerns and ensure that the sales rep is motivated and excited about the potential of the territory.

  1. Ongoing Evaluation

Territory planning is considered an annual task, but it should not be. Your sales team is constantly changing, and so is the potential of the territory. As new leads enter the funnel the workload of the sales team needs to be managed on an ongoing basis, at least quarterly if not more often. If you notice that a rep or territory is underperforming, it’s crucial to get to the root of the problem and modify the sales territory management plan as necessary.

One should not be afraid of making mid-year changes when needed. Mid-year changes, though painful to administer, provide the much-needed course correction and new impetus to the sales team for long term success.

An effective Territory management plan can help spread out the workload for your sales team, allowing them to complete tasks more efficiently, build better customer relationships, and increase the good-quality leads that they get. Just as important is the motivation it provides to your sales team if they feel like they are being productive and accomplishing a lot of the sales goals they set out to achieve.

Moving into 2019 with increased confidence in GDPR Compliance

Moving into 2019 with increased confidence in GDPR Compliance

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We’ve all seen it—the burden placed on IT teams to be everything to everyone. And for a time back from the late 80’s to the mid 2000’s that was the reality. The ability of IT teams to tackle everything IT-related was nothing short of astounding—from building custom CRMs to managing phone systems, handling the company’s website, and even building homegrown Sales Performance Management tools.

The sad reality in all of this is that approach is no longer an option. The role of IT has changed greatly, to say the least. Gone are the days of building from scratch—replaced with managing projects and business processes that span from keeping the proverbial lights on to implementing new and exciting revenue-generating projects.

And though the days of custom infrastructure and platforms built by the IT team should be over, far too often companies still fall into the trap of believing that homegrown applications are better and more cost effective than publicly available options.

Unfortunately, few consider the reality of what it truly means when it comes to the do-it-yourself approach. The costs associated with maintaining legacy systems can be astronomical—after all, a software company needs to be built and maintained inside the organization for the long term. This is costly: developers, time and energy are spent in maintenance, upgrades to align with changing infrastructure, and the list goes on.

There is also the reality that talent comes and goes, leaving new employees burdened with learning legacy systems, code types, and processes that may eventually become obsolete. All of which lead to more costs in the long term with little to no upside.

However, that’s not where it ends. Far beyond the bandwidth of maintaining legacy, homegrown systems, there is also the stark reality of the new digital age. It’s no surprise that digital transformation has become the single greatest business driver of the twenty-first century. The dissolving of IT silos, the integration of disparate systems that now need to perfectly connect to deliver better user experience, and the impacts of the digital economy all play a major factor in future business success.

With that need for integration comes one of the biggest challenges that companies will face in the next five years—making legacy, homegrown systems work seamlessly with the outside world. For so many companies, the idea that internal systems would one day need to bend to the needs of the end user, be cloud-ready, and so on was simply not in the plan. The future view of legacy systems was simply a financial decision based on saving money at the time—never realizing the astronomical cost of maintaining and evolving systems as the world’s expectations changed.

Not to be the bearer of bad news, but this still gets worse. The single greatest threat to companies in the digital age is IT security. And as data breaches, attacks, and theft become more and more prevalent, the need for enhanced monitoring of systems is paramount. The question becomes: How does one monitor something as archaic as an Excel spreadsheet or aging SPM system? The unfortunate reality is that one of the most common security-related issues is processes built with no controls in mind.

On any given day, people from any department can easily access and make changes to systems without any Identity Access tracking. This situation can lead to everything from compliance issues to data breaches and outright theft—all due to the fact that no one can tell who is doing what, from where, and when.

So is it surprising that one of the most notorious examples of this is Sales Performance Management systems? Whether it be maintaining it, integrating it into more modern systems, or securing it, the fact is that eventually the homegrown SPM system fails—every time.

Eventually the cost will catch up in some way or another. Maybe it’s integration and cloud access that will cost too much (even in loss of productivity) or, worse, a data breach that will bring down the company due to lack of security.

My advice—don’t live in the past, because homegrown solutions always fail. Get the professionals to plan and implement a Sales Performance Management solution for you that will truly meet all of your needs, without the cost of bandwidth, productivity, or security. Then imagine what your IT team can actually do for you—drive business and revenue—instead of just keeping the lights on.

Motivating Sales Team in the new SaaS world

Motivating Sales Team in the new SaaS world

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The SaaS movement is all about how customers buy and pay for value delivered. There is a dramatic shift with SaaS in how customers buy; hence, how we sell and incentivize sales teams. Before we can talk about how to adapt sales compensation plans to the new reality of SaaS, let’s understand how “we need to change our sales approach.”

Here are the key “sales approach” shifts happening with SaaS:

  • Focusing on our sales process Helping customers make buying decisions
  • One big decision Trying out things without exit barriers
  • Bulk Purchase Incremental purchases and “pay-as-you-go” and “pay-as-you-consume”
  • Kill and move on Land & Expand
  • Will they sign Will they be a profitable account (strategic qualification)

Previously, sales teams were more like hunters. Now they need to be both hunters and farmers—customer success. Even if customer success roles are separate in the organization, the way in which salespeople connect and sell sets up the foundation for customer success. Salespeople need to think beyond meeting their quota or maximizing their commissions; they need to build customer success-driven growth momentum.

