A financial quota is a quote that concentrates on financial criteria such as gross margin or, alternatively, contribution to overhead. Financial quotas are used to make salespeople aware of the cost as well as profit implications of what they sell.
Financial quotas are very often stated in relation to direct selling costs, gross margin or net profit. These are most applicable when the firm’s market penetration gets close to saturation levels. In such instances, increasing sales or market share is challenging so an emphasis on selling efficiency as well as cost control becomes a logical mechanism for increasing profits.
What Are Expense Quotas?
Expense quotas are linked to selling costs with a realistic timeframe. Very few businesses set quotas for expenses to different sales levels to be achieved by the salesperson. The sales team could be given an expense budget that is a percentage of a particular region’s sales volume. The salesperson should spend only that sum as expenses.
What Are Gross Margin Or Contribution Margin Quotas
This type of quota is designed in order to motivate the sales team to achieve the pre-determined benchmark profit for each product sold to exceed .the actual expenses involved with selling the product.
What Is An Activity Quota?
‘Activity quota’ is the lowest level of sales-oriented actions which must be met by a salesperson during a specific period of time. An activity quota may need a salesperson to make a particular number of outbound calls, send a particular number of emails to potential clients or submit a particular number of statements of work.
The quota is not usually based directly on a revenue figure requirement but is related to the actions which lead to a sale being made.
Using activity quotas in a business can help boost a sales team’s productivity and increase company’s revenue. A company sets activity quotas for its salespeople in order to ensure that they stay on track with the activities which will bring a high level of success in terms of generating sales.
A salesperson reaches his activity quota through the process of performing certain tasks, such as calling a specific number of prospective customers per day. An activity quota measures a single task which a salesperson completes to assist with generating sales. It doesn’t evaluate actual sales volume or output.
Management establishes activity quotas based on the most important activities which it believes will result in sales. In addition, management may set more than one activity quota for a salesperson or a team of salespeople. For example, a small company may expect each salesperson to make at least 20 calls to potential clients per day as well as to meet with at least five prospective clients per week.
Here is an example of an activity quota in the digital age:
The kinds of activities that are subject to quotas are constantly evolving in the era of social media. Cold calling is still seen as a way of reaching prospects however, increasingly, the method is being supplanted by contact techniques that are offered by social media.
Prospective customers are clicking on links, or “liking” or “tweeting” about a product or service. This activity gives direct signals to salespersons so they are able to better focus their sales efforts. Thus, rather than an activity quota of 250 phone calls during the period of a week for a financial advisor in his probationary period, he may be required to contact 50 people who made comments on “retirement planning” in a social media feed.
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