Sales cost and profitability management

Sales cost and profitability management

Sales cost to revenue ratio is one assumptions behind profitability projections. Minimizing the cost of sales while staying within assumptions boundaries is must.


Topics in Sales cost and profitability management : -

Sales Cost and Profitability Overview

Sales cost and profitability is the 'bottom-line' part of sales function. A sale, which does not meet the expectation of returns for the share-holders is not termed as success.

Sales Objectives Clarity

One has to define the measures for sales function, which layout the level of emphasis which needs to be placed on sales bottom line (sales profitability) vs. Sales Revenue. Sales people generally have a grouse that they get different messages from the management in terms on 'top line vs. bottom-line vs. both'. They also say that it's not possible to focus both on bottom-line and top-line at the same time.

Sales product Mix Profitability

Managing sales product mix helps to enhance the sales profitability, as sales people can aim at placing a greater focus on more profitable products.

Sales ticket Size Mix

Typically a sales ticket size translated into the higher sales profitability per dollar of sale. Sales people are always encouraged and incentivized for having larger ticket size. While the ticket size has to do with the sales effort, here are the other factors which influence the ticket size

Sales Channel Mix Profitability

This part is covered in more detail in sales channel management. There are many other factors which govern the decisions around sales channel mix. In this page, we will be covering the linkage of sales channel to sales cost and profitability (SCAP) in this page.

Variable Sales Cost

Sales functions are typically considered equivalent to P&L function where they are measured on the revenue generated by them minus the cost incurred. Variability of the sales cost is defined as the level to which the sales cost is function of the sales volume/value. Most closer is the linkage between the sales cost and sales volume, more is the variability

Sales facility Infrastructure

Sales facilities and infrastructure form a significant component of sales related costs.