Facilitators Guide Cathy

There are different ways to promote a product in different areas of media. Promoters use internet
advertisements, special events, endorsements, and newspapers to advertise their product.
Many times with the purchase of a product there is an incentive like discounts (i.e., coupons), free
items, or a contest. This method is used to increase the sales of a given product

1.2 Promotional Activities:-

There are an unlimited number of additional promotional activities. You can include any of the
following:

 Sponsorship of special events
 Participation in community projects like educational boards and city councils
 Exhibition at trade shows. You can set up a booth or kiosk to showcase your products or

services.
 Fairs. Depending on your product, you might consider educational fairs, job fairs, or county

fairs.
 Public speaking and conferences. Making speeches or participating on panels at

professional association meetings, conferences, and other events positions you and your
company as a leader in your field.
 Freebies. Everyone loves give-aways. If you can't afford to slap your logo on baseball caps
and mouse pads, consider coupons and free samples.
 Marketing collateral. Materials such as newsletters, brochures, and fliers all get your
message across to prospective customers.

It's crucial that you estimate your costs as accurately as possible. You should be able to obtain a
rate schedule from any media outlet and the sales departments of fairs and trade shows. Finally, in
order to measure your success or failure in various promotional activities, you need a specific
objective stating what you want to accomplish by what date and a way to measure your success. A
poor example of measurable objective would be "sending out brochures." A better example is
"sending out 1,000 brochures by May 1."
Small business owners often look for ways to make their marketing campaigns more effective. One
approach is to capitalize on opportunities for seasonal promotions, sales or special events. Offer
deep discounts or extended hours during traditional holiday shopping seasons. Create specialty gift
packages tailored to seasonal events such as graduations and weddings. Host special sales events
that will assist shoppers on Valentine's Day or Mother's Day. Offer "one-stop-shopping" by
combining your goods or services with those of retailers in related businesses to appeal to
shoppers' desires for convenience during holiday or back-to-school seasons.

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Once a good promotional opportunity has been identified, it’s time for retailers to ensure that their
websites make it as easy as possible for customers to find what they want, while being flexible and
easily modified at a moment’s notice.
It is essential that the process of designing an effective online promotion is simple and stress-free –
this will make it easy to react quickly to customer trends and create impromptu promotions to
harness profitable moments in between the more traditional seasonal periods. If a retailer is already
personalising its site or emails, seasonal promotions should also be made personal – using the
information they have about customers will help retailers to tailor campaigns according to the
behaviours of each individual, making a sale far more likely.
Retailers should also remember that no matter how great a promotion is, if customers’ eyes are not
drawn to the products in question, chances of increased sales are much lower. To prevent a
promotion becoming lost on a page, it is important to make sure that merchandise is clearly
highlighted as being part of the campaign, complete with bold design such as a unified colour
scheme, banners and calls to action. A user experience expert could help with this aspect of the
website.

1.3 Advertising:

Media Relations
Design a comprehensive plan for contacting and maintaining relationships with select members of
the media. You might want to develop a media relations campaign if it would benefit your company
to be mentioned in newspaper, magazine or TV broadcasts viewed by your target audience. Begin
by creating press releases, press kits and public service.
Print Advertising
This ranges from classified and display ads in trade journals, magazines, and newspapers, to ads
placed in programs for events.
Other Advertising
This comprises outdoor advertising, such as billboards and bus boards broadcast advertising on
radio, TV, and cable TV and last but not least, Internet sites.

2. Pricing

Pricing is a difficult decision when launching a product and a high or low pricing strategy may be
taken, with the general effect that the higher the price the less products you will sell the higher the
profit margin will be.

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Higher pricing seeks a premium market either because the product is desirable or because it is
necessary and there are no cheaper options. Market positioning needs to take account of this.
Good pricing strategy helps you determine the price point at which you can maximize profits on
sales of your products or services
2.1 Pricing at a Premium
With premium pricing, businesses set costs higher than their competitors. Premium pricing is often
most effective in the early days of a product’s life cycle, and ideal for small businesses that sell
unique goods.
Because customers need to perceive products as being worth the higher price tag, a business must
work hard to create a value perception. Along with creating a high-quality product, owners should
ensure their marketing efforts, the product’s packaging and the store’s décor all combine to support
the premium price.

2. 2 Pricing for Market Penetration
Penetration strategies aim to attract buyers by offering lower prices on goods and services. While
many new companies use this technique to draw attention away from their competition, penetration
pricing does tend to result in an initial loss of income for the business.
Over time, however, the increase in awareness can drive profits and help small businesses to stand
out from the crowd. In the long run, after sufficiently penetrating a market, companies often wind up
raising their prices to better reflect the state of their position within the market.

2.3 Economy Pricing
Used by a wide range of businesses including generic food suppliers and discount retailers,
economy pricing aims to attract the most price-conscious of consumers. With this strategy,
businesses minimize the costs associated with marketing and production in order to keep product
prices down. As a result, customers can purchase the products they need without frills.
While economy pricing is incredibly effective for large companies like Wal-Mart, the technique can
be dangerous for small businesses. Because small businesses lack the sales volume of larger
companies, they may struggle to generate a sufficient profit when prices are too low. Still,
selectively tailoring discounts to your most loyal customers can be a great way to guarantee their
patronage for years to come.
2.4 Price Skimming

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Designed to help businesses maximize sales on new products and services, price skimming
involves setting rates high during the introductory phase. The company then lowers prices gradually
as competitor goods appear on the market.
One of the benefits of price skimming is that it allows businesses to maximize profits on early
adopters before dropping prices to attract more price-sensitive consumers. Not only does price
skimming help a small business recoup its development costs, but it also creates an illusion of
quality and exclusivity when your item is first introduced to the marketplace.

