5 Ways To Divide Sales Territories

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Managing sales strategy and planning can be challenging, but the vast majority of business development departments can relieve some of that burden by mapping their sales territories.

If you think of your sales representatives as a tactical, on-the-ground team, sales territory planning is essentially your plan for attack. Defining and dividing by sales territory can help you and your sales team visualize every area that needs to be covered, and assign it efficiently based on their talents or bandwidth.

In our experience, every organization is unique and may choose to draw the boundaries of any given territory based on criteria that make sense for their specific business model. However, generally speaking, most sales teams choose one of the following methods for their sales territory management:

  1. Based on Geography
  2. Based on Demographics
  3. Based on Industry
  4. Based on Market Potential
  5. Based on Revenue Potential

Let’s look at each method of sales territory planning in more depth.

Sales Territories Based on Geography

Geographic territories, defined by states, cities, and zip codes, are some of the most traditional ways to define your sales territory management strategy.

As with all tried-and-true methods, this is a relatively straightforward way of segmenting an addressable area that does not take a lot of effort on the strategy side, while also making it easy to assign territories to specific sales teams.

For example, as a sales territory manager at the national level, you may be dividing sales territories across the whole United States into 4 main regions that have different strategies and specific sales teams that are familiar with the unique needs of those areas. Or you may segment them by state, especially if you need to make sure that local legislation is addressed and respected.

However, this method has its limitations. Dividing and assigning territories based solely on geography may result in uneven or ineffective distribution of your salesforce–this would be the case if, for example, a more urban area may be more densely populated, or physically easier to reach, compared to more rural ones.

So while geographic boundaries can be helpful for an effective sales territory strategy, their effectiveness can be amplified by taking into consideration a wider array of factors, including your sales data, sales goals, and other sales strategies already at play.

Sales Territories Based on Demographics

One fundamental truth is that to sell effectively, you need to know the people who you are selling to. And basing your sales territory on the characteristics of certain demographics can certainly help to get to know your target audience and customer base.

Demographic segmentation may include factors such as age, gender, race, religion, income, education, and language spoken. Identifying those traits and matching the audience to the particular expertise of each sales rep may be a game changer.

That is clearly the case if you are trying to sell your services and products in English to first-generation immigrants who may be more comfortable negotiating in their mother tongue–if you are able to assign sales reps able to speak their language, or who are part of the same cultural community, they are more likely to open more accounts and close more deals.

Listing out the different demographics you want to target as a B2C sales department may help in defining that sales territory plan. If, however, your focus is B2B, you may want to avoid demographics entirely and focus on completely different criteria such as industry or business size–as we’ll discuss below.

Sales Territories Based on Industry

This is particularly relevant if your target audience or existing customers are not individual consumers, but rather other businesses and organizations.

Building out your sales territory plan based on industry allows your sales team to become really familiar with the needs and preferences of a specific niche–which in turn is likely to make them far more effective and successful.

Depending on your products or services, you might even be able to target specific departments, as might be the case if you are selling software aimed at a unique function, like accounting, cybersecurity, or HR to name a few.

In those cases, narrowing down the ideal size of the company you want to target within specific industries might give you a great track record and an easy point of reference, which will further empower your sales reps to deeply understand their unique target audience.

Sales Territories Based on Market Potential

As smart sales managers will tell you, one of your goals should be to empower your teams with all the information and tools they need to succeed throughout the sales process.

When you base your territories on the market potential you are making sure that all your reps have the same chances to hit their revenue goals based on the opportunities that are available in the area assigned to them.

In order to do that, sales territories based on market potential are drawn based on a variety of factors, like the size of the addressable market, competitors already present in the area, and how saturated the market already is.

When all the available data is taken into consideration, you may decide that a specific area is not worth your team’s precious time, or you might give a chance to your more senior reps to scope out what opportunities the competition is leaving on the table.

Sales Territories Based on Revenue Potential

Territories based on revenue potential are less reliant on geographical or physical boundaries and concentrate strictly on the amount of business that can be generated and who should be handling certain clients.

For example, if you’re running a sales team with long-time clients and established accounts, it might make sense to create sales territories that weigh the importance not just of future sales opportunities but also the size of existing deals.

If deal sizes increase, you might want to draw territories to redirect fewer, more senior sales professionals to manage bigger accounts, while a larger number of reps cover the remaining smaller opportunities

Ultimately, revenue potential needs to be determined by how you measure sales success and how revenue can be expanded by maximizing the talents of your sales teams.

Methodology Considerations

Clearly, there are many ways to divide sales territories. The methods listed above are all great ways to get you and your team started with mapping sales territories in whatever way makes the most sense for your specific business structure, what you offer, and your sales targets.

As you get more comfortable exploring the possibilities offered by visualizing & assigning sales territories, you can group different combinations of criteria to better suit your business needs and evolve your sales strategy.

For example, you may choose to first draw geographic boundaries by zip code, and then add a revenue potential lens to your sales territory to group some of those zip codes together or assign them out based on experience and seniority.

Likewise, some sales organizations may first decide to draw your sales territory based on the industries you are targeting, the company size, and then add a demographic component to match the sales professionals who can best relate to the organization you are hoping to reach.

Not all sales territories are created equal, so it is especially important to approach sales territory design with an open mind since you will need to run a sales territory analysis after a set period of time to ensure that you have achieved the balanced territories and the sales territory alignment you set out to create to properly target prospects.

How to Get Started

Sales territory mapping can become an incredibly tedious process without the right tools.

Sales territory mapping software like Maptive can help you get started with easy visualization that can leverage your own data together with publicly available, census-based demographic information–so you can map out and assign sales territories in just a few clicks.

Managing sales territories has been proven time and again to be an incredibly effective tool to improve sales performance, as it can help you:

  • Understand the sales potential of each area
  • Improve your team’s sales productivity
  • Increase overall customer satisfaction

The sooner you get started with a sales territory plan, the sooner you can maximize both revenue growth and the overall performance of your sales rep team.

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