Too many times we have all heard the question “Why are sales down?” The answer is usually a quick response, such as, marketing or the competition or the economy or the weather.
The truth is no matter what business you are in, if sales are the measure of performance, then the reason that sales are down is that, fewer people are willing to buy your products this year than were willing to buy them last year. Why?
That is a much more complicated question and one that should be investigated to find the answers. The problems cannot be solved until the answers are determined.
There are many factors that contribute to declining sales and transactions but the key factors need to be identified.
If you don’t have a plan and a measurement system for what each discipline will contribute to sales growth, then how can you determine what area is not performing up to plan levels? Is it…
- Sales Team
- Product / Service Quality or Delivery
- Price / Value
- Advertising & Marketing
A good business plan will include a summary of how the sales growth goals will be achieved.
There are many factors that contribute to sales growth:
- Selling is an everyday process for most companies. Are our sales people achieving their goals? What part of the sales process can be improved…prospecting, relationship building, submitting RFPs, sales presentations, closing the sale?
- Price Increases can contribute to short-term sales growth but price increases usually also contribute to transaction decreases.
- Service Improvements can be the most impactful sales and transaction drivers because it gives your company a competitive advantage or can neutralize a competitor’s advantage.
- New Products have proven to be a double-edged sword; they may or may not improve sales and transactions. The product must satisfy a real consumer desire or need and must have a competitive advantage (such as, it tastes better or is less expensive than the competitor’s product). If not, then the new product will only, at most drive sales short-term (and it may not be profitable).
- Marketing is the highly visible form of sales and transaction building activity. Proper planning with sales and break-even analysis improves the odds of success.
The “Components of Sales Growth” chart demonstrates how a company might assign responsibility for a 7% incremental sales growth plan.
No individual component is solely responsible for the growth and all components of the mix are used. It is important to balance the sales building responsibility and also to monitor and measure the individual discipline’s performance against the goals.
COMPONENTS OF SALES GROWTH
- Selling (New Customers) +2.0%
- Price Increases +1.0%
- Service Improvements +1.5%
- New Products +1.0%
- Marketing +1.5%
Please notice that weather, the economy and the competition do not appear on this list. If desired they can be considered as “Potential Risks to Sales Growth” and assigned a negative value. It is difficult to forecast the impact of these three elements, don’t ignore them but don’t dwell on them.
Weather happens and it happens every year, it may cause short-term disruptions, but except for natural disasters, it is not along term issue.
- The Economy does cause the consumer at times to reduce their expenditures, but unless all of the competitors are closed, the economy is not the problem. The problem is you have not taken enough share from your competitors.
- The Competition is a key factor to be considered but the goal is to grow market share so the plan must be strong enough to outperform the competition no matter what tactics they employ.
What are your components of sales growth and are each of the components working as well as you expect them to?
[themecolor]Dave Baney is the founder and CEO of 55 Questions, LLC. We work with successful top executives with a driving ambition to crush their competition. We help CEOs and Entrepreneurs improve alignment, communication and accountability throughout their organization. [/themecolor]http://www.55questions.com
[themecolor]Follow Dave on twitter[/themecolor] https://twitter.com/55Questions