2.5 Psychology Pricing
With the economy still limping back to full health, price remains a major concern for consumers.
Psychology pricing refers to techniques that marketers use to encourage customers to respond on
emotional levels rather than logical ones.
For example, setting the price of a watch at R199 is proven to attract more consumers than setting it
at R200, even though the true difference here is quite small. One explanation for this trend is that
consumers tend to put more attention on the first number on a price tag than the last. The goal of
psychology pricing is to increase demand by creating an illusion of enhanced value for the
consumer.

2.6 Bundle Pricing
With bundle pricing, small businesses sell multiple products for a lower rate than consumers would
face if they purchased each item individually. Not only is bundling goods an effective way of moving
unsold items that are taking up space in your facility, but it can also increase the value perception in
the eyes of your customers, since you’re essentially giving them something for free.
Bundle pricing is more effective for companies that sell complimentary products.

3. Place

Place in the marketing mix refers to the channel, or the route, through which goods move from the
source to the final user. Place could be the intermediaries, distributors, wholesalers and retailers.

Through the use of the right place, a company can increase sales and maintain these over a longer
period of time. In turn, this would mean a greater share of the market and increased revenues and
profits.

Correct placement is a vital activity that is focused on reaching the right target audience at the right
time. It focuses on where the business is located, where the target market is placed, how best to

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connect these two, how to store goods in the interim.The right place means greater chances of
sales over a longer period of time. This translates into greater market share, more profits and better
ability to track the changes in the marketplace in thinking, styles, fashion and needs.

4. Products

Products come in several forms:-
 Consumer products can be categorized as convenience goods, for which consumers are
willing to invest very limited shopping efforts. Thus, it is essential to have these products
readily available and have the brand name well known
 Shopping goods, in contrast, are goods in which the consumer is willing to invest a great
deal of time and effort. For example, consumers will spend a great deal of time looking for a
new car or a medical procedure
 Specialty goods are those that are of interest only to a narrow segment of the
population—e.g., drilling machines. Industrial goods can also be broken down into
subgroups, depending on their uses. It should also be noted that, within the context of
marketing decisions, the term product refers to more than tangible goods—a service can be
a product, too

A firm’s product line or lines refers to the assortment of similar things that the firm holds.
In contrast, the firm’s product mix describes the combination of different product lines that the firm
holds

4.1 The Product Life Cycle

Products often go through a life cycle. Initially, a product is introduced. The product life cycle is tied
to the phenomenon of diffusion of innovation.

When a new product comes out, it is likely to first be adopted by consumers who are more
innovative than others—they are willing to pay a premium price for the new product and take a risk
on unproven technology. It is important to be on the good side of innovators since many other later
adopters will tend to rely for advice on the innovators who are thought to be more knowledgeable
about new products for advice.

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Introduction Stage – This stage of the cycle could be the most expensive for a company
launching a new product. The size of the market for the product is small, which means sales are
low, although they will be increasing. On the other hand, the cost of things like research and
development, consumer testing, and the marketing needed to launch the product can be very high,
especially if it’s a competitive sector.
Growth Stage – The growth stage is typically characterized by a strong growth in sales and
profits, and because the company can start to benefit from economies of scale in production, the
profit margins, as well as the overall amount of profit, will increase. This makes it possible for
businesses to invest more money in the promotional activity to maximize the potential of this growth
stage.
Maturity Stage – During the maturity stage, the product is established and the aim for the
manufacturer is now to maintain the market share they have built up. This is probably the most
competitive time for most products and businesses need to invest wisely in any marketing they
undertake. They also need to consider any product modifications or improvements to the production
process which might give them a competitive advantage.
Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s known
as the decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the
customers who will buy the product have already purchased it), or because the consumers are
switching to a different type of product. While this decline may be inevitable, it may still be possible
for companies to make some profit by switching to less-expensive production methods and cheaper
market

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SESSION 2.
Supervise implementation of the promotion.

Learning Outcomes

 All staff is provided with details of promotions in terms of the promotional
guidelines/brief.

 The promotional team as identified in the plan is informed of its responsibilities.
 Promotional activities are monitored for compliance with the implementation plan.
 Stock levels throughout promotion period are monitored and problems are dealt with to

meet the organisation's requirement

1. Guidelines and briefing

Team briefing provides a channel for delivering clear messages and encouraging open
communication
Timely face-to-face communication prevents rumour and the grapevine from gaining credibility
It’s a great form of two-way communication - it’s not just about informing people, but listening and
responding to questions and concerns
It enables questions and suggestions to be fed back from staff to the top
It develops greater awareness and involvement at all levels

1.1 Briefing

Briefing develops a shared sense of mission, vision, collective aims and reasons why we’re here.
Successful team briefing ensures that there is less misunderstanding within your team
It ensures that the staff members are kept up to date on performance results, progress and policy
changes.
Support and feedback is provided to staff on a formal and informal basis.
There is regular planned contact between staff and their nominated manager that provides for clear
direction and expectations, good communication and feedback, recognition of achievements and
resolution of problems or conflict.

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There is a defined process for appraising performance of individual staff.

The process occurs at planned intervals and includes:

 The staff member and their manager jointly setting performance goals and work
expectations

 Assessing performance against the agreed goals deciding where improvements or
change is needed and establishing an agreed plan for the next period documentation of
the process and outcomes.

 The performance appraisal process considers performance in the context of the
organisation’s goals and priorities.

Professional staff and those involved with direct client work have access to professional supervision
appropriate to the nature of the service. In choosing the appropriate model of supervision,
management ensures supervisors have suitable qualifications and experience and gives
consideration to a range of models (for example, internal, external, mentoring, peer supervision)
All staff that deal directly with clients have access to designated person/s with whom they can
debrief in cases that are demanding or difficult.
The appraisal process and on-going management and supervision arrangements provide for
identification of learning and development needs and training opportunities. Staff report satisfaction
with the frequency, amount and quality of support and supervision and with the value of the
appraisal process.
Staff members that have management responsibilities are appropriately qualified in this function and
are skilled and confident in their role.

