Sales Territory & Management of Sales

Quota

Is defined as a group present and potential customers assigned to an individual salesperson, a group of salesperson, a branch, a dealer, a distributor or a marketing organization at a given period of time.

Territories are defined on the basis of geographical boundaries in many organization.

In broader term, it is a geographical area that identifies and serves a category and a certain number of customers.

Sales Territory

However in some instances, companies do not follow geographic designs for sales territories.

Eg - a small firm catering to a niche market.

There are some situations where companies to build sales territories on the basis of the urgency and frequency of customer requirements rather than geographical coverage.

The problem with such a method is that the same customer may get calls from multiple salespeople from the same organization.

An alternative method is to make a single salesperson accountable for one set of clients only and if required call technical specialists for assistance.

Also in situations where personal relationships and acquaintances have a bearing on sales, organizations do not prefer territorial designs.

Ensures better market coverage, effective utilization of sales force and efficient distribution of workload among salespeople.

Convenient way to evaluate the performance of salespeople.

A territorial design brings more clarity and focus to the sales targets to be achieved.

The sales force can build higher sales through up selling and cross selling to the same set of customers.

Customer service improves over a period of time.

Advantages of Sales Territory

Helps understand customers current and latent need.

Helps salespeople to generate a better valve from the customers.

An effective territorial design helps to integrate the selling efforts with other marketing and promotional functional functions in the territory.

May not prove good in regions where personal relationship is required rather than professional approach.

Organizations with vast geographic area and large customer distribution, with a lower density in any specific block, firms using telemarketing and internet marketing as tools, do not plan territories on the basis of geographic division.

Disadvantages of Sales Territory

Small firms, particularly firms with single salesperson do not establish sales territory.

Highly sophisticated and technically complex products are sold through sales teams systematic effort.

Organizations sell products like insurance, fixed deposits and other investment products through personal acquaintances of sales people.

Functions

An outstanding salesperson will be an outstanding sales executive?

A sales executive’s job demands administrative skills much beyond those required of salespeople.

But personal selling experience and outstanding personal selling performance are two different things.

Functions and Qualities of Sales Executives

Basically the sales executive has two sets of functions : operating and planning.

The operating functions include sales force management, handling relationships with personnel in other company departments, communicating or co-ordinating with other marketing executives and reporting to some superior executive.

The sales executive planning function includes those connected with the sales programme, the sales organization and its control.

The sales executive is responsible for setting personal selling goals, for developing sales programme designed to achieve these goals, for formulating sales policies and personal selling strategies, and putting together plans for their implementation.

The relative emphasis that a sales executive gives to the operating and planning functions varies with –

Type of products Size of company The type of supervisory organization.

1) Ability to define the position’s exact functions and duties in relation to the goals the company should expect to attain:

The sales executives calculate what is entailed in their responsibilities.

They draw up their own descriptions.

Qualities

2) Ability to select and train capable subordinates and willingness to delegate sufficient authority to enable them to carry out assigned tasks with minimum supervision:

Effective executives select higher caliber subordinates and provide them with authority to make decisions.

The more capable subordinates, the wider policy limits can be.

3) Ability to utilize time efficiently:

They time of sales executive is very valuable.

They allocate time to tasks which yield the greatest returns.

Even the use of off-duty hours is very important.

Successful sales executive balance their time with their activities.

4) Ability to allocate sufficient time for thinking and planning:

Able administrators make their contribution through thinking and planning.

They recognize that reviewing past performances is a prerequisite to planning.

6) Ability to exercise skilled leadership:

Competent sales executives develop and improve their skills in dealing with people.

To a large extent, they depend more on the motivational factors.

Skilled leadership is important in dealing with subordinates and with everyone else.

Definition

Sales Quotas are the targets that that the sales people try to achieve within a specific period of time, which contributes towards achieving the organizational goals regarding sales forecasts.

Sales Quota

Quotas are routinely assigned to the sales unit.

