What are sales quota?

Any kind of sales figures given to any particular

person or region or distributor is called Sales
Quota. It can be measured either in terms
money or the stock of goods sold. It is
particularly an amount of target sales that is
assessed on daily or monthly basis. To assess the
performance of an individual sales person,
his/her ability is looked to meet the given target
Importance of sales quota

1.Quotas always lead organizations towards

management by exception

This means that management focuses

attention on the people who are highly
performance oriented and takes care of
their interests in the organizational
policies.
2.Quotas help in giving directions

In organizations, attainment of sales

quota is tied to the incentives and
financial rewards. These rewards brings
out the desired level of corporate
behaviour to reach at the organizational
goals.
3.Quotas serve as guidelines

It gives the power to augment

accountability and punish for non-
compliance.
Principle of quota setting
Organization of sales job
 Types of Sales Quotas
A sales organization can set many types of quotas. The most common quotas
are shown in the following diagram:

Sales Volume Profit Expense Activity Quotas

Quotas Quotas s Quotas Quotas Combinations
Sales Volume Quotas
Sales volume quotas include sales in rupees or
product unit objectives for a specific period of
time. For example, New East India Ltd.
calculates sales in rupees, whereas Bajaj Motors
calculates sales as number of cars sold. Sales
volume quotas are first set for the entire year.
The yearly total volume quota is then set for
shorter time periods, such as three months, six
months and nine months. The sales force is
assigned their yearly quotas. Sales targets are
set for the year for sales force, so their aim is to
sell throughout the year to achieve the total
sales objective. The sales volume quotas can
be set in the following areas:
Sales Volume Quotas (Contd.)

Product line

Sales Product range

Volume Sales divisions
Quotas
Sales territories
Sales districts
Branch offices
Sales force (Individual)
Profit Quotas
Profit quotas are particularly useful in multiproduct companies
where different products contribute to varying levels of profits.
It creates opportunities for the salesperson to make optimum
use of time.
Expense Quotas

Expense quotas are related to selling costs

within reasonable limits. Some companies
set quotas for expenses linked to different
levels of sales attained by their sales force.
Salespeople may receive an expense budget
that is a percentage of the territorys sales
volume. The salesperson must spend only
this amount as expenditure.
Activity Quotas
These quotas set objectives for job-related duties useful for
attaining salespeoples performance targets. Activity quotas
are required to make the sales force perform other activities
which have long term implications on the goodwill of the firm. A
sales organization must set a target level of performance for
salespersons. Some common types of activity quotas prevalent
in Indian companies are as follows:
Common Types of Activity
Quotas
Number of sales presentation made
Number of service calls made
Number of dealers visited
Number of calls made for recovery
Number of new accounts opened

Activity quotas typically should not be a basis for rewards. Rather, their
attachment helps the manager better understand why salespeople do or
do not meet their sales volume quotas.
Quota Combinations
Many companies use a combination of
these quotas. The two most commonly
combined are sales volume and activity
quotas. These quotas influence selling and
non-selling activities.
It is also important not to have too many
quotas; otherwise, the salespeople may
become confused as to what is expected.
Several quotas can be used, but they
should be on the most important activities,
total sales volume and the products that
result in the most sales.
Quotas based on Sales Forecast
and Potentials
Forecast the total sales or volume > divide
into territories> bring down to individual
salesperson level.

Can be generated at the corporate, total

product line or individual product level.

Estimated future sales per territory are

divided by the number of salesperson or by
number of branches to determine sales
quota for each.
Quotas based on Past sales or
Experience
Sales data of previous year> average them
out for each geographic territory> add an
arbitrary percentage for next years quota.

Major goal lies in surpassing the previous

years sales.

Does not ignore the past and present

situation of different territories.
Quotas based on Executive
Judgement
When little or no information is available
of the market.

Managers rely on their past experience

for future predictions.

Analyse facts and figures for different

markets> decide the quota for territory,
salesperson and intermediaries.
Quotas based upon the
Judgement of Salesperson

In situations where the company is

expanding the territory or starting up its
own sales force.

Allow salesperson to give data to set their

quota.

But, many a times salesperson set quota

lower than his level to have comfort.
Quotas based on Compensation
Salesperson promoted on the basis of
their achieving quota.

Extra compensation for reaching sales

volume quotas.

Quotas are determined by any of the

previously discussed quota setting
method.
Problems in setting Sales Quota
Salesperson fails to understand the logic
and reason behind the goals and quota
assigned to him.

Econometric models and services of

experts used to set quotas, adds to the
organization costs.

Quota setting procedures do not fulfill all

objectives of the organization.
 Quota setting has no relevance in
sellers markets, where demand of the
products is higher than sales.

It is incorrect to relate the increase in

profits solely due to selling efforts.

