Sales objectives and quotas

WHAT IS A QUOTA?
A quota refers to an expected performance
objective.
Quotas are tactical in nature and thus derived
from the sales force’s strategic objectives.

Copyright © 2001 by Harcourt, Inc. All rights reserved.

WHY ARE QUOTAS
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.


Sales volume quotas includes dollar or
product unit objectives for a specific period
of time.


TYPES OF QUOTAS
• Break down total sales volume.


• Product lines.
• Individual established and new products.
• Geographic areas based on how the sales
organization is designed, which would
include:

• Sales division.
• Sales regions.
• Sales districts.
• Individual sales territories.

TYPES OF QUOTAS

• Profit quotas.


The two types of profit quotas:
• Gross margin quota determined by
subtracting cost of goods sold from sales
volume.

• Net profit quota determined by subtracting
cost of goods sold and salespeople’s direct
selling expense from sales volume.


TYPES OF QUOTAS

• Profit quotas.
• Expense quotas.


Expense quotas are aimed at controlling costs of
sales units. Often expenses are related to sales
volume or to the compensation plan.


TYPES OF QUOTAS

• Profit quotas.
• Expense quotas.

• Activity quotas.


Activity quotas set objectives for job-related
duties useful toward reaching salespeople’s
performance targets.


Customer satisfaction refers to feelings about any
differences between what is expected and actual
experiences with the purchase.


TYPES OF QUOTAS
• Breakdown total sales volume.

• Profit quotas.
• Expense quotas.
• Activity quotas.

• Quota combinations.


METHODS FOR SETTING SALES
QUOTAS
• Quotas based on forecasts and potentials.

• Quotas based on forecasts only.

• Quotas based on past experience.
• Quotas based on executive judgments.

• Quotas salespeople set.
• Quotas related to compensation.

TABLE 7.4 LEVELS OF ORGANIZATIONAL SALES PLANNING

LEVEL

PURPOSE: WHAT IS
PLANNED

1. Marketing

•Organizational goals
Upper management and
(increase in market share or sales and marketing
penetration, increase in
executives
customers, increase in sales
dollars and units sold)

2. Regional plan

•Priorities (which regions,
markets, and products to
emphasize)

Regional and district sales
managers (which input
from sales reps)

3. District plan

•Dollar allotment (for
promotion, advertising,
new employees, sales
incentives, and so on)

District managers and sales
representatives

4. Territorial plan

•Goals for number of new
Sales representatives
customers and for increased
business with old
customers in each region
and territory


WHO (USUALLY) IS
INVOLVED

SELLING BY OBJECTIVES SETS
FUTURE TARGETS
Two basic steps to implementing sales strategies:
Step 1:

Organize the jobs.

Step 2:

Define annual objectives in
important areas.


FIGURE 7.2 THE FOUR MAJOR AREAS TO ESTABLISH OBJECTIVES
WITH EACH SALESPERSON

Step 1: Organizing the Job

SALES
MANAGEMENT

Salesperson

Territorial Management
• Limits
• Potential Business
• Size
• Customer Base
• Prospects
• Leads
• Market Share
• Growth
• Trade Relations
• Dealer Relations

Account Management
• Portfolio of
Accounts
• Potentials
• Coverage
• Records
• Order Size
• Penetration
• Reports
• Customer
Satisfaction

Call Management
• Preparation
• Selling Technique
• Training
• Communication
• Buyer Behavior
• Impact
• Handling Resistance

Step 2: Defining Annual Objectives
1. Regular
2. Problem Solving
3. Innovative

Self-Management
• Appearance
• Manner
• Communication
Skills
• Abilities
• Attitudes
• Selling Abilities

FUTURE TARGETS
• Treating the territory as a business.

• Managing each account.


Tactical plan for managing accounts:
1. Build the stars.
2. Harvest the cash cows.

3. Fix the problems.
4. Divest the dogs.


FUTURE TARGETS


• Managing each call.


Questions about the content of calls:

• Is the sales rep properly armed with
information, leads, and materials before the
call occurs?
• Is the sales rep applying the major principles
of selling technique during the presentation?
Or is the sales rep inventing his or her own
and perhaps making every mistake every
salesperson in history has made?
• Has the salesperson planned some coherent
attack for the sales presentation, and is it
working well?

Questions about the content of calls:

continued

• Does the sales rep have enough training in
communication, in meeting sales resistance,
in understanding buyer behavior, in
improving call impact, in gaining greater
account penetration, in follow-through
methods to do the job?
• Does the sales rep have enough knowledge
of the product and its applications, service
and system backup, and technical problems
to handle the toughest calling situation?

FUTURE TARGETS


• Managing each call.
• Managing oneself.


Self-management in selling includes the following:

• Since selling involves making contact with
strangers, dress, style, demeanor, and personal
decorum are part of the salesperson’s tool kit.
• Communication skills, memory, logical speaking

habits, and writing competence are vested in the
person.
• Attitudes and outlook toward the job, the product,
the company, and the customers all have an
important bearing in the results to be achieved.
• The knowledge of selling techniques, what the
various kinds are and how and when to use them,
are personally vested in the sales rep and can be
produced and polished by training.

BASIC LEVELS OF
INDIVIDUAL OBJECTIVES
1. Regular, ongoing, and recurring objectives.
2. Problem-solving objectives.

3. Innovative or creative objectives.
The highest level of excellence is reserved for
people who are attaining all three.

THE PROCEDURES FOR
SETTING OBJECTIVES AND
QUOTAS WITH SALESPEOPLE
• Prepare the way.
• Schedule conferences with each salesperson.

• Prepare a written summary of goals agreed
upon.
• Optional group meeting to share objectives.


FIGURE 7.3 SELLING BY OBJECTIVES FORM

Name
For Year
List Your Responsibility Area
Results Expected
Output

Pessimistic

Realistic

Optimistic

Results

1. $ Volume/month
2. $ Expense/month
3. Gross margin/month
4.
5.
6.
7.
8.
9.
10.
11.
12.
Other
Instruction: List the regular, ongoing, recurring objectives. Cover the ten major responsibilities of your job next year to manage territory, accounts, calls, and yourself.

A GOOD OBJECTIVE AND
QUOTA PLAN IS SMART

Specific
Measurable
Attainable
Realistic
Time specific

A simple three-way test to judge how well quotas
and objectives are written:
Test 1:

Does this quota state exactly
what the intended result is?

Test 2:

Does this quota specify when
the intended result is to be
accomplished?

Test 3:

Can the intended result be
measured?


SELLING-BY-OBJECTIVES
MANAGEMENT
Selling by objectives (SBO) is the process
elaborated on earlier whereby the manager and
salesperson jointly identify common goals, define
major areas of responsibility, and agree on the
results expected.


FIGURE 7.4 SETTING OBJECTIVES AND QUOTAS IS A TWO-WAY
PROCESS BETWEEN MANAGER AND SALESPERSON

Mutually Set
Objectives and
Quotas

Mu
es r
a e
Pf r ac
e om e
r
n

Eut
vl a
a e
Pf r ac
e om e
r
n
Publicize
Performance
Results

Ra
e r
wd
o Pay
re l
nt


THE SALES TERRITORY IS
WHERE QUOTAS ARE MADE
The sales territory is “where the action is!”


THE BOTTOM LINE
Quotas are important to a company because they establish the
“end state” sought, and they change according to external and
internal forces.
Many different types of quotas exist.
Methods for setting quotas may vary.

Setting a sales quota can be an involved process.
Selling by objectives (SBO) is a common concept and is widely
used by sales organizations.


Sales objectives and quotas

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