It is relatively easy to achieve an indefinite objective such as “increase sales,” 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 perhaps deplete a large inventory of books.
The distinction is important because each objective requires a different strategy. The journey to achieving any of these goals is made by manipulating the marketing tools over which you have complete control: the price, distribution network, 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 reduce 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 your real objective.
Objective One: 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, invest your newfound cash in a program of increased marketing activity. First, extend your product line by publishing more books (new titles, new authors, sequels) or producing other products (audio/video programs, booklets, CDs). Second, increase the average order size by selling more books to fewer, larger customers. Contact buyers in corporations, associations and even government agencies who can buy your books in large, non-returnable quantities. See www.bookapss.org
for help in doing that.
Next, increase your promotional activities, online and offline. 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. However, the price for greater cash flow may be lower profitability in the short run.
Objective Two: 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, there are additional tactics at your disposal. First, 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, 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 could take a different approach by increasing selected prices and decreasing 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. Additionally, decrease sales through the traditional distributor ⇒ wholesaler ⇒ bookstore channel where returns, discounts and 120-day payments wreak havoc on profits. At the same time increase your attention to special sales. A decrease in promotional expenditures may improve your short-term profitability, but probably at the expense of future net income.
Objective Three: Increase unit sales of a particular title. There is 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. Seek special sales and implement 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.
The next time the urge to increase sales hits you, be more specific about what you really need. Evaluate not only the available strategic options but also the best combination of them. Implement those with the greatest likelihood of delivering what you truly want.