Do You Want to Increase Your Sales?
By Brian Jud
Are you sure? It is difficult to plan your actions and focus your attention on such an indefinite objective as "increase sales." Instead, specifically restate your objective to increase your gross revenue, build additional profits or perhaps deplete a large inventory of books.
The distinction is important because each objective requires a different strategy, particularly when you consider the element of time. While not mutually exclusive, the journey to achieving any of these goals is accomplished by manipulating certain tools over which you have complete control: the price, distribution network, promotion and even the physical characteristics of your books.
The way you combine and execute these variables will impact your revenue, profits and unit sales. A simple price reduction may reduce your inventory in the short term but have lingering, negative impact on your profitability. And a reduction in your promotional budget may increase short-term profitability but deny long-term revenue. Here are examples of strategies to reach each objective.
Objective One: Increase your gross revenue (GR). Gross revenue is the total dollar amount of your income before deducting expenses, returns or the cost of goods sold. There are several strategies that should build GR and infuse working capital. First, give yourself more items to sell by extending your product line. You can accomplish this by publishing more books (new titles, new authors, sequels) or producing other products (audio/video programs, booklets, CDs).
Next, increase the order size. It is usually more efficient to sell additional books to fewer, large customers than it is to a broad base of small customers. This might require more attention on major accounts (chains, wholesale clubs), or increased emphasis on special sales.
Third, increase your promotional spending. Additional publicity, advertising, direct marketing, sales promotion and personal selling will increase unit sales, and when combined with a price increase will further enhance GR. As you have already surmised, the price for greater GR is lower profitability in the short run.
If you focus on building long-term GR you can also build market share. In this case you would maintain a competitive price and advance the value of your titles through improved quality or design. Maintain a balance between traditional distribution and special sales and improve your promotion.
Objective Two: Increase profitability. Profit is the money left after deducting all your costs from your GR. The obvious ways to build profits are to increase GR, lower your costs, or both. However, there is more you can do strategically, especially when you make the distinction between profit optimization (long term) and maximization (short term).
If your objective is long-term profit optimization there are additional tactics at your disposal. First, hold prices steady and invest in quality improvements. Instead of measuring the profit per title, assess the contribution of the total mix to long-term profits. For instance, use one title as a loss leader or bundle two or more titles. Also, maintain a balance of traditional and special sales and increase promotion to reduce returns. Short-term profits may decrease, but in the long run they will increase.
Conversely, if your objective is short-term profit maximization there are different actions to take. In this case you might want to increase selected prices and decrease quality. This does not mean that you should publish an inferior product, but you might publish a softcover instead of casebound edition. Furthermore, increase emphasis on special sales and decrease sales through the traditional distributor _ wholesaler _ bookstore channel where returns, discounts and 120-day payments wreak havoc on profits. A decrease in promotional expenditures will improve your short-term profitability, but probably at the expense of future net income.
Objective Three: Increase unit sales of a particular title. There is always an incentive to reduce a large inventory. But before you automatically think of remainders or extreme price reductions, evaluate the cause of the inventory glut. If seasonality is the culprit you may be best served by carrying the stock for a short period. However, if poor quality or obsolete information is the reason, then choose other tactics.
Lowering the price (or offering a price incentive) is an option, but generally will not resolve a problem caused by poor quality or if there is no need for the item (What would you pay for a ballpoint pen sharpener?). Stress traditional distribution and targeted promotion (i.e., direct marketing). Emphasize personal selling to increase the typical order size and to find new markets. You will find a decrease in profits, but this might be offset in lower carrying costs.
The next time the urge to increase sales hits you, be more specific about what you really need. Evaluate not only the available strategic options but also the best combination of them. Implement those with the greatest likelihood of delivering what you truly want.