5 Methods for Analyzing Sales Performance
Posted: Sun Dec 22, 2024 9:01 am
Let's look at the most popular analysis methods:
ABC sales analysis
This type of analysis is based on the Pareto principle, according to which 80% of the company's total income comes from the 20% most popular products. The method allows you to determine the share of the total sales of various types of products as a percentage.
Sales efficiency depends on this indicator. ABC analysis is especially useful for retail organizations, since it can be used to identify product groups with the highest and lowest profit margins.
For the analysis, it is necessary to determine indonesia email database the sales volumes by product, and also calculate the share of each product in the final sales results. Then it is necessary to sort by decreasing share, and then calculate the total share as a cumulative total, that is, the share of each subsequent product in total with the shares of the previous products. For example:
Total share of product 3 = share of product 3 + shares of products 1 and 2
Let's look at an example using a table. As a result of calculations, all goods will be divided into three groups:
Group A includes goods in the greatest demand, which bring from 0 to 80% of profit;
Group B contains goods of moderate demand, which bring in less profit (from 81 to 95%);
Group C consists of unprofitable goods that need to be removed from the assortment (from 95 to 100%).
For example, a company sells five products, but their share in the total profit by monthly sales is difficult to estimate, since the data changes from month to month. Conducting an ABC analysis will show that group A includes only products 3 and 2, and it is better not to work with product 4 at all.
Product Sales, in rubles Total Total share ABC
January February March
3 2000 8500 1200 11,700 28.5% A
2 3200 4100 3800 11 100 55.5% A
5 1900 5400 2900 10 200 80.3% IN
1 100 5000 500 5600 93.9% IN
4 1000 800 700 2500 100.0% WITH
XYZ Demand Analysis
This method allows you to determine product categories that have stable demand from consumers. Analysis of demand constancy helps to predict the effectiveness of sales of goods and services and to plan: the stronger the fluctuations, the more difficult it will be to bring sales of a given product to planned indicators in the future.
XYZ Demand Analysis
Source: shutterstock.com
To conduct the analysis, you need to create a list of all products and their sales volumes by month. After that, you need to find the variation coefficient, which shows how demand can change.
The formula for calculating the coefficient manually is difficult to use, but it is easily configured in Excel:
Coefficient of variation = Standard deviation / Mean for all months × 100%
Depending on the coefficient of variation, products fall into the following categories:
Category X — coefficient below 10%. There is a stable demand for these products, so you can accurately plan the quantity of goods. It will not run out unexpectedly and will not lie in the warehouse;
category Y — the coefficient is within 10-25%. Demand for goods changes depending on the season, advertising, sales, etc., so purchases should be planned taking these factors into account;
Category Z — the coefficient exceeds 25%. The demand for the product is random and difficult to predict. The number of such products should be minimized.
BCG matrix
This method allows you to predict the effectiveness of increasing sales volumes by working with the product range. The calculation is based on sales volumes, market share and market growth rate. The results are reflected in the BCG matrix, which has four fields:
BCG matrix
Source: shutterstock.com
For each product group in the corresponding field, a specific strategy must be applied:
"Stars" - these products are characterized by the fastest growth, they occupy a large market share. It is necessary to pay attention to their promotion, but often this requires significant investments, the effectiveness of sales depends on advertising.
"Cash cows" - occupy a large market share, the growth rate is low. They are able to provide stable profits with small investments.
"Dogs" - the growth rate is poor, the market share is small. Such a product drags the company down, so it is better to get rid of it.
"Problem children" - occupy a small market share, but have a significant growth rate. These products have good prospects, but require significant investment.
Factor analysis
This method is used to determine the factors that influence sales efficiency and to establish the extent of their influence. When conducting such an analysis, it is necessary to take into account that profit is influenced by revenue and expenses, revenue depends on the cost and quantity of goods sold, and expenses are divided into several categories. For the analysis, all sales are divided into these components, and then their change by periods is determined as a percentage.
Let's look at the table, which shows that the organization's profit remained at the same level, although revenue increased by 18%. If we look at the last column, we will see that commercial expenses have increased by almost 100%. It is this factor that leads to the fact that the business does not grow.
