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A Presentation on

Methods for Estimating Sales Quota

By :- Surbhi jain Zenmay jai singh negi Apoorva karoria


It may be defined as the Individual sales target figure assigned to each sales unit as a required minimum for a specified period (month, quarter, year). Sales Unit may be such as a sales person, dealer, distributor, region, or territory. Sales quotas may be expressed either in dollar figures (monetary terms) or in number of goods or services sold (volume terms).

Methods For Setting Sales Quota :

Territory Potential Past Sales Experience Total Market Estimates Executive Judgment Salespeoples Estimates Compensation Plan

Territory Potential :
This method is mainly used in large organizations for setting sales quota. First step- Estimation of market potential for a product line over a geographical area.

Second step- Estimation of multiple factor index, for each sales territory.
Third step- The expected industry sales in each territory obtained by multiplying the industry sales forecast by multiple factor index. Fourth step- The companys estimated market share in the territory is considered out of the territory market potential in order to come up with sales volume quota for the territory.

Past Sales Experience :

It is used in companies that consider past sales only for setting the volume for sales quota. Under this the companies take the figure of sales from the past year from each sales territory, then add a considerate amount and then state them as new sales volume quotas. Another alternate and common method relates to taking out an average of previous 3 or 5 years sales, then add a percentage by which the market growth is expected. This is a relatively better method for calculation of Sales Quota as it considers the importance of variable sales trend. This assumption based on past sales may not always be correct. (Due to- Market structure, companys Image, poor market coverage)

Total Market Estimates :

This is a known Top-Down approach in setting sales quota. The Process followed by established companies is as under:
Companys total sales are estimated. These are divided in different territories. Each territory divides its quota among different sales personnel working in the territory.

Executive Judgment :
Under this, quotas are decided on the basis of judgment made by the top officials. It is generally used by new business units or by those organizations that are entering new sales territories. This method is justified when there is absolutely no record of past sales. Most importantly, when the product is new and its rate of market acceptance is unknown, then sales quota is determined and set through this method.

Sales Peoples Estimates :

This is a method in which the sales quota is estimated by each salesman/salesperson himself. Salesmen/Salesperson are the ones who are most familiar with the actual market conditions and are in a better state to estimate the sales in their territory. Achievements of such quotas are easier as sales force works with high enthusiasm and are highly motivated. the major drawback for this method is that the sales force might not always have sufficient knowledge base to adjust sales quota for changes taking place in Marketing Mix, Competitive Strategies, etc

The sales force may set their sales quota at low level to avoid work.

Compensation Plan :
Some companies set quotas to fit their sales compensation plan. For an instance if the sales quota of a company for the current year is x then for the next year the sales quota is also set to x. Employees have a target to achieve now and whatever they achieve further the decided quota they get a commission over each sale. Most companies have a salary + commission plan in India. Salary plan is a fixed compensation plan and Commission plan is a Variable compensation plan. It increases efficiency in the sales force as the employees struggler to achieve the highest commission. The effects are almost instantly reflect in the sales chart and thus benefit the employees greatly.