Sales Analysis

In the article titled The Marketing Control Process for your Business – Explained, we outline what marketing controls are: 

“Marketing control is a process where company management or executives analyze and assess their marketing activities and programs.”

image of a hand sketched sales graph - Marketing BinderThe marketing control process includes four types of marketing control, they are,

  • Annual plan control
  • Profitability control
  • Efficiency control 
  • Strategic control 

This post focuses on the sales analysis part of the annual control plan. The other three types of measuring tools that fall under the annual control plan, aside from the sales analysis, include,

  • Marketing share analysis,
  • Marketing expense-to-sales analysis,
  • Financial analysis.

The sales analysis measures and evaluates the firm’s actual sales as it relates to their sales goals. The two types of sales analysis tools used are the sales-variance analysis and the micro-sales analysis.

Sales-Variance Analysis

A sales-variance analysis is a metric that measures the relative contribution of different internal and external factors to a discrepancy in sales performance. The ability to calculate and identify sales variance is an essential metric to understand so that the firm may address issues in expected sales deficiencies.  

Sales-Variance Example

Suppose a manufacturer planned on selling 2,000 units of Product A in the fourth quarter at $2.50 per unit. The expected total revenue is $5,000. However, at the end of the fourth quarter, 1,700 Product A units were sold at $1.95 per unit for a total revenue of $3,315. The calculation below shows how much sales performance is due to a price decline and how much is due to a volume decline. 

Sales-Variance Example Calculation

Variance due to price decline:($2.50 - $1.95) (1,700 units) = $93555.5%
Variance due to volume decline:($2.50) (2,000 - 1,700) = $75044.5%
$1,685100%

Metrics Analysis

Notice that almost half of the variance is due to a failure to achieve the volume target. The manufacturer needs to examine why sales failed to reach its expected sales volume. Possible reasons may include poor sales performance, lack of sales staff to cover a region, inferior quality product, or weak or no sales promotion activity. 

Micro-Sales Analysis

hand sketched pie chart - Maarketing BinderThe micro-sales analysis examines specific products, sales regions or territories, and other measurable factors that underperformed the expected sales goals. For example, imagine that the manufacturer in our case above sells Product A into three regions. They set their sales goals for region one at 900 units, region two at 400 units, and region three at 700 units for the fourth quarter. However, the actual sales volumes were 800 units for region one, 498 units for region two, and 325 units for region three. Thus, the sales manager notices a 12% sales reduction for region one, a 22% increase in region two, and a dramatic 73% drop in region three sales.

From the data, the sales manager may come to several possibilities. They may conclude that the salesperson in region three is performing poorly, a new competitor entered the market in that region, or the product is priced too high for the market. Other possibilities may come into play as well.

The Takeaway

The sales analysis is just one tool for managing marketing programs. When used to analyze sales volumes, marketers can learn if internal or external factors are to blame for sales volume deficiencies or surpluses. The data collected can help marketers make adjustments to existing marketing programs as well as used to incorporate them into new programs in new markets.

Sales-Variance Calculator

The following is a simplified version of a sales-variance calculator. All required fields must be entered for the calculator to properly compute the variance.

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by Allen Stafford |

published on: July 15, 2020 |

updated on: August 6, 2020

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