SALES OBJECTIVES AND

QUOTAS

Copyright 2001 by Harcourt, Inc. All rights reserved.

LEARNING OBJECTIVES
Objectives and quotas are fundamental parts of a company, because
they provide the sales force with direction and goals. Selling by
objectives (SBO) is a system that unites the sales force. This
chapter should help you understand:
The relationship between sales objectives and quotas.
Why quotas are important.
The various types of quotas.
The methods for setting quotas.
Criteria needed for a good quota plan.
Major areas for establishing objectives.
How organizations set objectives.
The selling
by objectives
process.
Copyright
2001 by Harcourt,
Inc. All rights reserved.

WHAT IS A QUOTA?
A quota refers to an expected performance objective.
Quotas are tactical in nature and thus derived from
the sales forces strategic objectives.

Copyright 2001 by Harcourt, Inc. All rights reserved.

WHY ARE QUOTAS

IMPORTANT?
1 Quotas provide performance targets.
2 Quotas provide standards.
3 Quotas provide control.
4 Quotas provide change of direction.
5 Quotas are motivational.

Copyright 2001 by Harcourt, Inc. All rights reserved.

TYPES OF QUOTAS
Sales volume quotas.

Copyright 2001 by Harcourt, Inc. All rights reserved.

Sales volume quotas includes dollar or

product unit objectives for a specific period
of time.

Copyright 2001 by Harcourt, Inc. All rights reserved.

TYPES OF QUOTAS
1 Sales volume quotas.
2 Break down total sales volume.

Copyright 2001 by Harcourt, Inc. All rights reserved.

 Product lines.
Individual established and new products.
Geographic areas based on how the sales
organization is designed, which would
include:
Sales division.
Sales regions.
Sales districts.
Individual sales territories.
Copyright 2001 by Harcourt, Inc. All rights reserved.

TYPES OF QUOTAS
1 Sales volume quotas.
2 Break down total sales volume.
3 Profit quotas.

Copyright 2001 by Harcourt, Inc. All rights reserved.

The two types of profit quotas:

1 Gross margin quota determined by
subtracting cost of goods sold from sales
volume.
2 Net profit quota determined by subtracting
cost of goods sold and salespeoples direct
selling expense from sales volume.

Copyright 2001 by Harcourt, Inc. All rights reserved.

TYPES OF QUOTAS
1 Sales volume quotas.
2 Break down total sales volume.
3 Profit quotas.
4 Expense quotas.

Copyright 2001 by Harcourt, Inc. All rights reserved.

Expense quotas are aimed at controlling costs of

sales units.
Often expenses are related to sales volume or to
the compensation plan.

Copyright 2001 by Harcourt, Inc. All rights reserved.

TYPES OF QUOTAS
1 Sales volume quotas.
2 Break down total sales volume.
3 Profit quotas.
4 Expense quotas.
5 Activity quotas.

Copyright 2001 by Harcourt, Inc. All rights reserved.

Activity quotas set objectives for job-related

duties useful toward reaching salespeoples
performance targets.

Copyright 2001 by Harcourt, Inc. All rights reserved.

Customer satisfaction refers to feelings about any

differences between what is expected and actual
experiences with the purchase.

Copyright 2001 by Harcourt, Inc. All rights reserved.

TYPES OF QUOTAS
1 Sales volume quotas.
2 Breakdown total sales volume.
3 Profit quotas.
4 Expense quotas.
5 Activity quotas.
6 Quota combinations.
Copyright 2001 by Harcourt, Inc. All rights reserved.

METHODS FOR SETTING SALES

QUOTAS
1 Quotas based on forecasts and potentials.
2 Quotas based on forecasts only.
3 Quotas based on past experience.
4 Quotas based on executive judgments.
5 Quotas salespeople set.
6 Quotas related to compensation.
Copyright 2001 by Harcourt, Inc. All rights reserved.

SELLING BY OBJECTIVES SETS

FUTURE TARGETS
Two basic steps to implementing sales strategies:
Step 1:

Organize the jobs.

Step 2:

Define annual objectives in

important areas.

Copyright 2001 by Harcourt, Inc. All rights reserved.

SELLING BY OBJECTIVES SETS

FUTURE TARGETS
1 Treating the territory as a business.
2 Managing each account.

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Tactical plan for managing accounts:

1. Build the stars.
2. Harvest the cash cows.
3. Fix the problems (Question Marks).
4. Divest the dogs.

Copyright 2001 by Harcourt, Inc. All rights reserved.

