N5 Sales Management 3.1.1 Types of sales volume quotas


• Sales volume quotas in currency value Businesses selling broad product lines set quotas in currency value rather than in units, because it is difficult to evaluate sales performance for individual products. An advantage of this type of quota is that it relates easily to other data, such as selling expenses.


• Unit sales volume quotas This is used when prices vary considerably and when narrow product lines are sold at stable prices, for example, a salesperson from PPC selling cement.


• Point sales volume quotas Businesses use these quotas because of problems in using the two previous types of quotas. Sales personnel often attained most of their quotas through selling only one or two easy- to-sell products. Management can overcome this problem by classifying products in groups according to relative profitability. Individual point volume quotas are set for each category and bonus points can be achieved by reaching these quotas.


3.1.2 Methods (procedures) for setting sales volume quotas A combination of the following methods can be used to set sales volume quotas.


Sales volume quotas derived from territorial sales potentials This procedure is used when territorial sales potentials are determined in conjunction with territorial design, or where the bottom-up planning or forecasting procedures are used in obtaining the sales forecast. Sales management set sales volume quotas by calculating the percentage relationship between each territorial sales potential, and total sales potential and using the resulting percentages to apportion the business sales estimate among territories. If, for instance, territory A’s sales potential is 2% of the total and the business sales estimate is R20 million, then the sales volume quota for territory A is R 400 000. Assuming that no further adjustments are needed, the sum of all territorial sales volume quotas equals the business sales estimate. The total sales potential is not equal to the total sales estimate, even though the two figures are related. Sales potentials for businesses, as well as for territories, are the sales volumes attainable under ideal conditions, whereas sales estimates and sales volume quotas are the sales levels management expects to attain under normal conditions.


If bottom-up planning and forecasting procedures have been used, management already has considered factors such as past sales, competition, changing market conditions and differences in personal ability. Then the final revised estimates of territorial sales potentials become the territorial sales volume quotas. Further adjustments are advisable and, because of their experience, the judgement of management is used to set realistic quotas. An ideal territorial design is not achieved because of territorial differences; adjustments should be made to compensation.


Few businesses achieve an ideal assignment of sales personnel to territories, so, in setting quotas, differences in personnel effectiveness, because of age, experience and knowledge of the territory, require adjustments to the final figures.


Reading: How to set quotas in the sales force: http://smallbusiness.chron.com/set-quotas-sales-force-10507.html


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