Management of Sales Quota

Sales Quota
• It is an expected performance objective.
• Quotas are routinely assigned to the sales units,
such as departments, divisions, and individuals
and they proceed to reach at these quotas in their
respective domains.
• A sales quota is the sales goal set for a product
line, company division, or sales representatives.
• It is a quantitative goal assigned to specific
marketing unit such as salesperson or a territory
for a period of time.
 Importance
• Sales managers use the sales quota for
motivating the salespeople.
• Quotas always lead organisations towards
management by exception.
• Sales quotas helps in giving directions to the
salespeople’s efforts and resources for specific
ends.
 Principles of Quota setting
• It is a challenge to the sales manager, which
should be handled with precision and
adequate skills.
• There is no specific method or formulae for
setting quota, however a scientific principle
can be followed for effective quota setting.
• There should be objectivity in the approach
while fixing quotas and it should be based on
facts and figures drawn from the market.
 The concept of SMART
• Specific-Clear & Concise, as they donot leave
any doubt in anyone’s mind as to what is to be
expected.
• Measurable- In terms of volume of sales
generated in quantity or in rupee terms.
• Attainable & Realistic- Realistic goals based on
market facts.
• Time-Specific- Quotas are developed for
short-term periods and long-term periods.
Level Questions that need to be answered while setting quota

Level 1 Does the quota state accurately what the intended results
are?

Level 2 Does the quota specify when the intended result is to be

accomplished?

Level 3 Can the Sales Manager measure the intended result?

 Procedure for Setting Quota
• A successful procedure for setting quotas in organisations is a
process built on one-to-one discussion between the sales
manager with each salesperson serving a territory.
• Three steps to be followed for quota setting: Schedule
Planning, Conferencing with each salesperson and arriving at
a summarized quota statement.
• A schedule planning involves planning for goal settings with
individual salespeople particularly with new recruits.
• These schedules are necessary to explain systems and
reasons, benefits and incentives for each salesperson and
goals for the organisation. These are called orientation
briefings.
 Individual Goal Setting Form
Name --------------------------------------
Year -----------------------
Your Territory --------------------------
Output Results Expected -----------------------------------

Pessimistic Realistic Optimistic Results

1.Volume per Month
2. Expenses per Month
3. Gross Margin per Month
4. Market Share per Month
5. Key Account Coverage per
month
 Conferencing with Each Salesperson

• The salespeople brings the filled in goal setting form with him
for discussion.
• The sales manager allows the sales person to discuss all the
rows in the first column in the output table.
• The discussion revolves around the key four areas- the
territory, the account, the call management and self
management.
• The manager gets an agreement on these areas.
• The purpose is to create a win-win situation for both the
organisation and the employee.
 Types
• Sales Volume Quota
• Sales Budget Quota
• Sales Activity Quota
• Combination Quota
 Sales Volume Quota
• Sales volume quotas communicate the organisation’s
expectations in terms of what amount of sales for/in what
period.
• This kind of quota can be set for geographical territories,
different product lines, different marketing intermediaries.
• For. Ex. Torrent Pharmaceuticals uses rupee sales objectives,
whereas a company like General Motors uses the no. of cars
and commercial vehicles.
• The annual quota is set for the year and then they are broken
into specific time periods such as quarters, months and
weeks. This is called breakdown approach.
 Sales Budget Quota
• These kinds of quotas are set for various units by the
organisation in order to control expenses (Expense Quota),
gross margin and net profits (Profit Quota).
• The setting of such quota is to make clear to the salesperson
that their job includes not only obtaining desired sales volume
but also making good profits.
• Expense Quota ensures that the salespeople limit their
expenses in alignment with the sales volume and control the
costs to acquire customers.
• Profit quota can be set on gross margins or on net profits.
 Sales Activity Quota
• Quotas can be fixed on the activity a salesperson has to
perform, rather than final outcome.
• The salesperson has to do some non-selling activity in
addition to the direct selling activity.
• It can be set on total sales call, calls on prospects, number of
new accounts, product demonstration.
 Combination Quota
• Combination quota is used to control sales force performance
on the basis of selling and non-selling activities.
• The most common combination is the sales volume and
activity quota.
• A combination sales quota can be achieving a sales target of
1000 units along with developing 20 new key accounts,
identifying 100 prospects and bring back 50 lost customers.
 Methods of Setting Sales Quota
• Quotas based on sales forecasts and potentials- Total sales
volume for the entire market, which is then divided into
territories and then brought down to individual sales person.
• Quotas based on Past sales or experience- Companies collect
the sales data for the previous years, average them out for
each territory and then add a arbitrary percentage for the
next year’s quota.
• Quotas based on Executive Judgement.
• Quotas based on the Judgement of Salespeople.
• Quotas based on compensation.