Sales quota


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Sales quota

  1. 1. Sales Quota(MY CLASS NOTE)MBA<br />A Sales Quota is a quantitative goal assigned to a sales unit relating to a particular time period. It is a device to direct and control sales operations.<br /><br />
  2. 2. Objectives<br />To provide quantitative performance Standard –Quotas provide a means for determining which sales unit are doing an average, below average or above avg. job. It is the yardstick for measuring sales performance, but management must dig deeper to uncover reasons for variations.<br /><br />
  3. 3. To obtain tighter sales and expense control – Quotas are designed to keep selling expenses within limits. Many companies reimburse sales expenses only up to a certain percentage of sales quota.<br /><br />
  4. 4. To motivate desired performance –Quotas provide incentive to achieve certain performance level. Companies may use quota to provide their sales force the incentives of increasing their earnings through commissions or a bonus if the quota is surpassed and recognised for superior performance. <br /><br />
  5. 5. Controlling Sales Persons’ activities – <br /> Quotas provide an opportunity to direct and control the selling activities of sales persons. If the sales person fails to attain the quota the company can take corrective actions to rectify the mistake.<br /><br />
  6. 6. Administering the Quota system<br />A quota should be Accurate, Fair &Attainable<br />Accurate – The more closely quotas are related to territorial potential, greater the chances of accuracy.<br />Fair- It is a proper blend of sales potential and previous experience.<br />Attainable – possibility to reach the target.<br /><br />
  7. 7. Management must make sure that the sales <br />personnel understand quotas and quota setting<br />Procedure. Conveying this understanding is a <br />critical step in securing acceptance of quotas. <br />It is important that sales personnel understand<br /> the significance of quotas as communicators<br /> of “ how much for what period”. It requires: <br /><br />
  8. 8. Participation by sales personnel in quota setting:If sales personnel participate, the task of explaining quotas and how they are determined is simplified.<br />Keeping sales personnel informed: Effective sales management keeps sales personnel informed of their progress relative to quotas. It permits them to analyse their own strong and weak points.<br /><br />
  9. 9. Need for continuous managerial control: In administering any quota system, there is a need for continuous monitoring of performance.Sales personnel need encouragement, advice and occasionally warnings in deciding to take measures to improve their performance.Continuous managerial review and appraisal are required.<br /><br />
  10. 10. Types of Quota<br />Sales Volume quota - Oldest and most common <br />method.It is an important standard for appraising the<br /> performances of individual sales personnel. It may <br />be set in terms of units of product sales or rupee <br />sales or combination of these two on point basis. <br />Considerable Price Fluctuations : Unit Quota<br />Multiple products : Rupee Quota<br />Try to attain both unit & revenue : Point Quota<br /><br />
  11. 11. Procedures:<br />Past Sales: It depends on past sales Experience. <br /> Determine the % by which Co’s market share is <br /> expected to increase & add this to Last year’s quota.<br />Territorial Sales Potential: Sales potential <br /> represents max sales opportunities open to a selling unit. Appropriate method when territorial potentials are determined in conjunction with territorial design.<br /><br />
  12. 12. Executive Judgment: When the product is new, probable market share is unknown, sales person is newly recruited or assigned to new territory – SVQ is set on judgment basis.<br />Total Market Estimates: Territorial potential is unknown. Management breaks downthe total estimated company sales, using index of relative sales opportunities in each territory. <br />Sales personnel Estimate: Sales personnel are closest to the territory and know them best.<br /><br />
  13. 13. Budget quota-It is set to control the sales expenses incurred as well as to attain desired net profit. Intention is to make it clear to the sales personnel that their jobs consist of something more than obtaining sales volume and the Co is business to make profit.<br /> * Expense Quota – To keep the selling cost within reasonable limits, Co. may set quota for expenses linked to different levels of sales attained by their sales force. Very strict conformity to expense quota norms results in demotivation of salesforce.<br /><br />
  14. 14. * Net profit Quota- Use full for a multi product firm where different products contribute varying level of profits. It is important for the management to ensure that its sales person do not spend more time on less profitable products.<br /><br />
  15. 15. Activity Quota – It is set for total sales call, number of new accounts, product demonstration, placement or erection of displays, making collections etc. Balanced Quota.<br />Combination Quota – Any combination of the above mentioned quotas.<br /><br />