Conceptual Models Samouels Employee Database

Supervision

Work Groups

Employee Commitment

Compensation Supervision

Work Groups

Intention to Search

Compensation

Potential Hypotheses: Commitment is positively related to supervision, work groups and compensation. Intention to Search is negatively related to supervision, work groups & compensation.

Possible Reasons of Declining Sales

Posted on January 19, 2012 by Erdener Ortan

Hello everybody! As I mentioned here, there will be a mini question-answer section in the blog. The truth is I prepared this blog post to publish it as a part of mini question-answer series. The question was Our sales volume is going down! What may be the reason? However, while writing it, I realized that it became longer and more detailed than it should be to be a part of mini q&a series. Thus, I decided to post it as a pa rt of the Strategy Guide category. Actually, it is more detailed and longer than mini q&a series post and shorter and less detail ed than my regular blog posts. The blog post will include several reasons of declining sales. Please note that, there may be many reasons of declining sales. Thus, one can not expect the list below to be complete. However, it will provide most of the main reasons. Besides, possible reasons presented below are not mutually exclusive, since they might be related to each other.

Before going over the reasons, I want to note something here: You will the terms increasing performance and decreasing performance in the reasons. Here is what I meant:

*Increasing Performance:

Increasing value via a better price and/or more benefits Increasing quality and/or size of marketing efforts, Decreased perceived risk of purchasing the product Increasing availability of the product, Better presence at distribution channels (displays, shelf space, eye-hand level etc..)

will result in an increasing performance.

**Decreasing Performance: These will result in a decreasing performance:

Decreasing value via a worse price and/or less benefits Decreasing quality and/or size of marketing efforts, Increased perceived risk of purchasing the product Decreasing availability of the product, Decreased presence at distribution channels (displays, shelf space, eye-hand level etc..)

External Reasons:

Internal Reasons:

Products/Services: Change in product/service mix being offered Perceived price:

Price changes (I am using changes in price rather than increasing price because in some cases, a price increase could inc rease sales volume see Giffen goods) Increasing transaction costs Increasing life-costs Change in quality of the product/service Change in positioning of the product/service Decreasing quality of customer service Decrease in number of elements that signal quality (may be because of shortening warranty period, cancelling a money back guarantee program etc.)

Perceived Quality

Perceived Risk

Increased perceived risk of getting the product (uncertainty about the performance of the product etc..) Declining quality of marketing efforts Declining size of marketing efforts

Marketing:

Availability: Decreased product availability. Reasons of decreased product availability may be:

Problems with distribution channels Being out of emerging distribution channels Internal problems such aslogistics problems, manufacturing problems etc. Decreased number of displays and/or quality of displays Decreased shelf space Decreased eye-hand level shelf presence Key people might have left the company Ending alliances/partnerships A change in structure of incentive system or KPIs of existing incentive system New structure might not fit the strategy People might have been moved to new positions in which they perform worse

Presence at Distribution Channels

Capability Change:

Incentive System Change: Organisational Structure Change:

Please let me now, if you want to add other reasons to this list. By this way, we can build a more complete list. As I mentioned before, I prepared this answer to be in a mini question-answer series. Thus, it is less detailed than my regular posts. See you in the next blog post,

Operating Profit
Its possible to lose money on sales and still make a profit, depending on your sources of income. Operating profit refers to the money you make on your core business, such as making and selling a widget. If you sell $100,000 worth of widgets, but your manufacturing and overhead costs are $110,000, you have an operating loss of $10,000. If you make $25,000 from royalties, investments or asset sales, you can still show an overall business profit.

Low Sales
An obvious reason for a decline in operating profit is a decline in sales. However, its possible to increase your sales reve nues and suffer a profit decrease. This can occur if your sales increase comes from higher sales of low-margin items while you suffer a decrease of sales of high-margin products. Even during good times, its important to track your sales by margins, territory, distribution channel and sales rep to spot trends that might lead to problems. Related Reading: Operating Profit to Sales Ratio

Increased Expenses
Another common reason for a decrease in profits is rising costs. Even if your cost to make a widget doesnt increase, you might have increasing overhead costs, especially as you increase the pay of long-term employees each year. If your manufacturing and overhead costs remain the same and your sales are good, you can still see profit erosion if your debt-service costs increase. For example, missing a payment on a credit card can raise your interest rate and payments significantly.

Addressing Profit Erosion

Financial reports help you project income, expense, cash flow and debt service, allowing you to take steps to manage each of these critical areas. Divide your expenses into manufacturing and overhead expenses if you havent already. Manufacturing expenses include any costs directly tied to produci ng your product or service. Overhead costs are those you accrue to run your business, such as rent, phones, insurance, marketing and office supplies. Track your manufacturing and overhead expenses each month as a percentage of sales to spot any large swings that indicate a problem. Even though credit card interest gets rolled into your balance each month, record it as an expense in your budget to get a true picture of your profits. Analyze your budget performance against your projections each month to determine if you need to adjust your spending based on faulty sales projections.