SELLING BY OBJECTIVES SETS

FUTURE TARGETS
1 Treating the territory as a business.
2 Managing each account.
3 Managing each call.

Copyright 2001 by Harcourt, Inc. All rights reserved.

Questions about the content of calls:

Is the sales rep properly armed with information,
leads, and materials before the call occurs?
Is the sales rep applying the major principles of
selling technique during the presentation? Or is the
sales rep inventing his or her own and perhaps
making every mistake every salesperson in history
has made?
Has the salesperson planned some coherent attack
for the sales presentation, and is it working well?

Copyright 2001 by Harcourt, Inc. All rights reserved.

Questions about the content of calls:

continued

Does the sales rep have enough training in

communication, in meeting sales resistance, in
understanding buyer behavior, in improving
call impact, in gaining greater account
penetration, in follow-through methods to do
the job?
Does the sales rep have enough knowledge of
the product and its applications, service and
system backup, and technical problems to
handle the toughest calling situation?
Copyright 2001 by Harcourt, Inc. All rights reserved.

SELLING BY OBJECTIVES SETS

FUTURE TARGETS
1 Treating the territory as a business.
2 Managing each account.
3 Managing each call.
4 Managing oneself.

Copyright 2001 by Harcourt, Inc. All rights reserved.

Self-management in selling includes the following:

Since selling involves making contact with
strangers, dress, style, demeanor, and personal
decorum are part of the salespersons tool kit.
Communication skills, memory, logical speaking
habits, and writing competence are vested in the
person.
Attitudes and outlook toward the job, the product,
the company, and the customers all have an
important bearing in the results to be achieved.
The knowledge of selling techniques, what the
various kinds are and how and when to use them,
are personally vested in the sales rep and can be
produced and polished by training.
Copyright 2001 by Harcourt, Inc. All rights reserved.

BASIC LEVELS OF
INDIVIDUAL OBJECTIVES
1. Regular, ongoing, and recurring objectives.
2. Problem-solving objectives.
3. Innovative or creative objectives.
The highest level of excellence is reserved for
people who are attaining all three.
Copyright 2001 by Harcourt, Inc. All rights reserved.

THE PROCEDURES FOR

SETTING OBJECTIVES AND
QUOTAS WITH SALESPEOPLE
1 Prepare the way.
2 Schedule conferences with each salesperson.
3 Prepare a written summary of goals agreed
upon.
4 Optional group meeting to share objectives.

Copyright 2001 by Harcourt, Inc. All rights reserved.

A GOOD OBJECTIVE AND

QUOTA PLAN IS SMART
Specific
Measurable
Attainable
Realistic
Time specific
Copyright 2001 by Harcourt, Inc. All rights reserved.

A simple three-way test to judge how well quotas

and objectives are written:
Test 1:

Does this quota state exactly

what the intended result is?

Test 2:

Does this quota specify when

the intended result is to be
accomplished?

Test 3:

Can the intended result be

measured?

Copyright 2001 by Harcourt, Inc. All rights reserved.

SELLING-BY-OBJECTIVES
MANAGEMENT
Selling by objectives (SBO) is the process
elaborated on earlier whereby the manager and
salesperson jointly identify common goals, define
major areas of responsibility, and agree on the
results expected.

Copyright 2001 by Harcourt, Inc. All rights reserved.

SETTING OBJECTIVES AND QUOTAS IS A

TWO-WAY PROCESS BETWEEN
MANAGER AND SALESPERSON
Mutually Set
Objectives and
Quotas

M ea s u r e
P er fo r m a n ce

E va lu a te
P er fo r m a n ce
P u b l i ci z e
P er f o r m a n ce
R es u l t s

R ew a r d
o r P en a l t y

Copyright 2001 by Harcourt, Inc. All rights reserved.

THE SALES TERRITORY IS

WHERE QUOTAS ARE MADE
The sales territory is where the action is!

Copyright 2001 by Harcourt, Inc. All rights reserved.

THE BOTTOM LINE

Quotas are important to a company because they establish the
end state sought, and they change according to external and
internal forces.
Many different types of quotas exist.
Methods for setting quotas may vary.
Setting a sales quota can be an involved process.
Selling by objectives (SBO) is a common concept and is widely
used by sales organizations.

Copyright 2001 by Harcourt, Inc. All rights reserved.