Presentation on theme: "Importance of Sales Quotas"— Presentation transcript:
1 Importance of Sales Quotas Sales quotas serve several purposes. The important objectives are shown in the diagram below:Sales QuotasQuotas provide performance targetsQuotas provide standardsQuotas provide controlQuotas are motivationalSales Objectives
2 Types of Sales QuotasA sales organization can set many types of quotas. The most common quotas are shown in the following diagram:Sales Volume QuotasProfit QuotasExpenses QuotasActivity QuotasQuotas Combinations
3 Sales Volume QuotasSales 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:
5 Sales Volume Quotas (Cont’d.) 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 BangaloreSales forceSales Quota(in Rs)Actual sales(in Rs.)DifferencePerformance IndexS Kumar56,96,00057,92,00096000101.7%R Kumar55,84,00048,42,00086.7%W Kumar60,12,00060,46,00034000100.6%P Kumar43,10,00043,34,00024,0002,16,02,0002,10,14,000-58800
6 Profit QuotasProfit 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.ProductSales price per unitProfit margin per unit (%)Volume per month (Mr Raj Kumar)Net profit per month (Mr Raj Kumar)Product ARs 400Rs 280 (70%)60,0001,68,00,000Product BRs 200Rs 80 (50%)25,0002,00,000Product CRs 100Rs 20 (20%)10,00
7 Expense QuotasExpense 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 territory’s sales volume. The salesperson must spend only this amount as expenditure.
8 Common Types of Activity Quotas These quotas set objectives for job-related duties useful for attaining salespeople’s 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 madeNumber of service calls madeNumber of dealers visitedNumber of calls made for recoveryNumber of new accounts openedCommon Types of Activity QuotasActivity 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.
9 Quota CombinationsMany 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.