1.2 Promotional Teams and their responsibilities

Promotional Representatives, also known as promo reps, are people who are hired to promote a
brand, product, or service. They are generally hired by event marketing agencies, staffing agencies,
and companies choosing to promote their products, services, and brands through the use of live
events, mobile tours, and guerrilla marketing instead of television, radio, and print advertising. This
persuades customers to use sales promotional advertising items of wholesale commodity
distributor: Visits to retail establishments, e.g. Retail Stores, Restaurants, Supermarkets, and
Salons to persuade customers to use advertising items to promote sale of company products.

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Deliverables of promotion items, for example posters, glasses, napkins, and samples of product,
and arranges display of items in customer’s establishment. May also take sales order from
customers

Advertising

1. Advertising - you can advertise your product, service or brand in newspapers, radio,
television, magazines, outdoor signage and online.

2. Personal Selling or Telemarketing - effective personal selling relies on good interpersonal
and communication skills, excellent product and service knowledge and the ability to sell
product benefits to prospective customers

3. Publicity - created by sending media releases to print and broadcasting media, giving
interviews to the media and from word-of-mouth.

4. Short-Term Sales Promotions - market your product or service using coupons,
competitions and contests.

5. Direct marketing - involves sending letters, emails, pamphlets and brochures to individual
target clients, often followed by personal selling or telemarketing.

You can use any combination of these methods to target your customers. The right promotional mix
will help you satisfy your customers' needs, increase sales, improve your results and increase your
ability to reach multiple customers within your target market.

1.3 Monitoring Stock levels throughout promotional periods

To sell physical products you will need to keep a track of the stock levels. This ensures that you’re
not selling stock you don’t have. It is often desirable to have the necessary promotion stock in place
earlier.
By getting goods in earlier, ordering all promotion items at once and reshipping goods to stores.
It is worth remembering that with an increased level of seasonal promotional activity, retailers using
price comparison websites should pay special attention to making sure their product data feeds are
up to date; information such as delivery times and stock availability must be accurate or retailers run
the risk of alienating customers with false information.
During seasonal shopping periods, easy transactions are important, but a neglected data-feed can
weaken relationships with customers. While it is vital for companies with niche or specific offerings
such as sports gear to latch onto relevant national events like the Rugby World Cup, these can also
hold opportunities for a wide variety of other types of retailers. It is worth remembering that while

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promotions are mainly designed to increase sales, they can also be used to ‘give something back’
carefully examining the results of last year’s seasonal promotions can be a great help when
designing a new one.
By looking deeper into which products sold best and on which days of the promotion this
happened, retailers can better understand how to merchandise specific products and ranges, as
well as learning more about how customers really shop – as opposed to just predicting how their
customers will shop.
When planning a new promotion, it can also be helpful to look at sales data from the past year – or
even several years back, if it’s available – and try to isolate any unexpected sales increases. These
could be clues to undiscovered seasonal opportunities that can then be integrated into the calendar
for future promotions.
Some previously bestselling seasonal products and ranges may fall out of fashion while others may
come to the fore unexpectedly, or at a different time than usual. This process will continue evolving
as each year passes – the customer never stands still, and keeping in touch with their behaviours
will ultimately decide the success of any campaign

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SESSION 3
Evaluate the outcome of the promotional activity.

Learning Outcomes

 Implementation is carried out according to the promotional plan.
 Received promotion guidelines are evaluated and reported as per organization’s

requirements.
 Impact of the promotion is evaluated and reported

1. Implementing According to a promotional Plan

Implementation is the carrying out, execution, or practice of a plan, a method, or any design for
doing something.
As such, implementation is the action that must follow any preliminary thinking in order for
something to actually happen. In an information technology context, implementation encompasses
all the processes involved in getting new software or hardware operating properly in its
environment, including installation, running, testing, and making necessary changes.

1.2 Promotion guidelines are evaluated and reported as per organization’s
Requirements

The organisation is aware of the range of stakeholders it is accountable to and can describe the
processes it uses to ensure different accountabilities. (This can include clients, community groups,
and members of the organisation, other community organisations, funding bodies, donors and
sponsors).
Information about the strategic directions and performance of the organization is publicly available.
The organization uses a range of methods to communicate its work to those it serves (clients,
members, organizations and communities).
Clients and community groups have opportunities to influence the organization’s goals and
philosophy and their participation in this is encouraged.
The service is open to external scrutiny and provides opportunities for key stakeholders to provide
feedback or contribute their views on issues. Financial and performance reporting requirements of

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funding agencies are met in a timely way. Policies in the organization reflect compliance with all
relevant legislation.
Organisations have risk management systems in place

1.3 The Impact of the promotion

Promotion is the component of the marketing mix strategy that emphasizes the use of various
communication tools to promote the value of your company, products or services. While much of
promotion is focused on long-term communication objectives, sales promotions have a specific
motive of creating immediate sales.

1. Attract Customers

Sales promotions are typically used as a price inducement to attract price-conscious buyers not
interested in products regular prices. This is common when companies want to build a customer
base, such as at a grand opening, when a competitor goes out of business, or in a highly
competitive industry. In some cases, sales promotions on one product, known as a "price leader" or
"loss leader," are used to get customers into the store so you can sell them other, more profitable
items.

2. Increased Revenue

Increasing revenue is a common goal for sales promotions. Often, sales promotions restrict your
profit potential, but they allow you to generate more revenue in the short run due to increased sales
volume. This also means more cash flow, which is why companies struggling to meet near-term
financial obligations often turn to discounts. To realize greater revenue, you need more customers
to buy more products at the reduced price.

