The goal of territory planning is to achieve an optimal level of market coverage with the resources available.

The way in which this goal is achieved varies according to the type of company and market concerned. Some typical questions we ask prospective clients in order to clarify their aims include:

• Do you want to increase the efficiency of your customer service?
• Do you want to prioritize the acquisition of new customers in certain segments of the company sales/service network?
• How important is increasing turnover levels among existing customers?
• Could low-turnover customers be better served via a call center?
• Are the company's support response time and quality in need of improvement?
• How important is it for any realigned or new sales/service areas to contribute toward better market coverage and/or customer accessibility?

The ideal solution varies according to the precise goals of our clients. A few possibilities include the:

• Design of a completely new territory structure
• Realignment of some or all of an existing territory structure
• Reduction or expansion of sales force assignments.

Any territory planning should commence with a clearly and unambiguously defined vision. Only then can the appropriate planning parameters be established.

A well-functioning and efficient sales force structure depends upon the equal distribution of the elements that most directly contribute to a company's success:

• Workload (e.g., driving routes and number of customer assignments)
• Market potential
• Turnover

Various factors - e.g., the branch of business concerned - determine how heavily certain criteria should be weighted in the course of a territory planning.

Planning specifics

Resource planning entails the evaluation of various critieria whose precise nature depends upon the branch of business, concentration of customers and complexity of the product/service being offered. Companies generally take either a location-, product- or customer-oriented approach - or some combination of these - to meeting the challenge of full market coverage and optimal customer service.

Location-oriented sales territory structures:
All sales/service personnel are assigned territories within which they are responsible for introducing the company's entire product line to prospective customers. The clearly defined borders of the assigned territories serve as an incitement to offering the best possible customer service.

Additional advantages of this approach include easy comparability with regard to sales representative performance, low travel costs and relatively straightforward scheduling of customer visits.

Less favorable is the fact that when it comes to consultation-intensive products or companies with a very wide spectrum of products, sales representatives tend to focus on a more narrow range of products during their sales visits. In planning or optimizing location-oriented sales territory structures, it's also important to give consideration to regional differences in turnover potential, workload, number of customers and accessibility.

Product-oriented sales territory structures:
In the case of companies selling products requiring significant explanation to prospective customers - for example, pharmaceuticals and medical technologies, a product-oriented sales territory structure is often preferable. Customers are served on an individual and as-needed basis. The territory structure can easily be organized around the areas in which profits are concentrated. An additional advantage of this approach is that sales representatives can be assigned territories of varying sizes dependong on the turnover potential of the products for which they are responsible.

The disadvantages of this approach are clear: In order to provide full market coverage, multiple sales structures are necessary, resulting in higher travel costs than in the case of a location-oriented sales territory structure. In some cases, individual customers will be served by multiple sales representatives. Sales-related planning as well as any global company actions are more complicated with this kind of structure.

Customer-oriented sales territory structures:
Another option is the so-called customer-oriented sales territory structure. This type of structure often resulted from instances in the past in which companies took advantage of the lack of local ordinances governing territorial exclusivity.

The organization of sales structures according to branch or customer type should be carried out based on the extent to which this option maintains and further develops existing customer relations. This type of structure places customer needs above all else and is particularly well suited to companies with services or products that are very labor-intensive and must be adjusted according to the needs of individual customers. Often customers are quite geographically dispersed in the case of companies who take this approach.

Customer care and particularly new customer aquisition are difficult to plan and implement. It's also difficult to compare the performance of individual sales team members and calculate actual travel times associated with customer visits. Compared to the two previously described structures, the number of customer visits per day is markedly reduced in this type of structure.

Other (and mixed) sales territory structures
There are numerous variations on these three main structure types. For example, structures are often adapted to concentrate on major customers or adjusted due to the existence of one or more call centers.

Even when companies have sales territories that span two or more countries, the general planning principles and structure types outlined above still apply.

In some special cases, sales members are assigned both a specific territory and a particular classification of customer, allowing them to build up and utilitze their specialized knowledge and sales strategies. In these cases, a location- and customer-oriented structure coexist. One often finds this type of configuration in companies who have restructured their sales territories in the past but who have preserved some of the existing customer-sales representative assignments. Once a given sales representative retires or leaves for another position, his or her customers are typically assigned to the sales representative responsible for the territory in question.

Important territory-planning parameters

Successful territory planning creates a consistent structure designed according to the most important parameters, including:

Existing customer relationships: It's sometimes best not to disrupt existing customer relationships in order to ensure the continuance of the turnover volume for which these customers are responsible. However, while this may  hold true in some cases involving products requiring a high level of service and consultation, a change in customer-sales representative assignments is sometimes just as likely to positively impact turnover.

Abilities of the external sales force: In theory, all external sales force members are capable of generating the same turnover, but this simply isn't the case in practice. Also, some sales force members are responsible for office duties as well as visiting and advising customers. Consequently, any territory structure should take this human element into account.

Territory size: Travel time inevitably increases as the sales area grows. After a certain point, overnight stays are necessary. A general rule of thumb is that the quality of customer service dramatically decreases in the case of day trips exceeding 80-100 km.

Company locations and employee places of residence: When planning a structure, it's important to consider sales staff's places of residence and/or the locations of existing company sites. Only rarely do employee contracts give companies the right to require staff to change their places of residence.

