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Sales budgeting, forecasting and market planning are crucial components of any organization's overall success. Each plays a significant role in determining the company's direction, revenue projections, resource allocations, and overall financial health. Market share is a key factor in this process as it directly impacts an organization's sales targets and strategies. DISC provides full distribution marketplace sizing for both the supply and demand side and can assist with share calculations. Below is our guidance on the sales budgeting process, some steps you can take during the process, and how they relate to market share.
#1. DEVELOP A COMPREHENSIVE MARKET ANALYSIS OVERVIEW
The first step in the sales budgeting process is getting a comprehensive market analysis overview. Understanding the total market size and looking at it from the primary electrical verticals (construction, industrial, institutional and utility) is a solid starting point. From here we want to know the areas of growth and the areas of slowing to help identify market trends, understand customer preferences, and target areas of weakness and opportunity. Market share data is vital at this stage as it helps the company gauge its position relative to competitors. By knowing your current market share, organizations can set realistic goals for growth.
#2. BUILD A SALES FORECAST THAT MEASURES POTENTIAL IN THE GEOGRAPHIES OF INTEREST
Sales forecasting is the cornerstone of the sales budgeting process. It involves making educated predictions about future sales based on historical data, market trends, and other relevant factors. Simply divide sales by market size to get a benchmark share calculation. Geographical information is key in performance measurement and planning and national, state, county and zip code data should all be considered in the calculations. National, regional and more granular sales territory should all be considered. Market share data becomes crucial, as it can help determine your current position and the potential for capturing a larger portion of the market and for maintaining the existing share.
#3. ESTABLISH SALES TARGETS
Using the sales forecast and market share data, organizations can establish specific sales targets. These targets should be both realistic and ambitious, considering the company's growth objectives. Market share goals may include maintaining the current share, increasing it, or even entering new markets to gain a share.
#4. CONSTRUCT A BUDGET THAT ALLOCATE RESOURCES TO ACHIEVE SALES GOALS
With sales targets in place, budgeting and resource allocation become critical steps. This involves determining how many resources (financial, personnel, facilities and otherwise) will be needed to achieve the sales goals. Market share data based on current and past resources is useful in making informed decisions about the level of investment required to compete and meet sales targets effectively.
#5. DEVELOP SALES STRATEGIES
Once the budget is allocated, developing sales strategies is vital to winning strategy. These strategies should align with the market share objectives. For example, if the goal is to increase market share within a vertical market, strategies might include expanding product lines, entering new geographic markets, targeting specific industries or intensifying marketing efforts.
#6. MONITOR SALES PERFORMANCE
Regular monitoring of sales performance against the budget and the market is crucial. Market share data provides insight into whether the strategies are effective in achieving the desired market share goals. If market share is not increasing as planned, adjustments to strategies or resource allocation may be necessary.
#7. TRACK COMPETITORS’ MARKET ACTIVITY
Any discussion of market share must take competitors into account. It's essential to continuously analyze competitors' actions, acquisitions, staffing, and market share changes. Understanding their strategies and market share trends can help refine your own approach and identify potential opportunities or threats.
#8 ENGAGE WITH CUSTOMERS
Deep customer engagement is vital to maintain or grow market share. Building and maintaining a strong customer relationship through shared and planned goals with scheduled progress reviews is a great strategy. The key is to become an integral part in your customers’ operations and processes. Engaging with customers through feedback, surveys, and market research can help align products and services with customer needs and preferences. Not everyone has the time and resources to accomplish this internally. David Gordon and his company Channel Marketing Group offers this type of market research as well as providing some guidance on how to get the most value from the research.
#9 FOCUS ON INNOVATION
Innovation also plays a crucial role in market share growth. Understanding innovation from within your customers’ organizations and understanding leading-edge industry innovation can open new markets. Leaders must continually update their knowledge about new technologies, products, and services to differentiate themselves from competitors. Market share objectives should consider how innovation can help gain a competitive edge. Communication, both internal and external, should be a key part of any innovation and differentiation strategy.
#10 PLAN FOR GROWTH
Sales budgeting is not just about short-term goals. Organizations should also have long-term plans and targets for market share growth. This may involve researching and planning to enter future emerging markets, staying on top of policy changes and regulations that can drive new business, and of course building a strong brand presence over time.
In conclusion, sales budgeting is a dynamic process that relies heavily on market share data and analysis. It guides organizations in setting realistic sales targets, allocating resources effectively, and developing strategies to either maintain or increase their market share. Market share is not just a static metric or just another statistical benchmark; it is a critical factor that informs decision-making throughout the budgeting process and is closely tied to a company's overall success and growth in the marketplace.
DISC has been providing thoughtful and reliable market intelligence and forecasts for both the supply and the demand side of the electrical distribution community since 1985. We are here to help you understand your market and plan a roadmap to success.
Christian Sokoll is president of DISC Corp., Houston, the electrical market’s leading provider of sales forecasts and related market data. He can be reached at [email protected].