Sales Territory Mapping in 2024

This article provides an in-depth introduction to sales territory mapping. It covers the basics as well as some more in-depth topics. This is for anyone managing sales territories, especially those new to sales territory mapping.

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    What is sales territory mapping?

    Many companies have sales teams. Their job is to meet with existing and prospective customers to sell the company’s products. Choosing which customers to assign to each sales representative is a crucial question. Since geography plays an important role, it’s advisable to know where the customers are located. Plotting zip codes and customers on a map and then assigning them to a sales territory is the essence of sales territory mapping. The formal definition is as follows:

    Sales Territory Mapping: The systematic process of grouping customers and geographical areas into territories to maximize the sales team's efficiency.

    The rest of this article will highlight the importance of sales territory mapping and provide best-practice guidance for anyone responsible for the alignment of sales territories. This will be invaluable for anyone new to sales territory mapping, but will also contain insights for veterans of the subject.

    Why is sales territory mapping important?

    Plotting customers on a map is a simple task. It only starts to get complicated when you try to balance the sales territories (e.g., balance the number of customers or workload). The difficulty arises because of the multitude of possible combinations. For example, suppose you have only twenty customers and four sales reps. How many ways are there to assign five customers to each sales representative? Even in this simple example, there are more than 11 billion ways to assign twenty customers to four sales representatives. This number comes down dramatically once you impose some basic business rules (e.g., the territories must be contiguous). Nevertheless, even with a small sales force visiting hundreds of customers, there are billions of possible solutions. It turns out that the task of mapping zip codes and accounts to a set of territories is an NP-hard problem, i.e., one of the most difficult to solve. Put simply, creating a set of balanced sales territories is not a trivial task.

    Not only is the task difficult, but if you have poor sales territories, your sales organization's efficiency will be compromised. This can have the secondary effect of reducing morale and increasing sales representative turnover, causing more disruption and further damaging the business. All things considered, sales territory mapping is important, and well-managed sales teams invest in technology and processes to ensure their sales territories are balanced and topologically sound.

    What data is required to evaluate the alignment of your sales territories?

    We can break this down into essential data and optional data. The only necessary data is a list of customers and their locations (their zip code, postcode, or longitude and latitude). With this basic data, you can plot them on a map and group them together to form sales territories.

    In most cases, customers are not all equally valuable to the business. You will need some data to assess each customer’s potential. The nice-to-have data falls into three categories:

    Customer Data

    In addition to each customer's name and location, you should have a unique identifier (likely their CRM ID), the territory ID they currently belong to, their latest 12 months of sales, and potential metrics such as the number of prescriptions, patients, or employees.  Ideally, you should also have a workload metric i.e., some quantitative measure of the amount of work a sales representative will need to do, if they are assigned the account. This is usually the number of visits a sales representative is expected to make each year to the customer. It is a standard output from a customer segmentation exercise andis the most important metric for mapping sales territories.

    Geocoding the customer locations is also best practice at this stage. This involves using a service to convert each customer’s addressinto exact longitude and latitude coordinates.

    Zip Code Data

    This is typically referred to as the “Zip-to-Terr” or "ZTT." It contains a list of all zip codes in the United States, their assigned territory ID and territory name, as well as any sales team hierarchy data. For example,a territory's assigned district and region.

    It may also be appropriate to add potential metrics at the zip code level. This could be demographic data (e.g., the number of females over the age of 60 living in the zip code) or business-relateddata(e.g., the count of businesses with a relevant Standard Industry Classification (SIC) or NAICS codes in a zip code). This can be helpful in the territory evaluation process.

    If you are using US counties as the base geography, you will list the FIP code instead of zip codes. And if you're outside the US, you will most likely use Forward Sortation Areas (FSAs) in Canada or postcodes elsewhere.

    Personnel Roster

    Identify each sales representative's residence and their assigned territory or district. In the event of a significant reorganization, you may also gather performance data to determine the allocation of a territory among two sales representatives who reside in the same territory.

    How often should you adjust your sales territory map?

    Whenever there is a change in the organization, you should take the opportunity to review your sales territory mapping. The adjustments you make (if any) depend upon the level of change in the business. Here are some examples:

    Temporary Changes

    Maybe someone is taking a short leave of absence. In this case, you could temporarily assign their accounts to surrounding territories.

    After a Resignation

    The organization will experience a "disruption" if a sales representative leaves. You can take this opportunity toevaluate if their territory has a heavy workload compared to surrounding territories. This would be a good time to rebalance the surrounding territories.

    Annual Assessment

    Most companies conduct an annual assessment of their alignment. This uses the latest data to evaluate the alignment index and highlight territories that are high or low. You may then “open up the alignment” and give the first-line managers the opportunity to adjust the territory boundaries.

    As Part of a Company Reorganization

    If your organization is restructuring, merging with another company, or changing the sales force headcount, you will need to undertake a full sales territory mapping exercise. This can be a stressful time. In most cases, it is wise to hire external consultants to do this (such as Cozmix). They can provide the skills to carry out a re-alignment while minimizing the disruption.

