Chapter 07

CHAPTER 7

SALES OBJECTIVES AND
QUOTAS


LEARNING OBJECTIVES
Objectives and quotas are fundamental parts of a company, because
they provide the sales force with direction and goals. Selling by
objectives (SBO) is a system that unites the sales force. This
chapter should help you understand:
 The relationship between sales objectives and quotas.
 Why quotas are important.
 The various types of quotas.
 The methods for setting quotas.
 Criteria needed for a good quota plan.
 Major areas for establishing objectives.
 How organizations set objectives.
 The selling by objectives process.

WHAT IS A QUOTA?

A quota refers to an expected performance
objective.
Quotas are tactical in nature and thus derived
from the sales force’s strategic objectives.


WHY ARE QUOTAS
IMPORTANT?

• Quotas provide performance targets.
• Quotas provide standards.
• Quotas provide control.
• Quotas provide change of direction.
• Quotas are motivational.


TYPES OF QUOTAS

• Sales volume quotas.


Sales volume quotas includes dollar or
product unit objectives for a specific period
of time.


TYPES OF QUOTAS

• Break down total sales volume.


• Product lines.
• Individual established and new products.
• Geographic areas based on how the sales
organization is designed, which would
include:
• Sales division.
• Sales regions.
• Sales districts.
• Individual sales territories.

TYPES OF QUOTAS

• Profit quotas.


The two types of profit quotas:

• Gross margin quota determined by
subtracting cost of goods sold from sales
volume.
• Net profit quota determined by subtracting
cost of goods sold and salespeople’s direct
selling expense from sales volume.


TYPES OF QUOTAS

• Profit quotas.
• Expense quotas.


Expense quotas are aimed at controlling costs of
sales units. Often expenses are related to sales
volume or to the compensation plan.


TYPES OF QUOTAS

• Profit quotas.
• Expense quotas.
• Activity quotas.


Activity quotas set objectives for job-related
duties useful toward reaching salespeople’s
performance targets.


Customer satisfaction refers to feelings about any
differences between what is expected and actual
experiences with the purchase.


TYPES OF QUOTAS

• Breakdown total sales volume.
• Profit quotas.
• Expense quotas.
• Activity quotas.
• Quota combinations.


METHODS FOR SETTING SALES
QUOTAS
• Quotas based on forecasts and potentials.
• Quotas based on forecasts only.
• Quotas based on past experience.
• Quotas based on executive judgments.
• Quotas salespeople set.
• Quotas related to compensation.


TABLE 7.4 LEVELS OF ORGANIZATIONAL SALES PLANNING

LEVEL PURPOSE: WHAT IS WHO (USUALLY) IS
PLANNED INVOLVED

1. Marketing •Organizational goals Upper management and
(increase in market share or sales and marketing
penetration, increase in executives
customers, increase in sales
dollars and units sold)
2. Regional plan •Priorities (which regions, Regional and district sales
markets, and products to managers (which input
emphasize) from sales reps)
3. District plan •Dollar allotment (for District managers and sales
promotion, advertising, representatives
new employees, sales
incentives, and so on)
4. Territorial plan •Goals for number of new Sales representatives
customers and for increased
business with old
customers in each region
and territory


SELLING BY OBJECTIVES SETS
FUTURE TARGETS

Two basic steps to implementing sales strategies:

Step 1: Organize the jobs.
Step 2: Define annual objectives in
important areas.


FIGURE 7.2 THE FOUR MAJOR AREAS TO ESTABLISH OBJECTIVES
WITH EACH SALESPERSON
SALES
MANAGEMENT
Step 1: Organizing the Job

Salesperson

Territorial Management Account Management Call Management Self-Management

• Limits • Portfolio of • Preparation • Appearance
• Potential Business Accounts • Selling Technique • Manner
• Size • Potentials • Training • Communication
• Customer Base • Coverage • Communication Skills
• Prospects • Records • Buyer Behavior • Abilities
• Leads • Order Size • Impact • Attitudes
• Market Share • Penetration • Handling Resistance • Selling Abilities
• Growth • Reports
• Trade Relations • Customer
• Dealer Relations Satisfaction

Step 2: Defining Annual Objectives

1. Regular
2. Problem Solving
3. Innovative


FUTURE TARGETS

• Treating the territory as a business.
• Managing each account.


