sales objectives and quotas

Copyright © 2001 by Harcourt, Inc. All rights reserved.

WHAT IS A QUOTA?

A quota refers to an expected performance objective.

Quotas are tactical in nature and thus derived from the sales force’s strategic objectives.


WHY ARE QUOTAS

IMPORTANT?

• Quotas provide performance targets.

• Quotas provide standards.

• Quotas provide control.

• Quotas provide change of direction.

• Quotas are motivational.


TYPES OF QUOTAS

• Sales volume quotas.


Sales volume quotas includes dollar or

product unit objectives for a specific period

of time.


TYPES OF QUOTAS


• Break down total sales volume.


• Individual established and new products.

• Geographic areas based on how the sales

organization is designed, which would

include:

• Sales division.

• Sales regions.

• Sales districts.

• Individual sales territories.

• Product lines.


TYPES OF QUOTAS



• Profit quotas.


• Gross margin quota determined by

subtracting cost of goods sold from sales

volume.

• Net profit quota determined by subtracting

cost of goods sold and salespeople’s direct

selling expense from sales volume.

The two types of profit quotas:


TYPES OF QUOTAS



• Profit quotas.

• Expense quotas.


Expense quotas are aimed at controlling costs of

sales units. Often expenses are related to sales

volume or to the compensation plan.


TYPES OF QUOTAS



• Profit quotas.

• Expense quotas.

• Activity quotas.


Activity quotas set objectives for job-related

duties useful toward reaching salespeople’s

performance targets.


Customer satisfaction refers to feelings about any

differences between what is expected and actual

experiences with the purchase.


TYPES OF QUOTAS


• Breakdown total sales volume.

• Profit quotas.

• Expense quotas.

• Activity quotas.

• Quota combinations.


METHODS FOR SETTING SALES

QUOTAS

• Quotas based on forecasts and potentials.

• Quotas based on forecasts only.

• Quotas based on past experience.

• Quotas based on executive judgments.

• Quotas salespeople set.

• Quotas related to compensation.


TABLE 7.4 LEVELS OF ORGANIZATIONAL SALES PLANNING

LEVEL PURPOSE: WHAT IS

PLANNED

WHO (USUALLY) IS

INVOLVED

1. Marketing •Organizational goals

(increase in market share or

penetration, increase in

customers, increase in sales

dollars and units sold)

Upper management and

sales and marketing

executives

2. Regional plan •Priorities (which regions,

markets, and products to

emphasize)

Regional and district sales

managers (which input

from sales reps)

3. District plan •Dollar allotment (for

promotion, advertising,

new employees, sales

incentives, and so on)

District managers and sales

representatives

4. Territorial plan •Goals for number of new

customers and for increased

business with old

customers in each region

and territory

Sales representatives


SELLING BY OBJECTIVES SETS

FUTURE TARGETS

Two basic steps to implementing sales strategies:

Step 1: Organize the jobs.

Step 2: Define annual objectives in important areas.


FIGURE 7.2 THE FOUR MAJOR AREAS TO ESTABLISH OBJECTIVES

WITH EACH SALESPERSON

Step 1: Organizing the Job

Step 2: Defining Annual Objectives

SALESMANAGEMENT

Salesperson

Account Management Call Management Self-ManagementTerritorial Management

1. Regular

2. Problem Solving

3. Innovative

• Portfolio of

Accounts

• Potentials

• Coverage

• Records

• Order Size

• Penetration

• Reports

• Customer

Satisfaction

• Preparation

• Selling Technique

• Training

• Communication

• Buyer Behavior

• Impact

• Handling Resistance

• Appearance

• Manner

• Communication

Skills

• Abilities

• Attitudes

• Selling Abilities

• Limits

• Potential Business

• Size

• Customer Base

• Prospects

• Leads

• Market Share

• Growth

• Trade Relations

• Dealer Relations


• Treating the territory as a business.

• Managing each account.


FUTURE TARGETS


1. Build the stars.

2. Harvest the cash cows.

3. Fix the problems.

4. Divest the dogs.

Tactical plan for managing accounts:




• Managing each call.


FUTURE TARGETS


• Is the sales rep properly armed with

information, leads, and materials before the

call occurs?

• Is the sales rep applying the major principles

of selling technique during the presentation?

Or is the sales rep inventing his or her own

and perhaps making every mistake every

salesperson in history has made?

• Has the salesperson planned some coherent

attack for the sales presentation, and is it

working well?

Questions about the content of calls:


• Does the sales rep have enough training in

communication, in meeting sales resistance,

in understanding buyer behavior, in

improving call impact, in gaining greater

account penetration, in follow-through

methods to do the job?

• Does the sales rep have enough knowledge

of the product and its applications, service

and system backup, and technical problems

to handle the toughest calling situation?

Questions about the content of calls: continued




• Managing each call.

• Managing oneself.


FUTURE TARGETS


• Since selling involves making contact with strangers, dress, style, demeanor, and personal decorum are part of the salesperson’s tool kit.

• Communication skills, memory, logical speaking habits, and writing competence are vested in the person.

• Attitudes and outlook toward the job, the product, the company, and the customers all have an important bearing in the results to be achieved.

• The knowledge of selling techniques, what the various kinds are and how and when to use them, are personally vested in the sales rep and can be produced and polished by training.

Self-management in selling includes the following:


BASIC LEVELS OF

INDIVIDUAL OBJECTIVES

1. Regular, ongoing, and recurring objectives.

2. Problem-solving objectives.

3. Innovative or creative objectives.

The highest level of excellence is reserved for

people who are attaining all three.


THE PROCEDURES FOR

SETTING OBJECTIVES AND

QUOTAS WITH SALESPEOPLE

• Prepare the way.

• Schedule conferences with each salesperson.

• Prepare a written summary of goals agreed upon.

• Optional group meeting to share objectives.


Name

For Year

List Your Responsibility Area

Results Expected

PessimisticOutput

1. 2. 3. 4. 5. 6. 7. 8. 9.

10. 11. 12. Other

$ Volume/month $ Expense/month Gross margin/month

OptimisticRealistic Results

Instruction: List the regular, ongoing, recurring objectives. Cover the ten major respon- sibilities of your job next year to manage territory, accounts, calls, and yourself.

FIGURE 7.3 SELLING BY OBJECTIVES FORM


A GOOD OBJECTIVE AND

QUOTA PLAN IS SMART

Specific

Measurable

Attainable

Realistic

Time specific


Test 1: Does this quota state exactly what the intended result is?

Test 2: Does this quota specify when the intended result is to be accomplished?

Test 3: Can the intended result be measured?

A simple three-way test to judge how well quotas and objectives are written:


SELLING-BY-OBJECTIVES

MANAGEMENT

Selling by objectives (SBO) is the process elaborated on earlier whereby the manager and salesperson jointly identify common goals, define major areas of responsibility, and agree on the results expected.


FIGURE 7.4 SETTING OBJECTIVES AND QUOTAS IS A TWO-WAY

PROCESS BETWEEN MANAGER AND SALESPERSON

Mutually Set

Objectives and

Quotas

Measure

Performance

Evaluate

Performance

Reward

or Penalty

Publicize

Performance

Results

VIPIN

Highlight


THE SALES TERRITORY IS

WHERE QUOTAS ARE MADE

The sales territory is “where the action is!”


THE BOTTOM LINE

Quotas are important to a company because they establish the

“end state” sought, and they change according to external and

internal forces.

Many different types of quotas exist.

Methods for setting quotas may vary.

Setting a sales quota can be an involved process.

Selling by objectives (SBO) is a common concept and is widely

used by sales organizations.

sales objectives and quotas

Education