As an organization grows, it tends to grow geographically, horizontally in terms of industries, and across customer types. The sales force should be organized in such a way that there is a definition of responsibilities for each member of the sales force, the assignment of goals must be fair, and all key customers should be appropriately served. Otherwise, organizations face problems of duplicated sales effort, improper allocation of resources, missed opportunities, and performance tracking.

SAP Territory and Quota Management allows an organization to structure its sales process through creation of sales territories, allocating customer accounts, and assigning quotas to individuals and teams.

What Is SAP Territory and Quota Management?

SAP Territory and Quota Management involves the planning of sales territories and the distribution of sales quotas among various sales teams, regions, and individual sales representatives.

The territory management defines who is accountable for particular customers, particular geographies, or particular markets. The quota management revolves around defining sales goals for those individuals who are accountable for business success.

These two processes assist companies to determine sales ownership and build a more balanced sales structure.

Thus, for instance, a business that operates in South Africa, Kenya, and Nigeria can plan its sales activities in terms of countries, regions, industries, and customer categories.

1. Comprehending Sales Territory Structures

A sales territory structure refers to the process whereby an organization categorizes its markets and allocates sales responsibilities. This involves organizing territories hierarchically instead of letting the sales representatives contact their clients without any boundaries.

These territories can be categorized in various ways as follows:

• Geographical territories: The clients are grouped according to their respective countries, states, cities, or regions.
• Industry territories: Sales responsibility is shared across the various industry categories like manufacturing, health care, retailing, and finance industries.
• Client based territories: Accounts are classified based on the client type, size, and revenue.
• Product based territories: The representatives manage various types of products or business solutions.

Territory hierarchies may comprise parent and child territories, whereby regional sales managers have several smaller territories that are managed by individual representatives.

2. Account Allocation and Sales Accountability

Territory formation is simply part of the sales process. The firm also needs to properly allocate its customers or prospective clients into different sales territories.

Account allocation refers to the connection of customer accounts with appropriate sales territories and sales representatives. This ensures that the account belongs to somebody who will manage and sell the product or service to the customers.

• There are several factors that may influence account allocation such as:
• Geographic location of the customer accounts.
• Industry or business needs.
• Relationships with the customers.
• Customer account revenue and future potential.
• Specialization of the sales representative.

For instance, an industrial firm may choose to allocate large accounts to experienced sales representatives while small accounts go to regional sales representatives.

Proper account allocation prevents conflicts among the sales representatives and neglects important customers. It also makes it easy for management to monitor account allocation.

3. Mechanisms of Quota Allocation

A sales quota is a quantifiable goal set for a sales person, sales team, or territory within a particular period of time. This quota could be tied to revenue, sales, number of new customers acquired, or any other measures of business performance.

The process of quota allocation can be defined as the allocation of overall business quotas among various sales teams in accordance with their roles and potential.

Generally, managers take into account such aspects as:

• Historical sales and revenue.
• Size and potential of territories.
• Customer base and the number of prospects.
• Demand for product and seasonality.
• Sales resources available.
• Growth goals of the company.

Thus, if a company sets itself an annual revenue quota of $5 million, it may allocate this quota among five different territories depending on their potential.

If one territory has more customers and demand than others, it will receive a bigger quota than developing territory.

Proper quota allocation ensures realistic expectations and motivation for business goals achievement.

4. How Does Territory Planning Improve Sales Coverage?

The territory planning helps companies determine how effective the use of sales resources of the company is. Through territory planning, managers will be able to analyze territories, customer distribution and uncover opportunities that remain untapped.

Here are some significant advantages of territory planning:

• Better Market Coverage: Companies can uncover regions and customer groups that do not get enough sales attention and allocate resources as needed.
• Balanced Workload: Manages will be able to evenly distribute account responsibilities so that none of the representatives will be overwhelmed with accounts or have too few accounts to work on.
• Sales Accountability: With defined territory and account ownership, managers will know better which representative is responsible for certain customer and sales results.
• Effective Sales Forecasting: Territory performance and quotas allow managers to estimate sales and uncover possible deficiencies compared to business objectives.
• Better Sales Performance: As the representatives know their territories and objectives, they will be able to visit customers, sort out opportunities and perform sales activities.

5. Best Practices for Territory and Quota Management

Businesses need to continually review their approaches to territory and quotas, rather than thinking about them as something fixed.

Following are some best practices that can be followed:

• Review the performance and distribution of customers in all territories.
• Revise account assignments in case there is a need to change.
• Assign quotas on the basis of actual performance and data.
• Avoid any overlap among territories assigned to various salesmen.
• Monitor performance on the basis of individual and regional goals.
• Redefine territories on the basis of new markets and customer segments.
• This will ensure that companies do not get disorganized in their sales process.

Conclusion

SAP Territory and Quota Management is very important in the formation of a structured and responsible process of sales. With the help of territory hierarchy, account assignment, reasonable quota setting, and better sales coverage, organizations can properly manage their sales process.

Knowledge on the above concepts is essential in developing the necessary skills of sales planning and performance management.

Prompt Edify allows individuals to develop knowledge on SAP by providing training and education on the same. Learn about SAP through training to understand how sales operate and how businesses operate.