When it comes to sales territory and quota planning (TQP), two methods, top-down and bottom-up, are likely to come up in conversation. Do you know which one your business uses? If so, how satisfied are you with it?
Your satisfaction with how you plan might depend on where you sit in your organization. More importantly, how you plan could affect the forecasting accuracy of your territory and quota plans when compared with actuals. In a 2021 survey conducted by Cascade Research and analyzed by Varicent with Symon.AI, we learned some interesting things about how top-down planning and bottom-up planning are perceived and used.
Eager to find out what else we learned in our research? Check out our research and reports here
The Two Planning Methods: A Quick Refresher
As its name suggests, top-down territory and quota planning (TQP) is hierarchical, flowing from the very top of an organization down to its different departments and levels. Larger organizations are more likely to use top-down TQP. Sales leaders set the territories, quotas, and objectives that align with wider business KPIs, rather than looking in granular detail at the ability and track record of individual salespeople. Leaders and department heads own accountability, and sales teams work out the specifics of how to achieve the target.
On the other hand, bottom-up territory and quota planning starts from the field. Sales managers and their teams communicate goals upward, using their own insights and experience when setting territories and allocating quotas. Bottom-up planning gives sales team more autonomy and control—they can be an ongoing part of discussions over whether a territory is performing or needs rethinking — which keeps them both focused and motivated. That means that individual sales representatives, sales teams, or sales managers do not have to deliver on abstract and intangible company-wide goals.
Who Prefers Top-Down Planning?
We asked participants whether they prefer the top-down or bottom-up method for TQP. The data showed that 64% of sales managers, 60% of directors, and 55% of VPs would rather use a top-down approach to planning. The data showed that 64% of sales managers, 60% of directors, and 55% of VPs would rather use a top-down approach to planning. The reason these non-executives might lean toward top-down could be include time-savings, especially for large organizations. Instead of analyzing each department’s performance to determine targets, leadership sets them for the whole business, and management can rapidly implement the company’s goals.
Another advantage of top-down planning is that the targets are global, which results in a unified message for all departments, and no one expends extra effort in departmental realignment. By contrast, bottom-up territory and quota planning can also isolate executives from important decisions, And, because the territories and quotas are set by each subsection of the organization, management must work harder to unify each approach into a single company-wide message.
Who Prefers Bottom-Up Planning?
Overwhelmingly, executives in the C-suite are the main proponents of the bottom-up approach. A majority (60%) said they preferred it to top-down. And only 9% were strongly in favor of using the top-down method. Why would the C-suite choose a method that requires them to cede control of TQP targets? For one, bottom-up planning does not require speedy decisions from leaders who are not on the front lines, which can differ with reality. It is a grassroots way of working, so there is clearer and more realistic sense of what revenue a sales rep can generate, or how many closes they are likely to achieve.
Also, bottom-up planning gives the entire sales organization the room it needs to plan territories around factors such as the age and economics of an area. The very people who are out in the field can contribute their knowledge. Historic data reflecting past campaigns has its place in the present and future. That and the general opinion of experts from the likes of Forbes that bottom-up planning better aligns targets with actuals are probably why executives think it is the better approach.
Does the Method of Planning Used Really Matter?
Based on sales leader satisfaction with TQP processes, the survey says yes. The results of the analysis with Symon.AI enabled us to divide the respondents into four distinct clusters based on their satisfaction with their TQP processes. The first cluster consisted of respondents from small and mid-sized businesses, representing 26% of the total number of businesses. Not only are they the most satisfied with their TQP processes and outcomes of any cluster, but a substantial majority of them (86%) used bottom-up planning.
Interestingly, the fourth cluster, was full of respondents who were very unhappy with their TQP processes and outcomes. This mostly B2C group included sales leaders from industries such as manufacturing, technology, and hospitality. They were also the only group that did not overwhelmingly indicate a focus on bottom-up planning.
So, bottom-up wins… or does it?
For any sales organization, either approach can be a winner. The size of your organization, the scale of your sales campaigns, and the impact of your territory and quota plan on wider business objectives is most likely to guide your choice. In addition, deciding between top-down or bottom-up decision can also hinge on what you’re selling and where.
In some cases, you might not have to make a choice at all. Some sales organizations augment bottom-up territory and quota planning with market insights generated from top-down strategizing. Also, bottom-up territory and quota plans can be rolled up to the top and used to inform overall revenue strategy.
Most importantly, satisfaction with TQP processes and outcomes is not solely a factor of the type of planning used. The State of Territory and Quota Planning, 2021 research report examines all the trends and challenges that affect TQP and shares what sales leaders told us can increase the effectiveness of their plans. Download the report today!
Frequently Asked Questions (FAQ)
What is the difference between top-down and bottom-up forecasting?
Top-down forecasting starts at the macro level by analyzing the overall market size, market share, and broader market trends to set strategic goals and then works downward to allocate targets across departments or teams. It provides a big picture view and is often faster to implement, requiring fewer resources and less granular data. In contrast, bottom-up forecasting builds projections from the ground up, starting with granular data such as individual sales activities, pipeline details, and historical sales data to create an aggregate forecast. Bottom-up forecasting offers more accurate forecasts and detailed operational insights but requires a significant time investment and high data quality. Many organizations use a hybrid approach combining both methods for improved forecasting accuracy.
What is an example of bottom-up planning?
An example of bottom-up planning is when a sales team starts by analyzing individual sales representatives' quotas, pipeline stages, and expected deal closures. Each sales rep forecasts their expected sales based on their current opportunities, average deal size, and historical conversion rates. These individual forecasts are then aggregated by sales managers and rolled up to create a comprehensive sales plan for the entire organization. This approach ensures that the territory and quota plan reflects real-time market conditions and the team's capacity, providing actionable insights into resource allocation, marketing costs, and potential revenue growth.
Why might a company choose top-down planning?
Companies, especially those in early stages or with limited historical data, often choose top-down planning because it allows for rapid, high-level strategy development using market research and industry trends. It is ideal for setting strategic growth targets, new market entry, or investor pitches where detailed internal data is unavailable.
What are the advantages of bottom-up planning?
Bottom-up planning provides realistic goal setting, creates accountability across the sales organization, and offers detailed analysis of specific products or customer segments. It connects directly to day-to-day sales activities, allowing teams to adapt quickly to rapid market changes and sales cycles, although it requires significant effort and robust data systems.
Can organizations use both planning methods?
Yes, many organizations implement a hybrid planning approach that leverages the strategic vision of top-down planning with the detailed reality of bottom-up analysis. This combination improves overall planning accuracy and helps reconcile differences between market-level insights and operational data.
