In the early weeks and months of any new venture, large amounts of both effort and money will be expended without any visible signs of sales revenue, let alone profits. Even once the business has been trading for some time, the most reliable predictor of likely future results will be the sales and marketing efforts for the immediate past. Your business plan should explain how you intend to monitor and control this activity.
CASE STUDY The Supreme Garden Furniture Company
Gordon Smith set up his business, the Supreme Garden Furniture Company, shortly after being made redundant. Using 800 square feet on the ground floor of an old Lancashire textile mill, he planned to produce a range of one- to four-seat garden benches in an authentic Victorian design, together with matching tables. Each item in the range was manufactured to a very high standard using top-quality materials, such as kiln-dried African Iroko hardwood.
With professional advice he drew up a business plan incorporating cash and profit forecasts, an assessment of the market and his likely competitors, the plant and machinery required and the start-up capital he would need.
His main customers would be garden centres, and he planned to spend a couple of days a week out on the road selling, initially in Lancashire, Yorkshire and Cheshire. He also produced a leaflet and price list which he intended to send to potential customers further afield. These he would follow up later.
Once Smith had gained a number of customers, he found that future sales to existing customers were much easier than constantly seeking new customers. So, he kept records of existing customers, to monitor their purchases and plan follow-up visits.
From an analysis of his customer records Smith was subsequently able to discover that garden centres in the south-east placed average orders of £2,000 a time, while in his home area a £500 order was exceptional. In his business plan for his future trading he would be able to incorporate this information and alter his selling strategy accordingly (see Table 26.1).
Table 26.1 Sales and marketing controls
|
Sales and marketing report for July |
||||
|
Control |
Objective |
Result |
Variance |
Action |
|
Sales volume |
10 |
8 |
(2) |
Step up sales activity |
|
Sales value |
£5000 |
£4500 |
(£500) |
Emphasize higher-priced products |
|
New customers |
6 |
5 |
(1) |
Make more calls |
|
Repeat customer purchase – numbers |
3 |
2 |
(1) |
Incentivize existing customers |
|
Average order size – North |
£1000 |
£300 |
(£700) |
Shift emphasis to visiting fewer but bigger accounts |
|
Average order size – South East |
£1000 |
£2000 |
£1000 |
Reduce sales activity in the North and do more in the South East |
|
Number of sales visits |
20 |
15 |
(5) |
Plan territory and calls better to fit in more sales visits |
Controlling your promotional costs and judging their cost-effectiveness is also an early, vital marketing control task.
CASE STUDY Richer Sounds
Julian Richer opened his first Richer Sounds shop (www.richersounds.com) at London Bridge when he was 19. Today he has 53 outlets, and together with his online business generates sales of over £144 million a year. Richer was worth an estimated £115 million in 2014. Performance measurement and control is based on a wide range of financial measures, such as profit, sales, and stock turn, enhanced by measures of customer satisfaction, employee involvement and employee satisfaction. In addition stores are assessed by ‘mystery shoppers’. Employees are given performance information through weekly reports and a monthly video from the chairman relaying facts about company performance on sales, margins, customer satisfaction and proposed changes.
Richer’s plan by 2014 was to ‘stick to the knitting’ by doing more of what they do now – keeping everyone informed.
In May 2017 Which? awarded Richer Sounds the accolade of Retailer of the Year 2017 alongside Apple and John Lewis.
Equally, advertising costs per sales lead generated and converted should be recorded, while tear-off coupons, discounts on production or special offer leaflets all help to measure the cost-effectiveness of your promotions.
CRM is the business strategy concerned with identifying, understanding and improving relationships with your customers to improve customer satisfaction and maximize profits. The myriad of facts and figures that need to be assembled have made the subject ideal for software applications.
For example, businesses can maintain a database of which customers buy and what type of product, and when, how often they make that purchase, what type of options they choose with their typical purchase, their colour preferences and whether the purchase needed financing. This information will
advise the sales team on what products services or messages are likely to be the most effective and when would be a good time to target each customer.
While CRM systems put customers at the centre of the data flow, sales force management systems capture, track and manage sales enquiries in a central database that track leads throughout the sales cycle from lead generation to closed sale.