Chapter 10 Sales Forecasting, Quotas and Territory Management-Sales and Distribution Management (1)
Ch 05- Sales Quotas
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Transcript of Ch 05- Sales Quotas
Toning Skills
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Prof. B. Raj
Sales Offic
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Sales Objectives & QuotasSales Objectives & Quotas
What is a quota?
• A quota refers to an expected performance objective.
• Quotas are guides for what need to be done and a means of evaluating how well they were done.
• Quotas are performance expectation, standard, and control.
Types of Quotas
• Sales Volume Quotas • Profit Quotas • Expense Quotas • Activity Quotas• Conversion Quotas
Sales Volume Quotas • Value/Rupee Sales • Unit SalesTo achieve the quota, you need to get to the
specifics. 5 questions are usually asked:1. To whom we are going to sell?2. Where are they located geographically?3. Which products will be sold?4. Which products will sell the best?5. During what time will these sales occur?
Sales Persons
Sales Quota
Actual Sales
Rupees Difference
Performance
Anil Rs.5,696 Rs.5,792 Rs. 96 101.7%
Mohan 5,584 4,842 -742 86.7%
Sachin 6,012 6,046 34 100.6%
Anand 4,310 4,334 24 100.6%
Total 21,602 21,014 -588 97.4%
Performance=(Actual Sales/Quota)*100%
Potential Problems
1. Cutting price and no maximum profit
2. Large sales expenses
Profit QuotasGross margin quotasNet profit quotas Gross Margin= Sales Volume – Cost of
Goods
Net Profit= Sales Volume – Cost of Goods – Direct Selling Expenses
Anil Manish Sunil Mohan
Sales 5,792,000 4,842,000 6,046,000 4,334,000
Cost of Sales
4,633,600 3,873,600 4,836,800 3,467,200
Gross Margin
1,153,400 968,400 1,209,200 866,800
Expenses 68,000 72,000 64,000 88,000
Net Profit 1,090,400 896,400 1,145,200 778,800
Sales/Net Profit Ratio
18.8% 18.5% 18.9% 18%
Potential Problems
1. Sales personnel generally do not set prices and have no control over the cost. They are not responsible for the gross margin.
2. Salespeople may cut the sales expenses and therefore harm the sales when the net profit measure is used.
Expense Quotas
A salesperson may receive an expense budget that is a percentage of the territory’s sales volume.
1. Other firms may set up rupee limits.2. Others may have limits on items
such as lodging, meals, and entertainment but pay all the expenses on cars and office expenses.
Activity Quotas
Activity quota set objectives for job-related duties useful toward reaching the performance target.
Examples are prospects, calls and
presentations. Activity Quotas typically are not the basis for reward. They are more for control and better customer service.
Sales Persons
Number of Calls
Number of Presentati
ons
Number of Orders
Order/Call ratio
Actual Sales (000)
John 1,900 1,400 1,140 60% $5,792
Manish 1,500 1,220 1,000 66.7% 4,842
Sunil 1,400 890 700 50% 6,046
Fardeen 1,030 450 279 27.1% 4,334
Total 5,830 3,960 3,119 51.0% 21,014
Conversion Quotas
E.g. Call/Presentation and Call/Sales Ratio
Quota Combinations The most common practice is to
combine the sales volume and activity quotas. These quotas influence both selling and non-selling activities.
Methods for setting sales quotas
Sales quotas are breakdowns of the sales forecast.
Sales Quotas= Function (Past Experience, Market Capacity, Market Growth, Executive Judgment)
Process of Setting Sales Quotas
The Unilever Example
VP, Marketing and Sales
Marketing Manager Sales Manager
Goals and PlanningMarket ShareSales (Dollar and Unit)Advertising and PromotionProduct Introduction and DevelopmentCustomer Research
Regional PlanningRegional QuotasNetwork PlanningMajor Account Management
District PlanningDistrict QuotasGoals to each customer
Territorial PlanningTerritorial Sales QuotasSales representative /Distributor ManagementCustomer Service
What is a good quota?A good objective and quota plan is
SMARTQuotas should be• Specific,• Measurable,• Attainable,• Realistic, and • Time Specific.
Selling-by-objective Management
Set Objectives and Quotas
Measure Performance
Evaluate Performance
Reward or Penalty
Publicize Performance Results
Discussion and Questions
1. The selection on the different types of quota.
2. Discuss if the following is a good plan:
“Our objective is to increase sales in the territory next month by making more effective sales calls through improved customer relation and better communication skills.”