3. Price Orientation

One of the more risky or negative effects of sales promotions is that they can lead to a price
orientation amongst customers. This is especially true if you overuse them or maintain discounts for
an extended period. Customers psychologically connect the promotion price with the value of the
product, and a price hike down the road may not work.

4. Inventory Reduction

Effective sales promotions lead to inventory reductions because customers buy more products. In
fact, this is why companies hold them regularly at the end of a buying season. For example, when
Christmas is over, you often see retailers discount decor and candy to make room on the shelves
for other products. While this often results in a gross loss on the excess inventory, you at least get
some revenue rather than throwing out expired or outdated products.

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5. Types of Sales Promotions
Many types of sales promotions can induce a consumer to buy your goods or services. A product
sample delivered to the consumer's door is a good way to introduce a new product, but also one of
the most expensive. Coupons offering a discount off the usual price, cash refunds or rebates
redeemable after purchase, and prizes or sweepstakes are also ways of attracting consumer
attention.

6. Measuring Effect of Sales Promotion
Measuring the effect of a sales promotion is relatively easy but requires careful analysis of sales
data before and after the promotion. You will also need to keep track of what other marketing and
communication efforts your firm is undertaking at the same time as the sales promotion. Because
sales promotions deal in tangible things, such as redeemed coupons or cash refunds and rebates,
you can count those and see how many sales were as a result of those promotions.
Compare those sales figures to those your company had before the promotion to see if the
promotion resulted in increased sales. To understand the true effect of the promotion, keep other
media expenditures and types the same during the promotion as before. That way you are only
measuring the effect of the sales promotion itself.

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Supervise Sales Performance

Unit Standard ID 118037
Unit Standard Title Supervise Sales Performance
Field Services
Sub field Wholesale and Retail
Level 4
Credits 8

PURPOSE: This unit standard is intended for supervisors
who are responsible for the achievement of
sales performance within a designated area.

Persons credited with this unit standard will be
able to:

 Explain the effect of sales on the Net
Profit of the organisation to his/her team,

 Monitor sales to budgets and propose
actions to improve sales performance to
management

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LESSON PLAN

Unit Standard Supervise Sales Performance U
Title Time N
Date From Comments :
A
Date To

Resources Purpose
This unit standard is intended for sup
 Facilitator Guide
 Learner Guide performance within a designated are
 Facilitator Assessment
the effect of sales on the Net Profit o
Guide
 Learner Assessment Guide propose actions to improve sales pe
 White board
 Data projector
 Register
 Other

Specific Outcomes 1 Resources Formative
Assessment T

 Explain the effect of
sales on the Net Profit
of the business

Income statements/profit and
loss accounts are used to show
the effect of sales on the profits
of a business.
The effect of reduced Net Profit
on employees is explained

The effect of sales on the
organisation and employees is

Unit Standard 118037
Number
Register Y/N
Attendees

pervisors who are responsible for the achievement of sales
ea. Persons credited with this unit standard will be able to explain
of the organisation to his/her team, monitor sales to budgets and
erformance to management

Summative Workplace Assignment
Assessment Tool
Tool

48

explained to members of the Resources Formative
team simply ensuring full Assessment T
understanding by all concerned
Specific Outcomes 2 Formative
Assessment T
 Monitor sales
performance.

An understanding of budgets and Resources
targets for the designated area
are explained as applicable to
the organisation.
Methods of identifying sales for
own area of responsibility is
identified as applicable to the
organisation.
Reports are compiled showing
actual sales to budgeted sales
are monitored and correctly
analysed
Specific Outcomes 3

 Propose actions to
improve sales
performance

Methods for improving sales in
designated area are explained as
they apply to the organisation

Methods to improving sales in
designated area are proposed to
management in accordance with
organisational procedures

Summative Workplace Assignment
Assessment Tool
Tool

Summative Workplace Assignment
Assessment Tool
Tool

49

SESSION 1.
Explain the effect of sales on the Net Profit of the

business.

Learning Outcomes

 Income statements/profit and loss accounts are used to show the effect of sales on
the profits of a business.

 The effect of reduced Net Profit on employees is explained.
 The effect of sales on the organsiation and employees is explained to members of

the team simply ensuring full understanding by all concerned.

Understanding Net Income
Perhaps the single most important measure of a company's profitability is net income. That's
because generating profits is the most important responsibility that for-profit companies have to their
shareholders. In fact, it's the very reason that many companies exist

1.1 Net Income

The best way to think about net income is in terms of profits. It's the money left over after all the
expenses of the company have been subtracted from revenues. It's also important to understand
the calculation of net income is prescribed by a variety of accounting rules, which are known as
GAAP, or Generally Accepted Accounting Principles. Because companies follow the same
accounting rules when reporting of net income in their financial statements, it's easier for regulating
authorities, such as the Securities and Exchange Commission, as well as investors to understand
the financial health of a particular company. This standardization of reporting also allows investors
to make direct comparisons between companies.
A simplified formula for calculating net income is as follows:
+ Revenues
- Expenses
= Net Income
The next several sections in this tutorial will explain each of the items appearing in the income
statement in more detail. Later on, an example of an income statement will demonstrate how these
components fit together.

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1.2 Revenue

The price paid by customers for the goods or services sold by a company are known
as revenues. When a company sells these goods or services to a customer, they receive money in
the form of cash or book credit sales to accounts receivable, which is money to be collected in the
near future. The revenues for any period of time are equal to the inflow of cash plus the increase in
accounts receivable. Companies recognize or "book" revenue when the goods or services are
delivered to customers. Revenues have a positive effect on net income.

