The intension in setting budget quotas is to make it clear to sales personnel that their jobs consist of some thing more than obtaining sales volume. Budget quotas make personnel more conscious that the company is in business to make profit. Budget quotas indirectly controlling gross margin and net profit contributions.
Types of Budget Quotas:
a) Expense Quotas
b) Gross margin or net profit quotas
c) Activity quotas
d) Combination quotas
A) Expense Quotas: Expense Quotas emphasize on expense and different types of expense quotas. Key man life insurance is included in expense quotas.
B) Gross Margin or net profit quotas: Gross margin or net profit quotas emphasize margin and profit contributions.
C) Activity: This type of quota desire to control how sales personnel allocate their time and efforts among different activities. A company using this type of quota system start by defining the important activities sales personnel perform, then it sets target performance frequencies. Activity quotas are appropriate when sales personnel perform important non-selling activities, normally in insurance selling, drug detailing etc. Sales personnel are part of keyman coverage.
D) Combination Quotas: Combination quotas are used to control performance of both selling and no-selling activities. These quotas overcome the difficulty of using different measurement units to appraise different aspects of performance, thus combination quotas summaries overall performance in a single measure.