There are three basic reasons why your sales are declining or growing. Knowing which one is driving your numbers and addressing that one is the key to capitalizing on the economy.
It may not be as obvious or as easy as you think.
You've been there before and you may be there now: sales are down. The immediate reaction for most companies is one or more of the following:
- Cut prices
- Cut production
- Cut people
This is the one-size-fits-all approach. It can seem to work but it can also have lasting negative effects on your business. The issue stems from treating the symptom, not the problem; looking at the result, not the source.
Three Reasons
There are three basic reasons why sales go up or down significantly:
- Industry trends
- Market shifts
- Company activities
We must understand which of these is the primary driver and address it. Sound simple? It isn't. Here are some scenarios being played out unwittingly in most organizations:
PROBLEM: Our industry is trending in the wrong direction, has become obsolete or is being displaced by alternative technologies.
SOLUTION: Cut prices, cut production, cut people.
- or -
PROBLEM: Our market has shifted. Demographics have changed; geographic boundaries have moved, customer requirements have altered significantly.
SOLUTION: Cut prices, cut production, cut people.
- or -
PROBLEM: Our company's sales are down even though others in our industry are experiencing healthy sales volumes.
SOLUTION: Cut prices, cut production, cut people.
An Alternative Approach
As you can see, using a single approach regardless of the problem may not make sense. Trying to address an industry problem by making internal changes is not the best way to proceed. Begin by examining your own industry and see where the pockets of success - or budding successes - are. Only then will you know how to make any internal changes.
When your market shifts, rather than make internal adjustments, first consider how those market shifts might actually work for you, not against you. Then you will be in a position to determine what internal changes need to be made. You might actually have to hire people, raise your prices and increase production!
And if it turns out that something in your company is the real culprit, think about alternative strategies BEFORE considering the three alternatives above.
More Details
This is an extensive subject, one that cannot be adequately addressed in a newsletter. There is a White Paper you can download for free using the link below. This comprehensive, 12+ page document explains all three drivers, how to analyze them and how to capitalize on each one.
This is a necessary and important document for your CSO library.
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