The general objective that sales management has in mind in using quotas is to control the sales effort. Management also uses quotas to motivate personnel to achieve desired performance levels.
The word ‘quotas‘ is the clarion call to sales action for the salesperson.
For the sales manager, quotas are a key measure in the planning, control, and evaluation of sales activity to increases the marketing efficiency of the company.
Objectives and Importance of Sales Quota
The objectives and importance of sales quotas may be explained under the following points:
1. Lifeblood of Business
The sales quotas are the lifeblood of a business and serve both as a goal and as a means of measuring the performance of a company in relation to that goal.
It is also a basis for setting sales and operations budgets.
For a salesperson, it stands as a method of measuring performance and qualifying for advertisement.
It is a common objective both for the salesperson and the company.
Related: 13 Major Functions of Marketing (With Examples).
2. To Provide Performance Standards
Quotas provide a means for determining which sales personnel are doing an average, below average, or above-average job.
Territorial sales volume quotas, for instance, are yardsticks for measuring territorial sales performance.
Quotas identify the strong and weak points additional analysis of performance data uncovers reasons for performance differentials.
3. Sales and Expense Control
To maintain a check on expenses and profits, the company determines expense quota.
Still, others establish quotas for-profits percentages on sales.
Control over expenses and profitability is tightened trough quotas.
4. To Motivate Desired Performance
Quotas motivate sales personnel and distributive outlets to achieve assigned performance levels.
Some managements use quotas solely for inspirational purposes, basing them almost entirely upon what they think individuals can be inspired to achieve.
Quotas should be attainable goals, achievable with the justifiable price.
Related: 19 Characteristics and Objectives of Sales Organization (With Examples)
To motivate him, a salesman should belive strongly in quotas attainability.
5. The Basis for Sales Contests
Companies frequently use “performance against quota” as the main basis for making awards in sales contests.
Sales contests are more powerful incentives they are based on the percent of quota fulfillment.
Thus, a company can design contest quotas’ for contest use.
Contests and prize trips as a means of stimulating distributors and dealers to meet their quotas are used widely.
Many companies offer their salesmen and dealers free trips as a reward for meeting their quotas.
Bonus: 6 Powerful Methods of Setting Sales Quota (Step by Step).
6. Reflect Overall Sales Plan
Sales quotas reflect the firm’s personnel selling objectives and its overall sales plan.
7. To Make Goals Obtainable
A sales goal contains only wishful thinking, it is something hoped for and worth striving for.
But sales quotas make the goals obtainable.
Achievement-oriented people want specific and challenging goals, with regular feedback on their performance.
Sales quota performs this function.
Related: 15 Key Benefits of Sales Training or Coaching (Explained).
8. Sense oF Direction
Sales quotas are assigned to the salesmen, so as to give them a sense of direction in their sales effort.
When Companies assign quotas for each product in their total line of products, they are trying to communicate to their salesforce which products should be given priority.
By setting quotas for various product lines or for certain classes of customers, the sales managers can guide salesforce activities into desired channels.
9. Basis of Compensation
Sales compensation is often tied to the degree of quota fulfillment.
Incentive plans are also linked to quota fulfillment.
10. Better Performance
Sales quotas are set higher than the sales forecast to encourage sales managers and salespeople to perform at their best level quotas provide goals and incentives to achieve a certain performance level.
Related: 18 Requirements of Good Sales Compensation Plan (Explained).
11. To Evaluate Performance
Performance against quotas also helps in identifying strong and weak points of the salesperson.
The performance can be judged for various products and in various territories.
If a salesperson is below average in many ways then sales executives can take action for correct weaknesses.
12. Appraising Selling Effectiveness
As standards for appraising selling effectiveness, quotas specify desired performance levels for sales volume.
13. To Provide Data
The two basic uses of quotas are, first, to provide standards of measurement of each individual’s salesperson’s performance and, secondly, to provide the basic data for company sales forecasting and financial control.
Related: 12 Need and Importance of Motivating Salesman (Explained).
14. WWW Approach
Sales quotas perform a WWW approach in sales management.
It schedules sales force activities.
Sales quotas explained that it is the responsibility of sales executives to direct the planning of where the company’s salespeople go in their sales work, when and with what frequency they make their alls, and what they do when they get there.
15. Provide Change of Direction
Quotas may serve to redirect the activities of the salesperson.
For example, a company might emphasize the only part achieved by placing sales quotas on different products.
For example, salespeople show up on selling a product the firm is not emphasizing during the current sales period and concentrate on selling a new product with a quota attached to it.
16. Balanced Growth of Market Territories
By the process of setting sales quota, all the market territories can be developed in a balanced way.
For example, for slow-moving territories, more sales quotas can be assigned.
17. Preparing Promotional Budget
Sales quotas also serve as a basis for determining the budget for promotional activities like advertising, sales promotion, etc.
If the sales quota is high for a particular territory, its budget for promotional activities will also be determined high.
Related: 12 Essential Tools of Public Relations (Explained with Example).
18. Well Defined Duties and Rights
Sales quotas help to define the duties and rights of every salesman, sales department and branch, etc.
These can work freely, within their defined area of authority.
19. Avoids Repetition of Work
As the sales quotas determine the work of every salesperson, each will perform his own duties and work.
Thus, the interference in other’s territories will be stopped and the repetition of work ill be removed.
20. Equal Workload
The determination of sales quotas is based on certain principles and on set procedures.
Hence, the possibility of discrimination in the allocation of work will be reduced.
21. The Estimate of Future Needs
After setting sales quotas for every salesperson, territory.
Sales branch and middlemen, it becomes easy to estimate the future needs in relation to the number of salesmen, offices, necessary equipment, and materials, etc.
Related: 31 Factors Affecting the Choice of Distribution Channels (Explained).
22. Coordination with Other Departments
Setting sales quotas also makes it easy to establish coordination with other departments such as production purchasing, finance, warehousing, etc.
All departments make efforts according to the total and integrated sales quota.
Thus, now you know the objectives and importance of sales quota.
What is sales quotas?
A sales quota is a managerial tool of direction and control of sales activities. And it is directly linked to the company’s marketing plan.
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