How to Prevent Declining Performance

To prevent complacency with your current and future high performance salespeople apply these seven approaches:

Pay attention to the metrics. Too many managers (and organizations) only look at sales results. Sales/revenue is a lagging indicator. It is imperative to keep an eye on the leading indicators that are predictors of future results. For example, calls, meetings, proposals, other marketing activities, etc. Make sure that each rep is consistently performing the fundamentals that create sales.

Assume nothing. As in the example of Jim, above, it is a massive mistake to take your attention off of your top performers. Spend time with them in the field and on the phone. They may not think that they need you to be on sales calls with them. But you need to be there. Observe their mechanics. By being actively engaged with them, you can avoid the performance declines discussed earlier in this article. Continuously develop and coach each member of your team. Identify skills or knowledge that can be improved and train and coach individually. Use role play in your meetings to keep everyone sharp. Ignore the grumbles. The more consistently you use role play the more it will be accepted as normal. Think about it. What professional sports team doesn't practice together? As a manager, make very short courtesy calls (on the phone) to all of your key customer contacts at least twice per year to check in and see how things are going. Let your salespeople know that this is your standard process, even if it isn't the company's standard process. This can help you avert or identify issues before they become entrenched and before they do damage. Create opportunities for your top sales performers to mentor newer reps. In doing so, please be sure to educate them on what mentoring is provide clear expectations on what you expect of them. Communicate high expectations of value. Provide top performers with new challenges to keep them engaged and prevent coasting or burnout. For example involve them in planning sessions or task forces with company executives. Just make sure that they stay focused on their sales production. If the rep has the attributes of a leader, begin developing them with management and leadership training. Don't make or imply promises of a promotion or provide a specific time line. They still have to earn that promotion at some point, in competition with other internal and external candidates. Nonetheless, this training will be appreciated and develop new skills that will make them better in their current role as well.

How Did This Happen?

Even the most driven and successful sales professional can progressively lose their inspiration, enthusiasm doing the same role for a long time. And let's face it, some salespeople just become complacent, or lazy, or arrogant, or rest on their past accomplishments. It happens. More often then not, however, declining performance happens when, without realizing it, they can also stop doing the things that made them successful in the first place. As one example, experienced salespeople often identify a problem that a potential customer has before the prospective buyer is aware of it, and then immediately begin proposing a solution that the buyer is not ready for because they lack awareness that they have a problem. This leapfrog over asking relevant discovery questions is crucial for the buyer to develop an awareness of the problem and the related business (and personal) impact of it. So missing these sales steps (even though the salesperson may rightly think they already know the answers) results in lower sales success and subsequent frustration. With this example, and others, it's not at all uncommon to observe a top performer's results begin to progressively slide over time. The following model has been widely used in explain team development and performance. We've adapted it here to look at the performance of an individual salesperson. The reforming stage is where a salesperson, and their manager, have the opportunity to revisit the sales processes and habit that made them successful (norming) and to propel the salesperson back into a high performing contributor. Without observation and intervention by the manager, the slide will likely be prolonged if not permanent.

KEY POINTS

Sales volume declines as competition becomes too strong for the company in question; as well as the fact that changes in consumer tastes and new technologies also erode sales. Maintaining profitability increasingly becomes more about efficiency of production and distribution rather than about increasing sales.

Usually, product termination is not about the end of the business cycle or the entire product class; rather, it is about the termination of a single product or market entrant that can no longer compete as it has reached the end of its life.
TERMS

decline

The stage of the product life style where low/negative sales growth, lower profits, and maximum competition occur, forcing the product into decline an

A decrease in sales can be a clue that the need for a product is declining. Although a small business does not necessarily have to offer a continuous supply of new products to keep customers happy, you may have to change your marketing strategy for some of the current products you offer. Improving or changing a product in some way often works to stimulate renewed interest.
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Innovation
When sales decline over an extended period of time, the products or services you sell could be the problem. Take a closer look at how your competitors are faring. While there may be nothing wrong with your product, the problem could be a lack of innovation in how you do business. Any successful business -- large or small -- must meet current consumer needs. Sam Hogg, Director of Venture Development at NextEnergy, points out that small companies have the advantage when it comes to innovation. While large companies may have more dollars to invest in making improvements, small businesses have less to lose if a new idea doesnt work out. Innovation isnt just about developing new products. For a lot of small businesses, innovation is more about finding ways to create new value for an already existing product.

