Sales Quotas

Sales Quotas
a) Provide goals: sense of directions, salespeople
have to focus on work in keeping with co.
objectives, present challenges to work harder and
perform better

Sales Quotas
a)

Provide goals: sense of directions, salespeople have to focus

on work in keeping with co. objectives, present challenges
to work harder and perform better
b) Standard for measuring performance:
Sales representative
Dealer/Distribution
Branch / Region
Territory

Can compare performance throughout

organization irrespective of territories/product
Sales Person

Quota (in
lakh rupees)

Actual Sales
(in lakh
rupees)

Difference (in
lakh rupees)

Performance
Index (in %)

20

20.5

+0.5

102.5

15

15.1

+0.1

100.66

18

17.8

-0.2

98.88

22

22.1

+0.1

100.45

Sales Quotas
c) Controlling expenses/salespersons activities;
failure to achieve quota enables sales manager to
spot deviation in performance

Sales Quotas
c) Controlling
expenses/salespersons
activities;
failure to achieve quota enables sales manager to
spot deviation in performance
d) Strengths & weaknesses in structure; Change of
direction

Sales Quotas
c)
d)
e)

Controlling expenses/salespersons activities; failure to

achieve quota enables sales manager to spot deviation in
performance
Strengths & weaknesses in structure; Change of direction
Basis for compensation plan: tool for motivating sales force;
achievement of quota increases self confidence
Different view also prevails that salesperson need
compensation as well as acknowledgement; cos. compensate
on customer satisfaction; also in traditional quotas bonus
ranges between 90 110%, in new compensation plan bonus
ranges between 25-300%, new system allows rejection of
non-profitable/non-strategic customers

i.

Sales Volume Quotas: Most simple, set for

product/territory/line/channel or distribution;
may be re Sales/unit sales; annual quota can be
broken down into half yearly / quarterly /
monthly quotas
Managers can evaluate / compare performances

ii.

Gross margin / Net Profit Quotas: Fixed on gross

margin / net profit aimed at; cuts expenses (Sales /
Expenses);
Gives an accurate picture of profits generated
Commission paid is more accurate when calculated
on gross margin
Help managers do profitability analysis for
organizational effectiveness
But sales people can concentrate on selling only
profitable products

iii. Budget / Activity Quotas: Emphasis on non

selling activities; Have to know that apart from
selling there are other considerations should be
clubbed with sales volume quotas prospects
called displays service demos dealer
training ; After sales calls, customer relations,
promotion management

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IV. Expense quotas: For making people cost conscious

expense tied to sales volume.

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Combination Quotas: Apportionment of weightage

between various activities

12

What is a good Quota?

13

What is a good Quota?

Fair;

14

What is a good Quota?

Fair;
Challenging and Rewarding: Sufficiently

15

What is a good Quota?

Fair;
Challenging and Rewarding: Sufficiently high &
linked to bonus / commission
Understandable

16

What is a good Quota?

Fair;
Challenging and Rewarding: Sufficiently high &
linked to bonus / commission
Understandable
Flexibility

17

What is a good Quota?

Fair;
Challenging and Rewarding: Sufficiently high &
linked to bonus / commission
Understandable
Flexibility
Must help achieve management goals
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Quota Setting Process

Based on

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Quota Setting Process

Based on
A. Sales forecasts and market potential

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Quota Setting Process

Based on
A. Sales forecasts and market potential
B. Sales forecast alone (used when company does not
have data / software / personnel to calculate market
potential

21

Quota Setting Process

Based on
A. Sales forecasts and market potential
B. Sales forecast alone (used when company does not
have data / software / personnel to calculate market
potential
C. Past experience; arbitrary increase over past years
sales / averaging sales over past years; used when
company does not have sales forecast / market
potential data
22

Quota Setting Process

Based on
A. Sales forecasts and market potential
B. Sales forecast alone (used when company does not have data
/ software / personnel to calculate market potential
C. Past experience; arbitrary increase over past years sales /
averaging sales over past years; used when company does
not have sales forecast / market potential data
D. Executive judgment; common in small orgns

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Quota Setting Process

Based on
A. Sales forecasts and market potential
B. Sales forecast alone (used when company does not have data
/ software / personnel to calculate market potential
C. Past experience; arbitrary increase over past years sales /
averaging sales over past years; used when company does
not have sales forecast / market potential data
D. Executive judgment; common in small orgns
E. Sales people compensation
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Quota Setting Process

Based on
A. Sales forecasts and market potential
B. Sales forecast alone (used when company does not
have data / software / personnel to calculate market
potential
C. Past experience; arbitrary increase over past years
sales / averaging sales over past years; used when
company does not have sales forecast / market
potential data
D. Executive judgment; common in small orgns
E. Sales people compensation
F. Set by sales people themselves
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Quota Administration

Motivating Quota
Setting understandable quotas
Involvement of sales person
Keeping them updated
Common problems
Deciding priority of accounts
Allocation between present & prospect
customers
Proper balance between selling & non
selling activity
For overly demanding a/c s.
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