Some companies do not use sales quotas due to certain reasons. Also in certain circumstances, it is probably not advisable to use sales quotas.
Sales quota is a sales performance goal.
It is assigned to a marketing unit, a salesperson, branch, middleman or customer.
Sales quotas are directly linked to the company’s marketing plan.
Limitations or Problems in Setting Sales Quota
A few problems and limitations of the sales quota setting are described below:
1. Lack of Accurate Sales Estimates
In certain industrial goods categories, it is difficult to obtain accurate sales estimates.
Most of the sales quota is based on “guesstimates”
2. Based on Subjective Judgement
Most of the sales quotas are based on the options, views and ideas of executives and salesmen which not only different but also produce doubtful results.
Related: 6 Powerful Methods of Setting Sales Quota (Step by Step).
3. Time and Money Cost
In some situations, it is possible to obtain accurate sales estimates, but executives contend that obtaining and analyzing other data necessary for quota determination means unordinate expenditures of time and money.
No quota should cost more than it is worth.
4. Complex Statistical Techniques
Sales quota determination requires the use of the statistical technique.
But there always is a fear that sales personnel will not accept quotas prepared by ‘hard to explain‘ techniques.
5. Too High and Too Low Problems
In some instances, there are difficulties in arriving at fair weights for territorial potential, competitive position, coverage difficulty, and sales personability.
Thus, when quotas are tried, they may be set too high, which could cause high-pressure selling, or too low, which could provide insufficient incentive.
Related: 11 Key Factors Affecting Sales Forecasting (With Examples).
6. Too Much Emphasis Upon Making Sales
Some executives oppose sales quotas on the grounds that they place too much emphasis upon making sales.
This may be a legitimate criticism of sales volume quotas.
Due to sales quotas, salesmen feel a type of pressure which disturbs them to work properly.
7.Negative Connotation
Some managers object to the word “quota” which they say has a negative connotation and creates work tension, pressure, fear and mental reactions.
Hence, they prefer to assign “objectives”.
These executives, in other words, use sales quotas but under another name.
8. Short Supply
Where the demand exceeds the supply of goods (seller’s market), there will be no difficulty in selling the product.
The producers of such products believe that it is wise to divide the available supply equitably among customers.
Hence, they do not prefer to set sales quota.
In the seller’s market, the allocation substitutes for the quota.
Related: 18 Requirements of Good Sales Compensation Plan (Explained).
9. Joint Cooperation of Sales
In certain circumstances, it is probably not advisable to use sales quotas.
For example, when a significant portion of sales depends on cooperation between salespeople in different territories, individual quotas may either be unfeasible or discussing cooperation.
10. Long Selling Cycle
Another situation not conducive to quotas is when sales are infrequent with a long selling cycle but the money value is very high.
In this case, no sales may be recorded in a period, followed by extremely high sales volume in a subsequent period.
Sales quota performance is relatively meaningless in such a situation.
11. Individual Differences
Abilities and skills of salespersons may differ.
While determining sales quotas, a sales manager might not consider the differences in qualities, abilities, experience and positions of the salesmen.
These individual differences may cause sales quotas unrealistic.
Related: 5 Major Steps in Setting Up a Sales Organization.
12. Effects of Various Factors on Sale
Profit is not the only result of increased sales.
In fact, selling is the outcome of various factors such as price, quality, cost of production, demand and supply conditions, buyer behaviour, competition, etc.
These factors may influence the sales and quantum of profits.
Thus, sales quotas are not the only measure of the salesperson’s effectiveness.
13. Personal Bias
It is a difficult task to set an accurate, unbiased, equitable, and fair sales quotas.
The farness of sales quota setting may be influenced by the person thinking, views and biased feeling of sales managers. 18 Important Aspects and Characteristics of Sales Territory.
14. Avoidance of Non-Selling Activities
Due to sales quotas, salespersons pay more attention to making sales.
Thus, they avoid many important non-selling activities such as searching for new customers, market studies, consumer behaviour research, removing customers objections, and collection of dues from customers.
Thus, now you know the limitations or problems in setting sales quota.
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