The majority of sales representatives require encouragement and special incentives. This is especially true of field selling reps usually work alone, their hours are irregular, and they often away from home. They confront aggressive, competing sales reps; they have an inferior status relative to the buyer; they often do not have the authority to do want it necessary to win an account; and sometimes lose large orders they have worked hard to obtain.
Sales managers must to able to convince salespeople that they can sell more by working harder or by being trained to work smarter: But if sales are determined largely by economic conditions or competitive actions, this link is undermined.
Sales managers must be able to convince salespeople that the rewards for better performance are worth the extra effort. If the rewards are set arbitrarily or too small or of the wrong kind the sales manager sales people link is undermined.
To increase motivation, marketers reinforce intrinsic and extrinsic rewards of all types. One research study that measured the importance of different of different rewards found that the reward accomplishment. The least valued rewards were liking and respect, security, and recognition. In other words, salespeople are highly motivated by pay and the chance to get ahead and satisfy their intrinsic needs, and less motivated by compliments and security. However, the researchers also found that the importance motivators varied with demographic characteristics: Financial rewards were mostly valued by older, longer tenured people and those who had large families. Higher order rewards (recognition, liking and respect sense of accomplishment) were more valued by young salesperson who were unmarried or had small families and usually more formal education.
Many companies set annual sales quotas. Quotas can be set on dollar sales, unit volume, margin, selling effort or activity, and product type. Compensation is often tied to degree of quota fulfillment. Sales quotas are development from the annual marketing plan. The company first prepares a sales forecast that becomes the basis for planning production, workforce size, and financial requirements. Management then establishes quotas for regions and territories, which typically add up to more than the sales forecast to encourage managers and salespeople to perform at their best level. Even if they fail to make their quotas, the company nevertheless may reach its sales forecast.
Each are sales manager divides the areaâ€™s quota among the areaâ€™s reps. Sometimes a repâ€™s quotas are set high, to spur extra effort, or more modestly, to build confidence. One general view is that a salespersonâ€™s quotas should be at least equal to the personâ€™s last yearâ€™s sales plus some fraction of the difference between territory sales potential ad last yearâ€™s. The more favorably the salesperson reacts to pressure the higher the fraction should be.
Conventional wisdom is that profits are maximized by sales reps focusing on the more important products and more profitable products. Reps are not likely to achieve their quotas for established products when the company is launching several new products at the same time. The company will need to expand its sales force for new product launches.
Setting sales quotas creates problems. If the company underestimates and the sales reps easily achieve their quotas, the company has overpaid its reps and if the company overestimates sales potential, the sales people will find it very hard to reach their quotas and be frustrated or quit. Another downside is that quotas can drive reps to get as much possible often resulting in their ignoring the service side of the business. The company gains short-term results at the cost of long term customer satisfaction.