    Every Five Years

    Even if there is not massive change in an organization, it is best practice to at least evaluate a full re-alignment every five years. Sales territory maps “decay” due to small changes. For example, temporary changes that become permanent, changing portfolios of brands, etc. These small changes add up. After five years, most sales territory maps are severely unbalanced. Consider a full re-alignment if less than 50% of your sales territories are ±15% of the average workl.

    How do I choose the right sales territory mapping software?

    A specialized sales territory mapping solution will save you time, and the resulting territories will be better. You really need to see the territories visually and try different “what-if” scenarios. This is virtually impossible in Excel and cumbersome in solutions like Tableau or PowerBI.

    There are several sales territory mapping solutions on the market. Some of the most popular are: AlignStar, TerrAlign, Javelin, Tactician, and AlignMix (our solution). Here is a list of important factors to consider: Some are not immediately obvious, but we see people overlooking them when choosing a sales territory mapping software solution:

    Base Geography

    Your sales territory mapping solution should be able to handle 5-digit zipcodes,including point zip codes. The zip code boundary data should be up-to-date.
    Beware of solutions that use ZCTAs. These are not real zip codes; they are approximations to zip codes used by the US Census Bureau. There are only 33,791 ZCTA shapes, compared to 41,633 USPS zip codes. ZCTAs do not cover all of the United States. There are gaps in lightly populated areas (see figure 1). As a quick check, verify that the solution has all 41,633 zip codes and includes zip code 85144, which the USPS added in 2023, as a quick test.

    Easy to Load and Update Data

    Ask to see how to load data. This can be a cumbersome task with some mapping software. Some solutions are even dependent on the vendor to update the data.

    Multi-Level Hierarchy

    If you have a hierarchy (e.g.,territories grouped into districts or regions), make sure the solution you choose can handle it. You will need to be able to assign territories to districts or regions and see how the data rolls up to higher levels. Doing this manually is cumbersome.

    Handling Overrides or Special Assignments

    There are cases when you will want to assign a customer to a territory they do not reside in — we call this an override. There are often good reasons to do this. For instance, you might wish to assign the same sales representative to a group of customers within a small chain. Not all sales territory mapping solutions handle overrides well.

    Calculating the Index

    An alignment index is the numerical measure you use to balance the sales territories. It is a combination of important sales territory mapping factors (e.g., workload, potential, and sales). You can do this in Excel, but it is much better if the software handles it for you. This makes it easy to adjust the index and try alternative measures without reloading the data.

    Geographic, Account-Based, and Hybrid Alignment

    Most field-based teams use geographic shapes (e.g., zip codes) to create territories. Some teams are account-based. For instance, an inside-sales team may assign accounts based on affiliations, unconstrained by geography. There are also hybrid alignments that are generally based on geography but also have accountassignments based on other criteria. Make sure your sales territory mapping solution covers all scenarios relevant to your teams.

    Multiple Ways to Realign

    People like to work in a variety of ways. A good sales territory mapping solution will have multiple ways to change the alignment. You should be able to change the alignment easily using the map and mouse, by selecting an area, and by individual account ID. You will be doing this repeatedly, so it is critical that your solution works the way you do.

    Optimizer:

    In the age of artificial intelligence (AI), a good sales territory mapping solution should be able to help you create territories. It should be able to account for roads, state boundaries, and natural boundaries such as mountains, lakes, and rivers.

    Six basic steps needed to remap your sales territories

    We have helped over 100 companies realign their sales territories. Based on our experience, these are the six key stepsneeded to create a new territory alignment.

    1. Pre-Project Planning

    Before you start any sales territory design project, you need to ask some key questions. In our experience, having clarity around these issues at the start of the project will help you avoid costly mistakes and improve your sales territory alignment.

    a. How many territories are you creating?
    From a sales territory mapping perspective, it is difficult to add or subtract territories. Any changes to one area of the country need to ripple through the whole alignment. We recommend that you put any sales territory mapping project on hold until you have a clear understanding of the number of approved territories in the final alignment.

    b. Is the customer segmentation up-to-date?
    Your customer segmentation will be used to create the workload metrics, which in turn will be used as an important element of the sales territory design criteria. If the customer segmentation is about to be changed or is out of date, you should consider postponing the sales territory design process until it is finalized.

    c. What will be the base geography for sales territory alignment?
    The base geography is a set of building blocks that you will group together to form the sales territories. For most US companies, you will use USPS zip codes. US counties are another possibility. If you only have a few sales reps, you may also consider a state-based alignment. The general rule is to use a base geography that makes it easy to work with your customers and their data. For instance, if you only collect data at the county level, you could consider US counties as the base geography.

    d. Who will be involved in the sales territory mapping project?
    By their very nature, changes to sales territories are disruptive. This causes worry for the sales representatives, which will undoubtedly have an impact on their productivity. Think carefully about who you involve in the sales territory realignment process. Typically, you will need the following people involved:

