Business Financial Analysis Process – Action Plan

Business Financial Analysis Process – Action Plan

Electric Toothbrush

The electric toothbrush retails for $68.99. The store’s projections predicted a sale of at least 22 brushes. The revenue obtained from this sale would have been $1,517.78. The actual sales for the product were 11 pieces, which generated a revenue of $758.89. The variance between the actual and planned sales is -50 percent. Compared to the other items, this product has the most significant variance, which confirms significantly low performance.

Causes of Low Performance

The possible causes of such low performance are varied. Firstly, the product’s visibility in the store could be poor. The product’s placement in a store can influence the sales volume for a particular item. The product may be placed below or way beyond the eye level. Customers tend to scan products that are within eye level. Within eight seconds, most clients have already chosen the products to buy (Adani, 2021). Therefore, it is essential to reconsider the position of electric toothbrushes in the store for sales increment.

Secondly, low visibility can also result from marketing strategies that do not expose the product to potential sellers. The retail store is responsible for promoting and marketing its products to clients. The marketing process creates awareness about a product and informs clients about the associated benefits. The clients also learn about the product’s price, mode of purchase, delivery, and other elements. Failure to choose strategies that ensure a product is made visible to the target market interferes with sales (Liu, 2017). It also causes low visibility on various platforms, including websites and physical stores.

Thirdly, the product may be accompanied by poor descriptions, which are usually found in the marketing campaigns or the product’s packaging. The poor descriptions undermine the client’s understanding of the product. This inhibits sales significantly because the benefits and usage are not adequately highlighted. When clients purchase such products, they tend to have a hard time when using them. In other cases, the description may be written in a foreign language that the store’s target market does not understand. Failure to understand the product’s attributes results in less knowledgeable clients. For instance, a client who seeks a solution to sensitive or yellow-stained teeth requires information on an electric brush’s cleaning modes (Bitmead & Denham, 2021). Failure to highlight or avail such information makes it difficult for the client to consider purchasing the product.

Fourthly, the store’s price range may be beyond the clients’ spending ability. A product that is priced highly may deter clients from buying it. The store’s selling ability is dependent on its capacity to price products within its market’s disposable income. If the store caters to a price-sensitive market, it must reconsider its prices to attract more sales.

Externally, the product’s quality may be poor. The quality of an electric toothbrush is determined by its performance, durability, cleaning modes, pressure sensor, efficiency, battery life, and safety (Bitmead & Denham, 2021). These elements are critical and tend to affect a client’s purchase decision. If the current electric toothbrush brand fails to satisfy the client’s expectations, the expected sales will not be achieved. This issue is considered external because the store lacks control over it. It can only be corrected by the manufacturer.

Current Sales Trends That Are Impacting Performance

The sale of electric toothbrushes at the store could grow exponentially if the highlighted factors are addressed. Currently, there is a growing awareness regarding dental hygiene around the world. This awareness is driving the purchase of electric toothbrushes higher. The effectiveness of an electric toothbrush over a manual one is significantly different. The desire to achieve such efficiency in personal care is one of the main factors that attract consumers to products such as electric toothbrushes. However, the high price of these brushes is prohibitive despite an increment in disposable income within the developed world. The need to constantly replace the heads monthly further deters the purchase of electric toothbrushes. These elements explain the currently low sales at the store.

Future Growth Plans

The Compound Annual Growth Rate (CAGR) between 2017 and 2023 is expected to reach 8 percent. This means that the annual growth of each year’s sales should be based on this CAGR (Electric Toothbrush Market Trends and Challenges 2021: Supporting Growth, Top Players Strategy, Size-Share Estimation, and Forecast Report till 2024, 2021). In this case, the store’s annual sales for the electric brushes will be calculated using the projected growth rate. The central assumption will be that the current sales are annual.

2021	2022	2023	2024	2025
$758.89	$1,319.60	$1,425.17	$1,539.18	$1,662.31

The current projections are based on a few assumptions. First, the store will market the product more on different platforms. The marketing process ensures that the respective team studies its current target market to understand its needs in relation to dental care. The information that can be obtained from these prices includes the preferred brands and the prices they are willing to pay. This information may compel the store to widen its product line as it pertains to electric toothbrushes. Since they range differently in prices, they will effectively cater to the price-sensitive and quality-oriented populations. The process of marketing demands that the team utilizes various platforms and provides clear product descriptions. Accordingly, the product description should clearly communicate the attributes of the different brushes. This ensures that targeted clients understand the benefits they may derive from using the products. These benefits should be used to justify the price and the constant need to change the heads.

In addition, the store should highlight to the manufacturers or suppliers any quality issues that clients raise. This process allows companies to improve their products by eliminating the issues that clients bring forward as complaints. In addition, the store could cease stocking the current brand until the quality issues are addressed. Furthermore, the store should strategically reposition the various brands they stock, preferably at eye level (Adani, 2021). This position allows increased visibility and could increase sales to meet or exceed the current projections.

To initially bring more clients to the store, the store’s management should consider offering incentives. This could include free dental checkups after purchasing an electric brush. Whenever possible, subsidized prices can be used to attract clients and create awareness about the products. The store can also use professional endorsements to lure more clients. In the store’s case, endorsement marketing could involve reputable dentists who recommend the electric brush brands that the store retails. This approach will appeal to the masses and create confidence in the products. These strategies should not only attract clients to the store but also create awareness regarding electric toothbrushes. The proposed techniques are expected to enable the store to meet the projected sales for electric toothbrushes. These strategies may affect other products but are tailored specifically for the underperforming product.

References

Adani, T. (2021). The Impact of Product Placement on Retail Sales.

Bitmead, C., & Denham, J. (2021). 15 best electric toothbrushes to buy in 2021.

Electric Toothbrush Market Trends and Challenges 2021: Supporting Growth, Top Players Strategy, Size-Share Estimation and Forecast Report till 2024. (2021).

Liu, J. (2017). How to find and fix underperforming products in your online store.

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Use the financial analysis process to answer questions as a manager for a retail company. To understand how the data is used in the process, review the following questions.

Financial Analysis Process (Recap):

• What does the reported data mean?
• What are the relationships between the various data points?
• What aspects of the business are performing well? Poorly?
• How is your store performing within your district?
• How is the store performing compared to the competition?
• Can we improve the product mix?
• What is driving the store’s business?

Instructions

Complete the following questions as they relate to a retail business. Conduct external research to complete the assignment.

1. Review this Example Sales Report by Product
2. Select an underperforming product.
3. Develop an action plan to improve performance. Include the following elements:
   • Historical information – Present probable causes for the low performance (internal, external, display of product, etc.)
   • Current information – Discuss current sales trends that are impacting performance
   • Future growth plans – Forecast your sales expectations and explain your rationale.