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Do You Want to Increase Your Sales?

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Are you sure that “increased sales” is really what you want? It’s relatively easy to achieve an indefinite objective such as that, but your business will become more successful in the long run if you can be more focused. Instead of simply trying to increase sales, restate your objective to “increase your cash flow,””build incremental profits” or “deplete a large inventory of books.”The distinction is important because each objective requires a different strategy-particularly when you consider the element of time. The journey to achieving any of these goals is accomplished by manipulating certain marketing tools over which you have complete control: the price, distribution, promotion, and even the physical characteristics of your books.The way you combine and execute these variables will impact your cash flow, profits, and unit sales. For example, a price reduction may lower your inventory in the short term but have lingering, negative impact on your profitability. And a reduction in your promotional budget may increase short-term cash flow but deny long-term revenue. Here are examples of strategies to reach a more focused objective.Objective 1: Increase your cash flow. Cash flow is your ability to generate cash from operations, after deducting expenses from your revenue. Publishing companies that can generate cash can sustain higher growth rates.This can be accomplished in a two-step process, the first of which is to improve gross margins. One way to do that is to reduce your cost-of-goods-sold through process efficiencies or volume discounts. In addition, speed up cash conversion by managing inventory, collecting receivables more quickly, and extending payables.In step two, use your newfound cash to implement marketing actions that will improve your cash flow. For instance, extend your product line by publishing more books (new titles, new authors, sequels) or producing other products (audio/video programs, booklets, CDs). Or increase the average order size by selling more books to fewer, larger customers. This strategy might require greater attention to major accounts (chains, wholesale clubs) or increased emphasis on special sales.Next, increase your promotional spending. Additional publicity, advertising, direct marketing, sales promotion, and personal selling will increase unit sales, and when combined with a price increase, could further enhance cash flow. As you have surmised, the price for long-term cash flow is lower profitability in the short run.Objective 2: Increase profitability. Operating profit is the money left after deducting your cost-of-goods-sold and expenses (selling, general, and administrative) from net revenue. Obvious ways to build profits are to increase revenue, lower your costs, or both. However, there is more you can do strategically, especially when you make the distinction between profit optimization (long term) and maximization (short term).If your objective is long-term profit optimization, hold prices steady and invest in quality improvements. Instead of measuring the profit per title, assess the contribution of the total mix to long-term profits. For instance, use one title as a loss leader or bundle two or more titles. Also, maintain a balance of traditional and special sales and increase promotion to reduce returns. Short-term profits may decrease, but in the long run, they will increase.Conversely, if your objective is short-term profit maximization, you should take a different approach. In this case, you would increase selected prices and decrease quality. This does not mean you should publish an inferior product, but you might publish a softcover instead of casebound edition or use black-and-white illustrations instead of four-color ones. Additionally, decrease sales through the traditional distributor (bookstore channel) where returns, discounts, and 120-day payments wreak havoc on profits. A decrease in promotional expenditures (with a corresponding increase in attention to special sales) will improve your short-term profitability, but probably at the expense of future net income.Objective 3: Increase unit sales of a particular title. There’s always an incentive to reduce a large inventory. But before you automatically think of remainders or extreme price reductions, evaluate the cause of the inventory glut. If seasonality is the culprit, you may be best served by carrying the stock for a short period. However, if poor quality or obsolete information is the reason, then choose other tactics.Lowering the price (or offering a price incentive) is an option, but generally will not resolve a problem caused by poor quality. Emphasize traditional distribution and targeted promotion (i.e., direct marketing). Stress personal selling to increase the typical order size and to find new markets. Profits will probably decrease, but this might be offset by lower carrying costs.Conclusion

The next time the urge to “increase sales” hits you, be more specific about what you really need. Evaluate not only the strategic marketing options that are available, but also the best combination of them. Implement those with the greatest likelihood of fulfilling your focused objective. That way, you are more likely to achieve your real goal.

Brian Jud is President of Book Marketing Works, a company helping independent publishers increase their revenue and profits from special sales. Contact Jud at imarketbooks@aol.com; PO Box 715, Avon, CT 06001-0715; phone 860/276-2452; or fax 860/276-2453. You can visit his Website at http://www.strongbooks.com.

 

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