1.3 Expense

The costs necessary to produce and deliver the goods or services to customers are known as
expenses. It is the money expended by the company to obtain revenues; typically referred to as the
cost of doing business. Examples of expenses include employee salaries, advertising, raw
materials, shipping, warehousing, income taxes, as well as the decrease in the value of certain
assets through depreciation. Expenses have a negative effect on net income. The expenses
reported for any period of time should be those incurred to produce the revenues associated with
that same period of time. The accounting guideline that calls for aligning revenues and expenses is
known as the matching principle.

Matching Revenues with Expenses

By aligning the expenses needed to generate revenues in a given period of time, the income
statement more accurately reflects the appropriate level of profits associated with that same period
of time. For example, the reporting of annual net income should match the revenues for the year
with the expenses associated with generating those revenues. This is why it's so important to
recognize revenues when they're earned and expenses when they're incurred. When these two
components of the income statement are matching, then net income for the period will be reported
correctly.

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Income Statements

Net income is usually reported as the final line item on a company's income statement. For now it's
important to understand that net income is a very good indicator of a company's financial
health. The process for building an income statement will be discussed later on.

Operating Section

The operating section of the income statement is used to report the revenues and expenses
associated with the company's primary business operations. The revenues and expenses
appearing in this section provide the investor with an indication of how well the core operations of
the company performed.

Net Sales or Revenues

Revenues, or sales, are the first items normally reported in the income statement. Revenues are all
of the cash and credit sales; companies usually recognize revenues at the point their goods or
services are delivered to the customer. If the company is reporting net sales, they are taking the
total revenues received in a time period and subtracting from it any sales discounts, allowances, or
returns.

Cost of Goods Sold

The cost of goods sold is the expense associated with the materials used to produce sales. The
cost of goods sold can include raw materials or merchandise removed from inventory. If the items
are typically shipped to the company's warehouses, then the account would also include freight
charges or transportation-in costs.

Operating Expenses

These accounts include all of the costs associated with operating the company. Typically, operating
expenses include costs directly related to selling goods or services, administrative, and general
expenses; sometimes referred to as SG&A.

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Selling Expenses

These are the expenses required to sell the company's product or service. Typical selling expenses
include sales salaries and commissions, travel and entertainment, freight or transportation-out,
postage, advertising, and all other costs the sales arm of the company might incur such as
depreciation of sales equipment.

Administrative and General Expense

Typical administrative and general costs include the salaries of the company's officers, office worker
salaries, legal services, insurance, utilities, depreciation expense on office equipment and buildings,
stationary, and other office supplies. These are the costs associated with the administration of the
company's operation.

Income from Operations

When all of the operating expenses mentioned above are subtracted from the net sales revenues,
the resulting value is considered the income derived from operations. This is a very important item
appearing on the income statement because it's a good indicator of how profitably a company is
with respect to their principal business operations.

Non-Operating Section

Companies can also realize revenues, gains, expenses, and losses that are not directly related to
their principal business. These items are reported on the income statement outside of the operating
section. These are either unusual items or they occur infrequently; not both, as discussed below in
extraordinary items. The non-operating section is usually broken down into two subsections: other
revenues / gains and other expenses / losses.

Other Revenues and Gains

This category includes revenues and / or gains, and these items are generally reported net of any
related expenses. Once again, these are non-operating transactions such as dividend revenues or
rental income.

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Other Expenses and Losses

Just like the other revenues and gains, the other expenses and losses are reported net of any
associated income and are non-operating transactions. The most common item appearing in this
section would be interest expense on the company's bonds or notes.

Income before Income Taxes

Also known as IBIT, this value provides the investor with a good feel for the income generated by
operations, with consideration for some non-operating gains and losses. Some of the adjustments
to income discussed later on will address events that happen very infrequently and are also
unusual, such as extraordinary items and discontinued operations.

Income Taxes

Income taxes appearing on the income statement include both federal and state level taxes.

Other Adjustments to Net Income

Sometimes companies need to report very unusual items. These are changes that don't happen
very frequently, and are often "discounted" by market analysts because they are so unusual. They
wouldn't normally be considered when evaluating a company's longer-term outlook. Adjustments
falling into this category include:

 Discontinued Operations: Gains or losses on the sale of a portion of the business's
operations.

 Extraordinary Items: Events which are both infrequent in nature and unusual.

 Changes in Accounting Principle: Any time a company changes an accounting method,
such as inventory pricing or depreciation rates, it needs to explain, or disclose, the cumulative
effect of that change on their income statement.

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Simple Income Statement Example

If the analyst were to model all of the above mentioned items, the result would be an income
statement for the company being evaluated. To demonstrate what a simple income statement
might look like, the following example was assembled:

Comparative Income Statement

Income Statement Year

Sales / Revenues

Net Sales 10,000,000

Expenses:

Cost of Goods Sold (6,000,000)

Gross Profit 4,000,000

Operating Expenses:

Selling Expenses (1,000,000)

Administrative and General Expense (500,000)

Total Operating Expenses (1,500,000)

Income from Operations 2,500,000

Other Revenues and Gains 250,000

Other Expenses and Losses (200,000)

Income Before Income Taxes 2,550,000

Income Taxes (1,020,000)

Income Before Extraordinary Items 1,530,000

Extraordinary Items (500,000)

Net Income 1,030,000

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Net Profit Decline can have the following effect on a company
Net profit is the money left over after your small business pays off all of it debts and operating costs
for a given month, financial quarter or fiscal year. Declining net profit is not the sign of a healthy
business and may indicate problems in a variety of areas, from employee management to pay
scales and methods of production. This can impact the financial welfare of every person involved
with your business.

Paying Off Debts

As net profit declines, the likelihood of your small business's losses eating into your ability to pay
your monthly debt obligations increases. Your creditors may pay attention to your quarterly financial
statements and could be less likely to extend you additional credit in the future because of your
declining available cash. Credit reporting bureaus could lower your company's credit score due to
declining net profit because you have less capital to total debt, which is a sign that your small
business is sailing through rough financial waters.

