Sales ManagementSales QuotasTopic 11

3 Powerful ToolsQuotasCompensationCompany Policy

Effective QuotasAttainableEasy to UnderstandComplete

DisadvantagesTeam SellingUncontrollablesTerritory FairnessTime Consuming

Three Quota TypesSalesFinancialActivity

Sales QuotasMost PopularAdvantagesDisadvantages

Financial QuotasAdvantagesDisadvantages

Activity QuotasAdvantagesDisadvantagesUse in Training

Price Setting IssuesSales Commissions are Dangerous with Pricing AuthorityNot a problem with Gross Margin CommissionsArgument is Equally Valid when Incentive Pay is a Bonus

Price Setting ExampleBrand is priced at $100Direct Unit Costs = $60Gross Margin = $40Compare 4% sales quota versus a 10% gross margin quota.

4% SC vs 10% GM CommissionInitially both have $4 earned on a $100 unit sold.But, suppose you cut the price $10 to get an order what happens?

4% Sales Commission$10 price cut so new price is $90Sales Commission is .04 x $90 = $3.60But company margins are now:$90 - $60 unit cost - $3.6 commission = $26.4Versus $100 - $60 - $4 = $36

10% GM CommissionSame $10 price cutCommission = ($90 - $60) x .1 = $3Company margin = $90 - $60 - $3 = $27Price cut 10%, and commission fell by 25% ($4 vs $3)Incentive to cut price is lessened.

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