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5.6 Sales Strategy Questionnaire

What is Sales Strategy and how can a small business like Central Plumbing & Heating Inc. benefit from having one?

Sales strategy is probably the single most important items that can directly make or break a small business like Central Plumbing & Heating Inc. Why you ask? Well, the answer is very simple - for most businesses - the amount of product or service they sell directly affects their ability to stay in business. Thus coming up with a comprehensive sales strategy is key to their sales and survival. Most small businesses think that sales is the only thing that matters and how you come up with the sales is not important at all - we beg to differ - your sales strategy is what drives your sales efforts in the right direction and if you get your strategy wrong, you will most certainly not be doing as well as you should or could be doing.

Components of a sales strategy that a business owner like Felix Gonzalez needs to know about?

A comprehensive sales strategy begins with a clear understanding of the market place and the behavior of your clients as well as your competitors:Sensitivity to pricing: Are your clients extremely price sensitive? Do they react quickly to even small changes in prices?Size of Competition: Do you have a lot of competition for your products and services in a target market like Mecklenburg County, North Carolina?Competitors Strategies: Do your competitors have a very tight and competitive pricing strategy - are they pricing their products and services on the high or low side?Incentives: does your target market respond well to incentives like coupons, discounts and sales.Positioning: Where have you positioned yourself in the market place - are you seen as the low cost average quality provider or are you looked at as the high cost high quality provider of goods and services?

The pricing of your product or service and the price breaks you give to your clients are the most important elements of your sales strategy. Price your products or service too high and you will risk losing a large part of the market to your competitors - price it too low and you will risk giving your business away and not generate enough revenues and thereby profits to break even and stay in business. In larger businesses. sales strategy is a highly complicated element of day to day business operations and it entails having a very keen understanding of the marketplace. If you happen to be in retail, you must understand that your pricing ties into your positioning and is critical to survival.

In competitive target markets like Mecklenburg County, North Carolina small business owners like Felix Gonzalez are finding that not only do they have to compete with with businesses locally, but they have to compete with the interent that has resulted in the narrowing of profit margins for almost every industry.

While price may well be one side of the sales coin, the other side if volume. The balance between price and volume of sales tends to be an inverse relationship but it may not always be the case. Make sure you read about the section entitled Positioning.

What if I want to compete at the lower end of the market for my products or services?

If you are a business that is offering a product or service and you are looking to be the low cost provider for that product or service in a competitive target market like Mecklenburg County, North Carolina, remember that you will have a very tough time surviving if you are not able to generate the volume necessary to cover your overheads and break even cost. Businesses that compete on the lower end of the price spectrum look towards sales volume to make up for the loss of revenues they face due to the lowered price. This concept of pricing and profitability applies towards both goods and services.

We have always been advising small businesses like Central Plumbing & Heating Inc. that they can choose to offer their clients any two of three key components of the positioning triangle - Cost, Quality and Time. Thus depending on which of the two elements you choose to focus on, you will have to construct your sales strategy accordingly.

You must understand the constraints that these three elements of your positioning have on how you operate your business on a day to day basis. For example if you are an attorney or mortgage professional that provides high quality service with very good turnaround times, you will find it very difficult to price yourself at the bottom end of the market. You will have to increase your prices to survive because having great quality and turnaround times in your business entails that you have a well functioning office and staff and that of course entails an increase in your operational costs that you now have to cover.

How does a small business like Central Plumbing & Heating Inc. compete at the higher end of the market place?

Competing at the higher end of the market is not simply about increasing the prices for your products or service. You must have a keen understanding of your clients expectations when they pay up for your goods or services. Thus if you are in the food service business and you decide to raise your prices without an understanding of your clients expectation, you could take a hit in sales. If you start increasing your prices for your fast food offerings when the rest of your competitors are not doing so, you could actually loose market share - on the other hand if you are increasing prices but are also offering larger portions, you may actually benefit since the customer may view you to be a better bargain than your competitor - needless to say, your food still needs to taste as goes as it used to as well!

What sales strategy should I adopt in a slow market or recession?

Slow markets come and go - businesses that survive tend to be the ones that are able to keep their costs down and have a low break even and thus adjust their sales strategy accordingly to generate at least enough sales to ride our the storm. While we don't recommend that you change your sales strategy completely, since that can affect your positioning, you will have to recognize the reality of a slower sales environment and make some adjustment accordingly.

We recommend that you offer your clients discounts more aggressively and use a lot more promotions to get clients into your store or use you for your services. Moving the merchandise is much more important in tough times than holding on to a higher price point. In very competitive target markets like Mecklenburg County, Central Plumbing & Heating Inc. clients may be very price conscious but they also tend to be creatures of habits. Thus if you already have an established clientele for your goods or services, all you really have to do is show them that you have a recognition of the slower economic times and are offering them some discounts to keep their patronage.

The real challenge is of course if you have just started a new business and are in the process of creating a client base, and a recession or slow down hits the economy at the same time. This is why we recommend that new business owners keep their leverage and operating costs as low as possible, so they can withstand a slowdown as they are building up their clientele. Once a business is mature, they have the ability to ride out economic storms and in fact gobble up market share as weaker and newer competitors go out of business.

Quick Links:

  1. Go to the Corresponding Business Plan section for this industry.

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