Sales Management

Chapter 7
 Chapter 7

Management of Sales Quota

What is Quota?

• Quota refers to an expected performance objective

assigned to a sales unit such as Region, Area or a District
Why quota is important?
• Quotas provide performance targets
• Quotas provide standards
• Quotas provide control
• Quotas provide change of direction
• Quotas are motivational
Types of quotas
• Sales Volume Quotas
• Profit Quotas
• Expense Quotas
• Activity Quotas
• Combination of above Quotas
Sales volume quota
• Sales Volume Quotas include Rupee or Product Unit
objectives for a specific period of time.
• Example:
1. Hindustan Unilever uses Rupee sales as objective,
2. Ford Motors uses No. of Cars sold as objective
Profit Quotas

• Firms use a set Profit Quotas along with Sales Volume

Quotas
• Two types of Profit Quotas are
1. Gross Margin Quota
Sales-Cost of Sales=Gross Margin
2. Net Profit Quota
Gross Margin-Sales Expenses=Net Profit
Expense Quotas

• Expense Quotas are aimed at controlling costs of Sales

Units.
• Expenses are fixed as percentage of territory sales volume.
 Activity quota
• Activity Quotas set objectives for job-related duties useful
for achieving sales people’s performance objectives.
• They help in directing sales people towards non-selling
activities such as post sale follow-up, collection of
payments etc.
Combination quotas
• Many organisations use combination of Sales Volume
Quota ,Profit Quotas, Expenses Quota and Activity quotas.
 • To help
motivate
Quotas- Why? salespeopl
e
• To direct
salespeopl
e where to
put their
efforts
• To provide
standards
for
performan
ce
evaluation
11
 • Goal
Theory:
When are they effective? proposes
that
difficult
goals (if
accepted)
will lead to
higher
performan
ce than
lower goals
or no goals
such as “do
your best”
• Classic
12 study: high
 • Past sales
• Forecasted
Administering Quotas sales
• Sales
potential

13
 • Everyone
knows
Quotas- advantages? their
quotas in
advance
• Easy to
cascade
corporate
sales goals
through
organizatio
n
• Can
capture
some
territory
14
differences
 • Difficult to
set
Quotas-disadvantages? accurately
(especially
for new
products)
• Payout is
hard to
predict-
exceed the
budget or
turnover
• Difficult to
adapt to
changes
through
15
the period
 • Executives
who earn
Quotas- disadvantages? less than
their goal
often
complain
about the
fairness of
the setting
procedures
• Good-
performing
executives
may
“coast” if
future
16 quotas are
 • When
teamwork
Quotas- when for sure “not”? is
important-
individual
quotas
might be a
problem
• Long
selling
cycle
• rough on
new
executive
s
• if also a
17
high
dollar
 • May or
may not
Performance Plans have
quotas
• Measure
performa
nce to a
benchma
rk:
“average
performe
r”
• Relative
payouts
are set in
advance:
• “top
perfor
mer
18 gets
2.5
 • May not
work in
Drawbacks to Performance Plans
team-
selling
environme
nts
• No goal -
motivation
al issues
• Executives
doesn’t
know in
advance
what their
payout will
be since
19
they don’t
 • Quotas
appear to
Summary have
strong
motivation
al value if
well
implement
ed
• They are
however
difficult to
implement
• Need to
trade-off
the
20
administra
SUMMARY

• According to salespeople, managing time and territory is

the most important factor to be considered when carrying
out their selling duties.
• Developing sales territories has advantages as well as
certain disadvantages.
• Sales force objectives are usually converted into individual
sales territorial goals.
• The three main influences affecting the sales personnel’s
workload are nature of the job, intensity of market
coverage, and products sold.
SUMMARY continued

• Before designing sales territories, managers must consider

six factors.
• The customer contact plan includes scheduling sales calls
and routing salesperson’s movement around the territory.
• Territorial control allows actual performance to be
compared with standards of performance for evaluation
purposes.
• Sales Quotas help the organization to achieve sales
objectives both in terms of revenue and net profit.