Signs of Inefficiency

Inefficiency can drag down your small business's revenue stream by taking more time to produce
fewer goods or accomplish fewer tasks. A decline in net profits could be an indicator that your
company is not operating at peak efficiency. Correcting this problem could involve the layoff of
workers to reduce your payroll or adjusting building materials and operational procedures to reduce
operating costs and shorten the time it takes to create products. Failing to streamline the production
process and increase efficiency can lead to a further decline in net profits.

Risk and Opportunity Management

Managing risk is a critical component of your small business's operational strategy. Declining net
profit reduces the cash available to cope with problems that can occur through the normal course of
business operation, including equipment failure and damage to your business's physical location.
Low net profit also limits your company's ability to seize opportunities that may come up, including a
perceived product need in the market or a void created by a competitor leaving the market.

Lower Owner Salary

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As a smart small business owner, you shouldn't receive any kind of payment or compensation from
your company until it satisfies all its debts and other financial obligations for the given month or
quarter. A declining net profit means you effectively have to take a pay cut to keep your business
operating at normal capacity. This can have an adverse effect on your personal finances, including
your ability pay your personal debts and keep food on the table. Personal sacrifices will continue to
mount as your company's net profit declines.

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SESSION 2.
Monitor sales performance.

Learning Outcomes

 An understanding of budgets and targets for the designated area are explained as applicable
to the organisation.

 Methods of identifying sales for own area of responsibility is identified as applicable to the
organisation.

 Reports are compiled showing actual sales to budgeted sales are monitored and correctly
analysed.

1. Measuring Sales Performance

Most companies have the problem of measuring the performance of their sales staff because each
salesperson is different and they work in varied methods. A sale involves customers; there are other
factors that impact sales. Customers and their needs are different, business conditions vary,
individual customer bases differ and the product mix offered to each customer can vary.

1.1 What are the important components to track to determine sales success?

The factors can be tangible and intangible. When examining the tangible side of the sales ledger
you need to consider methods for targeting, frequency of contact, message and presentation, and
communications.
Some intangible factors that can be difficult to quantify are the salesperson's ability to build
relationships and "connect" with customers, and whether or not there is a clear purpose of the call
or meeting.

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The reason for contact can be to help the customer, or sometimes it is to help the sales person's
quota.
Effective results from measuring the performance of each salesperson should have a purpose:

 To help them be more profitable to your company. When this occurs they have more worth
through additional pay and incentives, and they receive a value, and that is a good feeling
about doing a great job.

 There are three steps in bringing about the improvement of an employee when a problem is
identified:
1. Measuring,
2. Correcting with training
3. Planning to make the change permanent.

1.2 Measuring the Performance

The ability to measure performance depends on the use of success-based criteria as a model to
compare daily, weekly and monthly numbers.
Here are some of the criteria that Sales Creators uses when designing a monitoring system for their
customers:

1. Time spent selling, time spent in administration, time prospecting
2. Number of calls made on existing accounts
3. Number of calls made to new customers, and number of new customers
4. Promptness in submitting reports and sales orders and accuracy of reports
5. Volume of sales, number, size, product mix and repeat account
6. Accuracy in quoting prices and delivery information with approved margins to customer
7. Method of call backs set up with the customer
8. Cost of customer to company
9. Marketing and promotional time, specific areas
10. Improvement areas where time is being invested on the part of the salesperson and

management; this includes topics such as behaviour modification, appearance, schooling
and other personal issues

Measuring must start with standards that are compiled from the averages of all employees who are
doing the same task. Then review the progress for the last 12 months and determine how it
compares to the budget compliance standards. If the performance levels do not meet the basic
standards set by the company, or if their performance falls more than 10 percent from the last year's
numbers then it is time to move into a corrective step of action.

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1.3 Training and Process for Correction

This is a positive step for improvement and it starts with management re-evaluating the sales and
marketing systems.
Is there a need to increase promotional campaigns, change or add prospecting methods, establish
tighter controls with price variances, or get input to problems from the sales staff? Management's
first duty means time spent working on fixing the systems; then it is time to provide help for the
salesperson.

1. They should have daily direction and support
2. Be provided with proper coaching by role-playing on specific areas of weakness found in the

'measuring performance' section.
3. Make mentoring time available with best salesperson and the salesperson that needs help

and have them observe and listen to their instructor.
4. Daily progress must be recognized and acknowledged until the problem is resolved by

noticeable improvement in a given area.

1.4 Planning for a Positive Change

Once a problem has been identified, management must help to rectify the problem. Once it has
been rectified it is time to outline an agreement to reach the stated goals. Planning in its final form
should be in writing with the steps needed to reach the final outcomes. Then the time must be
allocated to put management's system changes into effect by introducing them to the employees at
a meeting.

1.5 System to monitor sales performance

It is the Supervisors role to promote excellence in customer service, achieve sales targets and
monitor performance of their Department. Supervisors should ensure data is recorded correctly so
customers receive quality service and your store makes a profit. Supervisors need to monitor and
evaluate selling systems in order to see the big picture and improve the strategy where necessary.

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A supervisors three key functions are:

 Implementation of store sales policies and procedures
 Monitor the achievement of sales targets
 Provide feedback and rewards

Step 1:
 Implementation of store sales policies and procedures
 Identify store policies and procedures related to selling

It is the Supervisors responsibility to ensure all policies and procedures which relate to selling are
understood and followed. All staff members are to be trained accordingly. Our store manuals which
relate to selling are:

 Customer Service Standards, which include dealing with customer complaints and
greeting the customer.

 Selling, which includes approaching the customers, establishing the customer’s needs,
presenting of merchandise, dealing with objection, selling related items (add on sales),
closing the sale.

