Sales Territory

and
Management of Sales Quota

Presented by: Tushar (65-MBA-16)

Urvi Gupta (66-MBA-16)
Vidhu Arora (68-MBA-16)
 Sales Territory
• Is defined as a group of 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.
•However in some instances, companies do not
follow geographic designs for sales territories.
• E.g - 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.
 Advantages of Sales Territory
• 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.
• 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.
 Disadvantages of Sales 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.
• 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
and
Qualities of Sales Executives
 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.
 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.
 Qualities
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.
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.
5) 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.
 Sales Quotas

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.
 Meaning
• 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.
‘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.’
• 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.
 Principles of setting Sales Quota
• 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.
• 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.
Quota Objectives

• Three kinds of objectives can be towards the quota…

1. Regular and recurring

2. Problem solving
3. Creative
 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.
 Procedure for Setting Sales Quota
• There are essentially three steps to be
followed for quota setting:

1) Scheduled planning
2) Conferencing with each sales person
3) Arriving at a summarized written quota
statement.
 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.
 Types of Sales Quota

1) Sales volume quota

2) Sales budget quota
3) Sales activity quota
4) Combination quota
 Sales volume 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.
• 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
 Monetary 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.
 Unit 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.
 Points 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……..
 Sales budget 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.
• 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.
 Sales activity quota
• 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.

•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.

 Combination quota
• 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.
 Methods of setting Sales 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,
1) Based on Sales Forecasts and Potentials

• 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.
 2. Based on Forecast
• 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.
 3. Based on Past Sales or Experience

• 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.
4. Based on Executive Judgement
• 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.
5. Based on Salespeople 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.
• Asking the salespeople their quota, provides an
opportunity for the salespeople to test their abilities
and it makes them to work with higher motivation.
 6.Based on Compensation
• 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.