Territory Design Across Industries

Creating effective sales territories is an essential component of a successful sales strategy in any industry, and designing these territories is a complex and often controversial topic for sales leadership. Regardless of your industry and company size, every sales team needs to have a set of clear and measurable guidelines for their sales coverage. How do you create sales territories across different industries? What are the characteristics and design elements of these territories? Are there different approaches for the type of company you are in?

Here we will look at approaches to designing sales territories in non-financial services industries to identify implications for developing territories to cover financial advisors.

Could asset managers benefit from ignoring geography?

The software industry is one example where companies have largely departed from using geography to create sales territories. Instead, they often rely on account-based teams to cover groups of clients in the same industry. For example, a company selling HR software may divide its sales team into territories based on client industry and then by size (number of employees at client/prospect firms). They may have a large team covering clients in the healthcare sector and that team will be further split into salespeople covering large, medium, and small healthcare practices. In this case, one “territory” encompasses all healthcare clients/prospects of a certain size across the country. The salespeople covering this segment will gain valuable experience and insight into the needs and operations of healthcare companies, consequently positioning them to better serve that segment.

Asset management parallel: Segmenting advisors based on their business model and unique practice characteristics and needs. It is often the case that sales leadership within asset management organizations emphasize advisors within the same business model (Wirehouse, Independent Broker/Dealer, Independent RIA, Hybrid RIA, etc.) as the highest element of commonality (i.e., the channelized model). That is an okay approach that can be effective for many organizations. However, the segmented approach is, in reality, several layers deeper. In this model, advisors will tend to have similar business needs, and a salesperson who focuses on a grouping of advisors with common practice characteristics and needs will be able to develop deeper relationships and deliver more specialized service as a result of their dedicated experience. These advisors are likely to be better served under a common “territory” than being covered by the same salesperson that covers all advisors that fall inside a specific geographical area.

Should asset managers move away from the one-size-fits-all approach to territory design?

Industries such as real estate, construction and moving companies are (understandably) much more location-focused and, as such, their sales teams are usually divided into geographic areas based on the number and value of properties per area. The geographic size of a territory will vary depending on the density of opportunities. For example, a small territory with high-value properties may require multiple salespeople to adequately cover it, while a larger territory with small-revenue customers would be sufficiently served by having only one rep.

Asset management parallel: Dividing territories geographically based on the number and size of advisors. This approach involves setting targets in terms of the number of relationships per salesperson and then prioritizing the highest value advisors within a specific geography. This is where data-driven territory design comes into play when calibrating the trade-off between the number of relationships vs. opportunity size.

Should opportunity drive coverage?

In retail, territories are a little different than the above examples. When it comes to retail stores, the sales opportunity has to be taken into account when deciding whether to open a physical store and/or how many stores to open. This involves measuring the cost and resources necessary to operate each retail location and determining how many stores can be supported by local sales. If an area is over-saturated with stores, or a store opens in an area where the demand for its products is not there, a firm risks damaging its profitability and brand equity. Instead, a retail brand should create a strong brand image and maintain a robust online presence and user experience to build consumer loyalty. This way, they can serve the right consumers even in areas that do not warrant opening a physical location.

Asset management parallel: Examining the level of wealth and financial advisory needs within a territory to determine whether to allocate dedicated coverage. This involves a look-through to the end client opportunity, not just the financial advisor and their practice. A territory, in this case, can be geographic (large metro area, affluent households) or based on advisor segmentation (advisors that manage portfolios for high net worth investors, advisors located in retirement communities, etc.). Asset managers’ sales teams will have to be deliberate in how they allocate resources and make sure that the size and type of opportunity are taken into account. For example, if a group of advisors mostly serves retired individuals, an alternative asset management firm may be wasting resources by allocating resources to cover those advisors given their lower tolerance for risk. Instead, digital coverage should be used to target populations of advisors where the size and likelihood of opportunity do not warrant personalized coverage.

How specialized should coverage be for alternative products?

Looking at another industry, manufacturers of specialty equipment may divide their sales team by product type. Highly specialized equipment, as the name suggests, is very technical and highly tailored. Examples of such products include lab robots that automate the testing and storage of lab samples, Internet-of-Things-enabled manufacturing equipment, and robotic surgical instruments.

The market for these types of products is concentrated to a small number of customers and the level of knowledge and experience required to sell them is relatively high. In the cases of companies that make and sell these products, the sales teams are often divided by product, with each product team consisting of highly specialized product experts who can speak at length about the technicalities of the product and work with clients and prospects to tailor them for their businesses.

Asset management parallel: Boutique asset management firms with alternative products focused on a niche sector or specialized vehicle structures, or large asset management organizations with highly specialized capabilities. Selling alternative asset management products requires specialized knowledge and the ability to speak about the characteristics of the product. Also, it is likely that there are fewer numbers of advisors buying these products, and the ones that are will require more specialized services. In this case, sales teams may be better off dividing territories by product where a salesperson is assigned to a product whereby they are the “sales expert” on that product and are able to sell it across all advisors where there has been an identified selling opportunity for that product. A generalist-specialist approach is often used for large asset management organizations.

Many asset management sales teams struggle to find the right approach to designing or optimizing territories. More often than not, there really is no one right answer and the best approach will likely be some combination of the approaches discussed above. One thing that all these methods, and indeed any territory design effort, have in common is that their success depends on having access to and effectively using quality data.

SS&C’s Research, Analytics, and Consulting team can help asset managers target the best opportunities and optimize their distribution efforts. To learn more, read about our consulting capabilities.