Territory Economics Calculator
A diagnostic framework for calculating whether territorial defense costs are sustainable relative to territory value.
A diagnostic framework for calculating whether territorial defense costs are sustainable relative to territory value. Produces a Defensive Intensity Ratio (DI%) that indicates whether territory is under-defended, sustainably defended, or over-defended.
When to Use Territory Economics Calculator
Use in Phase 1 of territorial strategy implementation (Month 1-2) to diagnose current territory health. Also use immediately when considering expansion, facing margin compression, or experiencing increased competitive pressure.
How to Apply
Map Your Current Territory
Define clear boundaries across four dimensions: Geographic (markets, regions, countries), Product (categories, segments, price points), Customer (demographics, psychographics, use cases), Channel (distribution, platforms, partners).
Outputs
- Territory map across all four dimensions
Calculate Boundary Length
For each territory dimension, count boundary segments requiring defense. Geographic = distinct markets, Product = adjacent categories that could invade, Customer = bordering segments, Channel = alternative channels.
Outputs
- Total boundary segments count
Measure Intrusion Frequency
For each boundary segment, count annual intrusions: competitor moves toward territory, customer defections, channel conflicts, new entrants testing boundaries.
Outputs
- Intrusion rate = Total intrusions / Total boundary segments
Calculate Defense Costs
Measure response cost for each intrusion type: competitive response (price matching, feature parity), customer retention (promotions, account management), channel defense (incentives, exclusives), legal/regulatory.
Outputs
- Average cost per intrusion
- Total defensive spending
Calculate Territory Value
Sum revenue generated within territory, gross profit (revenue minus direct costs), and strategic value (data, network effects, platform advantages).
Outputs
- Total territory value = Gross profit + Strategic value estimate
Assess Sustainability
Calculate Defensive Intensity Ratio = Total defense costs / Total territory value. Interpret: <15% under-defended (territory at risk), 15-30% sustainable (optimal zone), 30-50% over-defended (marginal), >50% unsustainable (consider territory reduction).
Outputs
- Defensive Intensity Ratio percentage
- Sustainability assessment