You want to boost your sales. Make sure that the sales volume is supported by all operational functions in the company. Think about machine and personnel capacities. Are these capacities in all functions prepared for the targeted volume or can they be scaled without any major problems? If this is not the case everywhere, there will be bottlenecks in the process which will prevent the increase in volume despite additional costs.
How do you achieve additional sales volume? You need to increase the reach of your advertising and sales activities. Obviously, you can improve sales through targeted advertising and active selling. You can also draw attention to your products and services on the Internet. Meanwhile, the procedures for optimizing websites for search engines are well developed. These natural measures are preferable to the following, but they can also have an effect.
You can also “buy” additional volume, including from additional customer segments, through price discounts. Expanding sales volume can make sense, but it is not always the case. Think critically about whether more volume is really a boon for your company? What impact will the additional volume have on revenue? What impact will it have on your profitability? Will it increase your dependency on customers, market segments or sub-markets? How much will you depend on the additional volume in the future if you have aligned your capacities to it?
Example 1: In the past, paper webs from which tight impervious bags were to be made were coated on the inside with polyethylene, which is sealable. This two-layer material was used, for example, to make bags with an aroma barrier for transporting tea and cocoa and bags for transporting fungicides and pesticides. Incidentally, the simplest version of such an impervious bag is the “vomit bag” in airliners. A Rhineland-Palatinate manufacturer of such heat-sealed block-bottom bags was financially squeezed by its parent company. For decades, investments were only possible to a limited extent. Therefore, the profitable company was not able to invest in modern machines for the production of contemporary stand-up pouches made of plastic. Sales stagnated.
After almost all competitors had switched to the trendy stand-up pouches, this manufacturer had become an insider tip and was able to generate fantastic margins in the remaining niche market for further decades with the outdated production principle.
Example 2: In the automotive supply industry, prototype samples are needed for product development. Producing such samples in small quantities is not much fun for series manufacturers. Automobile manufacturers also have to ensure the supply of spare parts for many years. At some point, this is also no longer fun for series manufacturers when the batch sizes to be produced become too small.
A manufacturer in northern Germany specialized in these two applications. The company specializes in vulcanizing door seals for product development and spare parts supply on old machines built before the “green machine era”. The company even bought back obsolete machines from Eastern Bloc countries that had been shipped there decades ago. The workforce was older than average; they were skilled workers who knew how to operate and maintain these old machines. And the company was able to grow with profitable orders and is successfully managed. In this field of business, what counts is technical expertise and the ability to retool quickly, not mass production.
If you have capacity that you want to utilize, consider adding a second brand or product line that you can sell at a lower price without cannibalizing your existing brand.
Extreme example: Ferrero’s “Nutella” brand is so strong that private label brands have little impact on Nutella sales and price in the market.
With a second product line, you can serve additional market segments and generate contribution margins.
You can also change your business model to gain access to additional market segments.
Example: A manufacturer of beer crates suffered from the dependence on the market power of a few large brewery groups. To introduce a set of 5 different beer crates with innovative design, 5 complex and large new injection molds are needed, each costing ?200,000. For a “crate family” (11s, 16s, 20s, 24s, 30s), this means an investment volume of ?1m. For large brewery groups, which have 3 million crates injected annually, such a decision, which enables them to position their beer advantageously in the beverage market in a competitive comparison, is economically justifiable. For smaller breweries, which only need a total of 100,000 crates, this is not feasible. They would be stuck with ?10 per crate of beer sold.
But if a crate manufacturer receives a commitment from 30 smaller breweries to buy 100,000 crates each, the investment is spread over 3 million crates. This means 33 euro cents per crate and can be realistically realized. If the manufacturer produces the crates in different colors and uses inmold labels to individualize the crate design, the branding of each brewery can be implemented.
In addition, smaller breweries pay the crate manufacturer higher prices for the crates than the large brewery groups.
A letter of intent (LoI) can therefore open the way to a broader target customer group below the top segment. It’s a way to increase sales volume while reducing dependence on individual customers.
Perhaps the idea behind the last example can be applied to your business.
If you can’t implement a sales expansion idea directly, there are often ways to achieve the goal indirectly.
Example: A North Rhine-Westphalian supplier of plastic fruit and vegetable crates wanted to increase sales by replacing disposable cardboard boxes from a discounter’s supply chain with reusable plastic crates. Replacing the ugly-looking cardboard cartons with attractive, stackable plastic crates was intended to make the discounter’s stores more visually appealing. The key account manager reported that the discounter’s purchasing department liked the idea after consulting with marketing, but was not prepared to pay for the plastic crates; after all, the cardboard boxes had previously been provided by the producers.
So an attempt was made to get the suppliers to buy reusable crates. Also in vain. Why should the suppliers invest?
Never give up. A large, very liquid recycling company wanted not only to recycle old plastic into granulate and supply plastic processors with the recyclate, but also wanted to implement a new sustainable business model. This opportunity turned into a win-win-win situation: The recycler founded a company that set up a plastic crate pool and operated it for the discounter (taking back from the discounter, technical inspection, cleaning, renewed supply for circulation). The plastics processor supplied plastic crates into this pool. The discounter received access to cleaned plastic crates in return for a user fee. The usage fee was charged to the fruit and vegetable suppliers.
This example shows that you can be successful if you combine the unconnected. To do this, you have to keep your eyes, ears and sometimes even your nose open and be alert for new combinations that make innovations possible in the first place. Do not limit your scope of possibilities unnecessarily. Talk about opportunities in the management team, even if the implementation seems impossible on the surface. Very good solutions often result from creative combinations. The creativity for innovations is not enough; it must be taken up by the sales management.
A commitment to sustainable management can increase sales in a competitive environment. It is therefore also worthwhile thinking through and specifically implementing concrete approaches to sustainable management in order to increase sales.