Sales team management consists not only of allocating duties to employees and hoping that they will bring in revenue for the company. Organizations require certain goals in order to be able to measure performance, motivate salespeople, and meet their revenue goals. Otherwise, there is a risk that the sales team will fail to set its priorities right, and sales managers will not be able to properly assess their efforts.

Here is when sales quota management comes in handy. Through sales quota management, companies will be able to set realistic goals, allocate them among sales people, and monitor their performance during a certain period of time.

What Is Sales Quota Management?

The term sales quota management refers to the procedure of determining, allocating, measuring, and assessing the sales goals set for individual salespeople, teams, or organizational departments. Usually, these goals are specified during a particular time frame such as month, quarter, or year.

Sales quota refers to the performance goal set for an individual salesperson or sales team. The quota could be established in terms of income generation, product selling, customer acquisition, and other kinds of sales-related activities.

As an example, a firm can allocate a revenue goal of $50,000 per month to a salesperson. Then, the manager measures the performance of that person against that goal to assess his or her performance.

Quota management helps ensure that the goals are set properly and align with the organizational objectives and employee goals.

Different Types of Sales Quotas

Various sales quotas are employed by companies based on the nature of their products and business sales strategy.

1. Revenue Quotas

Revenue quotas are based on the total amount of money made within a certain period of time. Revenue quotas are often used by businesses targeting revenue targets on a monthly and quarterly basis.

2. Volume Quotas

Volume quotas are used for the measurement of the total volume of products sold. For instance, a sales representative can be tasked to sell 100 software subscription packages every month.

3. Activity Quotas

Activity quotas are based on the activities carried out by sales representatives. Such activities can be customer contacts, meetings, demonstrations, follow-ups, and prospecting.

4. Profit Quota

Profit quotas are based on the amount of profit made from the sale of goods or services. It encourages salespeople to make profits.

5. Combination Quotas

In some organizations, a combination of different quotas is used for more insight into sales performance.

How do Companies Set Their Sales Targets?

To make sure that sales targets are realistic, there has to be proper planning and understanding of the environment. Unrealistic sales targets discourage the employees while realistic ones do not contribute towards organizational growth.

Following are some methods through which sales targets can be made:

• Top-down Approach: The top management of the company makes the target regarding the revenues and distributes these targets department-wise or group-wise or individual wise.
• Bottom-up Approach: Salesmen and the managers make their targets according to the possibilities with the customers and previous experience.
• Performance History Approach: Previous performance history is used to make future targets, keeping in view the demands of the season and the growth of the organization.
• Market Approach: The organizations set their sales targets after keeping in view the demand, competition, geographical advantage, and market trends.

Sales Quota Allocation

The process of sales quota allocation involves the division of the total quota among different sales representatives, territories, sales teams, or departments.

For instance, if a company has a quarterly target of $500,000, this figure will be divided into five sales representatives depending on their experience, territory capacity, existing customers, and past performance.

There are a number of issues that must be taken into account when allocating sales quotas correctly:

• The size of sales territories.
• Experience of individual sales representatives.
• Past performance of sales representatives.
• Existence of customer base.
• Demand for products.
• Business seasons.

Quota allocation allows eliminating unfair distribution of tasks and makes responsibilities clear for sales representatives.

How Is Sales Quota Performance Evaluated?

After the quotas have been set, there is a need to measure and compare the actual performance to the quotas.

Performance metrics that can be used include:

• Quota Performance: This refers to the percentage of quota assigned to a sales representative.
• Revenue Performance: It compares the revenue earned with the revenue quota assigned.
• Sales Conversion Ratio: This involves conversion of prospects to customers.
• Pipeline Performance: This includes evaluation of the opportunities in the pipeline.
• Activity Performance: It involves customer contacts, meetings, presentations, and sales activity measures.

For instance, if a sales person has a monthly quota of $40,000, but earns $32,000, he or she achieves 80% of the quota.

Performance evaluations allow managers to identify problem areas and high performers among others.

SAP Solutions to Support Sales Quota Management

Sales quotas that have to be managed within several groups or regions may become very difficult to handle if businesses rely solely on spreadsheets and separate systems. With SAP solutions, businesses can benefit from increasing sales visibility, organizing customer data, and planning sales performances.

By means of SAP sales management skills, businesses are able to manage sales territories, track sales opportunities, assess sales team performance, and ensure alignment of sales activities with business goals.

If you want to learn more about the process, you can consider taking the SAP Quota Management course.

Conclusion

The sales quota management provides an opportunity for organizations to develop a systematized way of setting goals, assigning tasks and assessing the sales performance. This process involves many stages such as selection of quotas and assessment of performance, among others.

Due to proper tools and assessment of performance, organizations will be able to identify their weaknesses, increase efficiency and boost revenues.