Sales Objectives and Quotas

MULTIPLE CHOICE QUESTIONS

B         142

7-1       A quota is:

A.  a strategic target

B.  an expected performance objective

C.  set only by top management

D.  a type of sales promotion used to increase sales for cyclical products

E.   described by all of the above

D         142-143

7-2       Which of the following statements about quotas is true?

A.    Quotas are strategic statements of expected performance by salespeople.

B.     Quotas are concerned with end results only; specific activities are the responsibility of the salesperson.

C.  In large industrial products firms, quotas are often the most important input used for creating marketing plans.

D.  Many salespeople find quotas to be motivational.

E.   To be effective, quotas should be static rather than ever-changing.

A         143

7-3       Vimal Kasuda sells computer-assisted design software for professional and amateur woodworkers.  Her sales manager has just informed her that her quota will be 6 percent higher next year because the company that employs her wants to increase its market share.  If she attains this goal, she will receive a bonus.  In this example, Vimal's sales manager is using the quota to:

A.  provide a performance target

B.  control Vimal's activities

C.     evaluate her performance

D.    provide formal feedback

E.     get her opinion

E.

B         143

7-4       At the end of each day Arturo Valenzuala fills out a call report which he sends to his sales manager, who can then see if Arturo has met his quota for number of calls per day.  Arturo's sales manager is using the quota system to:

A.  provide a performance target

B.  provide control

C.     to determine horizontal tactics

D.    establish industry standards

E.     to do none of the above

E.

A         143

7-5              Andi is a salesperson at a furniture store.  Her quota for next month is 5 bedroom sets, three dining room sets, and 8 living room sets.  This is an example of a(n) _____ quota.

A.  sales volume

B.  net profit

C.     expense

D.    gross margin

E.     activity

A         143

7-6       Robin sells for International Paper Company.  Her ____ quota for next month is $53,000.

A.  sales volume

B.     net profit

C.     expense

D.    gross margin

E.     activity

E          144

7-7  The two types of profit quotas are the:

A.    sales quota and activity quotas

B.     revenue and expense quotas

C.     contribution margin and the gross margin quotas

D.    selling and nonselling quotas

E.     gross margin and net profit

D               144

7-8       A sales quota based on the number of dollars generated after subtracting the cost of goods sold is a _____ quota.

A.  dollar sales volume

B.     expense

C.     net profit

D.    gross profit

E.     payback

C         145

7-9       A sales quota based on the number of dollars generated after subtracting both the cost of goods sold and the salesperson's personal expenses is a _____ quota.

A.  dollar sales volume

B.     expense

C.     net profit

D.    gross profit

E.     payback

E.

D         145

7-10     "Slade," his sales manager said, "Your expenses are grossly out of line compared to the rest of the sales force.  They're too low, and that appears to be hurting your ability to sell." Slade is surprised because he thought the cutback would actually help him meet his _____ quota for the period.

A.  balanced

B.  quality      

C.     payback

D.    net profit

E.     gross profit

A         145

7-11          One drawback to using _____ quotas is that sales personnel generally do not set prices and have no control over manufacturing costs.

A.    profit

B.     dollar sales volume

C.     expense

D.    activity

E.     unit sales volume

C         145

7-12     A company that set limits on how much expense money salespeople are allowed based on a percentage of the territory's sales volume would be said to be using a(n) _____ quota:

A.  balanced

B.  payback

C.     expense

D.    net profit

E.     gross profit

E          146

7-13     Hewlett-Packard (H-P) manufactures ultrasound diagnostic equipment.  Because such equipment requires service after the sale, H-P might consider using _____ quotas.

A.  sales volume

B.  net profit

C.     expense

D.    gross margin

E.     activity

D         146

7-14     Because of their after-the-sale service responsibilities, salespeople for _____ are most likely to use activity quotas.

A.  Coca-Cola

B.  DeBeer diamonds

C.     International paper

D.    Phillips electronic equipment

E.     Colgate-Palmolive

C         146

7-15     _____ quotas typically should not be the basis for rewards.  Rather they help the manager better understand why the salespeople did or did not meet their sales volume quota.

A.  Payback

B.  Net profit

C.     Activity

D.    Gross margin

E.     Project

C         146

7-16 A radio station that wanted to reward its salespeople who sell ad time on the basis of how many cold calls they made in a week and how many new customers they sold to monthly would be most likely to use _____ quotas.

A.  payback

B.     net profit

C.     activity

D.    gross margin

E.     project

A         147

7-17     _____ refers to feelings about any differences between what is expected and actual experience with a purchase.

A.  Customer satisfaction

B.  Perceived quality

C.     Product differentiation

D.    Product Value

E.     Total quality

B         147

7-18 To measure customer satisfaction, organizations typically:

A.    use experiential research

B.     construct questionnaires to ask for customer feedback

C.     use focus groups

D.    survey their salespeople

E.     use secondary data

C         147

7-19     Which of the following is an easy method an organization can use to keep track of all customer satisfaction data?

