Sales Force
Quotas and
Expenses
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Purpose of sales quotas
Types of sales quotas
Factors influencing sales force expenses
Characteristics of sound expenses plans
Sales quotas is a performance goal assigned to
marketing unit for a specific period of time.
 Sales quotas are developed for several purposes.
1. To indicate strong or weak spots in the selling
structure – tell why sales exceed or fail to meet
quotas.
2. To furnish goals and incentives for the sales
force – express expectation in a specific
quotas.
3. To control salesperson’s activities – quotas
enable management to direct the sales
activities more effectively.
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4.
5.
6.
7.
To evaluate productivity of salespeople –
quotas provide a yardstick.
To improve effectiveness of compensation
plans – quotas can furnish incentives to
salespeople.
To control selling expenses – a company may
set an expense quota and let the salespeople
know their effectiveness is being judged in part
by how well they meet it.
To evaluate sales contest results – sales quotas
are used frequently in conjunction with sales
contests.
Indicate strong /
weak spots in
selling structure
Furnish sales
force goals /
incentives
Evaluate sales
contest results
Control selling
expenses
Sales quotas
are used
to…
Improve
compensation
plan
effectiveness
Control sales
force activities
Evaluate sales
force productivity
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Sales volume – most widely used and is based
on sales volume. A volume quota may be
established based on geographical area, a
product line, a customer, a time period or a
combination of these bases.
Profit quotas – quotas based on gross margin
or net profit. For example, a gross margin
quota may be set for a salesperson, a branch,
or a group of products. It may reflects the
importance of profit rather than volume.
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Expense quotas – a company may attempt to
encourage a profit consciousness by establishing a
quota based on the rep’s travel and other expenses.
A rep’s attention may be devoted more on cutting
expenses rather than boosting the sales profits.
Activity quotas and customer satisfaction – quota
based on activities. Management may based it on (1)
daily calls, (2) new customer called on, (3) orders
from new accounts, (4) product. If properly
established can do much to stimulate a fully balanced
sales job.
Combination quotas – this seeks to use the strong
points of several types but it is a bit more complex.
Quota bases
Sales
volume
Gross margin
or net profit
Combination
Expenses
Activities
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Sales reps are among the few company
employees who are allowed to spend the
company’s money, even when the expenses
are properly managed, sales force expense
accounts are a nuisance/problem.
Factors Influencing Sales Force Expenses
Office
supplies
Transportation
Meals
Communication
Entertainment
Expenses
Gifts
Lodging
•
No net gain or loss – the expense plan should be
designed so that employees neither profit nor
lose.
•
Equitable treatment – sales reps should be able
to maintain approximately the same standard of
living on the road as at home.
•
No limitation of beneficial activities – a good
expense plan should not impede the
performance of selling duties, nor should it
limits activities beneficial to the company.
•
Simple and economical – clerical and
administrative expenses should be minimized.
Characteristics of a sound expense
plan
• Clarity – a good expense plan should be
clear enough to prevent misunderstandings
between management and the sales force.
• Company control of expenses and
elimination of padding – a sales manager
should be able to get all the benefits of
control without damaging sales force
morale and should be able to eliminate
padding.
Salesperson Expense Options
Method
Reimbursement
Advantages
Disadvantages
Salespeople pay
their own expenses
None
Simple, no costs
Reps may not spend
enough on customers
Unlimited
payment plan
All legitimate
business expenses
Flexible and fair,
allows for territory
differences
Encourages excessive
spending
Limited
payment plan
Specific amounts
allowed
e.g.
Limited and predictable
expenses
Inflexible
Possibility for
$80/day - lodging
$45/day - food
$0.26/mile - transportation
switching expenses
between categories
Sales may resent
Flat allowance
$700 per week
Limited and predictable
expenses
Inflexible
Sales may resent
Factors Influencing Automobile Ownership Decision:
Company Owned, Company Leased, or Salesperson
Owned
Maintenance
Special design
Size of
sales force
Control
Mileage
Operating
Personal
preference
Investment
Administrative
problems
Automobile Allowance Plans
Method
Example
Flat amount
$400 /month
Fixed mileage rate
$.28/mile
Graduate mileage rate
$.25/mile, first 15,000 miles
$.15/mile, second 15,000 miles
Combination flat and
mileage rate
$200/month + $.16/mile
Other Methods of Expense Control
• Training and enforcement – teach
sales reps how they are expected to
spend the company money.
• Credit cards – accepting charges
from designated list of hotels and
restaurants.
• Expense bank account – firms
place a certain sums in a checking
account for each reps.
Other Methods of Expense Control
• Change in nature of
entertainment- stop taking clients to
expensive places.
• Telemarketing – sales reps
pushing customers to make
purchases via company’s websites.
• Careful travel planning – minimize
travel expenses by careful
advanced planning.