Quota setting procedures suffer from the

biasness of the managers.
Sales Force Motivation
You can bring the horse to the water but
you cannot force him to drink.

Motivation is the willingness to expend

internal energy to achieve a goal or a
reward, where;
Performance (P) = Ability (A) * Motivation (M)
Nature of Motivation
An internal feeling and an energetic
force

Produces goal oriented action

Has a system orientation, i.e. the goal of

the individual is shaped by the forces
within the individual and interaction with
the environment
 When action yields rewards, individual is more
motivated to repeat the process.

Motivation and satisfaction, achieved through a

compensation and reward are interrelated.

Motivation is the drive to achieve goals.

Motivation is a complete process in which

needs get satisfied and generate newer and
modified needs.
Importance of Motivation
Organizations effectiveness is a function of
managerial ability to motivate sale
employees for achieving goals.

Organization may miss the talent pool, if

motivation issues not addressed.

Frequent rejections by customers,

customer complaints etc. highly demotivate
the salesperson.
 Nature of the job itself is a strong
demotivation.

Salesperson faces domestic problems and

misses onto a normal family life, which
indeed hampers the efficiency.

A higher salary can bring satisfaction to

the basic needs but as the job evolves, so
does the need structure.
 Motivation develops a win-win situation
between the organization and the
salespersons.

Helps in building morale of the

employee.

A successful motivation programme

aims at optimum use of manpower.
Process of Motivation

Motives > Behaviour > Goal

Motive prompts people to action.

Motives arise continuously and

determine the general direction of
salespersons behaviour.
 Behaviour comprises of series of activities
performed by being motivated to achieve
goals.

Disequilibrium may arise due to

imbalances between physiological and
psychological state of the salesperson.

Behaviour of attaining goals restores the

balance.
Motives and Motivational Drives
Motives are drivers for behavioural action
of customers.

Motives can be:

a) Primary: based on physiological needs
instinctive and unlearned

b) General: unlearned but not purely based

on physiological needs
eg. Curiosity, affection, manipulation
 Primary motives seek to reduce tension
or stimulation, whereas General needs
induce the person to increase the
amount of stimulation.

c) Secondary: drawn out of conditions of

society and interaction with the elements
of society
eg. Motives of power, achievement and
affiliation
 Security: Primary motivation in which
people stay committed for their own
sake rather than for any reward.
Glen Pharma, has a motivational
programme in which a majority of
salesperson receive incentive in the
form of cash for achieving quota levels.
 Achievement: If there is no sense of
achievement, it cannot stimulate the
salesperson to achieve higher goals.
Life Insurance Corporation, has a
motivational programme for its agents
called the crorepati agent scheme,
which involves an appreciation and
citation to the sales agents for achieving
the sales of Rs. 1 crore.
 Approval: An appreciation among peers
does wonders compared to financial
reward system.
Wine companies, such as EW
Breweries as a motivation tool take
successful salesperson on a cruise to
the Caribbean with the CEO and top
brass of the company.
 Advancement: a motivation programme
should provide opportunities to develop
and grow in the career.
In TATA motors, employees are
given multiple jumps for exceptional
performance. While designing the TATA
Indica brand of car, people who did
pathbreaking product and component
design were given advancements in
their career.
Motivation is the characteristic that helps you achieve your goal.
It is the drive that pushes you to work hard .It is the energy that
gives you the strength to get up and keep going - even when
things are not going your way.
THEORIES OF MOTIVATION

CONTENT THEORY
PROCESS THEORY
Theories of Motivation
Maslow's
hierarchy of needs

Content Herzberg's
motivator-hygiene
Theory theory

Alderfer's ERG
theory

McClelland's
three-needs
theory
Theories of Motivation
Adams' equity
theory

Proce Vroom's
expectancy theory
ss Goal-setting
Theor theory

y Reinforcement
theory
Hierarchy of Needs
Maslows Theory
We each have a hierarchy of needs
that ranges from "lower" to "higher."
As lower needs are fulfilled there is a
tendency for other, higher needs to
emerge.

Maslows theory maintains that a

person does not feel a higher need
until the needs of the current level
have been satisfied.
 Self
Actualization
Esteem needs

Social needs

Safety needs
Physiological
needs
 Physiological Motivation: Provide ample
breaks for lunch , pay salaries that allow
workers to buy life's essentials.

Safety Needs: Provide a working

environment which is safe, relative job
security, and freedom from threats.

Social Needs: Generate a feeling of

acceptance, belonging by reinforcing team
dynamics.
 Esteem Motivators: Recognize
achievements, assign important
projects, and provide status to make
employees feel valued and appreciated.

