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Sales quotas are a way of life for the sales force. All activities of the sales force revolve around the fulfillment of sales quotas. Sales quotas are targets assigned to sales personnel. They signify the performance expected from them by the organization. Sales quotas help in directing, evaluating and controlling the sales force. They form an indispensable tool for sales managers to carry out sales management activities. Sales quotas are prepared on the basis of sales forecasts and budgets. Sales quotas serve various purposes in organizations.
It must also help in the coordination of sales force activities. Setting motivating and easy to understand quotas is essential to obtain the cooperation of the sales force. Various methods are used to set sales quotas, among which, quotas based on sales forecasts and market potential are the most common. Skilful administration by sales managers is required for effective implementation of quotas. Convincing salespeople about the fairness and accuracy of quotas helps the sales management to successfully implement quotas.
Sales quotas have certain limitations such as being time consuming, difficulty in comprehending if complicated statistical calculations have been used and focusing on attaining sales volumes at the cost of ignoring important non-selling activities. Quotas may reduce risk-taking among sales personnel and may influence them to adopt unethical selling practices. With changes in the competitive environment and variations in customer expectations, many companies have started developing compensation plans that are increasingly based on non-traditional aspects, thereby reducing dependency on quotas.
Purpose of sales quotas
Importance of sales quotas
Provide performance targets
Provide change of direction
Tool for motivating salespeople
Types of sales quotas
Sales volume quotas
Characteristics of a good sales quota
Methods of setting sales quotas
Quota setting processes
Quotas based on sales forecasts and market potential
Quotas based on sales forecasts alone
Quotas based on past experience
Quotas based on executive judgment
Quotas based on sales force compensation
Quotas set by sales people themselves
Administering sales quotas
Minimizing acceptance problems
Managing and controlling people through quotas
Limitations of sales quotas