The SaaS shift is also having a significant impact on company cash flow. Although there is a reduction in the “highs” of large deals, on the positive side there is more steadiness in long-term cash flow in addition to the potential for a reduction in overall sales costs. The SaaS movement has a huge impact on how we qualify and engage with customers, and how we incentivize our sales team.

Many software and technology companies that only sold “one-time” or “perpetual licenses” are now transitioning aggressively to selling “subscription licenses.” This is happening across the board for small and large value software licenses. This shift has huge implications on how companies sell and how they design sales compensation plans for their salespeople. There is a higher risk of dissatisfaction amongst sales teams due to lower upfront commission earnings on new customers since the value realization is pushed into the future. 

On the other hand, the company has to be concerned about “retention” and “realization” from new customers and not pay commissions aggressively up front. This shift has huge implications on the sales force and sales plans. How companies handle the sales force structure, role and sales plan will decide who the winners and losers are during this huge shift.

SaaS Plan Design Considerations

Sales incentive plan design strives to optimize the interplay of three objectives:

  1. Incenting the right behaviors
  2. Protecting earning potential and cashflow
  3. Managing incentive spend ROI

Incenting the Right Behaviors

With SaaS, salespeople are no longer just closers and hunters. They need to be selective in the customers they acquire based on the long-term retention potential of the customer. Their focus has to be on transparency and value delivery to both the customer and the company.

The sales effort for a subscription fee model versus the upfront license model may not be that much less. So while revenues are realized over time, the sales effort is loaded up front. We need to recognize that and reward the salesperson with either a higher commission (on lower ACV of SaaS) or a sign-up bonus for new customer acquisitions.  

At the same time, salespeople need to be tied to the long-term success of the client and hence need to have renewal, retention and up-sell components that are more aligned to how customer value realization works for the organization.

Case-in-Point: A technology company wanted to grow rapidly and increase the number of customers they had. They decided to give signup commissions to salespeople for any account they signed. At the same time, the company did not create specific qualification requirements in the sales or commission process. They felt they could have the same kind of success with more clients than they had with their past clients—who were very selectively picked. The end result—after two years—was poor revenue realization. Many of the customers they sold were not long-term buyers. Moreover, these were not ideal clients and, consequently, whatever revenue they generated was not as profitable.

To incentivize a long-term perspective in salespeople’s behavior, a company may combine both a carrot and a stick approach.  The company can give bonuses for retention rates, renewal rates, up-sell and a profitable product mix. On the stick side, the company can also claw back commissions on customers if the customer discontinues within a certain timeframe, say they cancel in the first 6 months.

Another way to ensure the quality of customers is by rewarding managers and leaders on customer success factors such as CSAT, NPS and renewal rates. In the SaaS era, it is important to tie the salesperson back to the long-term success of the customers. They may themselves act as Customer Success Managers (CSM) or have a supporting CSM helping them. In either case, their commissions should be tied strongly to long-term revenue and the profitability of customers.

Protecting Earning Potential and Cashflow

When the transition to a SaaS licensing model is rapid for an organization, there is a reduction in first-year contract value (ACV) of new customers. To make up for this reduction in ACV and hence commissions, we need to reward the salesperson on subsequent year revenue through retention and renewals commissions.

By adding a retention and renewal component, we make the salesperson’s earning potential from a sale fair. However, there is a delay in realization which means that their current year commission cash flow would be negatively affected at the cost of future commissions.

To make up for that negative impact, companies can do two things:

  1. Increase the commission rate on first year ACV
  2. Provide a reducing guarantee on commissions that runs anywhere between 6 to12 months

The cash flow issue can also be mitigated by putting in an MBO or behavioral component for one or two years to help focus on the behavioral change needed, and by deciding how and what kind of customers should be acquired.  For example, they could get a multi-product bonus or a bonus for certain product line ACV above a certain amount.

Managing Incentive Spend ROI

The shift towards SaaS models brings about significant “revenue realization,” “cost of sales,” and “cost of commission” changes for a company. Suddenly, the company is paying out more in commissions for “future revenue.”

The interplay between cash flow shifts, salesperson earning potential, customer lifetime value and customer acquisition costs have to be modeled accurately in designing the sales commission plan.

The incentive plan has to shift from direct upfront commissions to a combination of upfront commissions, subsequent commissions and additional metrics of customer success over time. The worst thing that a company can do is break the incentive bank on “bad sales” in terms of the lifetime value of a customer. Another thing to account for is not giving guarantees for too long such that they become handouts.


The movement to SaaS is a huge shift and it will impact organizations both negatively and positively. Organizations that adapt and change to the new way of selling will thrive and grow, while the others will languish.

To thrive, organizations will have to rethink and re-articulate their sales process and focus on delighting customers and creating customer success. Salespeople will need to be motivated to become value creators and to build long-term success (versus meeting quarterly numbers).

The sales compensation plans will have to be more nuanced and modeled extremely carefully to ensure that motivation is not only sustained, but also strategically aligned. The compensation plans will have to ensure that salespeople aren’t negatively impacted by the shift so that companies can avoid having to compensate them for the loss of income. 

Moving to a SaaS model, if handled well, is a great opportunity for companies to leapfrog ahead of the competition.

Even with the pains of change, every disruption is a foreteller of a great opportunity!