      • National Sales Manager: They should own the project.
      • Sales Effectiveness or Commercial Excellence Manager: They will be responsible for managing the project. If this role does not exist, then the National Sales Manager should manage the project.
      • Data Analyst: Responsible for collecting the data. If you do not have external consultants, they will also be responsible for using and facilitating the sales territory mapping software.
      • Second-Line Managers: Even if the project is exploratory and confidential, it is worthwhile getting the second-line managers involved. They will have insights into the people and the local idiosyncrasies of the business.
      • First-Line Managers (FLMs): Only get the FLMs involved once the preliminary alignment has been completed. They can then fine-tune the alignment. This enables them to contribute their local knowledge and take ownership of the alignment.
    2. Kickoff and data collection

    Hold a kickoff session as soon as the decision has been made to go ahead. Invite everyone involved in the process. This presents a chance to clarify the goals, establish the parameters, choose the data to gather, and set milestones. As with any change, there will be some level of anxiety in the sales organization. This is an opportunity for people to ask questions.

    3. Define the alignment criteria

    The alignment criteria is encapsulated in answering the question, “What does a good sales territory look like?" There is a quantitative and qualitative component to the answer; both should be addressed in the alignment criteria. The sales territory mapping index captures the quantitative measure. An average territory has an index of 1.0 FTEs, which is a combination of balancing factors weighted based on their importance and scaled. There are normally three types of metrics that go into the index:

    1. Workload: This is a measure of the amount of time required each year to call on the customer. It is the most important alignment factor since you do not want a huge variation in the workload from one sales territory to the next. In many cases, it is perfectly acceptable to only use the workload to balance the sales territories. Typically, a workload-build-up exercise calculates the workload as the number of annual calls to the customer.
    2. Potential: Measures of potential can also be included in the index. This could be at the customer level (e.g., number of beds in a hospital, number of veterinarians at a location) or at the zip code level (e.g., number of females over 65).
    3. Sales: If you balanced the territories only on sales, the best sales representatives would get territories that get smaller with each realignment — that would not be good! Nevertheless, representatives need to manage high levels of sales, and a small weight of perhaps 10% of the index can be appropriate.

    You can calculate the index in Excel. Some sales territory mapping solutions can calculate the index for you (e.g., AlignMix). Use the sales territory mapping index, along with a suitable tolerance (we recommend ±15%), to assess the current alignment. This will show you how many territories are within the set tolerance.

    For the qualitative component of the alignment criteria, you should consider the following factors:

    • How much disruption is acceptable?
    • Is it possible to make changes across district lines?
    • Does a sales representative need to live in their territory (even in Manhattan)?
    • If a sales representative can live outside of their territory, how close to the center or edge do they need to live?
    • What are the criteria for assigning a sales territory to one of two sales representatives living there?

    These considerations should be made before the re-alignment commences.

    4. Create the preliminary alignment

    You can now start to create the new sales territory map. You will save significant time if your mapping software has AI optimization capability. The task should take no longer than a couple of days to complete. It is advisable to present the first pass to the second-line managers. They will have some local knowledge and be able to provide high-level feedback. Use this session to make any necessary adjustments to the sales territory map.

    Once you are happy with the preliminary alignment, export the data and send it to the first-line managers. They will review their territories in preparation for the next stage — the one-on-one fine-tuning sessions.

    5. Fine-Tuning Sessions with FLMs

    The preliminary alignment will undoubtedly be a good theoretical alignment. What is missing is local knowledge. Some examples are:

    a. Long-standing relationships
    b. Customers in the same local chain
    c. Personal links between a sales representative and a customer
    d. Local geography
    To incorporate this into the sales territory map,you must hold one-on-one sessions with the first-line managers. This is also an opportunity for the FLMs to provide their input andto "own” the new territory alignment;after all, they will need to sell the new territory map to their sales representatives.

    Each one-on-one session should last between one and two hours. You can hold them in person or remotely through Teams or Zoom. The FLMs should have time to review the proposed territories before their one-on-one sessions.We recommend the FLMs do this withoutdiscussing the new territories directly with the sales reps.

    During the fine-tuning sessions, the facilitation team will work with the FLMs to create test scenarios and make any desired changes. This may include several iterations of "what-ifs." This is also an opportunity for the managers to assign each rep their territory.

    6. Handover

    Once everyone is happy with the new sales territory map, the data can be exported. This export will be used to communicate the new territory assignments and to update other systems (e.g., the CRM).

    In conclusion, this comprehensive guide to sales territory mapping has highlighted the intricacies and significance of designing effective sales territories to enhance the efficiency of sales teams. The importance of understanding the geographic distribution of customers, balancing territories, and utilizing the right technology for mapping cannot be overstressed. For those navigating the challenges of sales territory mapping or seeking to refine their strategies, expert guidance is invaluable. Do not hesitate to reach out for tailored advice and solutions to ensure your sales territories are mapped and aligned properly.

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