 Store Security Procedures, dealing with preventing theft and apprehension of shoplifters,
point of sale transactions dealing with cash register procedures, credit, cheques and EFT
POS, refunds, returns, exchanges and repairs.

Monitoring staff selling performance

To ensure customers are satisfied with our service, and sales targets are met, in accordance with
store policy and procedures, it is essential that the Supervisor monitors staff members at point of
sale area for:

 Implementation of store sales policies and procedures.
 Accurate data entry (incorrect information put into the system can affect the stock processes

such as ordering and stocktake results, as well as lead to poor sales and adverse customer
perception)

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 Efficient sale processing of goods through the point of sale area (service and selling quality
is essential)

 Appropriately matching customer needs to product and services.
 Processing returns should include the reason for the return to determine whether the

problem is with the stock (faulty), or staff member sold the inappropriate stock to the
customer.
 Store customer service and selling techniques are implemented.
Monitoring customer service is a critical factor in identifying deficiencies and making improvements.

Evaluating staff selling performance

Our store has devised two ways to evaluate staff selling performance. The evaluation needs to look
beyond the sales result and into the area of procedural performance. The Supervisor should
regularly monitor performance in this area and provide necessary feedback to staff.

 Point of Sale Questionnaire: to be completed by the Supervisor on individual staff members
at least once a month (see attached)

 Customer Satisfaction Questionnaire: is an informative way of measuring service quality.
Place at information stands throughout the store and encourage customers to complete and
return to the store.

Remember the Point of Sale area is often the last contact a customer has with our store and last
impressions count. The Point of Sale area provides opportunities to reinforce the stores image,
advertise services, sell add on and display coordinates. Just because the store is achieving sales
targets, it doesn’t necessarily mean that everything is working well. The target may have been
achieved because of a hard sell approach by some staff members. The impact of this can be
detrimental on return custom and sales will reflect this in future months.

Step 2:
 Monitor the achievement of sales targets

Monitor sales staff
It is the Supervisors role to report staff performance, evaluate areas and identify where further
training is required to maximize profit. A sense of balance is required to keep staff members happy,
customers satisfied, reaching sales targets and achieving required profit margins. To carry out the
above, procedures the following must be followed.

Setting sales targets

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It is the responsibility of an accountant to allocate sales targets, which are then approved by Store
Manager and passed onto Department Supervisors. Department sales targets are formulated based
on previous trading patterns of the store. Each Department is given a monthly sales target and it is
the Supervisors responsibility, on a daily level, to ensure targets are being met.
Recording of sales targets

Supervisors need to evaluate sales results as well as selling systems. Our store has a computerized
system which updates all sales information based on daily sales. Supervisors have computer
password to assess the Department sales targets and any individual sales targets. Sales results
should be circulated by superiors during staff meetings. It is the Supervisors responsibility to print
out daily sale sheet, file in appropriate folder and complete store sales target sheet. A Sales
Performance Chart is updated daily and displayed on a staff noticeboard.

Measuring sales performance

A store measures sales performance in monetary terms and customer satisfaction. An indication of
customer satisfaction could be from returns and complaints. A Company’s procedure for informing
staff members of their sales performance are as follows:

Performance Reviews: carried out on a monthly basis. Supervisors will complete Point of Sale
Questionnaire.
Performance Appraisals: carried out every three months.

Staff Meetings: Supervisors are to hold monthly staff meetings to improve communication with
staff members and reinforce sales targets and achievements. Recognizing and monitoring good
service performance reinforces their behaviour. Good individual performance should be discussed
with all staff members at these meetings. Further staff meetings can provide a forum for open and
positive discussion of grievance.

Training Sessions: The HR Department should provide monthly training sessions to enhance
sales performance. Supervisors must attend as an opportunity of being able to refine and improve
any changes with staff members. The advantage of monthly training sessions is to practice changes
by using role plays, ensure understanding of revised or new policies and procedures.
If sales targets are not being met by staff members, HR should offer and carry out

 Workplace coaching (one on one)

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 Individual counselling
To improve sales performance, staff members should be encouraged to improve their customer
service skills with signage posted in various locations in the store.

Step 3:
 Providing feedback
 Feedback to management

Supervisors are required to report to Management as follows:
 Daily: Department Sales Sheet (takings)
 Weekly: Sales Performance Report
 Monthly: Sales Performance Report

It is of importance that these reports are completed correctly and indicate:
 The Sales targets for the month
 Reason for not achieving sales targets or reason for exceeding sales targets
 Action plans to take if an individual or department’s sales targets were not achieved.
 Feedback and rewards to be provided to staff for exceeding targets.
 The reasons for achieving or not achieving sales targets need to be indicated. Take
appropriate action if a staff member or Department sales targets were not achieved and
provide feedback to staff members for exceeded targets.

Providing feedback to staff members on sales performance
Supervisors must review results staff members are achieving and give appropriate feedback.
Recognising excellence in achievement of sales targets is motivating for staff members, and
provides incentive to continue enhancing their sales performance in the future. Recognising
achievements can take a number of forms. The simplest is by personally congratulating individuals
and teams on their performance. The biggest reward one can sometimes get is a pat on the back
for a job well done. Tangible forms of rewards a company can offer are:-

 Bonuses,
 Team dinners
 Gift vouchers.
A Company can offer a number of incentives for staff members who achieve sales target. These can
be:
 Sales Employee of the Month
 Team Member of the Month

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 Award for Outstanding Customer Service.
As a Supervisor, nominate your staff member for these awards to the HR Department.
Poor performance
Giving feedback on poor performance is sometimes harder to do than giving positive feedback. We
need to look not only at why sales targets were not met, but what remedies can apply to improve
performances. There are a number of strategies that can be implemented to support sales staffs
that are experiencing performance problems.
Some strategies are:

 Counselling
 Training
 Coaching
 Job aids

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SESSION 3.
Propose actions to improve sales performance.