Self-Actualization: Offer challenging

and meaningful work assignments which
enable innovation, creativity, and
progress according to long-term goals.
Two Factor Theory
motivation-hygiene theory
Frederick Herzberg performed studies to
determine which factors in an
employee's work environment caused
satisfaction or dissatisfaction. He
published his findings in the 1959 book
The Motivation to Work.
motivation-hygiene theory
Motivating Hygiene
factors factors
Achieve Company
ment policy
Recognit Supervisio
ion n
Work Relationsh
itself ip w/Boss
Respons Work
ibility conditions
Advance Salary
ment
Relationsh
Growth ip w/Peers
McCLELLANDS
MOTIVATION THEORY
 Mc Clellands need theory,
is also known as Three
Needs Theory. The three
needs are:

Need for achievement

Need for affiliation
Need for power
 NEED FOR ACHIEVEMENT
Employees prefer working on tasks of
moderate difficulty, prefer work in
which the results are based on their
effort rather than on anything else, and
prefer to receive feedback on their
work. Achievement based individuals
tend to avoid both high risk and low
risk situations.
 NEED FOR AFFILIATION
People who have a need
for affiliation prefer to spend time
creating and maintaining social
relationships, enjoy being a part of
groups, and have a desire to feel
loved and accepted. People in this
group tend to adhere to the norms
of the culture in that workplace.
 NEED FOR POWER

People in this category enjoy work

and place a high value
on discipline. A person motivated
by this need enjoys status
recognition, winning arguments,
competition, and influencing others.
McClelland's research
showed that 86% of
the population are
dominant in one, two,
or all three of these
three types of
motivation.
ALDERFERS ERG THEORY
ERG theory is
a theory in psychology
proposed by
Clayton Alderfer. ERG
refers to : Existence,
Relatedness and
Growth.
 EXISTENCE NEEDS are the
most concrete and easiest to
verify.
RELATEDNESS NEEDS are
less concrete than existence
needs
GROWTH NEEDS are the least
concrete in that their specific
objectives depend on the
uniqueness of each person.
PROCESS
THEORY
REINFORCEMENT THEORY
Reinforcement theory of motivation was
proposed by B.F. Skinner and his associates.

It states that individuals behaviour is a

function of its consequences.

It is based on law of effect, i.e., individuals

behaviour with positive consequences tends
to be repeated, but individuals behaviour with
negative consequences tends not to be
repeated.
 Positive Reinforcement- This implies giving a positive response
when an individual shows positive and required behaviour

Negative Reinforcement- This implies rewarding an employee by

removing undesirable consequences. Both positive and negative
reinforcement can be used for increasing desirable behaviour.

Punishment- It implies removing positive consequences so as to

lower the probability of repeating undesirable behaviour in future

Extinction- It implies absence of reinforcements. In other words,

extinction implies lowering the probability of undesired behaviour by
removing reward for that kind of behaviour
 IMPLICATONS OF
THEORY
Reinforcement theory explains in detail how an
individual learns behaviour

Managers who are making attempt to motivate the

employees must ensure that they do not reward all
employees simultaneously

They must tell the employees what they are not

doing correct

They must tell the employees how they can achieve

positive reinforcement
EQUITY THEORY
First developed in 1963 by John Stacey
Adams

Employees seek to maintain equity

between the inputs that they bring to a job
and the outcomes that they receive from it
against the perceived inputs and outcomes
of others.

The structure of equity in the workplace is

based on the ratio of inputs to outcomes
Equity Theory
1)Equity:
A person feels equitably treated when his
outcome/input ratio is equal to other
persons outcome/input ratio.
Individuals outcome = Others outcome
Individuals input Others input
Equitably paid workers are said to feel
satisfied.
 Equity Theory
2)Under rewarded inequity / Negative inequity:
A person feels under rewarded when his outcome/input ratio
is less than whom the person compare himself.
Individuals outcome < Others outcome
Individuals input Others input
Equity theory states that an underpaid worker feels angry.

3)Over rewarded inequity /Positive inequity:

A person feels over rewarded when his outcome/input ratio
is greater than whom the person compare himself.
Individuals outcome > Others outcome
Individuals input Others input
Equity theory states that an overpaid worker produce higher
quality.
Inputs & Outputs
Individuals Organizations return
contribution to an to an Individual.
Organization.

Job Security
Time
Salary
Effort
Loyalty Employee benefits

Hardwork Recognition
Commitment Reputation
Abilities Sense of achievement

Inputs Outputs
EXPECTANCY THEORY
The expectancy theory says that
individuals have different sets of goals
and can be motivated if they have
certain expectations.
Fancy Version
As we are constantly predicting likely
futures, we create expectations about
future events. If things seem
reasonably likely and attractive, we
know how to get there and we believe
we can make the difference then this
will motivate us to act to make this
future come true.
Simple Version
In other words, if people expect a
positive and desirable outcome, they will
usually work hard to perform at the level
expected of them.
Who Came up With It?
This theory is about choice, it explains
the processes that an individual
undergoes to make choices. In
organizational behavior study,
expectancy theory is a motivation theory
first proposed by Victor Vroom of the
Yale School of Management.
Vrooms Expectancy Theory
Variables
Vrooms Expectancy Theory is based
upon three variables-

Valence

Expectancy

Instrumentality
Valence
Is the outcome I get of any value to me?.
It refers to the emotional orientations which
people hold with respect to outcomes
[rewards]. The depth of the want of an
employee for extrinsic [money, promotion,
free time, benefits] or intrinsic [satisfaction]
rewards.

