1. Copyright © 2001 by Harcourt, Inc. All rights reserved.

2. C HAPTER 7 S ALES O BJECTIVES AND Q UOTAS

3. Copyright © 2001 by Harcourt, Inc. All rights reserved.  The relationship between sales objectives and quotas.  Why quotas are important.  The various types of quotas.  The methods for setting quotas.  Criteria needed for a good quota plan.  Major areas for establishing objectives.  How organizations set objectives.  The selling by objectives process. L EARNING O BJECTIVES Objectives and quotas are fundamental parts of a company, because they provide the sales force with direction and goals. Selling by objectives (SBO) is a system that unites the sales force. This chapter should help you understand:

4. Copyright © 2001 by Harcourt, Inc. All rights reserved. W HAT IS A Q UOTA? A quota refers to an expected performance objective. Quotas are tactical in nature and thus derived from the sales force’s strategic objectives.

5. Copyright © 2001 by Harcourt, Inc. All rights reserved. W HY ARE Q UOTAS I MPORTANT? Quotas provide performance targets. Quotas provide standards. Quotas provide control. Quotas provide change of direction. Quotas are motivational.

6. Copyright © 2001 by Harcourt, Inc. All rights reserved. T YPES OF Q UOTAS Sales volume quotas.

7. Copyright © 2001 by Harcourt, Inc. All rights reserved. Sales volume quotas includes dollar or product unit objectives for a specific period of time.

8. Copyright © 2001 by Harcourt, Inc. All rights reserved. T YPES OF Q UOTAS Sales volume quotas. Break down total sales volume.

9. Copyright © 2001 by Harcourt, Inc. All rights reserved. Individual established and new products. Geographic areas based on how the sales organization is designed, which would include: Sales division. Sales regions. Sales districts. Individual sales territories. Product lines.

10. Copyright © 2001 by Harcourt, Inc. All rights reserved. T YPES OF Q UOTAS Sales volume quotas. Break down total sales volume. Profit quotas.

11. Copyright © 2001 by Harcourt, Inc. All rights reserved. Gross margin quota determined by subtracting cost of goods sold from sales volume. Net profit quota determined by subtracting cost of goods sold and salespeople’s direct selling expense from sales volume. The two types of profit quotas:

12. Copyright © 2001 by Harcourt, Inc. All rights reserved. T YPES OF Q UOTAS Sales volume quotas. Break down total sales volume. Profit quotas. Expense quotas.

13. Copyright © 2001 by Harcourt, Inc. All rights reserved. Expense quotas are aimed at controlling costs of sales units. Often expenses are related to sales volume or to the compensation plan.

14. Copyright © 2001 by Harcourt, Inc. All rights reserved. T YPES OF Q UOTAS Sales volume quotas. Break down total sales volume. Profit quotas. Expense quotas. Activity quotas.

15. Copyright © 2001 by Harcourt, Inc. All rights reserved. Activity quotas set objectives for job-related duties useful toward reaching salespeople’s performance targets.

16. Copyright © 2001 by Harcourt, Inc. All rights reserved. Customer satisfaction refers to feelings about any differences between what is expected and actual experiences with the purchase.

17. Copyright © 2001 by Harcourt, Inc. All rights reserved. T YPES OF Q UOTAS Sales volume quotas. Breakdown total sales volume. Profit quotas. Expense quotas. Activity quotas. Quota combinations.

18. Copyright © 2001 by Harcourt, Inc. All rights reserved. M ETHODS FOR S ETTING S ALES Q UOTAS Quotas based on forecasts and potentials. Quotas based on forecasts only. Quotas based on past experience. Quotas based on executive judgments. Quotas salespeople set. Quotas related to compensation.

19. Copyright © 2001 by Harcourt, Inc. All rights reserved. TABLE 7.4 LEVELS OF ORGANIZATIONAL SALES PLANNING LEVELPURPOSE: WHAT IS PLANNED WHO (USUALLY) IS INVOLVED 1. MarketingOrganizational goals (increase in market share or penetration, increase in customers, increase in sales dollars and units sold) Upper management and sales and marketing executives 2. Regional planPriorities (which regions, markets, and products to emphasize) Regional and district sales managers (which input from sales reps) 3. District planDollar allotment (for promotion, advertising, new employees, sales incentives, and so on) District managers and sales representatives 4. Territorial planGoals for number of new customers and for increased business with old customers in each region and territory Sales representatives

20. Copyright © 2001 by Harcourt, Inc. All rights reserved. S ELLING BY O BJECTIVES S ETS F UTURE T ARGETS Two basic steps to implementing sales strategies: Step 1:Organize the jobs. Step 2:Define annual objectives in important areas.