A.  hire an outside consultant

B.     make each salesperson keep up with their own customer data

C.     use a Customer Satisfaction Index (or Rating)

D.  create a functional department to manage satisfaction data

E.   place primary responsibility for customer satisfaction information gathering in the human resources department

B         147

7-20     For larger national U.S. corporations, the most commonly used method for setting quotas is:

A.  computer models, tempered by executive judgment

B.     sales forecasts, plus market and territory potentials

C.     market and territory potentials, tempered by sales force judgment

D.  last year's results plus this year's sales forecast divided by two

E.   sales forecasts only

C         148

7-21     Jennifer Barlow sells refrigerator units to supermarkets, convenience stores, and florists.  Her sales manager has advised her that she, as well as all of the other salespeople in the firm, must help the company increase its sales by 12 percent this year.  Which general approach to quota setting is being used?

A.  a quota based on territorial potential, not territorial size

B.     a quota based on executive judgment

C.     a quota based on the organization's sales forecast, not individual potential

D.  a quota based on territorial size, not territorial potential

E.   a combination approach to quota setting

A         148

7-22     According to the text, for which of the following products would the selling organization be most likely to base its quotas on executive judgment?

A.  Phillips flat-screen television

B.  Lay's potato chips

C.     vanilla ice cream

D.    3M adhesive tape

E.     bricks

D         150 (Table 7-4)

7-23 Regional plans determine:

A.    which regions, markets, and products to emphasize

B.     the projected return on time invested

C.     the dollar allotment for promotion

D.    which accounts to emphasize and who is responsible for each account

E.   all of the above

C         150 (Table 7-4)

7-24     Who is generally responsible for all precall planning?

A.  national sales manager

B.  district manager

C.     sales representative

D.    regional sales manager

E.     marketing vice president

B         152-153 (Figure 7.2)

7-25     To successfully implement annual objectives, there are four key areas of concern.  Which of the following is NOT one of the areas of concern listed in the text?

A.  territorial management

B.  product management

C.     call management

D.    account management

E.     self-management

E          153

7-26 A tactical plan for managing accounts that are described as stars is to:

A.    ignore these accounts

B.     develop a new approach for dealing with these accounts

C.  divest yourself of these accounts

D.  maintain the present share of business from these accounts

E.   spend more time and effort on these accounts

C         153

7-27 A tactical plan for managing accounts that are described as dogs is to:

A.    ignore these accounts

B.     develop a new approach for dealing with these accounts

C.  divest yourself of these accounts

D.  maintain the present share of business from these accounts

E.   spend more time and effort on these accounts

D         153

7-28     Accounts with a low and declining potential, that occupy more time than can ever be justified, and that show no promise of improvement are referred to as:

A.  problem children

B.  question marks

C.     cash cows

D.    dogs

E.     stars

B         153

7-29     Salespeople to achieve a performance rating of excellence must excel in achieving three different types of annual objectives.  These objectives are categorized as:

A.    day-to-day, weekly, and monthly

B.     regular, problem-solving, and innovative

C.     star, cash cow, and problem

D.    strategic, tactical, and operational

E.     profit, activity, and sales volume

D         158

7-30     For objectives and quotas to be fully accepted by the sales force, a quota plan should be SMART.  The letters in the acronym SMART represent:

A.  Sales-oriented, Marketable, Adequate, Reward-worthy, and Time specific

B.  Specific, Motivated, Acceptable, Reciprocal, and Territorial

C.  Sales-oriented, Moral, Acceptable, Reciprocal, and Territorial

D.  Specific, Measurable, Attainable, Realistic, and Time specific

E.   Systematic, Motivated, Attainable, Reciprocal, and Timely

D         158

7-31     "Leonard, I expect your sales volume to be a little better next month," said his sales manager.  What is most clearly wrong with the preceding statement as a sales quota?

A.  It's not challenging.

B.  It's not reasonable.

C.     It's not attainable.

D.    It's not specific.

E.     It's not for a definite time period.

A         158

7-32     The sales manager told Liz, "During the next six months, I want you to improve your relations with the R&M purchasing agent, or else I will have to give the account to another sales rep."  With which of the goals illustrated in the SMART acronym is this objective most in conflict?

A.  The objective is not specific.

B.  The objective is not sales-oriented.

C.  The salesperson is given no motivation to achieve this objective.

D.  The objective is too time-specific.

E.   The objective is not long-term oriented.

D         158

7-33     Her sales manager told Ruth that he wanted her to decrease her sales expenses by 5 percent, or else he would have to lower her commission rate by 3 percent.  With which of the goals illustrated in the SMART acronym is this objective most in conflict?

A.  The objective is not specific.

B.  The objective is not sales-oriented.

C.  The salesperson is given no motivation to achieve this objective.

D.  The objective is not time-specific.

E.   The objective is not long-term oriented.

E          158

7-34     Which of the following is an appropriate question for you as a sales manager to ask yourself about quotas you are setting for your subordinates?

