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Definition: Territory

A territory generally refers to sales territory which can be defined as the geographic district or customer group which is assigned to a sales team or an individual salesperson. Sales Territories are generally defined on the basis of various factors like sales potential, geography, history, or a combination of multiple factors. The companies always strive to obtain a balance between their territories as it helps in increasing sales and reducing costs. There are different ways to perform analysis of territories.

In general, the territories are compared to each other on the basis of their size or potential. It is a very important process because if there is a sharp difference between the territories or they slip out of balance, then the sales team or sales personnel will be allocated too little or too much work. The result will be either under- or over-servicing of customers.

Under-servicing – When the sales personnel or sales force is assigned work beyond the capability then the quality of their performance decreases to cover the entire territory. The sales force performance decreases as they find only a few leads, identify a small number if new prospects and give too less time to the prevailing customers. This eventually results in loss of business to other rivals as the dissatisfaction of customers due to sub-optimal sales performance.

Over – servicing – This is exactly opposite to the under-servicing. The sales force is allocated tasks less than its capability. This leads to increase in costs and decrease in efficiency. Over-servicing of one territory leads to under-servicing of any other territories.

When there are under- or over- served territories, the problem of unfair distribution of sales potential among sales force members arises. It leads to distorted compensation and results in turnover of talented Salesforce who seek equal opportunities and compensation.

Territory Design Procedure

Hence, this concludes the definition of Territory along with its overview.


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