Selecting Appropriate Sales Quota Plan Structures and Quota-Setting Procedures

Abstract

The typical objective of a sales quota-bonus plan (QBP) is to enhance salespeople's performance by granting them a bonus when they reach a prespecified performance level (a sales quota), set higher than the performance level they would achieve otherwise. Even though QBPs are short-term plans, they have long-run profit impacts through their effects on a sales force morale and feelings of equity (or inequity). This is why devising sales quota plans has always been a difficult task. This paper's objective is to discuss how different QBP structures and related quota setting procedures are likely to be selected by management, depending on such situational characteristics as management's objectives, constraints, and available (or collectible) information.