What is Sales Analysis? Marketing Cost Analysis

What is Sales Analysis?

It is a detailed examination of sales volume by territory, sales person, customer, product line, etc. It works on the principle that the trends of the total sales volume conceal rather than reveal the market reality.

Researchers reveal that in most organizations a large percentage of customer order territories bring in a small percentage of total sales.

This is known as the 80-20 principle. 80% of the orders contribute over 20% of sales and 20% of selling units amount for 80% of sales. Likewise there is the example of the iceberg principle which shows that total sales volume may reveal 10% of the real market situation which is above the surface and 90% may remain unknown. Therefore, it is recommended that for unearthing reality and gaining meaningful insight, sales must be analyzed by territory, by sales person, by customer.

The sales manager scans the total sales on a territory basis. Any unusual conditions in any territory such as intense competition, the strike by labour union or transportation, etc., which make an adverse effect on the company’s products’ are considered for further sales analysis.

Marketing Cost Analysis

Here the cost incurred to achieve sales is considered. It is not just sales but sales with budgeted profits or expenses that matter. It is a fact-finding analysis that relates cost to sales volume and resultant profitability. It relates the cost and financial discussion of each selling transactions and activity. It can generate:

• Cost of goods per rupee of sale
  
• Profit per territory, product pack, sales person
  
• Profit per rupee of sale
  
• Sales volume and turnover of receivables
  
• Turnover of stock and profitability
  
• Average value of order
  
• Average cost per order
  
• Total value of orders.

Usefulness of Marketing Cost Analysis: Successful cost analysis benefits the manager in ascertaining:

• Relative cost and profitability of sales operation.
  
• Profitable, not so profitable and not profitable territories.
  
• Products, pack size, market segments, a distribution channel.
  
• Minimum order level quantity.
  
• Productivity of sales person.
  
• Profitability of different sales promotion techniques.
  
• Profitability of different marketing mix programmes.

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