Intelligent loss of sales

No one likes walking away from sales, especially in today’s competitive marketplace. But sometimes it makes sense to walk away from sales that carry a cost that is far higher than the profit from the sale. Certainly we don’t want to disappoint customers. On the other hand, trying to meet every customer need could drive you out of business.

A good example of letting sales go is in managing instock levels in retail locations. We all know that maintaining an instock level of 100% is not only nearly impossible; it’s also very expensive. Buying and stocking enough product to support this level of instock is prohibitively expensive. It also makes little sense from an overall sales perspective, as there is a point where having more inventory doesn’t lead to increased sales. So if we set an instock goal of 99.0%, we are in effect saying that we are willing to be out of stock 1% of the time, and we are willing to give up the sales that might come if we were never out of stock. We are intelligently choosing to lose these sales for the sake of the health of the overall business.

Every business will be slightly different, but every business – from Walmart to the corner deli – needs to understand that every sale carries a cost, and that some sales are more expensive than they can afford. In these cases the right business decision is to walk away from these sales and focus your energy on more profitable sales channels.

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