SALES QUOTAS

Provide direction-Help canalize the efforts of sales persons in the desired direction in alignment with organizational goals. Tool for Motivating Salespeople-Individuals are more motivated in their efforts when they have goals to achieve. Sales quotas apart from motivating sales persons help them have a healthy competition among themselves.

 Sales

volume quotas Quantity or value of products sold. Size of the territory, potential, concentration of business activity and product characteristics are taken into consideration while fixing the volume quotas

Expense quotas- Expenses could be fixed or variable ( usually percentage of sales) Profit quotas-Gross margin or net profit(ROI) Profitability analysis helps direct the organizational efforts (pricing, advertising, product mix , design of territories) based on the relative profitability of products/customers Activity quotas-Number of customer calls ,number of new customers developed , number of demonstrations etc

Fair-Should be based on competition, potential, economic conditions. Uniformity is the key. Challenging-To motivate sales persons perform better Flexible-More suited for seasonal products. Allows sales managers to react fast to cope up with the changed market conditions. Easily understandable-Clarity improves morale and commitment Help managerial coordination-Controlling the activities of sales force

It is relatively easy to set quotas for industrial products because of limited number of customers and demand which is relatively stable . This is not the case for consumer products. Quotas based on Sales Forecasts and Market Potential-Most common method Quotas based only on Sales Forecasts-Because sales forecasts already take into account factors like disposable income, population growth, employment ,consumer preferences and other demographic variables which determine the potential

Quotas based on past performance-Simple and preferred when organization does not have a formal forecasting system or data on potential Disadvantages: Changes in market conditions are not taken into consideration. Targets not based on potential may result in lost opportunities Mediocre performers continue to turn up with mediocre performance.

Limitation: Not suitable for launching new products/ entering new markets due to lack of past experience.

Quotas based on Executive judgmentAdopted by small organizations which do not have the wherewithal to collect market information scientifically.

Quotas based on Sales Force compensation- Quotas are a bi -product of average/minimum compensation. Sales persons get substantial bonus by exceeding quotas(Eureka Forbes)

Quotas set by Sales people themselves-Sales force composite method. Involvement of sales personnel in sales forecasting, type of compensation* plan etc affect this process

Some companies use sophisticated soft ware for automating the quota setting process .This helps equitable distribution of work load and control the expenses

Minimizing acceptance problems Job equity -Comparison with other members in the sales team AND Occupational equity-Comparison with sales personnel of another organization In terms of work load/degree of difficulty of targets etc

Sales persons have no control over prices and manufacturing costs. In such situations evaluating their performance based on profit quotas is not fair Small organizations can not adopt scientific research methods for estimating the potential etc due to limitations of resources Quotas based on past experience are not scientific

Quotas based on macro level information are not accurate (potential has to be broken up territory wise ,region wise) Quotas make sales personnel risk averse who may play it safe( Forecasting, non selling activities, development ) Absence of suitable rewards and punishment system renders the quotas ineffective ,from control point of view Quotas may encourage un-ethical behavior by sales personnel