How to Uncover the Culprit Clobbering Your Sales

As mentioned in greater detail, WonderBranding’s new focus is to teach Main Street business owners, like you, how to grow your business and deal with challenges of all sizes. (That said, please email us your marketing and advertising questions.)

Recently, WonderBranding reader and toy retailer, Phil Wrzesinski, asked:

“My biggest challenge is trying to figure out when a slow-down in business is simply the economy, something we are doing internally, or a fundamental shift in our market/industry.  The three issues require vastly different strategies to combat them and choosing wrong can be disastrous (see Borders).

I don’t know if that is anything you will address, but I would greatly appreciate any knowledge you have of signs leading one way or another.”

Phil, you ask a terrific question … one that I’m happy to address.

First, remember that you are dealing with immense natural forces which shift constantly, and identifying the specific force disrupting your sales is like predicting the stock market or our next recession.

In other words, rules and formulas simply do not exist.

At best, you can look to specific signpost questions that will give you an indication as to which force is affecting your business and costing you sales.

Second, you’re spot on … you must accurately diagnose the illness in order apply the correct remedy. Otherwise, you might make matters worse. For instance, companies who advertise during a recession often find that their market share has grown once the dark economic cloud has lifted – but companies who make good advertising for a bad product typically go out of business.

That said, here are a handful of signpost questions (broken down by category, and by no means exhaustive) to help uncover the culprit clobbering your sales:

Internal Signpost Questions:

  • Are your sales conversions (as a percentage) increasing or decreasing?
  • How about customer complaints? Testimonials? (You can also measure the occurrence of complaints and testimonials as a percentage of sales.)
  • What are prospects saying? Here, interview your employees on the front line and look for common themes such as frequently requested products or services absent from your offer.
  • Have there been any recent disruptions to your stock or inventory levels?
  • How about changes in suppliers?
  • Refinements to your strategy, message, or tactics?
  • Have there been any recent changes in policy or staffing?
  • Can you detect any conflict between what you are saying (advertising), and who you are being (customer experience) that would indicate a credibility problem?

Market Signpost Questions:

  • Are competitors’ sales levels growing or declining? And where do you stand relative to the competition? Has your position remained steady, or are your sales shrinking while the competition is growing? (I strongly encourage you to have a frank conversation with your vendors’ sales reps. Although they must protect the confidentiality of their other accounts, namely your competitors, they’ll likely be able to give you some indication of your standing relative to the competition.)
  • Has there been a recent shift in consumer behavior … maybe a shift in preference towards a disruptive technology? For example, are iPad and game apps eroding market share of traditional toys?
  • Have there been any shifts in the bargaining power of buyers or suppliers?
  • Have you seen an emergence of new competitors or substitute products/services?
  • How about the rivalry among existing competitors … has it become more heated?
  • Are companies inside your industry – but outside of your market – growing while your sales have remained flat or declining?
  • Do you own a business that’s affected by “acts of God” such as inclement weather? Has there been such an occurrence recently?

Economic Signpost Questions (your common economic indicators):

  • Generally speaking, in which direction is the economy moving … up or down? Also consider global, national and local economic trends.
  • In which direction does your business move relative to the economy? That is, are you operating a cyclical or counter-cyclical business? Have your sales recently diverged from this pattern?
  • What is the current level of consumer confidence? As you probably know, the Consumer Confidence Index® is updated monthly.
  • Similarly, you can also look at unemployment rates. Again, it might be helpful to also consider your local area unemployment statistics: http://www.bls.gov/lau/home.htm
  • Other economic indicators you may want to consider: http://www.investopedia.com/university/releases/

Phil, as you filter through these questions and others, see if you can rule out any single category or force. Not only should you – the business owner – answer these questions, but so should some of your key personnel within the business (i.e., inventory manager, purchasing, etc.). It will give a clearer picture from different perspectives and help present a much clearer signpost.

But, once again, this will not be an easy task. Making your challenge more difficult is the fact that none of these forces take place in a vacuum. Each force influences the others, which means a single culprit may not exist.

For example, down economies typically beget entrepreneurship and innovation, which can then reshape markets. Likewise, prosperity can free resources for Main Street business owners, like yourself, to increase advertising and improve your customer experience.

Always remember, you are relying on a series of rough guesses to help you uncover the root of the problem. All the best. And thank you, Phil, for sending us your question.

Got a signpost question you believe will help Phil or others? By all means, please comment and share below.

As always, if YOU have a marketing question you’d like answered, shoot us an email.

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2 Responses to “How to Uncover the Culprit Clobbering Your Sales”

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  1. Phil Wrzesinski says:

    Excellent questions!  Since I posted that question I did some digging on my own through many of those same thoughts.  What we have found is that while our local economy is showing signs of a pulse finally, we are still miles away from where we were.

    What has really helped is tracking our Market Share.  In 2010 it went down for the first time in over a decade.  In 2011 it went up dramatically, even though top line sales were down.  What happened was that both the toy and juvenile (baby) product industries had declines in business last year while our area also had a decline in population.  So our overall Market Potential decreased more than our sales decreased.

    We also saw a major shift in how customers bought baby furniture (which I should have been able to predict just from the pendulum presentations I have seen.)  New parents have gone away from buying the complete matching nursery to just buying the pieces that matter most to them.

  2. Michelemiller says:

    Great work, Phil!  You have been working hard on your business and have been doing some serious digging into all the different areas.  I really like to see that.  It certainly adds clarity, not only for you, but for your staff – takes a little of the pressure off for everyone to understand what is going on.  It also helps with knowing where you’d like to make your next move in improvement.  By continuing to work on customer satisfaction, you’re building word-of-mouth marketing so that when as the economy strengthens, your business is top-of-mind when someone needs your furniture.  Bravo!

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