Why Segmenting Sales Teams by Geographic Regions is Outdated

A reality of sales is that over time an assigned territory, or the book of business an account executive is responsible for, will shrink.

Generally, splitting up a company’s addressable customer base happens as the company is scaling and its revenues are growing. It was a unique situation within software-as-a-service (SaaS) companies over 2020-2022 that leaders tried to scale sales teams without the revenue, leads or product-market fit to do so.

Hence you had mass layoffs of sales teams across both startups and large software behemoths (see: Salesforce).

Hopefully things will change and companies will become prudent over the next few years, learning from the past mistakes of over hiring in good times. But, likely, they won’t.

Forecasting a company’s future revenues is both an art and science, a combination of numbers in a spreadsheet and gut instinct on the market conditions and your sales and marketing team’s ability to drum up demand, close new business and retain / expand existing business.

So, forecasting will continue to be difficult, unless ChatGPT begins predicting revenue growth better than sales leaders and CFOs can.

In that way, it’s important to be aware as a salesperson or sales leader what your company’s current and future hiring plans are and how the way customers buy today should be accounted for when segmenting your sales team.

The history of how sales teams are segmented

Territories have historically been split by geographic region. Initially, while in the startup phase, companies may choose to focus on certain countries or regions where they have had early customers. For companies in growth mode, expansion to new geographies or industries may be in future plans.

In general, there are a few basic ways to segment a customer base, and divide up the coverage of a sales team.

1. Geographic regions

2. Industry or sector

3. Size of the company (small business, mid-market or enterprise)

Why geographies made sense when in-person selling was the norm

For much of recent history, a lot of selling was done in person. Account executives would drive or fly to their customers offices, sometimes weekly, but probably closer to monthly.

It was normal for vendors to come in, catch up with their clients and cater lunch or take the client team to happy hour.

However, with the rise of web conferencing platforms like Zoom and Microsoft Teams, combined with the COVID-19 pandemic, virtual selling and meetings became more of the norm.

No longer was it necessary for salespeople to drive constantly to visit their accounts in-person. In fact, for a lot of the software (SaaS) industry, potential clients preferred to just have a 30 minute Zoom call over an office visit. Some even stopped going into the office themselves!

Times have changed a lot in even just the last 5 years. $100K+, multi-year software deals can now regularly be done virtually, with a combination of Zoom / Google Meet / Teams, email, Google Docs and Slides, Docusign, and Slack.

As a result, it is becoming outdated to some extent to require sales territories to be split geographically. Think about it, when customers and sales teams can now meet virtually, there is very little friction to getting deals done.

The only exception is if a significant language barrier exists, which can happen when engaging with prospects in the Asia Pacific region. However, Zoom now even has a language translation offering (in full transparency, I haven’t tried it yet). And recently, I spoke with a prospect in China in English completely over Slack!

I am not saying that selling virtually is a perfect, seamless process with no downsides.

Where language and cultural barriers exist, it still is quite beneficial to have a local sales team versus a sales team not versed in the norms of a prospect’s country. However, I expect over time these barriers may also decline with AI language models and the real-time translation features they can potentially enable on the web conferencing platforms we interact with every day.

With changing times, it is then expected that the way sales teams have operated before will also change.

The downsides of territorial segmentation of sales teams

It is a tale as old as time - an existing sales rep’s territory gets cut in half as the sales team scales. The leads they were getting before decrease and now their path to hitting their quota becomes fuzzy.

Or on the other hand, a new sales rep joins the team, and they get the “worst” territory. Perhaps a really fragmented region or a brand new one that has yet to be developed.

Whatever the reality is, the likely scenario in both cases is the sales person feels like they are at a disadvantage and are not set up for success.

Territorial distribution also makes it easier for underperforming sales reps to blame a geographic territory for their lack of success.

I’ve seen it firsthand where a sales rep will convince their manager that it is not a flaw in their process or habits, but rather it is the geographic region and the customer base in it that is not mature enough or ready for the product that is being positioned.

Adapting for the new realities of virtual selling

At my current company, leads are dispersed in a round robin fashion, meaning incoming leads are evenly distributed amongst all of the salespeople.

Besides it being sort of fun and gamified, round robin also socializes leads across reps regardless of geographic region, company size, and industry. Done over time, it appears to be the most fair way to give your sales team an equal chance at bat with potential customers.

A few caveats… this model only works if a startup’s marketing team is strong and brings in large amounts of high quality inbound leads. For very technical products where industry specialization may be needed, this model is not the best fit.

The round robin approach may also not work for large sales teams potentially, but it is an interesting model that may lead to better insights for sales leaders in shorter time frames on their team’s performance.

Human touch will be a differentiator in the coming years

Even if sales teams don’t have to be located in the same geographic region as their potential and existing clients, in-person meetings are still a differentiator.

As much of the SaaS industry shifts to virtual selling, sellers can set themselves apart by meeting in-person with clients at their offices or at events like conferences.

In past times, meeting in-person with clients was common, and virtual or phone meetings may not have been. This has been flipped.

Selling is no longer a purely relationship driven activity where the sales rep is a familiar face at a customer’s office, takes the customer out to lunch and outings, and sends them tickets to local events in the summer and Christmas cards in the winter.

It is still possible to banter and have small talk on Zoom, but overall, there is less of the human element in a virtual conversation.

It's why startups who are fully remote still choose to have company-wide offsites about twice a year. Because although virtual-first companies have proven that they can be successful and accomplish company goals with a dispersed workforce, there is still no replacement (yet) for in-person interaction in regards to building camaraderie and familiarity between coworkers.

Likewise, if used strategically, in-person visits can drastically improve prospect and customer engagements and potentially accelerate deals to a positive outcome.

Contracts get signed when a prospect is bought in both logically and emotionally to the business impact that purchasing a given piece of software will achieve. A prospect liking you as a sales rep won’t be the only reason a deal closes, but it can certainly help once the business and technical criteria boxes have been checked.

Geography based selling is outdated

In conclusion, I believe that sales teams, especially in the early startup days, benefit from being flexible in segmenting the customer base, rather than a traditional geographic split of territories.

Spreading leads out evenly not only allows for objective evaluation of a sales team's performance against the company’s goals, it also enables leaner sales teams.

Sales leaders can focus on distributing leads and closing deals first, then figure out how to properly segment the customer base and specialize the sales team if needed.

Over time, as the team expands, it may make sense to let reps cover certain account types.

For example some reps may be better suited for the faster pace of the small business (SMB) and mid-market (MM) accounts whereas others are better at the longer sales cycles of large enterprises.

Perhaps there is industry expertise that is needed in the sales team given the different application of the company’s software by sector.

There is no straightforward answer, but there is no denying that times are changing when it comes to closing new business and keeping existing customers happy. Sales leaders must adapt and prepare their sales teams for growth in the same way.