Types of Sales Quotas: Value Quota, Volume Quota, Activity Quota, Combination Quota31/08/2020
Sales quotas are quantitative goals set by managers to measure and compare the performance of individual salespeople and to help determine their compensation.
Any kind of sales figures given to any particular person or region or distributor is called Sales Quota. It can be measured either in terms money or the stock of goods sold. It is particularly an amount of target sales that is assessed on daily or monthly basis. To assess the performance of an individual sales person, his/her ability is looked to meet the given target.
Types of Sales Quotas
This can include many things from cold calling, Marketing emails, advertisements, invitation to executives for events and many more things. It’s always in the interest of the sales team as to how they should get the stuff out.
Sales volume quota
This always includes sales in monetary terms or units sold for a specific period of time. This type of sales quotas is always set for a given year. The sales teams are then assigned their yearly quotas to be accomplished. These quotas are set in the areas mentioned below:
- Product line
- Product range
- Branch offices
- Individual sales person
Under such quotas the sales team is required to execute other activities that will have a long term bearing on the company’s goodwill. Here certain objectives related to the job are set in attaining the performance targets of the sales force. When it comes to the Indian companies we have few common types of these quotas as mentioned below:
- Quantity of sales presentation made
- Amount of calls made
- Number of dealer visits
- Recovery calls made
- New clients procured
In a growing number of firms, managers are designing new types of sales quotas — called combination quotas — that combine two or more activity- or behavior-based goals. These goals are chosen to reinforce a set of skills that salespeople are expected to master and continually improve. For example, a combination quota could include: number of customer calls, percentage reduction in sales expenses, number of product demonstrations, frequency of conversions from trial to sale, percentage of customers who repeat or increase purchases or number of new accounts opened.
Sales quotas may be based on either net or gross profit margins of a product, brand or line. The advantage to the manager of this type of quota is that it eliminates the temptation to overemphasize highly visible, popular or trendy items over profitable ones. However, measurements of progress are generally less clear when goals are expressed in profits instead of in dollars or units. For this reason, profit-based quotas may encounter some resistance from salespeople.
These are linked to selling costs with a realistic time frame. Few companies set quotas for expenses to different sales levels achieved by the sales person. The sales team may be given an expense budget which is a percentage of a particular region’s sales volume. He/She should spend only that sum as expenses.
Other Measurement Dimensions
With increasing global competition and product customization, many companies are trying to differentiate themselves based on customer satisfaction. Their challenge is to motivate their salespeople to focus on building long-term relationships instead of making one-time sales. One motivational approach is to incorporate data from customer satisfaction surveys into traditional quota targets. For example, each salesperson may be tasked not only to sell certain numbers of items but also to attain satisfaction ratings at or above the median for his division.
Most companies use a permutation of these quotas. The best combined quotas are usually Sales volume and activity quota. Such combination influences selling and non selling activities. The above methods are only time tested from year to year to achieve the sales quota as these quotas are promised to vendors, investors and banking firms. They are also influenced by external factors and expenses which are not in the hands of sales personnel. It is advised not to have too many sales quotas as the sales person may not be able to equally concentrate on them.