Sales strategy: growing without sacrificing margins
A small business grows revenue, but discounts erode profitability.
Suggested analytical approach
- Analyse sales by customer, product and channel.
- Calculate contribution margin by segment.
- Identify discounts without a corresponding volume or retention benefit.
Possible deliverables
- Segment-level margin map
- Discount policy and sales action plan
- Revenue, margin and conversion dashboard
How would success be evaluated?
First establish a baseline, define relevant indicators, agree a review period and compare the observed changes with the initial objectives. Consider external factors before attributing any improvement to the intervention.
Illustrative discount and contribution example
Suppose a product sells for €100 with a variable unit cost of €65. The contribution is €35 per unit, or €3,500 for 100 units sold. A 10% discount, with costs unchanged, reduces the selling price to €90 and contribution to €25 per unit. To preserve the same €3,500 contribution, the business would need to sell 140 units—40% more volume. This is a fictional calculation and excludes further effects on capacity, logistics and fixed costs.
How to use the analysis in a sales policy
Before discounting, measure contribution by customer and channel, the actual volume uplift required and the risk of shifting customers’ price expectations. A sales decision should connect revenue, contribution and conversion targets, with transparent rules for exceptions.