Importance of Sales Quotas

Sales quotas serve several purposes. The important objectives are shown in the
diagram below:
Sales
Quotas
Quotas provide performance targets
Quotas provide standards
Quotas provide control
Quotas are motivational
Sales
Objectives
Types of Sales Quotas
A sales organization can set many types of quotas. The most
common quotas are shown in the following diagram:
Sales Volume
Quotas
Profit
Quotas
Expenses
Quotas
Activity
Quotas
Quotas
Combinations
Sales Volume Quotas
Sales volume quotas include sales in rupees or product unit
objectives for a specific period of time. For example, New
East India Ltd. calculates sales in rupees, whereas Bajaj
Motors calculates sales as number of cars sold. Sales
volume quotas are first set for the entire year. The yearly
total volume quota is then set for shorter time periods, such
as three months, six months and nine months. The sales
force is assigned their yearly quotas. Sales targets are set
for the year for sales force, so their aim is to sell
throughout the year to achieve the total sales objective.
The sales volume quotas can be set in the following areas:
Sales Volume Quotas (Contd.)
Sales
Volume
Quotas
Product line
Product range
Sales divisions
Sales territories
Sales districts
Branch offices
Sales force (Individual)
Sales Volume Quotas (Contd.)
Example: The following example of M/s South India Ltd. shows sales volume
quotas for Bangalore territory.

Sales Volume Quota of M/s South India Ltd. for Bangalore
Sales force Sales Quota
(in Rs)
Actual sales
(in Rs.)
Difference Performance
Index
S Kumar 56,96,000 57,92,000 96000 101.7%
R Kumar 55,84,000 48,42,000 -742000 86.7%
W Kumar 60,12,000 60,46,000 34000 100.6%
P Kumar 43,10,000 43,34,000 24,000 100.6%
2,16,02,000 2,10,14,000 -58800
Profit Quotas
Profit quotas are particularly useful in multiproduct companies where
different products contribute to varying levels of profits. It creates
opportunities for the salesperson to make optimum use of time. The
following example shows a situation in which a salesperson optimally
balances his time between high and low profit yielding products.

Product Sales price per
unit
Profit margin
per unit (%)
Volume per
month (Mr
Raj Kumar)
Net profit per
month (Mr
Raj Kumar)
Product A Rs 400 Rs 280 (70%) 60,000 1,68,00,000
Product B Rs 200 Rs 80 (50%) 25,000 2,00,000
Product C Rs 100 Rs 20 (20%) 10,00 2,00,000
Expense Quotas
Expense quotas are related to selling costs within
reasonable limits. Some companies set quotas for
expenses linked to different levels of sales attained
by their sales force. Salespeople may receive an
expense budget that is a percentage of the
territorys sales volume. The salesperson must
spend only this amount as expenditure.
Activity Quotas
These quotas set objectives for job-related duties useful for attaining
salespeoples performance targets. Activity quotas are required to
make the sales force perform other activities which have long term
implications on the goodwill of the firm. A sales organization must set
a target level of performance for salespersons. Some common types of
activity quotas prevalent in Indian companies are as follows:
Number of sales presentation made
Number of service calls made
Number of dealers visited
Number of calls made for recovery
Number of new accounts opened
Common Types of Activity Quotas
Activity quotas typically should not be a basis for rewards. Rather, their
attachment helps the manager better understand why salespeople do or do not
meet their sales volume quotas.
Quota Combinations
Many companies use a combination of these quotas. The
two most commonly combined are sales volume and
activity quotas. These quotas influence selling and non-
selling activities.
It is also important not to have too many quotas; otherwise,
the salespeople may become confused as to what is
expected. Several quotas can be used, but they should be
on the most important activities, total sales volume and the
products that result in the most sales.