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Sales Quotas




               1
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




                                          2
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




                                                 3
Can compare performance throughout
     organization irrespective of territories/product

Sales Person     Quota (in    Actual Sales   Difference (in   Performance
               lakh rupees)     (in lakh     lakh rupees)     Index (in %)
                                rupees)
    A              20             20.5           +0.5            102.5


    B              15             15.1           +0.1            100.66


    C              18             17.8            -0.2           98.88


    D              22             22.1           +0.1            100.45




                                                         4
Sales Quotas

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




                                          5
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



                                        6
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
e)   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



                                                  7
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




                                          8
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




                                            9
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




                                        10
IV. Expense quotas: For making people cost conscious
    – expense tied to sales volume.




                                       11
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

                                    18
Quota Setting Process
     Based on




                   19
Quota Setting Process
Based on
A. Sales forecasts and market potential




                                          20
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 orgn’s



                                               23
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 orgn’s
E. Sales people compensation

                                               24
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 orgn’s
E. Sales people compensation
F. Set by sales people themselves
                                          25
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.

                                    26

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Sales quotas

  • 2. 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 2
  • 3. 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 3
  • 4. Can compare performance throughout organization irrespective of territories/product Sales Person Quota (in Actual Sales Difference (in Performance lakh rupees) (in lakh lakh rupees) Index (in %) rupees) A 20 20.5 +0.5 102.5 B 15 15.1 +0.1 100.66 C 18 17.8 -0.2 98.88 D 22 22.1 +0.1 100.45 4
  • 5. Sales Quotas c) Controlling expenses/salespersons’ activities; failure to achieve quota enables sales manager to spot deviation in performance 5
  • 6. 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 6
  • 7. 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 e) 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 7
  • 8. 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 8
  • 9. 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 9
  • 10. 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 10
  • 11. IV. Expense quotas: For making people cost conscious – expense tied to sales volume. 11
  • 12. Combination Quotas: Apportionment of weightage between various activities … 12
  • 13. What is a good Quota? 13
  • 14. What is a good Quota?  Fair; 14
  • 15. What is a good Quota?  Fair;  Challenging and Rewarding: Sufficiently 15
  • 16. What is a good Quota?  Fair;  Challenging and Rewarding: Sufficiently high & linked to bonus / commission  Understandable 16
  • 17. What is a good Quota?  Fair;  Challenging and Rewarding: Sufficiently high & linked to bonus / commission  Understandable  Flexibility 17
  • 18. What is a good Quota?  Fair;  Challenging and Rewarding: Sufficiently high & linked to bonus / commission  Understandable  Flexibility  Must help achieve management goals 18
  • 19. Quota Setting Process Based on 19
  • 20. Quota Setting Process Based on A. Sales forecasts and market potential 20
  • 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 21
  • 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 22
  • 23. 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 orgn’s 23
  • 24. 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 orgn’s E. Sales people compensation 24
  • 25. 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 orgn’s E. Sales people compensation F. Set by sales people themselves 25
  • 26. 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. 26