Lower Prices
Lowering your prices is one way to remain competitive when the pressure is on. Unless your product is definitely made of better quality materials and offers more value than that of your competitors, you may have no choice but to lower your prices to attract customers, reports Entrepreneur magazine. You will probably make less profit, but if cutting prices keeps customers coming back, the move may be worth it. Pricing affects how successfully a product sells, and if you have trouble competing, you cant make money. For the right price, there will still be buyers for the product you sell. Related Reading: The Disadvantages of Market Research on New Product Development

Stand by Your Product

If you sell to a niche market, your best bet may be to stand by your product rather than try something new. Even when sales s low, it doesnt mean that there is no longer any need for the product. It may simply be a matter of finding new places to sell the product. There is always a market somewhere for an evergreen product. The problem could be that you are targeting the wrong consumer segment. Consumer attitudes change and so do their needs. According to John Zhang, a marketing professor at the Wharton School of the University of Pennsylvania, you really have to know your customers well. A practical approach is to find out what issues customers have with a product that isnt selling and then look for other ways the product can satisfy consumer needs.

Remarket the Product

Remarketing is a strategy businesses use to reintroduce a product when sales decline. For small businesses, remarketing a product costs less than developing a new product. It also involves less risk. Economics professor Conrad Berenson and marketing professor Iris Mohr-Jackson point out that product rejuvenation takes less time and can lower a company's costs, allowing for higher profitability. If you are not ready to give up on a product, focus on what makes it unique, especially if youve established brand recognition. Try launching a more creative sales strategy or target a different market segment. Educate consumers on how the product can benefit them and then back up your claims by providing exemplary customer service. Other options for remarketing a product include improving quality or developing new features to make the product more appealing to rekindle consumer interest.

How to Manage Operations to Prevent Sales Decline

By Mary Ann Anderson, MSE, Edward J. Anderson, and Geoffrey Parker, PhD from Operations Management For Dummies You can take some measures in your operations management to help prevent the decline of a product or to avoid it stalling out in the saturation phase. Some products, such as baking soda or refrigerators, are fortunate enough to never reach the decline phase; they remain in the saturation phase for eternity, usually at a lower sales level than they reached at their peak.

Repositioning
One tried-and-true method of breathing new life into a product is to find alternate uses for it. Take baking soda. When sales for the product were in the saturation phase, manufacturer Arm & Hammer came up with a brilliant idea to take advantage of the products odor -absorbing properties and started an advertising campaign suggesting that customers place whole boxes of the product in their refrigerator to keep it smelling fresh. Arm & Hammer even put a spot on the box where customers could record the date they placed it in the refrigerator, and the company recommended a regular replacement schedule. To exploit the advantages further, the firm advised customers to dispose of the old contents down the garbage disposal to keep their drains smelling fresh as well. Now you can find baking soda in a wide range of cleaning products. Another familiar example that probably happened initially by accident is the wide use of duct tape. Initially created to be used on heating ducts, the tape is now the universal go-to for holding anything together. If you look around most homes, youre sure to find a roll or two, and most likely it isnt used for its intended purpose. In fact, you can probably find duct tape in almost any color. The array of alternate uses for duct tape took a product with a very limited market and made it a household product.

Make improvements
Companies have become wise to the fact that, by introducing even small improvements to their product, they can entice consumers to abandon the old product even though it still provides good service and to purchase a new one. The iPhone is a familiar example. A classic example of how incremental improvements breathed new life into a product that was in its saturation phase is the refrigerator. Although the refrigerator will probably never enter a total decline, it had reached a saturation point where most sales were replacement sales. Manufacturers have found that by continually introducing new features, they can persuade consumers to replace their refrigerator long before it stops working and actually needs replacement. The first major feature that sent consumers back to the store was the addition of the automatic ice maker. This was followed by the side-by-side door design that facilitated putting the ice and water dispensers on the outside. The newest design is the French-door model that fixes a major flaw of the side-by-side, which is that you cant fit a pizza box in without significant rearranging of shelves and contents. Making these incremental improvements is a creative way to get more revenue out of a product because the improv ements continuously reset the products position on the life cycle curve.

Change the product portfolio

Rapidly changing technology has sped up the product life cycle and created the need for companies to introduce new products much more quickly. The computer industry has experienced these dynamics. The technology changed so rapidly at one point that a device could become obsolete within months of being purchased. Two major risks are involved with the introduction of the new. If you introduce the new product too early, youll cut off sal es of the old, often before full profit materializes. On the other hand, if you wait too long, a competitor may beat you to market with a new product that steals sales from your existing product. These risks are why the timing of a new product that provides a replacement/alternative for an exiting product is such an important decision for companies in rapidly changing environments.

A key to success in this environment is to make sure that design and operations are well coordinated around the introduction of the new product. Operations employees must be well informed of the timing of new introductions because they may need to make process changes to make the new product and to reduce inventory levels of the old product before the new one hits the market.

Buyer responses Choices of product brand dealer timing price Buy more, less, stay loyal etc

how to gain their credibility retain customer the core segment to be targeted.. Quality Personal body chemistry Brand image Teenagers Low price(relatively) Stress more on ambience Increase of celebrities Increase of social media usage especially in teenage networking sites Personal body chemistry Brand image

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