Activity Quota (Sales) - Explained
What is an Activity Quota in Sales?
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Table of ContentsWhat is an Activity Quota?How is Activity Quota Used?How Activity Quota WorksActivity Quotas in the Age of Social MediaImportance of Activity QuotaHow Activity Quota is MonitoredAcademic Research on Activity Quotas
What is an Activity Quota?
This refers to a minimum level of sales set by an organization where every salesperson is supposed to meet within a specified period of time. In other words, it is a method used to measure the sales employees performance. This is usually in relation to employees selling activities. The activities may include things such as a number of calls made, the number of new accounts that have been opened, etc. The activity quota is basically proof that work is being done regardless of whether or not there is an outcome from the product or services being sold.
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How is Activity Quota Used?
Activity quota is used in the following ways:
- It helps the management to find out the point of strength and weakness among its employees. For instance, it can make use of activity quota to determine an employees work performance. This is by looking at the amount of quota an employee is able to accomplish in a month.
- It assists the management to ensure that efforts are being made in the sales department to bring in more new customers.
- It is used to show the actual work being done by employees and also to determine the outcome in terms of the amount of work being produced.
- It is used by the management to identify the staff who have exceeded the activity quota so that they can be rewarded and motivated to maintain the good work
Activity quota is commonly used by sales employees who have to contact prospective customers regarding their goods and services. The activity quota is put in place to ensure that employees dealing with sales are making efforts to bring in new customers. When they happen to exceed the set activity quota limit, the employer may decide to reward their efforts. This is to ensure that they continue working hard to attract new customers and boost sales. Note that products and services will always require sales employees to put in more effort so that they can sell. This is so because some goods and services do not have strong brand equity. Also, some goods and services are difficult to differentiate. This, therefore, calls for hard work from the sales department to intensively promote goods and services. Generally, to achieve activity quota, it requires sales employees who are well-connected. For instance, an insurance sales employee will have to contact hundreds and to some extent, thousands of prospective customers so as to generate the expected income. Meeting the activity quota limit is what will make the sales employees keep his or her job. If not, the employer may do away with him or her. The same case applies to financial advisors. Note that in any business, it is employees from the sales department that are held responsible when the organization is not able to reach its quota activity (sales target).
How Activity Quota Works
Let's assume that a sales employee is expected to make 120 cold calls to potential clients so as to meet the 6 potential clients per week. The sales employee manages to complete his or her telephone calls and also able to sell the product ask required. On the other hand, the same sales employee does not manage to meet the 6 per week of sales through meetings. This is because he or she is not able to hold the required 6 meetings per week. This is a clear indication that this particular employee needs to be trained in both interpersonal as well as communication skills. Training on these two skills is required as they are essential in enhancing physical meetings. Also, when the employee is able to exceed the set activity quota limit, the employer will always increase the activity quota. This ensures that the organization utilizes the capacity of every employee so as it can maximize its sales. Some examples of activity quotas in an organization may include the following:
- Number of product demonstrations
- Number of calls on new accounts
- Number of letters to prospective accounts
- Number of submitted proposals
Activity Quotas in the Age of Social Media
The way social media is taking center stage on the activities related to quotas, it is clear that this instrument is losing its use. This is because social media is overtaking the activity quota method. When prospective clients tweet, like or click on the link about a service or a product, it gives the sales department a clear signal of who the potential clients are. The sales employees can then shift their focus to this end, to convince these customers to buy the products or services. For instance, where the activity quota requires a financial advisor who is on probation to make 200 phone calls per week, he can instead contact 40 people who commented on retirement planning in a social media platform.
Importance of Activity Quota
Activity quota plays an important role in an organization. It is through the activity quota that the management is able to keep track of the sales department performance. If the employees in the sales department fail to achieve the set activity quota limit, then the entire business may suffer a huge loss. Therefore, Quota activity puts the management in a position where they are able to quantify the sales departments progress. This helps the entire organization to work towards achieving a bigger goal.
How Activity Quota is Monitored
Activity Quota is done using a continuous process. It is done in this manner so that the management can be able to identify the business point of strength as well as its point of weakness. By being able to identify the areas of strength and weakness, the management can then do some activity quota adjustments when the need arises. For instance, let's assume that the monitoring results show that the sales team exceeded its one-month activity quota allocation. In this case, the management is likely to increase the activity quotas in the month that will follow.