How to analyze sales
In order to find out which products bring income and which bring losses, what is trending with your customers and what the demand depends on, you need to analyze your sales. Different approaches and methods are used for this purpose. Let's consider the most effective of them.
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What the analysis shows
Properly conducted analytics helps to see the growth points and prospects of the company's development. Any parameters can be analyzed:
- sales volume in physical and monetary terms;
- efficiency of work of managers, salespeople;
- return on marketing budgets;
- warehouse balances;
- indicators of work with clients at each stage of the funnel;
- profitability of the business as a whole.
Studying a set of metrics helps to make good management decisions, such as:
- change the structure or motivation of the sales team;
- update the assortment;
- increase or reduce the number of personnel in sales outlets and warehouses;
- optimize business processes in work with suppliers, logistics, customer service;
- adjust the marketing strategy.
Проводить аналитику стоит регулярно: такой подход позволяет оперативно выявлять слабые места в работе компании и своевременно внедрять решения по оптимизации.
How to analyze sales
Step 1: data collection
First of all, you need to accumulate statistics. The more data you analyze, the more accurate your conclusions will be.
What statistics need to be gathered:
- sales reports - number of transactions, average check, revenue, profit;
- reports on the sales of each product or group of products;
- performance results of each division or manager;
- reports on product sales in different regions - sales geography;
- feedback from customers.
Data can be collected monthly, quarterly, annually, or at other convenient intervals.
Step 2: sorting the data
From the collected statistics, select the right data depending on the metric you want to study.
For example:
- to analyze the dynamics of the business you will need reports on product sales for the current and previous periods;
- to assess the structure of the customer base - the total number of customers and information on transactions for the reporting period;
- to assess demand - statistics of sales of each product group for several equal periods.
As you can see, already at the stage of data collection and sorting, you need to know what indicators you will analyze and what method you plan to use.
Step 3: analytics
Reports and statistics can be studied in different sections:
- sales volumes,
- dynamics,
- structure,
- assortment.
By examining several metrics at once, you'll know what products your company sells and in what volume during different periods, you'll be able to see seasonal spikes in demand, correlate with promotions, sales and advertising launches.
Additionally, the following parameters can be analyzed:
- efficiency of each retail outlet - for businesses with an extensive distribution network;
- efficiency of each manager or contact center operator - for online stores and companies with remote sales of goods;
- efficiency of interaction between departments - for transactions involving several departments, for multi-stage contract negotiation, for companies with a multi-level structure, in-house production, and complex logistics.
You don't have to process all the data manually; you can leave some of the work to technology. Let's look at the most effective analytics methods and tools for automating routine tasks.
Methods of sales analysis
Analysis of dynamics
You need to compare the statistics for the current period with data for previous similar periods to see whether the dynamics are positive or negative. You can compare by revenue, profit, number of orders, customer base growth, and other metrics.
The following formula is used to analyze the dynamics:
(Indicator for the current period / Indicator for the previous period) × 100.
For example, you want to know how much revenue has increased or decreased in 2022 compared to 2021. Then:
- The indicator for the current period is revenue for 2022;
- The indicator for the previous period is the revenue for 2021.
Let's use the formula and evaluate the result:
- Dynamics above 100% - positive trend, means revenue growth;
- Dynamics less than 100% - negative trend, revenue decline;
- Dynamics of 100% - there is neither growth nor decline, the situation in 2022 remains unchanged.
The formula is suitable for assessing the dynamics of the entire business or the efficiency of individual outlets.
Estimation of demand uniformity
You need to plot the sales of a product over several months or years:
- X-axis - time scale with reporting periods;
- Y-axis - revenue or number of units sold.
The graph will show how the product sells during different periods and how demand changes depending on the season, holidays, weather and other factors.
In times of falling demand, there are two ways to go:
- increase interest in the product by means of advertising or discounts;
- Conversely, reduce the quantity of the product and favor more popular product groups.
ABC analysis
The method is suitable for retail trade. It shows the share of goods in total sales and helps you understand which products bring the main profit and which ones you are selling at a loss.
The method is based on the Pareto principle: 20% of sold goods bring 80% of profit. The basis for the calculation is the profit or revenue from the sale of each product.
How to do ABC method analytics:
- take the profit or revenue figures for each product category;
- calculate what proportion of total sales each category accounts for;
- categorize the products into groups A, B and C, where:
- A - category generates up to 80% of profit or revenue (best sellers),
- B - up to 15% of profit or revenue (high demand products),
- C - less than 5% of profit or revenue (unprofitable products).
Based on the results, revise the approach to assortment formation and adjust the structure of the product matrix.
Study of the assortment structure
The method is suitable for improving the structure of the product matrix. It can be used when introducing a new product to the market, as well as for prioritizing product groups with the highest potential profitability.
The first step is to calculate the parameters of each product group:
- the market share it holds,
- market growth rate.
Then, based on the calculations, you need to categorize the goods into four categories:
- “Stars: highest market share, fastest growth rate;
- “Cash Cows: high market share but lower growth rate than the stars;
- “Difficult Kids": low market share, but high growth rate;
- “Dogs": low market share, slow growth.
The next step is to develop a strategy.
The “Stars” category contains the most promising products, they generate the most revenue. It is important to maintain market leadership in this category.
“Cash cows” bring constant profit without investments. To maintain income, it is enough to maintain the realization of this group of goods in current volumes.
“Difficult children” have high potential, but so far bring few profits. Often new products and products for a narrow audience fall into this category. The strategy is to continue investing in them at the same volume, accumulate statistics, and then decide whether to exclude them from the matrix or invest more.
The “Dogs” category is unprofitable products with low margins that require constant investment. Possible strategies are to abandon this product group altogether or reduce investment activity.
Analyzing work with clients
The method helps to understand the quality of the store, call center, and sales staff.
To evaluate the performance of sales managers, you will need:
- reports for each employee,
- sales plans,
- customer and peer feedback.
This data is needed in order to:
- compare the manager's personal plan with his/her performance results,
- compare the performance of different employees,
- assess the competencies of an employee based on feedback from customers.
This way you'll know how productive your employees are, who needs more training, and who needs encouragement and motivation.
Improving the quality of sales managers' work leads to increased customer loyalty. The more data you analyze, the better you can optimize the work of your employees, and the more noticeable the result will be for the business. To collect as many statistics as possible, you can use technology to analyze telephone conversations. For example, the SaluteSpeech Insights system.
The system analyzes every call in real time:
- recognizes employee and customer cues;
- assesses the emotional coloring of each cue;
- categorizes conversations as positive, neutral, and negative;
- predicts feedback.
The system evaluates the conversation on 345 characteristics and knows how a customer would rate a conversation with an operator.
With SaluteSpeech Insights, you can track customer satisfaction dynamics and react quickly to any changes. For example, if the system gives a low rating to a conversation, you can immediately try to correct the situation.
