Sales Planning- Budgets &

Quotas
Importance of Sales Planning

 Better implementation of corporate plans

 Direction
 Focus on realistic objectives
 Co-ordination & Control
 Good inter-personal relationships
 Reduce uncertainty & risks
Sales Budgets- Purpose

 Mechanism of control – disciplined effort

to follow a pre-established plan of action
& identify deviations if they occur
 Instrument of Planning- forecasting
sales, scheduling production processes
& budgeting
Benefits of Budgeting

 Improved planning
 Better communication & co-ordination
 Control & Performance evaluation
 Instill profit consciousness
Principles

 All employees must be involved in the

process
 Practical & acceptable
 Outputs linked to inputs
 Flexible to accept environmental
changes
Types

 Sales budgets

 Selling Expense budgets

 Sales departments administrative

budgets
Methods

 Affordability
 Percentage of sales
 Competitive parity
 Objective & Task
 Return oriented
Developing a sales budget

 Review and analysis of current markets

 Identify specific market opportunities
 Sales Forecasting
 Communicate Sales Goals & Objectives
 Allocate Resources
 Prepare budget
 Approval
Sales Quotas - Purpose

 Achieve organizational objectives

 Sets Performance Targets
 Sets Standards/levels of achievement
 Control
 Direction
 Motivation
Types of Sales Quotas

 Sales Volume
 Profit
 Expense
 Activity
Characteristics

 Fair
 Flexible
 Challenging
 Understandable
 Help in Co-ordination
Process

 Sales Forecasts & Market potential

 Past experience & judgement
 Sales force compensation
Limitations
 Profit quotas based on margins – sales may
not have control over external factors
 Accuracy – past experience may not hold
 Quota driven - risk-averse sales force
 Can lose effectiveness as a control
mechanism if Rewards/Warnings are not given
in event of achieving/not achieving the targets
Rewards
Rewarding employee is the most powerful way to
encourage customer- oriented behaviors.

 Extrinsic – pay, commissions, foreign holidays

 Intrinsic – pride, enjoyment, recognition from co-
workers and supervisors and /or accomplishing
challenging and meaningful goals.

Effective reward systems pass the seven tests -

In many instances, pay does not pass this effectiveness tests.
The 7 Tests of Reward Effectiveness

1. Availability: Rewards must available and substantial.

Not having enough rewards or large enough rewards is
likely to discourage desired behaviors rather than
encourage them.

2. Flexibility: Rewards should be flexible enough that

they can be given to anyone at any time.

3. Reversibility: Not lifelong or part of the basic salary.

Bonuses are better than pay increases that become
lifetime annuities.

4. Contingent: Rewards should be directly tied to

desired performance criteria.
The 7 Tests of Reward Effectiveness

5. Visibility: rewards should be visible, and their value should be

understood by all employees – high-profile events.

6. Timeliness: not to say that employees are rats, but rats are
trained to receive food pellets immediately following the
execution of desired behavior (e.g. pushing a bar). In this
instance, employees are not that much different. Rewards should
be given immediately following desired behaviors.

7. Durability: The motivating effects of a reward should last for a

long time. The motivational effects of plaques and medallions last
longer than the short-term effects of pay.

Source : Harvard Business Press.