Discuss the quantitative performance standards.

Ans.

Quantitative Performance Standards

Most business organizations use quantitative performance standards. Quantitative standards define both the nature and desired levels of performance. These are used for stimulating good performance.

Quantitative standards provide descriptions. Sales personnel with well defined objectives waste little time. Sales force have some control over several factors affecting sales volume. Company should select that combination of quantitative performance standards which is adequate, for its marketing situation.

Following are the popular quantitative performance standards:

1. Quotas

2. Territorial net profit or gross margin ratio

3. Selling expense ratio

4. Territorial market share

5. Call frequency ratio

6. Order call ratio

7. Sales coverage effectiveness index

8. Average cost per call

9. Average order size

10. Non-selling activities

11. Multiple quantitative performance standards

Above can be discussed as under:

1. Quotas: A quota is a quantitative objective. It can be expressed in absolute terms. It may be in the form of dollars on units of products etc. If sales personnels are assigned quotas, management is answering the significant questions.

2. Territorial Net Profit or Gross Margin Ratio: It attracts sales force’s attention on the requirements. For selling a balanced line and for relative profitability sales force influences the net profit ratios. Gross margin ratio presents computational problems.

3. Selling Expense Ratio: This is used to control the relation of selling expenses to sales volume. It is determined after making analysis of expense conditions and sales volume potentials in each territories. It is used by industrial-product companies.

4. Territorial Market Share: It controls market share on a territorial bases. Market share percentages are set by management for each territory.

5. Call Frequency Ratio: It is computed by dividing the number of sales calls on a particular class of customers by the number of customers in that class.

6. Order Call Ratio: Order call ratio measures the effectiveness of sales personnel in relation to orders. It is also called a batting average. It is set for each class of account.

7. Sales Coverage Effectiveness Index: It consists ratio of the customers’ numbers to the total prospects in a territory. It controls the thoroughness with which a salesperson works in the assigned territory.

8. Average Cost Per Call: Standards are set for each category of account. It emphasizes the significance of making profitable calls.

9. Average Order Size: It controls the efficiency of calls on various accounts using average order size, management controls the sales person’s allocation of effort, among different accounts.

10. Non-selling Activities: Quantitative performance standards can also be established for such non-selling activities appropriate standards are set.

11. Multiple Quantitative Performance Standards: It is widespread practice. It is used to assign multiple quantitative performance standards.