Transcript of "Sales territory and management of sales quota"
Is defined as a group present and potential
customers assigned to an individual salesperson, a
group of salesperson, a branch, a dealer, a
distributor or a marketing organization at a given
period of time.
Territories are defined on the basis of geographical
boundaries in many organization.
In broader term, it is a geographical area that
identifies and serves a category and a certain
number of customers.
However in some instances, companies do not
follow geographic designs for sales territories.
Eg - a small firm catering to a niche market.
There are some situations where companies to
build sales territories on the basis of the urgency
and frequency of customer requirements rather
than geographical coverage.
The problem with such a method is that the same
customer may get calls from multiple salespeople
from the same organization.
An alternative method is to make a single
salesperson accountable for one set of clients only
and if required call technical specialists for
Also in situations where personal relationships
and acquaintances have a bearing on sales,
organizations do not prefer territorial designs.
Ensures better market coverage, effective
utilization of sales force and efficient distribution
of workload among salespeople.
Convenient way to evaluate the performance of
A territorial design brings more clarity and focus to
the sales targets to be achieved.
The sales force can build higher sales through up
selling and cross selling to the same set of
Customer service improves over a period of time.
Helps understand customers current and
Helps salespeople to generate a better valve
from the customers.
An effective territorial design helps to
integrate the selling efforts with other
marketing and promotional functional
functions in the territory.
May not prove good in regions where personal
relationship is required rather than professional
Organizations with vast geographic area and large
customer distribution, with a lower density in any
specific block, firms using telemarketing and
internet marketing as tools, do not plan territories
on the basis of geographic division.
Small firms, particularly firms with single
salesperson do not establish sales territory.
Highly sophisticated and technically complex
products are sold through sales teams systematic
Organizations sell products like insurance, fixed
deposits and other investment products through
personal acquaintances of sales people.
An outstanding salesperson will be an outstanding
A sales executive’s job demands administrative
skills much beyond those required of salespeople.
But personal selling experience and outstanding
personal selling performance are two different
Basically the sales executive has two sets of
functions : operating and planning.
The operating functions include sales force
management, handling relationships with
personnel in other company departments,
communicating or co-ordinating with other
marketing executives and reporting to some
The sales executive planning function
includes those connected with the sales
programme, the sales organization and its
The sales executive is responsible for setting
personal selling goals, for developing sales
programme designed to achieve these goals,
for formulating sales policies and personal
selling strategies, and putting together plans
for their implementation.
The relative emphasis that a sales executive gives
to the operating and planning functions varies with
Type of products
Size of company
The type of supervisory organization.
1) Ability to define the position’s exact
functions and duties in relation to the goals
the company should expect to attain:
The sales executives calculate what is entailed in
They draw up their own descriptions.
2) Ability to select and train capable subordinates
and willingness to delegate sufficient authority to
enable them to carry out assigned tasks with
Effective executives select higher caliber
subordinates and provide them with authority to
The more capable subordinates, the wider policy
limits can be.
3) Ability to utilize time efficiently:
They time of sales executive is very valuable.
They allocate time to tasks which yield the greatest
Even the use of off-duty hours is very important.
Successful sales executive balance their time with
4) Ability to allocate sufficient time for
thinking and planning:
Able administrators make their contribution
through thinking and planning.
They recognize that reviewing past performances is
a prerequisite to planning.
6) Ability to exercise skilled leadership:
Competent sales executives develop and improve
their skills in dealing with people.
To a large extent, they depend more on the
Skilled leadership is important in dealing with
subordinates and with everyone else.
Sales Quotas are the targets that that the sales
people try to achieve within a specific period of
time, which contributes towards achieving the
organizational goals regarding sales forecasts.
Quotas are routinely assigned to the sales
Sales quotas are the sum of total sales of a
future period and duties to achieve the
component of total sales by each salesperson
are handed down to them at the beginning of
‘A sales quota is the sales goal set for a
product line, company division or sales
representative. It is primarily a managerial
device for defining and stimulating sales
Quotas are based on sales.
A sales forecast is an estimate of what a firm
Sales quotas may be set equal to, above or
below the sales forecast.
Sales potential is the maximum share of the
market demand that a firm can obtain.
There is no specific formulae or method for setting
sales quota, however a scientific method can be
followed for effective quota setting.
There should be objectivity in approach while
fixing quotas and it should be based on facts and
figures drawn from the market.
There should be an equal level playing field.
The set sales quota should be achievable by an
average salesperson with minimum effort.
A flexible quota often helps the salespeople to
adjust their efforts and returns to the market
There should be a level of definiteness in the quota
set for the salesperson based on – either
geographic territory, or on money value or on the
basis of units of product(s).
A participatory quota setting procedure serves as a
tool of motivation and realization of organizational
Three kinds of objectives can be towards the
Regular and recurring
1)Regular and recurring
These objectives are related to the sales volume,
target market share, expenses, frequency and
quantity of calls, prospects and lead generation,
growth in order size, market coverage, and
Achieving these goals is a satisfactory
performance evaluation of the concern.
2) Problem solving
Are individual salespersons goal that involve
deviations from the standard and routine
objectives, where things have gone wrong and
bringing a blockage in the smooth functioning of
the organization system.
These objectives need specific unique
commitments form the salesperson.
Creative objectives are actions the sales person
states and commits which are new, challenging,
creative, innovative, intelligent and original in the
territory or in another area of responsibility.