Sales quotas are the sum of total sales of a future period and duties to achieve the component of total sales by each salesperson are handed down to them at the beginning of the period.

Meaning

‘A sales quota is the sales goal set for a product line, company division or sales representative. It is primarily a managerial device for defining and stimulating sales effort.’

According to Philip Kotler….

Quotas are based on sales.

A sales forecast is an estimate of what a firm can sell.

Sales quotas may be set equal to, above or below the sales forecast.

Sales potential is the maximum share of the market demand that a firm can obtain.

Importance of Sales Quota.

Assignment

There is no specific formulae or method for setting sales quota, however a scientific method can be followed for effective quota setting.

There should be objectivity in approach while fixing quotas and it should be based on facts and figures drawn from the market.

There should be an equal level playing field.

The set sales quota should be achievable by an average salesperson with minimum effort.

Principles of setting Sales Quota

A flexible quota often helps the salespeople to adjust their efforts and returns to the market behaviour.

There should be a level of definiteness in the quota set for the salesperson based on – either geographic territory, or on money value or on the basis of units of product(s).

A participatory quota setting procedure serves as a tool of motivation and realization of organizational sales goals.

Three kinds of objectives can be towards the quota…

1) Regular and recurring 2) Problem solving3) Creative

Quota Objectives

1)Regular and recurring

These objectives are related to the sales volume, target market share, expenses, frequency and quantity of calls, prospects and lead generation, growth in order size, market coverage, and reporting procedures.

Achieving these goals is a satisfactory performance evaluation of the concern.

2) Problem solving

Are individual salespersons goal that involve deviations from the standard and routine objectives, where things have gone wrong and bringing a blockage in the smooth functioning of the organization system.

These objectives need specific unique commitments form the salesperson.

3) Creative

Creative objectives are actions the sales person states and commits which are new, challenging, creative, innovative, intelligent and original in the territory or in another area of responsibility.

These goals mean managing breakthrough and quantum leaps to new levels of performance.

The manager needs to talk to sell the objective and commitment to his sales staff as they meet

customers to sell products and services.

There are essentially three steps to be followed for quota setting:

1) Scheduled planning 2) Conferencing with each sales person3) Arriving at a summarized written quota

statement.

Procedure for Setting Sales Quota

1) Scheduled planning

It involves planning for goal setting meetings with individual salespeople and particularly with new recruits.

These schedules are necessary to explain systems and reasons, benefits and incentives for each salesperson and goals for the organization.

The salespeople should be allowed to ask questions and get clarification for their doubts.

2) Conferencing with each sales person

Here the sales manager allows the salesperson to discuss.

The discussion revolves around four key areas – territory, account, call management and self management.

The purpose is to create a win-win situation for both the organization and the employee.

3) Arriving at a summarized written quota statement.

The next task is to prepare written summary of the goals agreed upon.

The written goals become a document of understanding for all purposes.

It provides clear cut goals and responsibilities for the year ahead.

Quota types include

1) Sales volume quota2) Sales budget quota 3) Sales activity quota4) Combination quota

Types of Sales Quota

It is the most commonly used method as it provides an important standard of appraising the performance of individual salespeople, intermediaries and the branch.

Sales volume quotas communicate the organizations expectations in terms of what amount of sales for/in what period.

This kind of quota can be set for geographical territories, different product lines, different marketing intermediaries, or more than one of these combinations.

1) Sales volume quota

The annual quota is set for the year and then broken down into specific time periods.

In many cases, these specific time periods may vary depending upon the seasonality of the business, consumer attitude towards buying and the geographic location of the customer.

Organizations make sales forecasts on the basis of the sales divisions, regions, branches, districts and individual sales territories.

The sales volume quota is of three kinds:

a) Monetary sales volume quota, b) Unit sales volume quota,c) Points sales volume quota

The sales volume is set in monetary terms and not in terms of units of the product.

The monetary quota is set for each sales unit separately.

a)Monetary sales volume quota

Here quota is set in terms of volume.

