Methods of Setting Sales Quotas
The sales quota is determined in many ways. 4 important methods of setting sales quotas are discussed as follows:
1. Top Management Downward method
In this method, the management and executives, with their experience and judgement, estimate the total sales for the next year. Sales executives having enough experience in the sales are given the responsibility of setting such sales quotas. This method is sometimes called guess work quota method because it is estimated on the basis of executives’ guess work.
2. Territorial Estimate Upward method
This method is known as grassroots approach. In this method, the salesmen are asked to make estimation of sales of their territories for the coming years. The branch managers make adjustments in the salesman’s estimates. The district and divisional sales managers make further adjustments of salesman’s estimates with the cooperation of sales force. Finally, all such sales estimates are grouped and the sales estimate of the entire sales field is prepared.
3. Combination of Top Management-Downward and Territorial Estimate-Upward method
In this method, the above two methods of estimating sales quotas are combined. At the headquarters, the management by their past experience and judgement estimate the sales quota. At the grassroots level, the salesmen are asked to make their own estimates. Next, an overall estimate for the entire sales operations of the company is prepared based upon both the estimates. Then the estimate is divided into territories, products and salesmen.
4. Past Performance Method
Under this method, sales estimates are made keeping in view the past sales performance and the total sales estimate for the future is made by increasing the sales by a certain percentage. The increase is also made keeping in view of the competition, advertisement, economic condition, price of the product, etc. Then this total estimate is divided into sales quotas for each division, district, branch and individual salesman.
Besides, there are several methods of estimating sales quotas like survey of buyers’ intention, industry forecast and market share. While a company has the freedom to choose any method that suits it best, the basic criterion for choosing a particular method of sales quota estimation is that the method should be quick, less costly and more accurate.