Principles of Sales Quota Setting
The effectiveness of the sales quota setting of sales organization units (sales personnel, sales teams, individual sales districts/territory, different intermediaries) is guided by some principles/guidelines.
Thus, a planner or a sales manager has to take these principles into his account while setting sales quotas. If not done so, the set sales quotas may not yield positive results in the stipulated time and stipulated level.
Here, we will discuss the 7 essential principles/guidelines for setting a sound sales quota.
Attainable in the Stipulated Time
Sales quotas should be set for a specified period of time. These should be expressed in terms of the quantity that sales organization units are expected to meet within a given time frame, as their attractiveness is directly proportional to their ability and capacity to sell.
If not, the quotas planner will be confronted with a problem of differences, and several of the analytical scenarios will occur during implementation, necessitating rapid steps to revise the allocated quotas. This is unquestionably a waste of time, money, and effort.
In addition, the set sales quota should be specific in goal also, that can be easily calculable and measurable during the implementation course.
Matching To Sales Organization Units
One of the significant principles of setting a sales quota is that it should be matching with the salespeople. When it comes to assigning sales quotas, companies use various sales organization units. Sales districts, individual salespeople, sales teams, and intermediates such as wholesalers, merchants, and agents are examples of sales organization units.
Sales quotas should correspond to whatever sales units a company employs. These sales units could be huge or modest in size. In accordance with the size of the sales units, the quantities given to each unit should be a bigger or smaller number.
The objectives of the sales quota should be matching with the knowledge, skills, capacity, and invention of the salespeople. If the size of the sales unit is small, a small sales quota should be assigned to them, and vice versa. The unmatched assignment of sales quota certainly results in loss of achieving sales targets.
Set sales quotas should also be effective in terms of administrative costs as well as total sales costs for a certain sales unit. The company’s quota administration system has a significant impact on sales cost-effectiveness. And the sales manager’s expertise, talent, ability, and experience are all crucial in this process.
The sales manager should study the effectiveness of each sales unit, their ability to perform tasks, skill, experience, and motivation. He should allocate sales investment amount to sales units in accordance with their experience and knowledge to achieve sales targets.
Reflective of Market Information
By analyzing market information, sales quotas should be properly set. In order to set such quotas, the quota setter or sales manager must first gather appropriate market data, such as the size of the market, the types of product consumers, preferences of customers, the number of competitors, the strengths of competing firms, their brands, and the salespeople’s competencies.
This data should be accurate as well as sufficient for making informed decisions when setting sales quotas.
Furthermore, the sales manager should carefully study and identify the strengths and weaknesses of his sales organization and the market. He should not forget the mismatch of market information and objectives of sales quotas adversely affects the implementation.
Incentive Providing and Motivation Oriented
Set sales quotas should be aimed toward motivating and properly incentivizing sales organization units (individual salespersons). It is a fact that not all salespeople are equal in terms of capacity, productivity, or performance.
Some people may have a higher level of these personal characteristics than others. If sales quotas are established on the same quantity in this case, high-value salespeople get disappointed and demotivated.
They believe they have no way to improve their financial and career-related inventiveness. Their morale deteriorates, which has a negative impact on sales quotas and performance. Thus, the sales manager should not forget the individual differences of his salespeople and set quotas that best meets their personal attributes and career goal.
Oriented to Sales Increase
Sales quotas should be linked to sales contests. To win sales contests, salespeople will put up their best effort and talents to meet sales quotas within a set time frame. Once the prior quotas have been met, quotas are practically redesigned.
Quota setting becomes a moving cycle in this sense. As a result of this cycle, salespeople are constantly striving to win sales contests, resulting in increased overall sales and profits to the firm.
There should be enough room for each sales organization unit’s comments to be reinforced. If a sales organization unit fails to reach its set sales quotas, the sales unit should not be penalized. Instead, the sales manager should investigate the causes for this and try to pinpoint the differences/ deviations.
The sales manager should re-design sales quotas to assign to that particular sales organization unit or sales staff based on such differences. In addition, he should always try to be a good motivator to sales personnel to bring out their best talent and efforts.