Management must discover what

employees appreciate.
Expectancy

I am able to complete the

actions.

Expectancy refers to the

strength of a persons belief
about whether or not a
particular job performance is
attainable.
Expectancy Continued
Assuming all other things are equal, an
employee will be motivated to try a task,
if he or she believes that it can be done.
This expectancy of performance may be
thought of in terms of probabilities
ranging from zero (a case of I cant do
it!) to 1.0 (I have no doubt whatsoever
that I can do this job!). Management
must discover what resources, training,
or supervision the employees need.
Instrumentality
The belief that if I complete certain actions
then I will achieve the outcome.

In other words, it is the belief that if you

perform well that a valued outcome will be
received i.e. if I do a good job, there is
something in it for me.

Management must ensure that promises of

rewards are fulfilled and that employees
are aware of that.
What Does That Mean?
Vroom says the product of these
variables is the motivation and suggests
that an employees beliefs about
Expectancy, Instrumentality, and
Valence interact psychologically.

In this way they create a motivational

force, such that the employee will act in
a way that brings pleasure and avoids
pain.
GOAL SETTING THEORY
In 1960s, Edwin Locke put forward the
Goal-setting theory of motivation.

This theory states that goal setting is

linked to task performance & Specific
and difficult goals with feedback lead
to higher performance
Features of Goal-setting
theory
Goals Need to Be Specific

Goals Must Be Difficult but

Attainable

Goals Must Be Accepted

Feedback Must Be Provided on Goal

Attainment

Goals Are More Effective When They

Are Used to Evaluate Performance

Deadlines Improve the Effectiveness

of Goals
Eventualities of Goal setting theory

1. Self-efficiency- Self-efficiency is the individuals self-

confidence and faith that he has potential of performing the
task. Higher the level of self-efficiency, greater will be the
effort.

2. Goal commitment- Goal setting theory assumes that the

individual is committed to the goal and will not leave the
goal.
The goal commitment is dependent on the following factors:

Goals are made open, known and broadcasted.

Goals should be set-self by individual rather than
designated.
Individuals set goals should be consistent with the
Dr.Edwin Locke and Dr.Gary Latham (1990)

Dr. Lock & Dr. Latham joint published ..A Theory of

Goal setting & task performance in 1990.

This book says the importance of setting specific &

difficult goals. It included there are five (5)
fundamental principles that lie behind effective goal
settings.
Factors Influencing The
Motivation Of The Sales
Person
Factors Influencing The
Motivation Of The Sales
Person
EXPLORATION ESTABLISHMENT MAINTINENCE
DISENGAGEMENT
Growth in Career

20 30 40 50 60
Age
1. Exploration: This is the stage where the new
recruits are in the stage of exploration & are
unsure about whether selling is the career that
best suits them.

2. Establishment: In this stage the sales person

have settled in an occupation & wish to develop
that occupation into a successful career.

3. Maintenance: In this stage salesperson concern

is retaining the present position, status &
performance level with in the sales force.

4. Disengagement: At last stage the salespeople

prepare for retirement & loss self identity may
DESIGNING
MOTIVATIONAL
PROGRAMME
MOTIVATIONAL
FRAMEWORK
6. Reassesses 2. Search for
1. Identifies
need ways to
needs
deficiencies satisfy needs

THE
EMPLOY
EE

5. Rewards 3. Goal
or 4. Performance directed
Punishments behaviours
 SELECTING A MIX OF
MOTIVATIONAL TOOLS
Sales manager should know each
salesperson and understand his / her
specific needs.

For designing or selecting a mix of

motivational tools, a compromise between
differing needs of customers, salespeople,
and the company management becomes
necessary.

Motivational tools are divided into

(1) financial,
(2) non-financial
FINANCIAL REWARDS
Basic Compensation plan
Salary
Commissions
Bonus payments
Sales Contests
Merchandise & travel
Through Cyberspace Incentives
 NON FINANCIAL
REWARDS
Recognition awards; such as trophies,
Certificates
Promotions
Praise and encouragement from management
Job enrichment
Job security
Sales meetings and conventions
Sales training programme
Personal growth opportunities

Financial compensation is the most

widely used tool of motivation, as
salespeople give highest value to it .