Are you using data to improve sales performance?

How to analyze sales data to increase profits 

The key to increasing profits from sales is to analyze your sales results to figure out not only what people are buying, but also how and why. This will help you sell the best products at the best prices using the best distribution channels.

You also need to remember that increasing your profits doesn’t necessarily mean increasing your sales volumes. You can increase profits by selling fewer items with bigger margins, for example. You can also sell the same amount of units but decrease your cost of goods sold.

Of course, increasing sales volumes is also important, and data can help there, too.

Here’s how your company can use data from your sales to improve your bottom line. 

Create data categories

The first step to increasing your profits using sales data is to generate the right kind of data. This means having your salespeople and accountant record sales using the following tracking categories:

Product units sold

Analyzing the number of units of each product you sell each month will help you determine if one product has stagnant sales as compared to last year, and/or if another product is gaining in popularity. This will also show you the percent of your sales each product makes up. If one of your most profitable products has seen decreasing sales the last two or three years, it might be a sign that it’s near the end of its lifecycle and you need to find a replacement product.

Declining sales figures might also tell you it’s time to lower your prices or find a new place to sell the product. An increase in sales might tell you it’s a good time to raise prices or that a new distribution channel change is working.

Also, look at an example of sales analytics from my portfolio - (click here to see more detailed dashboards) 

Sales by margins

This data will help you determine which products are the most profitable by profit margins. For example, your blue widget might bring in the most total dollars, but it only gives you a 5 percent profit margin. Your red widget might only bring in 75 percent the gross sales of your blue widget, but it provides a 20 percent profit margin.

This means you’re getting a bigger return on your investment from your red widget.

Looking at sales using unit sales numbers and sales by margin will help you determine if you need to put more effort into selling red widgets, or if your sales volume with blue widgets is so high you’ll always have better gross profits selling these widgets.

Sales by price point

Do you sell similar products at different prices? For example, do you sell a bargain product and a high-end product? Examining sales by price point might help you re-examine your brand strategy.

If the two similar products have different volumes in different distribution channels (e.g., a website vs. a brick and mortar store), you might determine that you want to change your marketing strategy. For example, your sales data might tell you that people who shop online want your bargain product and people who come into a retail store are willing to pay more.

Sales by distribution channel

To maximize your profits, you need to examine each of your distribution channels by sales volume, cost of selling and customer satisfaction.

For example, a third-party e-commerce site might be driving most of your sales. However, by the time you’re done with seller fees, shipping and returns, your margins might be much lower than the same items you sell with in-house reps.

The opposite scenario might be true. In-house sales reps might generate higher sales, but by the time you’re done fulfilling orders, paying shipping fees, dealing with bad debt and spending money on customer phone calls, your margins might be extremely low.

Finally, happy customers are often repeat customers—the lifeblood of most businesses. If possible, analyze your sales data to determine which customers are your happiest and how you acquire and service them.

Sales by rep

Another way to analyze sales data is to review your sales by each sales representative you have. You must do more than just rank them by gross sales, however.

Find out which reps have the highest product return rates, sell the most high-margin products, generate the highest gross profits, have the largest number of new customers each month, and have the best customer satisfaction. This will help you improve each rep’s performance.