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Sales Quotas

 Part of daily duties for sales manager & sales people  After preparing sales states that when goals are set for individuals. company decides its sales budget which is then broken down to sales quotas for regions & sales motivates them to make an extra effort to achieve them.changing their attitude & behaviour  Sales Quotas are sales goals assigned to sales people. .Sales Quotas: Defined The concept of sales quotas was propunded by “Edwin Locke”in his goal setting theory.

Objectives of Sales Quotas:  Provide Performance Standards: Used as a tool to measure the performance of a sales person. To keep the motivation of sales people alive the setting of targets should neither be too high nor too low. Poor performance may reveal that training programme needs improvement.g.  Motivating People: Sales force compensation (Bonus/ Incentives) are generally measured against achievement of sales quotas. quality of product needs to be improved and repositioning of brand if required. Special R&R could be set to motivate sales force e. Making comparatives of actual performance against performance standards on quarterly and monthly basis.  Identifying Strengths/ Weaknesses: When actual sales performance is compared with respective quotas of different territories & salesperson. Sales managers can easily identify successful and unsuccessful performers. LCD etc. trip to Australia. .

 Controlling Performance:    Eg if quota of 8 calls per day is set.sales person knows that he has to make those calls.sales manager is indirectly controlling his activity Check wasteful expenditure-expense quota is made Reimbursement of selling expense .

for a specific period  Better to set quota for branches with in the region than for entire region Cos set sales vol. eg 40 lakh units in 1 quater -point sales vol. .distributors.Sales Quota-Types  Sales Volume: Cos set sales volume quota for individual salespersons.quota on -Rs/Dollar sales vol eg 20 lakh per month  -unit sales vol.

Net profit 3 lakh . salespeople & products.       Gross margin or Net Profit Quota Here the quota is decided by subtracting cost of goods sold from sales volume Eg Sales vol 20 lakh Cost of goods 15 lakh Gross margin 5 lakh Assuming for achieving 20 lakh sales 2 lakh was selling exp. Financial Quotas:  These are goals set to control gross margin or net profit and expenses of various sales units like sales territories.

displaying cos product in shops..after sales service.expenses are fixed at 10% of SV ie 2 lakh rs  Activity Quota:  These type of quotas are set by the companies when they want to control salesforce performance both on key selling & non selling activities like building customer relationshios. . Expense Quotas :   These are used so that selling expenses are kept in line with sales volume. so generally they are stated in % of sales Eg sales vol is expected to be 20 lakh.

Basis for Setting Sales Quotas       Territory Potential Past Sales Experience Total market Estimates Executive judgment Salespeople’s estimates Compensation Plan .

Mkt potential/industry sales forecast for skin care products is 13.5) in mumbai Co. mkt share is 20%.5 million in India Multiple factor index using population & buying power is 1.5 in Mumbai Expected industry sales 20.25 million(13.5*1. Territory Potential:     In this mkt potential/industry sales forecast for a product line for a geographical area is determined Then market factor index is determined for each sales territory Then expected industry sales in each territory(territory mkt potential)= industry sales forecast *multiple factor index Then co’s expected mkt share is that territory is found out.05 million  example     Used by large organisations for setting sales Quotas .s expected mkt share would be 20.25*

generally there are more than 1 sales factor like population and income..b’cz they are large in no. Market factor index For a co.these factors are given weights corresponding to the degree of sales opportunity Example: HUL is marketing and manufacturing detergents all over india..they want to estimate the Mkt potential of detergents in mumbai .but by identifying the factors that influnce the sales of that product or service.the estimation of market potential for a geographical location is done not by identififying households or individuals..

3 resp.  Major factor that influnced the sale of detergents were population.personal income & retail sales.9% of india’s retail sales  Based upon this the Mumbai’s multiple factor index would be (0.03*1)+(0.9)=0.85 India’s detergent industry forecast is Rs 55000 million for 2010-11.3 &0.7)+(0.then the expected mkt potential for Mumbai would be .7% of india’s population.weightage were gived as 0.3*0.4*0.0.85*55000=467 million for 2010-11 .  Suppose Mumbai had .1% of disposable income & .4.Potential of detergents in Mumbai.

is new  Product is new  Territory is new in such a situation senior managers use their judgements based upon their past experiences to perdict the sales quotas.  Sales people estimate:  Co’ s ask their sales persons to set sales they can understimate/overestimate the quota . Executive judgement:  Co’s use this method when  Co.this method is rarely used.

 Disadvantage   Considering future is based upon past If past sales are achieved by poor mkt coverage.quota Or they take the avg of pervious 3 or 5 yrs sales of each territory add a % by which mkt is expected to grow.s should consider as one of the factor and not the only factor . Past sales experience   Some co’s take past yrs sales for each geographical sales territory.the forecast would be co.add a % and deciede the sales vol.

1 million(43*7%)  Example:   . Total mkt estimates:    Some co’s set quotas for sales territories based upon total mkt estimates/mkt potential/industry sales forecast Then co’s expected mkt share is found out from total mkt estimate Then each territory %age share of total co’s share for previous yr is found out. Territory past yrs sales were 7% of total co’s sales(43 million) This yrs territory sales quota would be 3.

sales quota for this yr is 12 million & salesperson is paid an incentive of a fixed % of sales achieved over quota of 12 million Another method is co pays monthly salary of Rs. Compensation plan:  Co’s often set sales quotas to fit their compensation plans Last yrs sales were 12 million.5k plus a commission of 3% on all monthly sales above 1 lakh.  Example   .

Importance of Sales Quotas  Provide Performance Targets:     They help sales manager to direct the activities of sales personnel Assigning challenging goals sales managers prompt sales people to work harder n perform better Each yr the targets should be revised so that sales people could device new ways to achieve them Moreover they should not be unrealistic.  Provide Standards:  Tool against which the actual performance can be measured .

Appropriate remedial steps can be taken  Tool for Motivating:  Help sales persons to compete among themselves leading to improved performance and sales volume. . Provide Control:   Failure to achieve the quotas set for sales personnel provides the sales manager an easy index to spot the deviation in performance.

environment.territory potential while setting sales quota.Characteristics of a Good Sales Quota  Fair:   Sales manager should take into account factors like There should be uniformity in setting quota  Challenging:   To motivate the sales force to perform better They should not set the quota that are not in the reach .

.without causing drastic changes in sales budgets o sales forecasts  Easily understandable:   Quotas should be easily understandable and interpretable Quotas should be set after mutual discussion with sales force. Flexible:  Modified when required.