Page 176 - DMGT205_SALES_MANAGEMENT

Sales Management

Notes 1000 = 1 point. Also different points can be given to different products - 3 for product A, 5 for
product B and so on.
Unit sales volume quotas are found useful in market situations where prices of the product
fluctuate considerably or when the unit price of the product is rather high. Rupee sales volume
quota is found useful for sales force selling multiple products to one or different types of
customers.

11.8.2 Methods of Setting Sales Volume Quotas

Sales volume quotas can be set on the following basis.
Past Sales: Sales quotas are set based solely on past sales experience. If the sales quotas are to be
set for this year then we find out the sales of last year and taking the expected percentage
increase in market share, we add this percentage to last year sales.

E.g., Last years sales - 100
Percentage increase in market share expected is - 10%
Then for this year sales quota will be - 110%.
This method assumes that the preceding year was the typical year. We can also take the average
of past three years and add the rate of growth.
Total Market Estimates: In this method of setting sales quotas total market estimates are made
by the company for that year and sales quotas are derived from this. Two approaches are
generally used.
1. Market size estimates can be had from the data available and the judgement of the executive
at the head office.
2. Sales quotas can also be made from the projections made by field staff at each territory
office.

Territorial Sales Potentials: Many managers derive sales volume quotas from sales potentials.
Sales potential represents the maximum sales opportunities open to the same selling unit. This
approach is appropriate when:
1. Territorial sales potentials are determined in conjunction with territorial design. In this
case sales volume quotas are set by calculating the percentage relationship between each
territorial sales potential and total sales potential and using the resulting percentages to
apportion the company sales estimate among territories. For example, if territory X's
sales potential is 3 per cent of the total and the company sales estimate is 10 million, then
the sales volume quota for territory X is 3,00,000.
2. Bottom-up planning and forecasting procedures are used in obtaining the sales estimate
in the sales forecast. In this case, management, after considering such factors as past sales,
competition, changing market conditions and differences in personal ability, as well as
contemplated changes in prices, products, promotion and the like, gives final revised
estimates of territorial sales potentials which become the territorial sales volume quotas.
Compensation Plans: Companies sometimes base sales volume quotas solely upon the projected
amounts of compensation that management believes sales personnel should receive. No
consideration is given to territorial sales potentials, total market estimates and past sales
experience and quotas are tailored exclusively to fit the sales compensation plan. If, for instance,
sales person A is to receive a 2,000/- monthly salary and a 5 per cent commission on all
monthly sales over 40,000/-, A's monthly sales exceeds 40,000/-, management holds A's

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