Learning Outcomes

 Methods for improving sales in designated area are explained as they apply to the
organisation.

 Methods to improving sales in designated area are proposed to management in accordance
with organisational procedures.

 Agreed methods to improve sales are communicated to the team simply ensuring full
understanding by all concerned.

1. Increasing Sales

How to resolve immediate problems or implement a long-term plan?
A business may want to increase sales, either to overcome a problem in the short term or as part of
the planned growth of the business in the longer term.
Listed below are methods in increasing sales in situations, short term and long term:
 Diagnosing the cause of problems in the short term
 Increasing sales in the medium to long term
 A range of possible solutions to increase sales

1.1 Recognising the need

There are usually two kinds of situation in which you need to increase sales.
1. In the short term - you are reacting to a problem, such as the loss of one or more customers,

decline in a market or the arrival of a new competitor.
2. In the medium to long term - you are taking a more considered and deliberate approaches as

part of planned growth of the business.

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The approaches you take will be different in each of these situations. Some approaches will deliver
better results over the long term but it takes more resources and time to deliver them. Other
approaches are more effective in the short term. It is important to use the appropriate methods for
the situation the business is facing.

1.2 Diagnosing short-term problems

Short-term problems are usually to generate sufficient sales to fill your existing production or
operational capacity.
You may be reacting to:
 Loss of one or more significant orders
 Loss of one or more customer accounts
 Failure of a new product or service to sell
 New or increased capacity coming on line
It is important to identify and understand the causes of any shortfall in sales. For example, if a major
customer has not placed an order or has closed their account, try and find out why. Customers will
usually explain why they have taken that decision. Try to establish any pattern or trend there may
be.
The short checklist below may help to identify and diagnose causes. Failure point - if there is a
pattern or trend, where is the problem occurring? Are you failing to win, or are you losing, orders
from:
 Prospective customers?
 Regular customers?
 Customers who have tried you once but are not coming back?
 Customers with a particular need?
If you can identify where the failure point is, you can start looking at the processes you are using.
 Customer perceptions - do your customers perceive lack of commitment from your business

to them, to your product or market? Is a poor or negative customer perception of your business
spreading by word of mouth? Is one of your competitors undertaking a 'dirty tricks' campaign?

 Marketing process - if you are not getting enough customers, are enough potential
customers aware of your products and services? Is the price set too high for the benefits
offered? Is the product specification not suitable for customers' needs?

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 Selling process - if you are getting good levels of response but not enough orders, is the
follow-up poor or slow? Are you putting customers off before closure? Are your negotiators
weak? Are you failing to maintain the relationship with customers once you have created it?

 Competitive threat - is there a new and strong competitive threat? Has a competitor just
launched a new or improved product or service? Is a strong competitor conducting an
aggressive promotional campaign or price discounting? Is one of your competitors starting a
price war?

 Product/service quality - is your quality letting you down: do you have delivery problems; are
your products unreliable; are they fit for your customers' purpose; do you have slow or poor after
sales service?

Once you understand the causes, you can take corrective measures.

Increasing sales in the longer term

In the longer term, you will usually have the luxury of time to be able to plan your business growth
and set goals, rather than reacting to an immediate problem. The key to successful growth is to
understand and match the capabilities of your firm to the opportunities you have identified in the
market. Having a clear marketing strategy is important

What to do to increase sales

Having identified the underlying reasons for needing to increase sales, you can now start looking for
appropriate solutions. Below is a range of potential solutions you may wish to consider. The time
taken to achieve a result and the risks involved increase as you go down the list so it pays if you
can find a solution that works for you from higher up the list.

 Improve your marketing and sales processes - selling is often a numbers game: can you
improve your conversion ratio (number of orders to the number of initial enquires or contacts) or
do you need to increase the number of initial enquiries or contacts? Often, businesses simply do
not generate enough leads.

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 Offer a sales discount - can you offer a short-term discount to encourage existing users to
buy more or to attract new customers? Once you have them buying, you can then use different
approaches to keep them.

 Promote increased usage by existing users - can you encourage existing users or give
them incentives to increase their usage by an advertising or promotional campaign?

 Increase sales volumes by reducing price - this will work only if customers are price
sensitive, otherwise this may not have the desired effect and may send the wrong message. Be
sure that your competitors will not respond in kind, so escalating into a price war.

 Win competitors' business - can you identify a weakness in competitors that will enable you
to use your advantage to win new business? Is there a gap in their product/service portfolio?
Can you provide a consistently better service for the same or lower price?

 Convert non-users - can you persuade customers for your other products to adopt the
product/service where you are experiencing a shortfall? 'Cross-selling' will need sales calls or
some promotional activity.

 Find new non-users - can you find customers who are not yet using this type of product or
service and persuade them to start using it?

 Launch improved or new products and services - be sure that it is your product or
service that is letting you down before you go down this more expensive and time-consuming
route. It needs careful planning.

 Enter new markets - this is usually part of a business' planned growth, rather than a short-
term reaction, so needs careful planning. For further information on selecting and entering new
markets, see the Related Items section below for a link to the Factsheet: Entering new markets.

 Launch new products into new markets - this is usually an option of last resort as you are
doing two things at once. The risks and potential costs of this solution are likely to be high.

Increasing sales:

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 The need to increase sales is either a reaction to a short-term problem or part of the planned
growth of the business.

 If your sales are under pressure, start by looking at the sources and underlying causes of that
pressure, for example where things are going wrong.

 Once you have identified the causes, you can then take action to increase sales. This will
usually involve more or a redirection of existing sales and promotional efforts.

 There is a range of solutions to help you increase sales, with varying degrees of impact and time
taken to deliver a result.

 It is important to use a solution that is appropriate to the situation the business faces

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