Sales Management

Sales Quotas

Topic 11

3 Powerful Tools

• Quotas• Compensation• Company Policy

Effective Quotas

• Attainable• Easy to Understand• Complete

Disadvantages

• Team Selling• Uncontrollables• Territory Fairness• Time Consuming

Three Quota Types

• Sales• Financial• Activity

Sales Quotas

• Most Popular• Advantages• Disadvantages

Financial Quotas

• Advantages• Disadvantages

Activity Quotas

• Advantages• Disadvantages• Use in Training

Price Setting Issues

• Sales Commissions are Dangerous with Pricing Authority

• Not a problem with Gross Margin Commissions

• Argument is Equally Valid when Incentive Pay is a Bonus

Price Setting Example

• Brand is priced at $100• Direct Unit Costs = $60• Gross Margin = $40• Compare 4% sales quota versus a 10% gross

margin quota.

4% SC vs 10% GM Commission

• Initially both have $4 earned on a $100 unit sold.

• But, suppose you cut the price $10 to get an order – what happens?

4% Sales Commission

• $10 price cut so new price is $90• Sales Commission is .04 x $90 = $3.60• But company margins are now:• $90 - $60 unit cost - $3.6 commission = $26.4• Versus $100 - $60 - $4 = $36

10% GM Commission

• Same $10 price cut• Commission = ($90 - $60) x .1 = $3• Company margin = $90 - $60 - $3 = $27• Price cut 10%, and commission fell by 25%

($4 vs $3)• Incentive to cut price is lessened.