Tactical plan for managing accounts:

1. Build the stars.
2. Harvest the cash cows.
3. Fix the problems.
4. Divest the dogs.


FUTURE TARGETS

• Managing each call.


Questions about the content of calls:

• Is the sales rep properly armed with
information, leads, and materials before the
call occurs?
• Is the sales rep applying the major principles
of selling technique during the presentation?
Or is the sales rep inventing his or her own
and perhaps making every mistake every
salesperson in history has made?
• Has the salesperson planned some coherent
attack for the sales presentation, and is it
working well?

Questions about the content of calls: continued

• Does the sales rep have enough training in
communication, in meeting sales resistance,
in understanding buyer behavior, in
improving call impact, in gaining greater
account penetration, in follow-through
methods to do the job?
• Does the sales rep have enough knowledge
of the product and its applications, service
and system backup, and technical problems
to handle the toughest calling situation?


FUTURE TARGETS

• Managing each call.
• Managing oneself.


Self-management in selling includes the following:

• Since selling involves making contact with
strangers, dress, style, demeanor, and personal
decorum are part of the salesperson’s tool kit.
• Communication skills, memory, logical speaking
habits, and writing competence are vested in the
person.
• Attitudes and outlook toward the job, the product,
the company, and the customers all have an
important bearing in the results to be achieved.
• The knowledge of selling techniques, what the
various kinds are and how and when to use them,
are personally vested in the sales rep and can be
produced and polished by training.

BASIC LEVELS OF
INDIVIDUAL OBJECTIVES

1. Regular, ongoing, and recurring objectives.
2. Problem-solving objectives.
3. Innovative or creative objectives.

The highest level of excellence is reserved for
people who are attaining all three.


THE PROCEDURES FOR
SETTING OBJECTIVES AND
QUOTAS WITH SALESPEOPLE
• Prepare the way.
• Schedule conferences with each salesperson.
• Prepare a written summary of goals agreed
upon.
• Optional group meeting to share objectives.


FIGURE 7.3 SELLING BY OBJECTIVES FORM

N am e
For Y ear
L is t Y o u r R e s p o n s ib ilit y A r e a

R e s u lts E x p e c te d

O u tp u t P e s s im is t ic R e a lis t ic O p t im is t ic R e s u lts

1 . $ V o lu m e / m o n t h
2 . $ E x p e n se / m o n th
3 . G r o s s m a r g in / m o n th
4.
5.
6.
7.
8.
9.
10.
11.
12.
O th e r

I n s t r u c t io n : L is t t h e r e g u la r , o n g o in g , r e c u r r in g o b je c t iv e s . C o v e r t h e t e n m a jo r r e s p o n -
s ib ilit ie s o f y o u r jo b n e x t y e a r t o m a n a g e t e r r it o r y , a c c o u n t s , c a lls , a n d y o u r s e lf.


A GOOD OBJECTIVE AND
QUOTA PLAN IS SMART

Specific
Measurable
Attainable
Realistic
Time specific

A simple three-way test to judge how well quotas
and objectives are written:

Test 1: Does this quota state exactly
what the intended result is?
Test 2: Does this quota specify when
the intended result is to be
accomplished?
Test 3: Can the intended result be
measured?


SELLING-BY-OBJECTIVES
MANAGEMENT

Selling by objectives (SBO) is the process
elaborated on earlier whereby the manager and
salesperson jointly identify common goals, define
major areas of responsibility, and agree on the
results expected.


FIGURE 7.4 SETTING OBJECTIVES AND QUOTAS IS A TWO-WAY
PROCESS BETWEEN MANAGER AND SALESPERSON

M u tu a lly S e t
M ea su re
O b je c tiv e s a n d
P e r fo r m a n ce
Q u o ta s

E v a lu a te
P e r fo r m a n ce

P u b liciz e
P e r fo r m a n ce R ew a rd
R e s u lts o r P e n a lty


THE SALES TERRITORY IS
WHERE QUOTAS ARE MADE

The sales territory is “where the action is!”


THE BOTTOM LINE
Quotas are important to a company because they establish the
“end state” sought, and they change according to external and
internal forces.
Many different types of quotas exist.
Methods for setting quotas may vary.
Setting a sales quota can be an involved process.
Selling by objectives (SBO) is a common concept and is widely
used by sales organizations.


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