Chapter 8

Building Relationships – Beyond Quotas
Sales managers must find ways to motivate their salespeople not only to "sell" Building and maintaining relationships are also important
Firms are developing integrated compensation programs to:	Build customer relationships for long-term success Keep paying salespeople for selling the firm’s products/services
Example: AT&T Performance Management Program
Four components	Sales quotas Product and competition knowledge Knowledge of customer's business People Value-Added. Personal (or subordinate) development

Introduction
ZDNet Article Use of quotas is one of the more controversial issues in sales management Many quotas are not easy to either implement or administer One important benefit of sales quotas is a uniform comparison of salespeople
Basic Quota Design Questions	Can a quota be fair to all parties Should quotas Reflect reality or Set an improvement goal? Should quotas be a function of Salesperson's ability and/or Territory characteristics and/or The local environment What basis for quotas? units sold dollar volume profit activities Quotas for salaried people? How to sell quotas to the sales force
Basic Quota Administration Questions	What happens if they don't make the quota How often to revise How should the salesperson be involved
Definition
The sales goal For a given product, product line, or service, either dollars or physical units Other types of quotas are used in planning for and controlling sales operations Assigned to a particular individual or part of the sales force In a given territory During a given period of time Some sales managers equate sales forecast and sales quota Some managers believe in individual quotas Some managers believe in group or territory quotas
Attributes of a good quota
Fair to all parties	Salesperson Sales management Company Customers
Sound	Based on fact Derived using accepted research techniques
Understandable	not simple but clear for a thinking person
Accurate	Reflects actual territory conditions
Reachable	Through realistic effort Should not be a source of constant frustration

How good companies use quotas
Provide incentive
Set Goal	Dollars units sold profit cut expenses Activities demonstrations calls displays new accounts
Properties	should not be too high should not be too low
Basis for compensation
anything over quota gets a bonus anything under quota gets the ax
Evaluate performance
Can reflect a standard of performance Used to increase or influence performance
If quotas are used as performance standard then	The quota should realistically represent what can be sold in the territory Quotas should be set in all areas where the sales person is expected to perform Well designed incentives should be in place

Types of Quotas
Sales quotas
Based on dollars or units Most common easy to develop easy to implement Typically a breakdown of the sales forecast May put pressure to sell low profit high volume items. Good for fast growing markets without too much price competition
Expense quotas
Mature products and services Must cut marketing cost to maintain profitability Can lead salesperson to cut expenses to the point of losing business
Profit quotas
Incentive to sell profitable products or profitable customers
Sources of sales managers resistance to gearing up the sales force to sell more profitably	Tradition		It implies that the sales force are order takers Afraid of the impact on manufacturing
	Inappropriate goals		Most quotas have no relationship to profits Few attempts have been made to link quotas to product, customer or margins
	Incorrect Sales Strategy		Tendency to think that all customers are alike No segmentation No Targeting Sales people cannot negotiate
	Inadequate Sales Support.		Salespeople don't know what products or customers are profitable They don't care either
Activity quotas
Quota Base		Objective
Balanced Product Mix		Gets selling time for all products Diversifies company Can help balance production
Minimum Services		Training customers sales force Setting displays Workshops Studies at customer's business
Balanced Customer Mix		Encourages diversity of customers Firm is less dependent on one type or size of customer
New Customers		Encourages prospecting New customers are vital
Increased Selling Effort		Demonstrations Closes Bids Prospecting
Combination quotas
Sales New customer Service Any of the above can be combined

Developing quotas
Machinery Maker Adds Sales Quota Software Sales - Quota Roll-up Model
Why is the quota being developed	Motivator, basis for compensation, tool for evaluating, some combination
Factors to Consider
Company and department objectives Customer mix Individual salespersons capability Diversity of product line and mix desirable Importance of service and follow up Environmental factors
Ten Most Important Elements in Assigning Quotas
Business concentration in the territory Geographic Size of territory Business growth in the territory Sales manager's commitment to help Complexity of product	Salesperson's past performance Extent of the product line Sales force compensation Relationship of products in the product line Clerical support given salespeople
Develop a list of quotas Assign weights Develop a method to combine Use some discretion

Obtaining acceptance

Involve salespeople early in the quota preparation process
Sit down with each salesperson and explain what is expected

End Note

Sales managers should understand both the philosophy and design of quotas

Chapter 8.Quotas