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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.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
WHY ARE QUOTAS
IMPORTANT?
• Quotas provide performance targets.
• Quotas provide standards.
• Quotas provide control.
• Quotas provide change of direction.
• Quotas are motivational.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
TYPES OF QUOTAS
• Sales volume quotas.
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Sales volume quotas includes dollar or
product unit objectives for a specific period
of time.
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TYPES OF QUOTAS
• Sales volume quotas.
• Break down total sales volume.
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• 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.
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TYPES OF QUOTAS
• Sales volume quotas.
• Break down total sales volume.
• Profit quotas.
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• 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:
Copyright © 2001 by Harcourt, Inc. All rights reserved.
TYPES OF QUOTAS
• Sales volume quotas.
• Break down total sales volume.
• Profit quotas.
• Expense quotas.
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Expense quotas are aimed at controlling costs of
sales units. Often expenses are related to sales
volume or to the compensation plan.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
TYPES OF QUOTAS
• Sales volume quotas.
• Break down total sales volume.
• Profit quotas.
• Expense quotas.
• Activity quotas.
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Activity quotas set objectives for job-related
duties useful toward reaching salespeople’s
performance targets.
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Customer satisfaction refers to feelings about any
differences between what is expected and actual
experiences with the purchase.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
TYPES OF QUOTAS
• Sales volume quotas.
• Breakdown total sales volume.
• Profit quotas.
• Expense quotas.
• Activity quotas.
• Quota combinations.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
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.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
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
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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.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
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
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• Treating the territory as a business.
• Managing each account.
SELLING BY OBJECTIVES SETS
FUTURE TARGETS
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1. Build the stars.
2. Harvest the cash cows.
3. Fix the problems.
4. Divest the dogs.
Tactical plan for managing accounts:
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• Treating the territory as a business.
• Managing each account.
• Managing each call.
SELLING BY OBJECTIVES SETS
FUTURE TARGETS
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• 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:
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• 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
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• Treating the territory as a business.
• Managing each account.
• Managing each call.
• Managing oneself.
SELLING BY OBJECTIVES SETS
FUTURE TARGETS
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• 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:
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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.
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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.
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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
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A GOOD OBJECTIVE AND
QUOTA PLAN IS SMART
Specific
Measurable
Attainable
Realistic
Time specific
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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:
Copyright © 2001 by Harcourt, Inc. All rights reserved.
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.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
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
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THE SALES TERRITORY IS
WHERE QUOTAS ARE MADE
The sales territory is “where the action is!”
Copyright © 2001 by Harcourt, Inc. All rights reserved.
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.