WHAT IS A QUOTA?• Individual sales target figure assigned to each sales unit such asales person, dealer, distributor, region, or territory, as arequired minimum for a specified period (month, quarter,year).• Sales quotas may be expressed either in figures (monetaryterms) or in number of goods or services sold (volume terms).
Profit quotas• Gross margin quota determined bysubtracting cost of goods sold from salesvolume.• Net profit quota determined by subtractingcost of goods sold and salespeople’s directselling expense from sales volume.
• Activity quotas set objectives for job-relatedduties useful toward reaching salespeople’sperformance targets.• Expense quotas are aimed at controlling costsof sales units. Often expenses are related tosales volume or to the compensation plan.
Combination quota• Sales performance is calculated based onselling and non selling activities.• Various quotas are there.• uses points as common measure
Objectives• To provide quantitative performance Standard– Quotas provide a means for determiningwhich sales unit are doing an average, belowaverage or above avg. job. It is the yardstickfor measuring sales performance, butmanagement must dig deeper to uncoverreasons for variations
• To obtain tighter sales and expensecontrol – Quotas are designed to keepselling expenses within limits. Manycompanies reimburse sales expensesonly up to a certain percentage of salesquota.
• To motivate desired performance – Quotasprovide incentive to achieve certainperformance level. Companies may use quotato provide their sales force the incentives ofincreasing their earnings through commissionsor a bonus if the quota is surpassed andrecognised for superior performance.
• Controlling Sales Persons’ activities –Quotas provide an opportunity to direct andcontrol the selling activities of sales persons. Ifthe sales person fails to attain the quota thecompany can take corrective actions to rectifythe mistake.
• Management must make sure that the salespersonnel understand quotas and quotasettingProcedure. Conveying this understanding is acritical step in securing acceptance of quotas.• It is important that sales personnel understandthe significance of quotas as communicator of “ howmuch for what period”. It requires:• Keeping sales personnel informed: Effective salesmanagement keeps sales personnel informed of theirprogress relative to quotas. It permits them toanalyse their own strong and weak points.
Need for continuous managerial control:• In administering any quota system, there is aneed for continuous monitoring ofperformance.• Sales personnel need encouragement, adviceand occasionally warnings in deciding to takemeasures to improve their performance.• Continuous managerial review and appraisalare required.
Methods for setting sales quota• Territory potential.• Past sales experience.• Total market estimates.• Executive judgment.• Sales person estimates.• Compensation plan
Setting Sales Quotas for a Sales Team1. Establish Parameters for developing quotas Historical trends Last year’s revenue National Standards Territory Analysis
2. Add a Growth Expectation – now predict revenuesfor the next year.Expectation should be: Realistic Challenging
3. Adapt the Quotas to each Sales Reps – dividing total revenueby total number of salesperson.Factors to consider: Tenure Assigned job Sales skills Market potential Competition
4. Get buy-in from your sales team• outline the process youll be using to set quotas to yourteam.• Make it a joint decision, if possible, to assign a specificquota.5 Adapt Quotas to market realities Review Periodically. Change Quotas according to the economy
NameFor YearList Your Responsibility AreaResults ExpectedPessimisticOutput22.214.171.124.126.96.36.199.188.8.131.52.Other$ Volume/month$ Expense/monthGross margin/monthOptimisticRealistic ResultsInstruction: List the regular, ongoing, recurring objectives. Cover the ten major respon-sibilities of your job next year to manage territory, accounts, calls, and yourself.
A GOOD QUOTA PLAN ISSMART»Specific»Measurable»Attainable»Realistic»Time specific