This chapter discusses sales quotas, which are performance objectives or sales goals assigned to sales units like departments or individuals over a specific period. A sales quota aims to define and stimulate sales efforts. Setting quotas well is challenging and requires objectivity, understandability, flexibility, and definiteness. Quotas should also be based on facts and figures from the market. Participatory quota setting with salespeople can aid motivation. The chapter outlines principles of quota setting, types of quotas, methods of determining quotas, and potential problems in the process.

1. Sales and Distribution
Management, 2e
Dr Tapan K. Panda, Great Lakes Institute of Management, Chennai
Dr Sunil Sahadev, University of Sheffield, UK
Copyright © 2011 Oxford University Press
Chapter 8: Management of Sales Quota

2. Chapter 8
Management of Sales Quota
Copyright © 2011 Oxford University Press
Chapter 8: Management of Sales Quota

3. Sales quota
• a quota is an expected performance objective
• a quota is a sales assignments or goal to be
achieved in a specific period of time
• it is routinely assigned to the sales units (e.g.
departments, divisions, and individuals)
• sales units proceed to reach quotas in their
respective domains
“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 the sales
effort.”. … Kotler
Copyright © 2011 Oxford University Press
Chapter 8: Management of Sales Quota

4. Principles of quota setting
• setting of sales quotas is a challenge to the sales
manager and should be handled with precision
and adequate skill
• objectivity to be observed while fixing quotas
and should be based on facts and figures drawn
from the market
• it must be simple to understand both to the
manager and the sales people
• quotas set above the achievable limit often
demotivate and result in high turnover in the
organization
Copyright © 2011 Oxford University Press
Chapter 8: Management of Sales Quota

5. Principles.. contd.
• flexible to the prevailing and emerging market
conditions
• there should be a level of definiteness in the quota
set for a salesperson
• it should be fixed either in terms of geographic
territory, on money value, or on the basis of units of
product(s)
• a participatory quota setting procedure followed
jointly by the sales manager and sales people together
serves as a tool of motivation and leads to the
realization of the organizational sales goals
Copyright © 2011 Oxford University Press
Chapter 8: Management of Sales Quota

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Chapter 8: Management of Sales Quota

7. Organization of the sales job
Defining annual objectives
Procedure for setting sales quota
Individual Goal setting form
Output
1. Volume per month
2. Expenses per month
Name
Year
Your territory
Results expected
Pessimistic Realistic
Results
Optimistic
3. Gross margin per month
4. Market share per month
5. Key account coverage
per month
Conferencing with each sales person
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Chapter 8: Management of Sales Quota

8. Types of sales quota
• sale volume quota
• sales budget quota
• sale activity quota
• combination quota
Copyright © 2011 Oxford University Press
Chapter 8: Management of Sales Quota

9. Methods of setting sales quota
Quotas are based on…
• sales forecasts and potentials
• forecast
• past sales and experience
• executive judgment
• sales people judgment
• compensation
Copyright © 2011 Oxford University Press
Chapter 8: Management of Sales Quota

10. Problems in setting sales quota
1. There is a high level of individual difference in every
organization
2. A perfect quota is a combination of selling and nonselling activities
3. Often sales people do not give proper attention to the
non-selling activities (e.g. searching for prospects,
handling customer objections, and creating market for
probable entry of new products)
Copyright © 2011 Oxford University Press
Chapter 8: Management of Sales Quota