Market Analysis

How to Map Sales Territories Based on Market Data

Scalepath Staff
January 29, 2022

Mapping Sales Territories

Sales territory mapping has been used for decades to map sales territories in a way that allows sales executives to have an accurate view of their sales opportunities and sales forecasts.

However, designing sales territories is often time-consuming, expensive, and requires deep expertise in the industry you are selling into. New approaches can help build fair territories without the the time or expense of full manual assignment. 

Manual, Automated, or Hybrid Territory Assignment?

There are three ways to do sales territory mapping: manual, automated, or a hybrid approach between the two. 

Manual sales territory mapping requires sales executives or sales operations professionals to divide up the market into territories based on their own understanding of a market, which can lead to biased or inconsistent results.

A more accurate result is achieved with an automated sales territory mapping that uses data about your company's sales and sales performance to determine where sales reps should be mapped.

Finally, a hybrid approach starts with using reliable B2B market data to build sales territories, but adjusting based on local market penetration and insights not captured in a fully automated process. 

When you are a high-growth company or don't have a long track record of sales performance by region, using a hybrid approach based on market data is a good approach to building sales territories.

How to design sales territories

Here's a data-driven approach to assigning sales territories based on your market opportunity:

1. Assess and segment your market opportunity

Before dividing up a market into sales territories, understand the total addressable market opportunity. With a data-driven approach, you'll want to know:

  1. How many potential customers are in the market?
  2. What is the revenue potential for those customers?
  3. What is your current market penetration?

Finding this information often requires a market sizing exercise, where you identify the customers you sell to, make assumptions about revenue, and track your market penetration. This can be done manually, with the help of a market sizing consultant, or through tools like Scalepath's market sizing software.

With the overall opportunity understood, it’s time to segment the market. Markets can be segmented by:

  • Geographic regions (the most common approach);
  • the size of the customer, such as small, mid-sized, or large enterprise; or
  • the market vertical or customer segment. 

Building an understanding of your total market opportunity with the ability to drill into each of these segments will help you determine the best way to divide territories. 

2. Map goals to market opportunities to create sales targets

Now that you know the size of the market and have divided the total opportunity into various territories, it’s time to set sales targets that are achievable and relevant to your business. One way to do this is by mapping your company's goals (e.g., number of new customers, revenue growth) against market opportunities, ensuring the goal doesn't outpace the available revenue in a market.

Rather than look at the total available market, it's helpful to set territories by drilling down to the portion of the market that matches your Ideal Customer Profile (ICP). In market sizing terms, this is your Serviceable Obtainable Market (SOM), or the market you can expect to obtain.

For sales or go-to-market executives in technology companies, understanding the market opportunity might mean identifying the number of sales reps you want to hire to achieve the revenue goals. You can also use this information to determine what skillsets or sales enablement content you need in order to be successful. 

During this process, check to ensure the sales territories assigned and associated hiring plan can support the revenue goals. 

3. Review and track results against your market analysis

As your company grows and sales performance changes, it's important to continually review and update your sales territory mapping. This allows you to adjust as needed based on market conditions and ensure that you are still targeting the right areas for success.

Now that you have a data-driven approach to sales territory mapping, track results against sales targets. Monitor sales rep performance versus sales territories to ensure that your sales team is hitting their numbers and achieving success for your company.

You may want to refine sales territories based on the following:

  1. Is the ideal customer profile accurate? If not, how would changing it alter the sales territories?
  2. Does willingness to pay and likelihood to buy change by region, vertical, or company size? Does this need to factor into your sales territory assignment?
  3. Do you have the right sales reps assigned to the right territories, based on skill and market maturity?

How market sizing software can be used to create fair territories

You can use tools like Scalepath's software for sales territory mapping to make this process more accurate by removing bias from the market analysis. You'll have greater confidence that your sales territories are fair, consistent across teams, and will lead to higher revenue potential for sales reps.

This sales territory mapping approach allows you to make better decisions about how many people need to be sold, where they should go, and what skillsets or sales enablement content you need in order to be successful.  It will also lead to more effective resource allocation and higher revenue potential for each person on the team.

Next steps

Simple and free market sizing templates can help get you started. However, to build regional or state views, explore these market sizing resources or Scalepath's market sizing software.

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