Natural barriers: Natural barriers such as mountains, lakes and rivers can often increase the time required to reach customers, resulting in less time available for consultation. It is therefore advisable for companies to designate these these natural barriers as boundaries for territories located in such areas.

Cultural barriers: Cultural and linguistic differences should also be taken into account when planning a territory structure.

Seasonality: The turnover volume of many branches of business has a markedly seasonal element. A typical example would be chocolate, demand for which rises during the period leading up to Christmas (and then drops off), with an additional spike around the Easter holidays. Any planned structure should take the seasonal phenomenon into account.

Territory planning phases

Territory planning is a process that can be broken down into the following five classic phases according to task and those directly involved:

Phase I:

Analysis of the existing structure

Those involved*:

External consultant (if desired/necessary)

Tasks:

• Customer analysis (ABC)
• Market anaylsis
• Territory analysis (analysis of the degree of exploited potential as well as general strengths and weaknesses)
• Determination of any existing problems
• Estimation of future potential

Risks:

Proceeding without adequate analysis makes it difficult or impossible to identify existing problems and prevent future ones. Consequently, it's advisable to make use of the services of an external consultant.

Time line:

1-2 weeks

Phase II:

Defining of goals

Those involved*:

Management

Tasks:

• Determination of the kind and scope of action that needs to take place
• Territory expansion/reduction
• Planning based on customer potential, frequency of visitation, amount of coverage, turnover
• Regional and supra-regional distribution
• Consideration of any restrictions
• Data research

Risks:

Planning territories according to potential is the best method, but also the most difficult, because estimates in the absence of market research have limited value. Consequently, many companies plan according to turnover volume, but this can be risky, because the turnover figures in question reflect past - and not necessarily future - values.

Time line:

2-3 weeks

Phase III:

Implementation of plan

Those involved*:

External consultant

Tasks:

• Selection of structure type (location-, product- or customer-oriented)
• Selection of planning method (potential-, workload- or logistics-based)

Risks:

External influences can limit the scope of the planning. Examples include existing customer relationships, natural barriers (e.g., mountains, rivers), cultural and linguistic barriers, seasonality, company locations and employee places of residence.

Time line:

1 week

Phase IV:

Controlling and fine-tuning

Those involved*:

Management; regional directors; field staff

Tasks:

• Determination of whether goals have been addressed
• Determination of whether the proposed territories are practical
• Adjustment of individual territories (if necessary)
  

Risks:

Gaining acceptance of the new territory structure from existing field staff. If too many exceptions are made to the planned structure, the existing territories end up remaining virtually unchanged.

Time line:

2-8 weeks

Phase V:

Implementation of structure change

Those involved*:

Sales team; in some cases, Human Resources

Tasks:

• Drawing up of contract(s)
• Customer information/allocation
• Ongoing evaluation of success

Risks:

In some cases, new contracts with other commercial entites must be entered into, which sometimes makes the conditions less favorable.

Time line:

6-12 weeks

* Including any other parties directly involved with or affected by the proceedings (e.g., sales, controlling and/or management)

It's essential to allow adequate time for the planning and implementation of a new territory structure. Our experience suggests that this process usually takes between six months to a year, depending on the size of the company concerned.

Go it alone or with the help of a consultant?

Territory planning is time-consuming and necessitates significant expertise and finesse. Particularly in the case of large territory restructurings, external sales force members are sometimes slow to accept the new structure, fearing a loss of privileges or status.

An external consultant can provide much-needed objectivity and is often the best person to offer a frank assessment of the changes required for a given company to achieve its goals. Also, a consultant with many years of experience can render a professional estimate of a given restructuring proposal's chances of success.

External consultants are ideally placed to coordinate the negotiations between those involved and oversee the restructuring time line. Such consultants can also prepare company data for analysis and procure relevant market data in order to more accurately estimate potential.

The following elements comprise key components of a professional consultancy:

• Preparation of the customer base
• Analysis and visualization of customer data
• Visualization of the existing sales or service structure
• Procuring of relevant economic or socio-economic data
• Evaluation of existing territory structure
• Optimization of sales and service territories
• Design of a new territory structure
• Implementation of territorial reform
• Reduction or expansion of the external sales area
• Amalgamation of multiple external sales force lines
• Proposal of alternative territorial structures
• Preparation of results in the form of maps and reports for every region involved
  

Companies are well advised to consider the many benefits of using an external consultant when planning and carrying out a territory restructuring. Doing so often results in a greater level of objectivity, speed and quality. This can, in turn, help ensure the long-term sustainability of the restructuring.

Territory planning checklist

Whether you carry out your territory (re-)structuring alone or with the help of a consultant, the following principles should be observed in order to ensure its  inter-company acceptance as well as its overall success:

• Allow adequate time for the planning and implementation of the restructuring (a minimum of six months)
• Acquire all available data and details on the existing structure and enter these into a database
• Give all those involved a time line for the restructuring
• Give consideration to any suggestions from sales force members who have detailed knowledge and/or significant experience
• Clearly define the company goals (e.g., create more time for customer visits, increase new customer acquisitions by 10%, focus more on key accounts, reduce costs by 30%, etc.)
• Thoroughly document and analyze the existing territory structure
• Acquire the relevant market data (e.g., branch-specific benchmarks, purchasing power figures for particular product lines, customer potential data, customer survey results, etc.)
• Concentrate on achieving transparency and objectivity in the planning and implementation of the restructuring.