Let’s get this out of the way: Sales territories are rarely fair. No matter how hard you try, no matter what criteria you use to define them, they will never be perfect. Even when done well, they can cause low morale and friction between salespeople. They’re also difficult to manage and adjust, especially as your team grows.
But before you say “Screw it. Let’s stick with our ‘free for all’ approach,” there are ways to get as close to perfect as possible; encourage your team to focus and collaborate; and provide your individual reps with enough to work. And not just enough to work, but accounts likely to buy.
Divide And Conquer
Before we get to the nitty gritty, let’s talk about why territories are a good idea. According to a study from Northwestern University’s Kellogg School of Management, sales territories “...enhance customer coverage, increase sales [and] foster fair performance evaluation [for reps].” All good things, right?
But traditionally, territories were designed using geographic, demographic and firmographic data points. That means things like location (geographic), title (demographic), company size and revenue (firmographic) were used to divvy up inbound leads and give reps set ‘regions’ to prospect. A company with 1,500 employees just requested a demo? That goes to our Enterprise team. You have a new AE? Give them companies with less than $5M in revenue.
And while that approach can be effective, in modern B2B tech sales, relying solely on these data points to design territories puts you at a significant disadvantage.
It’s a false positive to just assume that because someone is in a particular geography that they, therefore, should buy your product. The same goes for looking at company size. Just because they have a specific number of employees doesn’t mean they’re ready to buy your product. They may have invested in technology in a disproportionate way compared to other companies of a similar size for many reasons that are unknown.
In other words, company size or location are poor indicators of fit, even if some of your current customers share those traits. There are too many underlying circumstances that can change that seemingly perfect prospect into a waste of time.
Granted, geographic and firmographic information is useful when you are refining your territories, but the correlation between things like company size or revenue, and whether they’ll buy your product, is too tenuous to use as the foundation of your sales territories.
So what’s left to inform territory design? If geographic, demographic and firmographic data doesn’t cut it, then what should you use?
The Technographic Era
When boiled down, sales territories are all about ranking potential customers and then dividing up sales load among your sales staff. And to accurately rank your potential customers, you need to examine your current customers.
Writing for Inc., Tim Donnelly advises to “...start by ranking customers or clients into different categories based on the percentage of revenue they generate vs. the time spent servicing them. The "A" clients might be the most reliable ones, the "Bs" and "Cs" might be promising but work-intensive clients, while the rest require a lot of effort for little return.”
Your “A” clients will also be the basis of your ideal customer profile (ICP). What characteristics do all of your “A” clients share? You may notice the majority are in the same industry and around the same size, but this is the point when you should look deeper. Go beyond firmographics, and examine your best customers’ technographic profile.
You may find the customers with highest total contract value (TCV) all share particular technology choices. For instance, they may all use the same sales or marketing automation software -- or, if you sell to HR, a specific applicant tracking system. That trait now becomes part of your ICP, and more than just a box to check when evaluating leads. Knowing what technologies a company is using not only reveals the tools that employees live in every day, but also the maturity of a company.
Segment by Tech Sophistication
Now that you’ve identified the technographic makeup of your best customers, it’s time to use those traits to create territories. One way to do that is by tech sophistication segmentation. If a particular company fits your ICP and uses mostly Enterprise-level solutions, that account should be owned by your Enterprise team, who, traditionally, are the most experienced in working complex, high-value deals.
Continuing along that path, if a company seems like a good fit and uses primarily SMB solutions, then that account should belong to one of your mid-market reps.
After examining our customers, here's a sample table detailing how we could segment by tech sophistication. This is not definitive, just an illustration of what's possible.
So, for example, if you want to sell into human resources, there are a multitude of different payroll providers they could use; a multitude of ATS providers they could use; and as they advance as an organization, and advance in their level of sophistication, they’ll likely improve the technologies that they use. Those are the choices that will indicate whether a company is truly SMB or Enterprise, and whether they’re ready for your product.
Plus, your reps now have a conversation starting point when they decide to reach out. “I see you’re using ‘X’. Our solution integrates well with ‘X’.”
Technographics give sales the ability to see past traditional data sets and really get to know a company, or a department within a company, and its level of maturity. It can also be used a proxy to determine company size and revenue: If a business is investing heavily in Enterprise-level solutions, you can infer they have sufficient revenue and budget to purchase additional tools. Furthermore, if they use Enterprise tools, chances are they’re a larger company or have chosen to invest in complex products in anticipation of growth. Armed with this information, leads can be easily segmented and routed to the appropriate rep.
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