Five tips to effective Territory Planning

Peter Buckingham Managing Director of Spectrum Analysis explains that Territory Planning not a guesswork job. Territory Planning involves a mix of facts and data in order to create the best results to suit a business and their concepts.

“Territory Planning is not an exact science, as we are governed by many factors, such as how to weight certain factors to see how attractive they are (in defining good areas from poor areas for customer potential). Many combinations may suit, and the job is to come up with the best one for your System,” said Buckingham.

The two big questions that are commonly asked in Territory Planning projects are “How many territories should we make for a particular market” and “How do we make each Territory of similar sales potential?” In many cases, businesses already have some of the knowledge, which can be used to answer these questions. A Territory Planning job is extracting this information and then applying it across a far broader market.

Peter Buckingham shares his five tips to effective Territory Planning

Step 1: Where is your business heading?
Every Territory Planning job needs to have a Business Plan to determine where the business is heading.  Business plans is an opportunity for owners to create a plan on where they would believe their business can go.

Business owners need to ask themselves “where am I heading long term?”, “what total revenues do I believe this great new concept can generate in 5 – 10 years?”

“This tells us where we should be aiming in our home market. If we think in terms of a chessboard, we are best to cut up to the number of territories we plan for the long term, as we can always ask a franchisee to have their core territory and care take some others for what may be some years,” said Buckingham.

“In the long run, if you have a vision of how you want the mature business to look, then you should be setting things up in that direction.” “It is better to cut too many territories based on the long-term vision of where you want to be long term than too few, and have to try and split up territories from franchisees in the future.”

Step 2: Territories in major Australian Cities
When a business has an idea on how many franchises they believe should have in their home market, Spectrum Analysis can then calculate how many could be created nationally.

“Our experience shows us in Australia, that for 100 stores or territories in the 5 major capital cities, most businesses will open 25 to 35 across the rest of Australia. This is normally not quite proportional to population, as in many cases, you must have a substantial major town to begin with, especially if it is a retail concept,” said Buckingham.

“The basic ratios for number of territories in a Territory Planning job of one city to another should be done on basic population. Whatever the total numbers of territories are across the 5 main capital cities, there will normally be another 20 – 30% of territories available in the country.”

Step 3: Territory Planning for Business to Consumer business (B2C)
There are two types of postcodes used in Australia, which businesses should be aware of when Territory Planning. The first type is the Australian Bureau of Statistic’s Postcode, which do not change between Census data. The second type is Australia Post’s postcodes, which can change in small amounts on an annual basis due to a need to alter postcode boundaries or add a new postcode.

“If a territory planning Project requires maps to define territories, we normally recommend that Australia Post’s postcodes be used, and the date (year) be specified so there is no doubt on how the territory boundaries are created,” said Buckingham.

“With the broad number of territories established in our new, long-term business plan, we now need to break that down to understand what will make up an individual territory. The main aim should be so that each territory or sales area offers the operator a similar amount of sales OPPORTUNITY.”

“Make each area of similar potential for the Franchisee. That means better areas will have less people, and areas that are not so favourable to your product will have more people in each territory.”

Step 4: Territory Planning for Business to Business (B2B)
Many territory planning jobs are for businesses that see themselves primarily as a B2B business. These kinds of business include printing, commercial light maintenance, business loans and sign manufactures.

“Spectrum still uses a concept called “Units of Demand”, and what we are trying to establish is how much demand comes from each “block”, usually postcodes, that we can use in building the territories,” said Buckingham.

“We then construct a matrix with the client to consider how much additional opportunity comes from each SIZE of business, and which category of business they see as best suits what they are selling.”

“If you are a B2B business, do not concern yourself about small area populations, but concentrate on what type of business you market to, and what size of business suits your product. In many cases, once a customer passes a certain size, they may no longer use your type of service, but do that work in house. This may mean your strength is in certain types of business up to a certain number of employees.”

Step 5: Describing territories to potential franchisees?
Spectrum Analysis has developed a high value information package to assist franchisors and franchisees in understanding the areas in which their business operates. Each territory can be identified, mapped and all the relevant information supplied.

“Major data sources include the 2006 Australian Census of Population & Housing, and the 2007 ABS Counts of Australian Businesses, which provide insights into where potential customers live and work, respectively,” said Buckingham.

Data packs are also a good way in describing territories to franchisees, they usually consist a combination of the following:

1. Local Area Fact Sheet
2. Demographic Summary
3. Business & Employment Summary
4. Map of Local Area
5. Land Use/Zoning Map
6. Map of Household Density
7. Map of Target Market Index
8. Customer Heat Map
9. Business Distribution Map & Business Hit List

For more information and advice on Territory Plannining, contact Spectrum Analysis Australia or ask a question.