Sales & Distribution Management

Chapter 9 : Sales Quotas

 Purpose of sales quotas

+Importance of sales quotas

+Types of sales quotas

 Characteristics of a good sales quota

+Methods of setting sales quotas

+Administering sales quotas

 Limitations of sales quotas

Chapter Summary

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.

They provide targets for sales personnel to achieve, act as standards to measure sales force performance and help motivate the sales force. Compensation plans are invariably linked to quotas. The commission and bonuses given to sales persons are based on their meeting quotas set for them. The four categories of sales quotas widely used are -- sales volume quotas, expense quotas, activity quotas and profit quotas. A sales quota should be fair, challenging yet attainable, rewarding, easy to understand, flexible and must satisfy management objectives.

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.

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