Quota
Definition: Sales Quota is a definite target or objective set for salespeople to achieve within a set period of time. The target may be in terms of total sales, volume of products sold, or activities done. Quotas support in appraising and motivating both persons and teams in selling.
Detailed Explanation
Sales quotas are considered an integral part of the sales process and prove to be the key tool for planning and forecasting in sales management. They are the benchmarks against which performances of salesmen are measured. The quotas could be of different durations, such as monthly, quarterly, and annually, and are offered as incentives to the salespeople in terms of commissions, bonuses, or other rewards based on their achievement.
Types of Sales Quotas:
- Revenue Quotas: These quotas are derived from the total sales revenue a salesperson or team is expected to generate.
- Volume Quotas: Number of units or volume of products a salesperson is supposed to sell.
- Activity Quotas: These are quotas relating to specific activities a salesperson is to execute in terms of, say, the number of calls, meetings, and proposals.
- Profit Quotas: They are profit based and the profit that has to be achieved is decided to be made from
Importance in the Sales Process
- Motivation: It’s kind of a motivation for the salespeople. The quotas created for salespeople will push and
- Measurement: They provide a clear metric for measuring the success and effectiveness of sales efforts.
- Align: Align the objectives of individual salespeople with the overall goals of the sales organization and the company.
- Planning: Helps to forecast and plan the activity of future sales and resource allocation.
- Reward: Provide a basis for rewarding and recognizing high performers in the sales team.
Real-World Example
For example, a good quota might be 50 cars per quarter for a single salesperson in a car dealership. Such a quota would thus push its salespeople to try to optimize their sales strategies and their customer interactions just to at least get to this target. People who meet their quota will most likely be rewarded with some bonus, while those who consistently outdo themselves may further qualify for other rewards or promotions. For example, in a software company, a sales representative can have a revenue target of $50,000 in a month. This is a great potential for motivating a salesperson not only to bag new clients but also to upsell and cross-sell to already existing clients in order to realize or surpass the target in revenue.