Advantages of Sales Quotas
The following are some of the advantages and disadvantages of fixing sales quotas.
1. Sales quotas enable the management to estimate the total sales for the coming years. This helps to adjust the production schedule to meet the demand.
2. Sales quotas help the sales organization to judge the performance of each individual salesman, making monitoring easy.
3. It becomes easier to locate weak and underdeveloped markets. Special efforts can be make in such areas to develop it.
4. Sales quota creates interest in work and it is a device to stimulate the selling efforts of the sales force. Sales quotas are also useful in conducting sales contests. Performance of sales against the sales quota becomes the base for awarding the sales force.
5. Sales quotas also stimulate salesmen to work for the company in a distinctive manner. Salesmen are likely to work hard to attain the targeted sales.
6. The work of motivated salesmen to attain sales quota will be amply reflected in the market. Such an effort will draw praise from wholesalers and keep the competition away.
Limitations or Disadvantages of Sales Quotas
The following are some of the disadvantages or limitations of fixing sales quotas.
1. Extending credit to unworthy customers: When sales quotas are fixed, the salesman, in a bid to achieve the quota, extends reckless credit even to unworthy customers. This may lead to accumulation of bad debts.
2. Unreasonable quota leads to loss of motivation: Sometimes, unreasonable sales quotas are fixed. In such cases, it leads to loss of motivation of the sales force. On the other hand, fixing easily attainable sales quota also poses problems as it may lead to idle capacity of an efficient sales force.
3. Identical quota leads to frustration: Sometimes, identical sales quotas are fixed for all salesmen, irrespective of seniority of the sales force or potentiality of a market. This may lead to frustration among salesmen.