Short Term Strategies For Increase Of Sales Volume (B)
What are the basic short term strategies for increase of sales volume?
Posted: Jul 2010
The volume performance, sales mix, long term and short term sales trends, numerical distribution, market share and other sales key performance (KPI) indicators are the result of the activities of the company within the market. The activities of the company should be focused on the long term strategies for the volume increase, since their give long lasting and sustainable effects. Still, there are moments in the business when the company needs to make quick, effective, short term measures that will give immediate result.
New SKUs – pipeline filling effect. The new launch of the product has a chance of the volume incremental, due to two factors. First, the market is interested in novelty, due to curiosity and wishes to explore new possibilities. The other factor is the filling the market pipeline itself. The company needs to sell the first delivery to the whole market, before the sell out to the consumer starts. The sell-out to consumer, from the other side, initiates repeated orders. The new product soon becomes old product, but it contributes to the volume increase in the initial period.
Price Discount ( limited time ) is a method of switching from push the market to pull from the market. The Price off, discounted prices for the specific, limited and well tempered period can awake the market and make the sales drive. When the market becomes dormant, non responsive to your sales initiatives of regular marketing plan, maybe it is the time to shake the market with the price off surprise. The reduced price will awake the interest of the customers, fill their stores and will increase your account receivable. The amount of incremented sales is at the same time the decreased amount for the competition, since you managed to take the customer's interest from competition to your portfolio.
The effect of the price discount is a good opportunity for sell-in, or filling the trade. The best combination is the discount that is agreed to be transferred to consumers too. By this double steps discount all parties gain; the company sells extra quantity, the trade do the same and the shopper is buying products cheaper.
It is true that discount is a direct cost of the company, due to decreased margin. But the bigger problem from reduced margin is reduced sales turnover. Without sales turnover there is no margin and no profit as well. Therefore, balanced reduction of margin for limited period, that will increase sellout, will be beneficial for the company.
Price Increase can be the sales driver as well, if it is carefully conducted. The mechanism is simple: once the market ( trade ) is informed that you will increase the prices, as of specific date, they will submit extra orders, in order to build stock at a lower price. There are several things that should be assessed prior to making this trick. The prices of the company should not increase by too much, since this could make market to switch to competition. The price increase should be balanced among SKUs; the stronger SKUs can sustain higher price increase, while weaker SKUs may not sustain price increase at all. The trade should be informed about the price increase early enough, but the period should not be too long as well, since the effect will weaken. This information should be presented to trade as the opportunity for them to earn extra money on the quantity that they bought at the old price, since they can sell it at the new price immediately.
Of course, this dirty tactics has some risks and it cannot be used to often. It is usually the benefit of the companies with the significant brand equity to perform this maneuver, while smaller companies may not be in position for this tactics.
Volume Targeting for the wholesaler channel is the rough tactic for the volume push. The wholesalers usually have the variable discount that depends upon achievement of their periodic targets. Increasing their targets versus sales trends can make them to use their warehouse and credit capacities to stock up. At same time this action is blocking the competition, since it leaves less space.
It is necessary to keep the balance between market demand, push of the target, capacity of wholesalers and discount policy. If the target is too high while the discount is low and risk high, the wholesaler may give up. With proper balancing of target stretching it is possible to gradually increase the volume and to block the space for the competition.
It is true that the long term strategies are healthier for the continuous sales growth. But still, the short time, rough and dirty strategies can be beneficial in the moments when the company needs to switch-on afterburners, in order to get an extra mile.