ABC sales analysis
This type of analysis is based on the Pareto principle, according to which 80% of the company's total income comes from the 20% most popular products. The method allows you to determine the share of the total sales of various types of products as a percentage.
Sales efficiency depends on this indicator. ABC analysis is especially useful for retail organizations, since it can be used to identify product groups with the highest and lowest profit margins.
For the analysis, it is necessary to determine indonesia email database the sales volumes by product, and also calculate the share of each product in the final sales results. Then it is necessary to sort by decreasing share, and then calculate the total share as a cumulative total, that is, the share of each subsequent product in total with the shares of the previous products. For example:
Total share of product 3 = share of product 3 + shares of products 1 and 2
Let's look at an example using a table. As a result of calculations, all goods will be divided into three groups:
Group A includes goods in the greatest demand, which bring from 0 to 80% of profit;
Group B contains goods of moderate demand, which bring in less profit (from 81 to 95%);
Group C consists of unprofitable goods that need to be removed from the assortment (from 95 to 100%).
For example, a company sells five products, but their share in the total profit by monthly sales is difficult to estimate, since the data changes from month to month. Conducting an ABC analysis will show that group A includes only products 3 and 2, and it is better not to work with product 4 at all.
Product Sales, in rubles Total Total share ABC
January February March
3 2000 8500 1200 11,700 28.5% A
2 3200 4100 3800 11 100 55.5% A
5 1900 5400 2900 10 200 80.3% IN
1 100 5000 500 5600 93.9% IN
4 1000 800 700 2500 100.0% WITH
XYZ Demand Analysis
This method allows you to determine product categories that have stable demand from consumers. Analysis of demand constancy helps to predict the effectiveness of sales of goods and services and to plan: the stronger the fluctuations, the more difficult it will be to bring sales of a given product to planned indicators in the future.
XYZ Demand Analysis
Source: shutterstock.com
To conduct the analysis, you need to create a list of all products and their sales volumes by month. After that, you need to find the variation coefficient, which shows how demand can change.
The formula for calculating the coefficient manually is difficult to use, but it is easily configured in Excel:
Coefficient of variation = Standard deviation / Mean for all months × 100%
Depending on the coefficient of variation, products fall into the following categories:
Category X — coefficient below 10%. There is a stable demand for these products, so you can accurately plan the quantity of goods. It will not run out unexpectedly and will not lie in the warehouse;
category Y — the coefficient is within 10-25%. Demand for goods changes depending on the season, advertising, sales, etc., so purchases should be planned taking these factors into account;
Category Z — the coefficient exceeds 25%. The demand for the product is random and difficult to predict. The number of such products should be minimized.
BCG matrix
This method allows you to predict the effectiveness of increasing sales volumes by working with the product range. The calculation is based on sales volumes, market share and market growth rate. The results are reflected in the BCG matrix, which has four fields:
BCG matrix
Source: shutterstock.com
For each product group in the corresponding field, a specific strategy must be applied:
"Stars" - these products are characterized by the fastest growth, they occupy a large market share. It is necessary to pay attention to their promotion, but often this requires significant investments, the effectiveness of sales depends on advertising.
"Cash cows" - occupy a large market share, the growth rate is low. They are able to provide stable profits with small investments.
"Dogs" - the growth rate is poor, the market share is small. Such a product drags the company down, so it is better to get rid of it.
"Problem children" - occupy a small market share, but have a significant growth rate. These products have good prospects, but require significant investment.
Factor analysis
This method is used to determine the factors that influence sales efficiency and to establish the extent of their influence. When conducting such an analysis, it is necessary to take into account that profit is influenced by revenue and expenses, revenue depends on the cost and quantity of goods sold, and expenses are divided into several categories. For the analysis, all sales are divided into these components, and then their change by periods is determined as a percentage.
Let's look at the table, which shows that the organization's profit remained at the same level, although revenue increased by 18%. If we look at the last column, we will see that commercial expenses have increased by almost 100%. It is this factor that leads to the fact that the business does not grow.