These goals mean managing breakthrough and
quantum leaps to new levels of performance.
The manager needs to talk to sell the objective and
commitment to his sales staff as they meet
customers to sell products and services.
There are essentially three steps to be
followed for quota setting:
Conferencing with each sales person
Arriving at a summarized written quota
1) Scheduled planning
It involves planning for goal setting meetings with
individual salespeople and particularly with new
These schedules are necessary to explain systems
and reasons, benefits and incentives for each
salesperson and goals for the organization.
The salespeople should be allowed to ask
questions and get clarification for their doubts.
2) Conferencing with each sales person
Here the sales manager allows the salesperson to
The discussion revolves around four key areas –
territory, account, call management and self
The purpose is to create a win-win situation for
both the organization and the employee.
3) Arriving at a summarized written quota
The next task is to prepare written summary of
the goals agreed upon.
The written goals become a document of
understanding for all purposes.
It provides clear cut goals and responsibilities for
the year ahead.
It is the most commonly used method as it provides
an important standard of appraising the
performance of individual salespeople,
intermediaries and the branch.
Sales volume quotas communicate the
organizations expectations in terms of what
amount of sales for/in what period.
This kind of quota can be set for geographical
territories, different product lines, different
marketing intermediaries, or more than one of
The annual quota is set for the year and then
broken down into specific time periods.
In many cases, these specific time periods may
vary depending upon the seasonality of the
business, consumer attitude towards buying and
the geographic location of the customer.
Organizations make sales forecasts on the basis of
the sales divisions, regions, branches, districts and
individual sales territories.
The sales volume quota is of three kinds:
Monetary sales volume quota,
Unit sales volume quota,
Points sales volume quota
The sales volume is set in monetary terms
and not in terms of units of the product.
The monetary quota is set for each sales unit
Here quota is set in terms of volume.
It is used in two situations;
When the prices of the products are expected to
fluctuate considerably during the quota period, and
when the companies with a narrow product line sell
at a price that fluctuates little during the quota
It helps the company to achieve the sales in terms
Some organizations use sales volume quota
expressed in ‘points’ into which money or unit
sales or both can be converted as desired by the
A multi-product firm may fix a point volume quota
where sale of one unit will bring a certain point.
Eg: if a salesperson is given a quota of 1000
These kinds of quotas are set for various units of
the organization in order to control the expenses
(expenses quota), gross margins and net profits
The objective not only to make desired sales
volume but also make profits.
Expenses quota ensures that the salespeople limit
their expenses in alignment with the volume and
control the cost to acquire customers.
Many companies set upper limits on items of
expenses like lodging, meals and entertainment
and expect the salespeople to manage within the
Profit quota can be set on Gross margins and Net
Organizations emphasize net profits more than
The rationale behind this type of quota is that the
sales personnel operate more efficiently to reduce
the expenses and increase the sales resulting in
increased margins and profits.
The manufacturing department provides the sales
manager with information regarding the cost of
goods sold, which includes the cost of
manufacturing the product.
By subtracting the cost of goods sold and the direct
selling expenses from the sales volume, one can
determine the net profit quota.
Here the sales person does not decide the price
and has no control over the manufacturing cost.
The sales person is not always involved in
sales realization; for example a retail
salesperson has a job of providing
In addition to direct sales activity, the
salesperson is expected to do some nonselling activity and the quota can be set as a
mix of these activities.
Eg: Insurance selling, Medical Reps.
Activity quota can be set on total sales
calls, particular classes or set of customers, calls
on prospects, number of new accounts, product
Activities quota set objectives for job related
The most common combination is the sales
volume and activity quota.
It is used to control the sales force
performance on the basis of selling and nonselling activities.
Fixing sales quota in organizations is a
challenging task today due to the sheer size
of the sales organizations, complex sales
force structure and varied competition
conditions in different territories.
For fixing quotas, the following methods can
Organizations forecast the total sales or
volumes for the entire market, which is then
divided into territories and then brought
down to the individual salesperson level.
Estimated future sales per territory are then
divided by the number of salespersons or by
the branches to determine the sales quota for
It is not always possible to obtain the
forecasted figures for individual sales
territories as companies lack information,
data, money and people to determine the
sales potential for individual sales territories.
Small companies set quota in relation to their
sales forecast or total market estimates.
Here the companies collect the sales data of
previous years, average them out for each
geographical territory and then add an arbitrary
percentage for next years quota.
This average method is followed due to the ease in
using trends and projecting them in future.
This method gives a rare view perspective, as it
does not take into consideration the sales
This method is used when there is no or little
information available in the market.
It may also be impractical to find out the
potential of new product in an existing
territory or an existing product in a new
Many companies ask their own salespeople to set
the quota for themselves.
This is mostly applicable in situations where the
company is expanding the territory or starting up
its own sales force.
These inputs from the salespeople allow the
company to fix their production and manufacturing
Asking the salespeople their quota, provides
an opportunity for the salespeople to test
their abilities and it makes them to work with
What can be the 2 issues here when the
salespeople are asked to set the quota for
Salespeople are promoted on the basis of their
Salesperson get extra compensation by reaching
sales volume quotas for total unit or rupee sales,
sales of existing products and new products… also
to a new or an existing customer.
Quotas related to compensation are determined by
any of the previously explained quota setting
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