Sales Territory Planning is the strategic process of defining, segmenting, and assigning markets to sales teams. It goes far beyond a simple geographic split: it is a structured plan designed to maximize market coverage, balance workloads, and align salespeople’s skills with the specific needs of customers.
An effective territory plan is never static – it is an ongoing exercise in balancing revenue potential with the operational capacity of the sales force.
Although the word territory suggests a physical boundary, in modern B2B sales geography is just one of many factors. According to industry best practices, effective segmentation requires a combination of criteria to create homogeneous, manageable clusters:
Geography: The traditional criterion (region, ZIP code, country), useful for reducing travel costs but often insufficient on its own.
Company size (revenue / employee count): Differentiating between Small Business, Mid-Market, and Enterprise. Sales cycles and required skill sets vary significantly across these segments.
Industry vertical: Assigning sales reps with expertise in specific markets (e.g., Pharma, Manufacturing, Utilities) increases credibility and close rates, as the rep understands the customer’s language and regulatory context.
Buying potential and historical data: Analysis based on CRM historical data and growth forecasts.
Relationship type: A distinction between new customer acquisition (hunting) and existing customer management (farming), which require very different mindsets and operating models.
One of the most delicate aspects – often overlooked in theoretical planning but critical in practice – is managing vacant sales territories. When a salesperson leaves the company or changes role, an operational gap emerges, creating immediate risks.
Lost opportunities: Leads are not followed up in a timely manner.
Declining customer retention: Existing customers, feeling neglected, are more likely to consider competitors, increasing churn.
Team imbalance: An unplanned redistribution of “orphaned” accounts can overload remaining reps, hurting overall performance.
Intervention strategies: To mitigate these risks, companies need a dynamic, scenario-based approach. Before reassigning a vacant territory, sales managers should simulate the impact of redistribution on individual workloads. The goal is to ensure that temporary or permanent assignments do not compromise service quality for the reps absorbing new accounts. Territory optimization tools make it possible to distribute accounts fairly, based on a rep’s actual capacity to manage and visit customers – not just geographic proximity.
A well-executed territory planning strategy directly impacts key sales KPIs:
Resource optimization: Ensures top performers focus on high-value opportunities, while junior reps can develop in less complex territories.
Higher morale: Balanced territories mean fair earning opportunities. When salespeople perceive that territories are assigned using objective, data-driven criteria, motivation and retention improve.
Better customer experience: Customers are served by the salesperson best suited to their needs, increasing satisfaction and enabling more effective cross-selling and upselling strategies.
Modern territory planning cannot be separated from advanced software:
Sales Performance Management (SPM): Connects territories to incentive plans and motivates the sales force.
CPQ (Configure, Price, Quote): CPQ software helps identify what is being sold and where, providing granular insights into product demand by territory and enabling more refined future segmentation.
Sales Enablement: Delivers the right content to sales reps based on the territory or industry they cover, accelerating onboarding in newly assigned areas.
Finding the right balance. Territories that are too large lead to neglected customers (under-coverage), while territories that are too small prevent reps from reaching quota, hurting motivation. The challenge is using data to define territories that are both manageable and rich in growth potential.
It is the foundation of any incentive plan. A territory with lower market potential may require lower quotas or higher commissions to maintain pay equity compared to a “rich” territory. Poor territory planning undermines even the most sophisticated Sales Performance Management system.
You need to analyze the root cause: is it the salesperson, competitive pressure, or an inaccurate estimate of market potential? Territory planning must be flexible. If data shows a structural change in the market, the territory should be redesigned or merged without waiting for the end of the fiscal year.
Absolutely. AI can analyze massive volumes of historical and demographic data to suggest segmentations that humans might miss, predict an area’s buying potential, and recommend the optimal distribution of sales reps to maximize revenue.
