Page 173 - DMGT205_SALES_MANAGEMENT

Unit 11: Controlling the Sales Effort

4. Management provide sales personnel with financial incentives to control their own expenses Notes
5. To reduce administrative burden and misunderstandings, expense quotas are generally
expressed as % of sales

6. Problems:
(a) Variations in coverage difficulty & other environmental factors, make it impractical
to set identical expense % for all the territories

(b) Different sales person sells different product mixes, so some incur higher expenses
than others
7. Advantages:

(a) Makes sales personnel more cost conscious
8. Gross margin or net profit quotas
(a) Appropriate when the product line contains both high & low margin items
(b) Problems

(i) Sales persons do not set the price and have no role on the manufacturing cost.
Thus, not responsible for gross margin
(ii) Certain selling expenses are beyond the salesperson's influence

(iii) Increased clerical & administrative costs
9. Activity quotas
(a) Define the important activities sales person perform; then set target performance
frequency
(b) Appropriate when sales personnel perform important non-selling activities
(c) Control & recognition of sales person performing non selling activities
(d) Reward sales person on quantity of work; irrespective of quality

(e) Problem in inspiring the sales force
Combination & Other Point System Quota

1. Combination quota
(a) Combination quotas control performance of both selling & non-selling activities
(b) Overcome the difficulty of using different measurement units to appraise different
aspects of performance
(c) Because performances are computed as %, known as Point systems, the points being
% points.
(d) Summarize overall performance in a single measure
(e) Problems
(i) Sales persons may have difficulty in understanding & appraising their own
achievements
(ii) Design imperfection may cause sales personnel to place too much emphasis
on one component activity

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