Long Term Risks of Sales Volume Loss (B)
What are the major long term risks of sales volume loss? How to fight these risks?
Posted: Apr 2011
The sales volume performance depends of many internal and external factors. Every company develops strategies for building and maintaining the sales volume growth. There are many methods for increase sales volume ( new product, price, marketing activities,... ) but there are many volume risks at same time. Many factors can jeopardy sales volume on the short and long run.
Long term risks are factors that can severely harm volume performance of the company. If the volume is jeopardized, the chain reaction is created and will affect other segments of business: reduced profit, excessive capacity, salary and headcount reduction, ...
Major Product Quality incidents can severely undermine the brand equity and company reputation. Major product quality incident is related to serious defects that can harm consumers of the product. The food industry is very sensitive when it comes to product quality. But food industry is not the only one under the risk, since other industries, like car industry or pharmacy, can seriously be harmed on the long run in case of major product quality issue. The preventive programs and measures can help preventing and reducing risks of product quality incidents effect. Still, if the problem is registered after the batch has been delivered on market, the good traceability record can help in product recall and minimization of negative effects.
Safety incidents can harm reputation of the company. The car accidents or frequent injuries in production of the company can gradually develop negative opinion of the market about the company that may result in decreased loyalty and trust. This public opinion can change the consumer preference and make them to switch to other brands.
Competition is present in almost all industries. Marketing activities of one company can gradually undermine the performance of another company. The expansion of the company can happen by increase of the market share or by the growth of the market. Company that does not respond timely and properly on competition activities can become a “cooked frog” and slowly loose the ground on the market.
Portfolio without innovation is doomed to slow but definite decline. Marker likes novelties. The new SKUs are attracting new customers. Some of these new customers will become regular customers, assuring the growth to the company and stabile market position. Company without innovative activities on portfolio is under a great risk to start long term decline trend in the market.
Logistic Delivery Problems is hitting many companies. The company that is having less late deliveries and inaccurate invoicing ( high DIFOTAI ) is having more chances in the market than less successful companies. Bad logistic services results in stock-outs, customer dissatisfaction, switch of consumers to competition, costs of expired and returned products, etc. All these factors are leading to long term decline of the sales volume and market share.
Negative PR can be created internally by the internal mistakes or incidents, or externally by negative PR, intentional or non-intentional. Regardless of the source of the negative PR, the importance of every company is to deal with the PR activities. In case that the size of the company do not allow the company to keep the PR function internally, the outsourced services of external PR agencies can solution too.
Every loss factor needs a different approach strategy. The risks can be reduced by a good strategy, business plan with contingency planning. The risk analysis is the starting point for assessing the risks. Every high rated risk needs to have risk response plan created and updated on regular basis. The incidents may still occur, but with proper risk analysis and adequate risk response plan it is possible to mitigate potential threats.