SALES QUOTA AND TYPES OF SALES QUOTA

SALES QUOTA It is an expected performance objective. Quotas are routinely assigned to the sales units, such as departments, divisions and individuals, and they proceed to reach respective quotas in their respective domain. They are sales assignments or goals which is to be achieved in a specific period of time. Philip Kotler defines Sales Quota as A sales quota is the sales goal set for a product line, company division, or sales representative. It is primarily a managerial device for defining and stimulating sales effort. It is a quantitative goal assigned to a specific marketing unit such as a salesperson or a territory for a time period. So, sales quota is a standardized method of evaluating the effectiveness and performance of salesperson. IMPORTANCE OF SALES QUOTA There are essentially three reasons for the use of sales quota: The sales manager use the sales quota for motivating sales people. People with a mind to achieve higher things like the concept of sales quota due to its objectivity in management and subsequent linking with the reward system. Quotas always lead organization towards management by exception. The sales person focuses on high performance and takes care of organizational policies. Sales quota helps in giving directions to the sales peoples efforts and resources for specific ends and targets the organization sets as important. It is seen that the attainment of sales quota is tied to the incentives and financial rewards of the organization. Quota serves as guidelines and direct the behaviour of sales person because it also assigns authority as a formal right to exercise control. It gives the power to argument accountability and punish for non-compliance.The sales persons acceptance of this provides the organization a control mechanism for smooth management.

TYPES OF SALES QUOTA 1. Sales Volume Quota: Most of the companies follow this method of quota setting. It is the most traditional and commonly used method in Indian organizations 2

because this method provides an important standard for appraising the performance of individual salespeople, intermediaries and branch. Sales volume quota communicate the organizations expectations in terms of what amount of sales for in/ what period. The annual quota is set for the year and then they are broken into specific time periods like quarters, months and weeks. This is called break down approach. Once the sales person knows his annual target, he can plan out his targets for different periods. The sales volume is of three kinds: monitory sales volume quota, unit sales volume quota and point sales volume quota. Organizations selling a broad product line set sales volume quota in monetory terms rather than in terms of units of product. The international sales quota is also shown in dollars/ pounds or relevant foreign currency. The monetary sales quota is set for each sales unit separately. The second method is quota setting by volumes. This method is used in two situations, viz., when the prices of products are expected to fluctuate considerably during the quota period, and when companies with a narrow product line sell at a price that fluctuates little during the quota period. Volume quota setting helps the firm to achieve the sales in volume terms as the rupee value may vary during the sales period The third method is the setting sales volume quota .in terms of points. Some organizations use sales volume quota expressed in points, into which money or unit sales or both can be converted as desired by the sales manager.

Sales Budget Quota: This kind of quotas are set for various units by the organization in order to control expenses, gross margins and net profits. The overall intention of setting a budget quota is to make it clear to the salespeople that they are more of a responsibility centre where the job includes not only obtaining the desire sales volume but also making good profits. This means the cost to acquire customers should be less than the revenue generated from those new customers. Expense quota ensures that the salespeople limit their expenses in alignment with the sales volume and control the cost to acquire customers.

Profit quota can be set on gross margins on their net profits. Organizations emphasize net profits more than the sales volume. The salesperson is asked to generate profitable sales rather than more sales.

The manufacturing department provides the sales manager with information regarding the cost of goods sold, which includes the cost of manufacturing the product. By subtracting the cost of goods sold and the direct selling expenses from the sales volume one can determine the net profit quota.

Sales Activity Quota:

The activity of the sales person has direct influence on the sales of the

organization. The salesperson is not always involved in sales realization; for e.g: a retail salesperson has a job of providing information only. In this case the quota can be fixed on tha activity a salesperson has to perform, rather than the final outcome. In addition to the direct sales activity, the salesperson is expected to do some non-selling activities and the quota can be set as a mix of these activities. This kind of quota is common in pharmaceutical selling, where the medical representatives spend time for calling on doctors and hospitals to explain new products and new applications of both old and new products. Activity quota can be set on total sales call, particular classes or set of customers, calls on prospects, number of new accounts, product demonstrations etc. Activity quota set objectives for job related duties , which help the salespeople in achieving their performance target. They help the salespeople to do the non-selling activities perfectly, as they become part of the job definition.

Combination Quota: Many organizations use a combination of these quotas . The most common combination is the sales volume and the activity quota. Combination quota is used to control sales force performance on the basis of selling and non-selling activities. A combination sale quota can be achieving a sales target of 1000 units along with deloping 20 new key accounts, identifying 100 prospects and bringing back 50 lost customers. This kind of quota often reduces the expected understanding level of the job for a novice, and often serves as a demotivator. So, sales managers have to use this method with continuous briefing and effective control over the sales force. Combined sales quota should be based on the most important activities like sales volume and the products that sell the most.