Sales Quota

(MY CLASS NOTE)

MBA

A Sales Quota is a quantitative goal

assigned to a sales unit relating to a
particular time period. It is a device to
direct and control sales operations.

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 Objectives
• To provide quantitative performance
Standard – Quotas provide a means for
determining which sales unit are doing an
average, below average or above avg. job. It
is the yardstick for measuring sales
performance, but management must dig
deeper to uncover reasons for variations.

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• To obtain tighter sales and expense control
– Quotas are designed to keep selling
expenses within limits. Many companies
reimburse sales expenses only up to a
certain percentage of sales quota.

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• To motivate desired performance – Quotas
provide incentive to achieve certain
performance level. Companies may use
quota to provide their sales force the
incentives of increasing their earnings
through commissions or a bonus if the
quota is surpassed and recognised for
superior performance.
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• Controlling Sales Persons’ activities –
Quotas provide an opportunity to direct and
control the selling activities of sales
persons. If the sales person fails to attain the
quota the company can take corrective
actions to rectify the mistake.

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 Administering the Quota system
A quota should be Accurate, Fair &Attainable
• Accurate – The more closely quotas are
related to territorial potential, greater the
chances of accuracy.
• Fair- It is a proper blend of sales potential
and previous experience.
• Attainable – possibility to reach the target.

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Management must make sure that the sales
personnel understand quotas and quota setting
Procedure. Conveying this understanding is a
critical step in securing acceptance of quotas.
It is important that sales personnel understand
the significance of quotas as communicators
of “ how much for what period”. It requires:
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• Participation by sales personnel in quota setting: If
sales personnel participate, the task of explaining
quotas and how they are determined is simplified.

• Keeping sales personnel informed: Effective sales

management keeps sales personnel informed of
their progress relative to quotas. It permits them to
analyse their own strong and weak points.

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• Need for continuous managerial control: In
administering any quota system, there is a
need for continuous monitoring of
performance.Sales personnel need
encouragement, advice and occasionally
warnings in deciding to take measures to
improve their performance.Continuous
managerial review and appraisal are
required.
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 Types of Quota
Sales Volume quota - Oldest and most common
method.It is an important standard for appraising the
performances of individual sales personnel. It may
be set in terms of units of product sales or rupee
sales or combination of these two on point basis.
Considerable Price Fluctuations : Unit Quota
• Multiple products : Rupee Quota
• Try to attain both unit & revenue : Point Quota

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 Procedures:
• Past Sales: It depends on past sales Experience.
Determine the % by which Co’s market share is
expected to increase & add this to Last year’s
quota.
• Territorial Sales Potential: Sales potential
represents max sales opportunities open to a
selling unit. Appropriate method when territorial
potentials are determined in conjunction with
territorial design.

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• Executive Judgment: When the product is new,
probable market share is unknown, sales person is
newly recruited or assigned to new territory –
SVQ is set on judgment basis.
• Total Market Estimates: Territorial potential is
unknown. Management breaks down the total
estimated company sales, using index of relative
sales opportunities in each territory.
• Sales personnel Estimate: Sales personnel are
closest to the territory and know them best.
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• Budget quota- It is set to control the sales expenses
incurred as well as to attain desired net profit. Intention is
to make it clear to the sales personnel that their jobs
consist of something more than obtaining sales volume and
the Co is business to make profit.
* Expense Quota – To keep the selling cost within
reasonable limits, Co. may set quota for expenses linked to
different levels of sales attained by their sales force. Very
strict conformity to expense quota norms results in
demotivation of salesforce.

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* Net profit Quota- Use full for a multi
product firm where different products
contribute varying level of profits. It is
important for the management to ensure
that its sales person do not spend more time
on less profitable products.

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• Activity Quota – It is set for total sales call,
number of new accounts, product
demonstration, placement or erection of
displays, making collections etc. Balanced
Quota.
• Combination Quota – Any combination of
the above mentioned quotas.

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