Module 5 • Quotas/targets 3.1.3 Sales volume quotas derived from total market estimates


In some businesses, management has neither statistics on nor sales force estimates of territorial sales potentials. These businesses use top-down planning and forecasting to the sales estimate for the whole business.


Management can do the following: • Break down the total business sales estimate and then make adjustments to arrive at territorial sales volume quotas.


• Convert the business sales estimate into a sales quota for the country by taking into account expected changes in price, product, promotion, etc.


Adjustments are also made for differences in territories and sales personnel before arriving at territorial quotas.


In businesses with more than two organisational levels in the sales department, additional adjustments are necessary. Adjustments take place at business level, as well as at regional level. Regional sales managers would want more adjustments before setting final quotas because they first want to consult sales personnel assigned to the territories. Quotas set in this way are more acceptable to the sales staff because they have participated in setting them, and they have had the opportunity to contribute information bearing on the final quota.


3.1.4 Sales volume quotas based on past sales experience


Businesses take the previous year’s sales for each territory, add a certain percentage and use the results as the sales volume quota. They can also take the average past sales for each territory over several years, add certain amounts and thus set quotas for sales volume. The second method is better than the first, because the averaging procedure cancels the distorting effects of abnormally good or bad years.


Businesses using past sales procedures for determining quotas, assume that past and future sales are related. Businesses that use these assumptions can repeat past errors. Past sales experience should be considered in setting territorial sales volume quotas, but it is only one of many factors to take into account.


3.1.5 Sales volume quotas based on executive judgment alone


This method is used when there is little information available to use in setting quotas. There may be no sales forecast, no practical way to determine territorial sales potential, the product may be new and its rate of market acceptance unknown, the territory may be new to the business or a newly recruited salesperson may have been assigned to a new territory. In these situations, management may set quotas solely on their own judgements. Management’s judgement is important in determining quotas, but it cannot be used on its own.


3.1.6 Sales volume quotas related only to compensation plan


Businesses sometimes base sales volume quotas solely upon expected amounts of compensation that management believes sales personnel should receive. No consideration is given to territorial sales potentials, total market estimates and past sales experience, and quotas are determined just to fit the sales compensation plan. Such quotas are poor standards for appraising sales performance because they do not relate to territorial sales potentials.


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