21. Copyright © 2001 by Harcourt, Inc. All rights reserved. FIGURE 7.2 THE FOUR MAJOR AREAS TO ESTABLISH OBJECTIVES WITH EACH SALESPERSON Step 1: Organizing the Job Step 2: Defining Annual Objectives SALES MANAGEMENT Salesperson Account Management Call Management Self-Management Territorial Management 1.Regular 2.Problem Solving 3.Innovative Portfolio of Accounts Potentials Coverage Records Order Size Penetration Reports Customer Satisfaction Preparation Selling Technique Training Communication Buyer Behavior Impact Handling Resistance Appearance Manner Communication Skills Abilities Attitudes Selling Abilities Limits Potential Business Size Customer Base Prospects Leads Market Share Growth Trade Relations Dealer Relations

22. Copyright © 2001 by Harcourt, Inc. All rights reserved. Treating the territory as a business. Managing each account. S ELLING BY O BJECTIVES S ETS F UTURE T ARGETS

23. Copyright © 2001 by Harcourt, Inc. All rights reserved. 1.Build the stars. 2.Harvest the cash cows. 3.Fix the problems. 4.Divest the dogs. Tactical plan for managing accounts:

24. Copyright © 2001 by Harcourt, Inc. All rights reserved. Treating the territory as a business. Managing each account. Managing each call. S ELLING BY O BJECTIVES S ETS F UTURE T ARGETS

25. Copyright © 2001 by Harcourt, Inc. All rights reserved. Is the sales rep properly armed with information, leads, and materials before the call occurs? Is the sales rep applying the major principles of selling technique during the presentation? Or is the sales rep inventing his or her own and perhaps making every mistake every salesperson in history has made? Has the salesperson planned some coherent attack for the sales presentation, and is it working well? Questions about the content of calls:

26. Copyright © 2001 by Harcourt, Inc. All rights reserved. Does the sales rep have enough training in communication, in meeting sales resistance, in understanding buyer behavior, in improving call impact, in gaining greater account penetration, in follow-through methods to do the job? Does the sales rep have enough knowledge of the product and its applications, service and system backup, and technical problems to handle the toughest calling situation? Questions about the content of calls: continued

27. Copyright © 2001 by Harcourt, Inc. All rights reserved. Treating the territory as a business. Managing each account. Managing each call. Managing oneself. S ELLING BY O BJECTIVES S ETS F UTURE T ARGETS

28. Copyright © 2001 by Harcourt, Inc. All rights reserved. Since selling involves making contact with strangers, dress, style, demeanor, and personal decorum are part of the salesperson’s tool kit. Communication skills, memory, logical speaking habits, and writing competence are vested in the person. Attitudes and outlook toward the job, the product, the company, and the customers all have an important bearing in the results to be achieved. The knowledge of selling techniques, what the various kinds are and how and when to use them, are personally vested in the sales rep and can be produced and polished by training. Self-management in selling includes the following:

29. Copyright © 2001 by Harcourt, Inc. All rights reserved. B ASIC L EVELS OF I NDIVIDUAL O BJECTIVES 1.Regular, ongoing, and recurring objectives. 2.Problem-solving objectives. 3.Innovative or creative objectives. The highest level of excellence is reserved for people who are attaining all three.

30. Copyright © 2001 by Harcourt, Inc. All rights reserved. T HE P ROCEDURES FOR S ETTING O BJECTIVES AND Q UOTAS WITH S ALESPEOPLE Prepare the way. Schedule conferences with each salesperson. Prepare a written summary of goals agreed upon. Optional group meeting to share objectives.

31. Copyright © 2001 by Harcourt, Inc. All rights reserved. FIGURE 7.3 SELLING BY OBJECTIVES FORM

32. Copyright © 2001 by Harcourt, Inc. All rights reserved. A G OOD O BJECTIVE AND Q UOTA P LAN IS SMART S pecific M easurable A ttainable R ealistic T ime specific

33. Copyright © 2001 by Harcourt, Inc. All rights reserved. Test 1: Does this quota state exactly what the intended result is? Test 2: Does this quota specify when the intended result is to be accomplished? Test 3: Can the intended result be measured? A simple three-way test to judge how well quotas and objectives are written:

34. Copyright © 2001 by Harcourt, Inc. All rights reserved. S ELLING-BY- O BJECTIVES M ANAGEMENT Selling by objectives (SBO) is the process elaborated on earlier whereby the manager and salesperson jointly identify common goals, define major areas of responsibility, and agree on the results expected.

35. Copyright © 2001 by Harcourt, Inc. All rights reserved. FIGURE 7.4 SETTING OBJECTIVES AND QUOTAS IS A TWO-WAY PROCESS BETWEEN MANAGER AND SALESPERSON

36. Copyright © 2001 by Harcourt, Inc. All rights reserved. T HE S ALES T ERRITORY IS W HERE Q UOTAS ARE M ADE The sales territory is “where the action is!”

37. Copyright © 2001 by Harcourt, Inc. All rights reserved. T HE B OTTOM L INE Quotas are important to a company because they establish the “end state” sought, and they change according to external and internal forces. Many different types of quotas exist. Methods for setting quotas may vary. Setting a sales quota can be an involved process. Selling by objectives (SBO) is a common concept and is widely used by sales organizations.