It is used in two situations; When the prices of the products are expected to

fluctuate considerably during the quota period, and when the companies with a narrow product line sell at a price that fluctuates little during the quota period.

It helps the company to achieve the sales in terms of volume.

b) Unit sales volume quota

Some organizations use sales volume quota expressed in ‘points’ into which money or unit sales or both can be converted as desired by the sales manager.

A multi-product firm may fix a point volume quota where sale of one unit will bring a certain point.

Eg: if a salesperson is given a quota of 1000 points……..

c) Points sales volume quota

These kinds of quotas are set for various units of the organization in order to control the expenses (expenses quota), gross margins and net profits (profit quota).

The objective not only to make desired sales volume but also make profits.

Expenses quota ensures that the salespeople limit their expenses in alignment with the volume and control the cost to acquire customers.

2) Sales budget quota

Many companies set upper limits on items of expenses like lodging, meals and entertainment and expect the salespeople to manage within the budget.

Profit quota can be set on Gross margins and Net profits.

Organizations emphasize net profits more than sales volume.

The rationale behind this type of quota is that the sales personnel operate more efficiently to reduce the expenses and increase the sales resulting in increased margins and profits.

The manufacturing department provides the sales manager with information regarding the cost of goods sold, which includes the cost of manufacturing the product.

By subtracting the cost of goods sold and the direct selling expenses from the sales volume, one can determine the net profit quota.

Here the sales person does not decide the price and has no control over the manufacturing cost.

The sales person is not always involved in sales realization; for example a retail salesperson has a job of providing information only.

In addition to direct sales activity, the salesperson is expected to do some non-selling activity and the quota can be set as a mix of these activities.

Eg: Insurance selling, Medical Reps.

3) Sales activity quota

Activity quota can be set on total sales calls, particular classes or set of customers, calls on prospects, number of new accounts, product demonstration, etc.

Activities quota set objectives for job related studies.

The most common combination is the sales volume and activity quota.

It is used to control the sales force performance on the basis of selling and non-selling activities.

4) Combination quota

Fixing sales quota in organizations is a challenging task today due to the sheer size of the sales organizations, complex sales force structure and varied competition conditions in different territories.

For fixing quotas, the following methods can be followed,

Methods of setting Sales Quota

Organizations forecast the total sales or volumes for the entire market, which is then divided into territories and then brought down to the individual salesperson level.

Estimated future sales per territory are then divided by the number of salespersons or by the branches to determine the sales quota for each.

1) Based on Sales Forecasts and Potentials

It is not always possible to obtain the forecasted figures for individual sales territories as companies lack information, data, money and people to determine the sales potential for individual sales territories.

Small companies set quota in relation to their sales forecast or total market estimates.

2) Based on Forecast

Here the companies collect the sales data of previous years, average them out for each geographical territory and then add an arbitrary percentage for next years quota.

This average method is followed due to the ease in using trends and projecting them in future.

This method gives a rare view perspective, as it does not take into consideration the sales potential.

3) Based on Past sales or Experience

This method is used when there is no or little information available in the market.

It may also be impractical to find out the potential of new product in an existing territory or an existing product in a new territory.

4) Based on Executive Judgement

Many companies ask their own salespeople to set the quota for themselves.

This is mostly applicable in situations where the company is expanding the territory or starting up its own sales force.

These inputs from the salespeople allow the company to fix their production and manufacturing schedules.

5) Based on Salespeople Judgement

Asking the salespeople their quota, provides an opportunity for the salespeople to test their abilities and it makes them to work with higher motivation.

What can be the 2 issues here when the salespeople are asked to set the quota for themselves……discuss….

Salespeople are promoted on the basis of their achieving quota.

Salesperson get extra compensation by reaching sales volume quotas for total unit or rupee sales, sales of existing products and new products… also to a new or an existing customer.

Quotas related to compensation are determined by any of the previously explained quota setting methods.

6)Based on Compensation