Certain laid out pattern procedures may be used to analyze sales by customers. Such analyses typically show that a relatively small percentage of customers accounts for a large percentage of sales. Distribution cost accounting should then be applied to determine the smallest customer it is profitable to keep on the books. By dropping customers smaller than this size, the firm can improve its profitability. In many cases, analyses of this sort combined with a study of sales calls will show that as much time is spent on the small accounts as on the large. Shifting some of that sales effort to the larger accounts may well increase values.
Analysis by customer combined with analysis by territory and product may be particularly helpful in pinpointing weak spots in the sales program. Some salesmen may not be developing sales with a certain type of customer or product that has proven profitable in other territories. When this is discovered remedial action can be taken because the precise point of weakness is known.
Sales Analysis by Size of Order:
Sales analysis by size of order may identify orders (and customers) that are not profitable. For example, certain customers may place frequent orders, each for a relatively small quantity. If the customers also require a great deal of service and attention by the sales representatives, the cost of securing and handling each order may be high. If cost accounting data are available, it is possible to identify if such orders are incurring a loss. This analysis may be extended to find territories, products, and customers where small orders are prevalent. This may lead to setting a minimum order size, to training sales representatives to develop larger orders, or to dropping certain territories, products, or customers.
Dunne and Wolk report the application of such an analysis to a small appliance manufacturer, which incurred a loss of $8,695 on sales of almost $3 million. Sales were analyzed by type of product, by geographic region, by type of customer, and the size of order. The results showed that one product yielded about 50 percent more profit contribution than the company’s other product. They also showed that the eastern region yielded about 25 percent more profit contribution than the western region. Most important, however was that the total four analysis (by product, region, customer, and size of order) showed that the company was particularly weak in the sale of one product (blenders) to one type of customer (wholesalers) in one region (western).
Market and sales analysis include market potential analysis, sales forecasting, and sales analysis.
Market potential analysis involves the development of potentials for individual markets. Market potentials are used in establishing sales territories, allocating marketing effort and setting sales quotas. Market potentials may be estimated in two major ways: (1) through direct data, or (2) through corollary data.
Sales forecasts are attempts to predict a company’s sales of a specific product in a specific market or region during a specific time period. Sales forecasts are important because they serve as the basic guide for planning within the company. Methods of forecasting vary from estimates made by executives or the sales force to more complex procedures involving trend analysis and regression.
Sales analyses are useful for identifying strong and weak points in the company’s sales programs. Typically, sales analyses are performed by comparing the sales and selling costs associated with different territories, products, customers, or order sizes. Sales analyses made on various combinations of territories, products, customers, and order sizes are especially useful, as are sales analyses made in conjunction with a distribution cost analysis Marketing Decision Support Systems (MDSS), combination of computer based sales analysis and models relating the application of marketing resources to sales and profit outcomes, are providing possibilities for more sophisticated decision making in the future.