What’s Wrong with Sales Quotas

11
Jul

 

 Between 2010 and 2013, the greatest emphasis of sales force change was in the area of compensation and quota setting.  That’s according to Mark Donnolo, founder of The SalesGlobe, a sales consulting group in Atlanta.  During those two years, in over 100 large companies that participated in his research, almost every vice president of sales was focused on addressing the issues of compensation and quota setting for the next year.

Quotas and compensation plans are great drivers of change.  A good compensation plan can change the behavior of an entire sales force.  But in most cases, compensation plans and the quotas on which they are based are designed with one purpose in mind – to make the supplier/vendor more profitable.

As I wrote in my last post, Zig Ziglar famously said that if you help enough other people get what they want, you will get what you want.  If you help the customer meet his or her needs, you have a much better chance of having your own needs met.  Therefore, making your customer’s bottom line your goal is the key to closing sales.

That leads us to the problem with many sales quotas:  they’re set for the wrong reasons by the wrong people

Set by the wrong people

To many senior executives, sales is a tall, mysterious, black wall over which one throws money, hoping to get a good return. Top management may provide a training budget, but they typically leave the role of sales strategy and tactics to the vice president of sales, or down the chain to the director of sales or sales managers, depending on the size of the company.

Many of these sales leaders are not in tune with how much the customer has changed the buying process in recent decades.  Because much of the sales training and literature of the last 50 years was based on either manipulating the customer into buying or increasing the sales rep’s activities, many older executives are woefully out of touch with what today’s customers demand.  Yet in many cases, these out-of-touch executives are the ones who are setting the quotas.

These senior managers are too far removed from the sales department and their processes to know how to set quotas effectively.  They tend to emphasize what they can directly control – price, quality, and providing a total solution.

When these managers do get involved in the sales process, it is typically to help create a quarterly forecast and set quotas based on the company’s revenue goals.  They then apply pressure on the sales force to meet their quotas by increasing the sheer volume of their activities (“Make more calls!”) or resort to other tactics that don’t work (“Drop the price to get the customer to buy by the end of this quarter.”)  Sales reps then do what they’re told, only to have customers delay over another issue.

Set for the wrong reason

The problem with these revenue-driven quotas is that they are too focused on the result and not on the process that will achieve the result.

Quota setting, for most organizations, is a number that is either driven by Wall Street or by historical trends.  It is not generally driven by customer needs and the customer’s buying trends.  It is done from the standpoint of “what I need,” instead of what the customer needs, which is a recipe for failure in sales.

Quota-driven sales tactics put pressure on customers to buy when they are not ready.  Cutting price to achieve a quota is manipulative and devalues your offering.  It sends customers the message that your sales rep’s goal is more important to you than their needs, and this degrades their trust in your rep and your company.

Effective sales techniques focus on what the customer wants and how the customer buys, not on how the company wants to sell and achieve their quotas.  Quotas that are set based upon market potential and customer opportunities are more realistic and motivating for sales reps.  Organizations who implement these methodologies meet their quotas faster and with higher margins.

If your sales reps are struggling to meet their quotas, ask yourself – or your sales managers – these questions:

  • Are you setting quotas based upon your need for revenue or are you basing it upon true market potential and the customer’s buying process?
  • What have you done to discover what your customers want from your sales reps?
  • When was the last time you did it?
  • Have you ever told your reps to cut price to close a deal? Did it bring about an immediate sale?  Or did the prospect still delay until another issue was solved?
  • Do your questions to your sales reps/managers focus on sales activity and getting the forecast right or on updates about where your customers are in their buying process?

The answers to these questions will point you to the reasons your quotas are so difficult and stressful to meet, and they’ll show you what you can do to improve your success rate.


Want to help your reps meet their quotas in less time, with higher margins, while creating loyal customers?

Attend my workshop, Sales Success Formula: How to Read Your Customers’ Minds and Exceed Their Expectations.  Click here for more information.

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