• Team Selling• Uncontrollables• Territory Fairness• Time Consuming
Three Quota Types
• Sales• Financial• Activity
Sales Quotas
• Most Popular• Advantages• Disadvantages
Financial Quotas
• Advantages• Disadvantages
Activity Quotas
• Advantages• Disadvantages• Use in Training
Price Setting Issues
• Sales Commissions are Dangerous with Pricing Authority
• Not a problem with Gross Margin Commissions
• Argument is Equally Valid when Incentive Pay is a Bonus
Price Setting Example
• Brand is priced at $100• Direct Unit Costs = $60• Gross Margin = $40• Compare 4% sales quota versus a 10% gross
margin quota.
4% SC vs 10% GM Commission
• Initially 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 $90• Sales Commission is .04 x $90 = $3.60• But company margins are now:• $90 - $60 unit cost - $3.6 commission = $26.4• Versus $100 - $60 - $4 = $36
10% GM Commission
• Same $10 price cut• Commission = ($90 - $60) x .1 = $3• Company margin = $90 - $60 - $3 = $27• Price cut 10%, and commission fell by 25%