A.  Are the quotas clear and concise?

B.  Have I made a distinction between long-run and short-run expectations?

C.  Is there a direct relationship between the quotas and the rewards available?

D.  Are the quotas measurable?

E.   All of the above are appropriate questions for a sales manager to ask.

C         158

7-35     A properly set salesperson's sales quota should:

A.  measure his or her improvement in relations with customers

B.  encourage lackadaisical behavior

C.  specify when the intended result is to be accomplished

D.  avoid congruence with the goals of the organization

E.   do all of the above

B         158-159

7-36     At the individual level, selling by objectives (SBO) is a process whereby the:

A.  manager applies the corporate objectives to each sales territory without regard to sales potential

B.  manager and salesperson identify common goals, define major areas of responsibility, and agree on expected results

C.  salesperson is expected to engage in feedback only if he or she has not met the average quota

D.  manager uses executive judgment to determine the quota criteria

E.   salesperson uses the corporation's objectives to set territorial size

C         158-159

7-37     Which of the following statements about selling by objectives (SBO) is true?

A.    With SBO, the sales manager sets goals for the next period.

B.     Typically no objectives are vetoed when using SBO.

C.     Motivation for salespeople is increased because they help set the objectives they must attain.

D.  Mutual understanding between a manager and a salesperson is unnecesary in setting objectives.

E.   The main drawback to SBO is the lack of connection between the objectives set and the rewards received by the salesperson.

D         158-159

7-38     Which of the following statements about selling by objectives (SBO) is true?

A.  The salesperson typically has no input in SBO.

B.  The main drawback to SBO is the lack of connection between the objectives set and the rewards received by the salesperson.

C.  SBO is simply a philosophy and is therefore very difficult to implement.

D.  Upper management typically retains the power to veto objectives set using SBO.

E.   All of the above statements about SBO are true.

TRUE FALSE QUESTIONS

T          142

7-39     Quotas are tactical rather than strategic.

T          142

7-40     Quotas are dynamic rather than static.

T          142

7-41     Because they guide the behavior of salespeople, quotas provide control.

T          143

7-42     Quotas may be used to change the activities of salespeople or the products they emphasize in their selling activities.

F          143

7-43     Quotas should not used as a motivational tool.

F          144-145

7-44     The gross margin quota is determined by subtracting cost of goods sold and salesperson direct selling expenses from sales volume.

F          146

7-45     Activity quotas are least important in cases where salespeople must perform important nonselling duties.

F          146

7-46     Most experts recommend using activity quotas as a basis for rewarding sales force members.

F          147

7-47     Customer satisfaction refers to feelings about any differences between what is expected and actual experience with the purchase.

F          147

7-48     The most commonly used combination of quotas is a sales volume quota together with an expense quota.

T          148

7-49     The use of past experience to set quotas ignores sales potential.

T          148

7-50     No matter what method is used for setting quotas, executive judgment should always be part of the process.

F          149

7-51     The process of setting sales quotas varies significantly from organization to organization.

T          150 (Table 7.4)

7-52     Sales representatives are usually responsible for territorial sales plans.

T          152

7-53     The two basic steps to take to successfully implement a sales strategy are the organizing of the jobs and then the definition of the annual objectives.

F          153

7-54     With an account that is described as a cash cow, a salesperson should abandon the account.

T          154

7-55     Sales objectives that are classified as regular deal with expenses, leads, sales calls, growth in order size, and reports.

T          155

7-56     To get maximum commitment to achieving sales objectives, sales managers should establish those objectives by personal, face-to-face discussion rather than by an exchange of memoranda.

F          156

7-57     Individual meetings with each sales representative are unnecessary when using the selling by objective (SBO) process.

F          158

7-58     To be fully acceptable to the sales force, objectives should be Sales-oriented, Measurable, Attainable, Reward-oriented, and Time-specific.

T          158

7-59     The basic selling by objectives (SBO) process is a two-way approach to quota setting.

SHORT ANSWER QUESTIONS

7-60 What are the two types of profit quotas?

Ans:     gross margin and net profit

Page:   144

7-61          Miller was told by his sales manager that one of his objectives for the next year should be to "Attend one three-day product training seminar."  What kind of quota does this exemplify?

Ans:     activity quota

Page:   146

7-62          What is the most common method of setting quotas in the large national companies in the U.S.?

Ans:     the use of sales forecast plus market and territory potentials

Page:   147

7-63 When should a company use executive judgment for setting its sales quotas?

Ans:     when little information exists, such as with a new territory or new product

Page:   148

7-64 There are four major areas in which objectives need to be established for each salesperson.  List them.

Ans:     territorial management, account management, call management, and self-management

Page:   153 (Figure 7.2)

7-65          When setting objectives for individual salespeople, there are three different types of objectives that the sales manager needs to establish.  List them.

Ans:      (1) regular, ongoing, and recurring objectives, (2) problem-solving objectives, and (3) innovative or creative objectives

Page:     154

7-66          A good objective and quota plan is SMART.  What do the letters in the acronym SMART represent?

Ans:     Specific, Measurable, Attainable, Realistic, and Time specific

Page:   158