Rewarding the Sales Territory Not the Sales Person
Tuesday, June 16, 2009 at 3:05PM Are you rewarding your sales territories instead of your sales people? Are your top sales people really your top performers or do they merely have the best territories?
I asked a sales manager at a manufacturing company what would happen if his #1 sales person and his worst one exchanged sales territories. Would #1 work his way back up to #1 again and would the worst one find his way to the bottom again, and if so how long would that take? He thought about this for a moment then a light bulb went on and he realized the #1 sales man would either not be able to succeed in the worst territory or would leave for greener pasture without even trying.
The situation I am describing also had a few other important factors at play. The salesmen did not have formal quotas and any targets they were expected to meet were based on their past performance. Both the #1 salesman and the bottom one were coasting.
How can you determine if it is the territory or salesman being rewarded? The first step is to determine what the market potential is for each territory and to establish sales quotas based on these. Depending on the potential, the average sales cycle, and a few other factors you may determine that your salespeople have a capacity limit. Their personal capacity may be limited by time and travel constraints. If it takes them a amount of time for each sale and you assume they spend all their time on that there is a limit to how much business they as an individual can process.
You may want to do this exercise to see what resources you can leverage to allow them to get better use out of their time and to delegate some clerical elements, but the exercise is in part to determine at what point a sales territory needs to be split up and additional salespeople brought in. Some people refer to this as capacity planning.
Reader Comments (1)
Good stuff. I have seen many instances of the territory making or breaking the salesperson.