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Methods and Problems of Setting Sales Quotas

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Methods and Problems of Setting Sales Quotas

  1. 1. Indian Institute of Tourism and Travel Management Wednesday, November 5, 2014
  2. 2. •Sales Quota is the sales goal set for a product line, company division or sales representative. It helps the managers to define and stimulate sales effort. Sales quota is the minimum sales goal for a set time span. •Generally sales quotas are set slightly higher than the estimated sales so as to stretch the sales force effort. •Sales quotas are developed through the study of annual territory marketing plan. In this the plan for developing new accounts and expanding existing accounts is given by the representatives. Indian Institute of Tourism and Travel Management Wednesday, November 5, 2014
  3. 3. Methods of Setting Sales Quota • Flat Quotas • Historic Quotas • Market Potential Quotas • Account Planning Quotas • Full Time Equivalent Quotas Indian Institute of Tourism and Travel Management Wednesday, November 5, 2014
  4. 4. Indian Institute of Tourism and Travel Management Wednesday, November 5, 2014 Flat Quotas This method sets flat targets across the entire sales team. It is company-centric and simple, but it may create a “free ride” for representatives in high-potential territories or impossible targets for those in low-potential territories. Companies use this methodology when little data is available and a cost-of-sale approach is in place. It is most common in transactional environments with shorter sales cycles.
  5. 5. Indian Institute of Tourism and Travel Management Wednesday, November 5, 2014 Historic Quotas The assumption here is that history predicts the future. Salespeople could deliberately reach a certain point in their compensation plan where they’re comfortable with the income. Historic quotas are fairly good for early stage markets, or for markets with high potential. But, it’s important to protect salespeople in particularly competitive or saturated markets.
  6. 6. Market Potential Quotas This method is simple and use specific information to understand the market. You can combine this with a historic process and use market opportunities as a modifier, or you can use an approach like this completely on its own. It typically creates equitable objectives and is easy to administer. It can work well for organizations that have accurate market data and in markets with considerable uncertainty. Indian Institute of Tourism and Travel Management Wednesday, November 5, 2014
  7. 7. Account Planning Quotas This method evaluates account opportunity and assigns the corresponding target to the representative that owns it. It is most effective for territories or regions with a small number of large accounts per representative. Account planning can be difficult in organizations with a large number of accounts in which the potential for sales opportunities is unknown. Indian Institute of Tourism and Travel Management Wednesday, November 5, 2014
  8. 8. Fulltime Equivalent Quotas Count how many full time equivalent people are working in your business. Multiply that number by your breakeven point per person. This gives you a guesstimate of your breakeven point. Add a profit target to determine your measurable goal. Indian Institute of Tourism and Travel Management Wednesday, November 5, 2014
  9. 9. Problems of Setting Sales Quota • Improving Company Profits • Incentives to Sales Force • Lack of Formal Process • Lack of Clarity and Coordination • Limited Monitoring and Inventory Indian Institute of Tourism and Travel Management Wednesday, November 5, 2014
  10. 10. Insight into Setting & Administration of Sales Indian Institute of Tourism and Travel Management Wednesday, November 5, 2014 Quotas •Set realistic quotas •Understand problems in setting quotas •Ensure salespeople understand quotas •By allowing salespeople to participate in the process •By continuous feedback to salespeople on their performance compared to quotas •Have flexibility in administering quotas •Use monthly or quarterly quotas for incentives and annual quotas for performance evaluation

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