The Drawbacks of Sales Overloading

There is a danger inherent to sales teams and salespeople everywhere: overloading. Overloading is evil, but its effects, despite usually short-term, do not seem to affect sales teams, who will soon oversell and overload the market with despicable effect.

Overload happens whenever you sell more than you originally forecasted. I know many forecasts are weak and prone to change according to the dynamics of the market. But in many other cases, forecasts are easy to project and analyze. Accounts with a long-standing history and little change in the trade channel are good candidates for very accurate forecasting. If you did your math right and set good targets, you should hit those targets more often than not and come very close to the median of above and below the forecast target. But if you happen to surpass your target by large, let’s say anything above 10%, then you might be a victim of overloading.

I speak from experience. I have seen many times how my sales team surpassed its targets by 40% or more, only to miss them the next month (usually by the same amount, thus losing any advantage gained.) Sales managers should be very dubious of easy numbers. If you met your target and blew it out by the 20th of the month, you either had a weak forecast or most likely you are overloading the market.

Overloading has two principal problems. The first one is that since the channel can only absorb so much product if you push too much of it you are only choking the channel and promoting a bottleneck. I know brands can gain market share thus expanding sales, but market share gains come to a point at the time, sometimes even slower, thus the overload effect is usually not concomitant of market share gains. In simple words, what you sold extra this month is what your customer won’t sell this month, so he or she won’t buy next month.

The second negative effect is when overload hits retail. Too much product at the same time and sales will not grow proportionally. All of the sudden your customer will detect they have too much of your product on hand, but since sell-through will be pretty much the same, turnover of goods on hand will drop. When the product moves slowly from the warehouse to the shelves retailers have to start discounting or promoting it in some way, both measures that consume resources, thus reducing their profits on your products. Retailers will not think about the overload effect (they know it, they just won’t think about that.) Retailers will think your product is moving slow and its profits are reducing, and adjust their buy long-term. This is hurtful since your forecast will now be negatively affected.

Some will say that once the normal flow of product, or even reduced flow, start to hit the market, retailers will have to refresh their inventories more often and will start buying more. This is a truth, but it’s also a truth that consumers will buy from your competitor if they cannot find your product more often than not. Lost sales to inventory adjustments from overloading usually don’t come back, again, negating any effects from the initial rush of sales abundance.

So next time your sales team is about to throw a party for that 74% above budget sales result, think twice. Companies do get lucky from time to time, but history tends to repeat itself, and most likely you are the next victim of the overload effect, something that will come back to haunt you soon.

Brute Force Sales

I used to believe that any sales problem can usually be solved – if not best solved – by brute force sales strategies. Programmers call brute force algorithm a very general problem-solving technique that consists of systematically enumerating all possible candidates for the solution and checking whether each candidate satisfies the problem’s statement.

A brute-force algorithm to find the divisors of a natural number n would enumerate all integers from 1 to the square root of n, and check whether each of them divides n without remainder. A brute-force approach for the eight queens puzzle would examine all possible arrangements of 8 pieces on the 64-square chessboard, and, for each arrangement, check whether each (queen) piece can attack any other.

While a brute-force search is simple to implement, and will always find a solution if it exists, its cost is proportional to the number of candidate solutions – which in many practical problems tends to grow very quickly as the size of the problem increases. Therefore, brute-force search is typically used when the problem size is limited, or when there are problem-specific heuristics that can be used to reduce the set of candidate solutions to a manageable size. The method is also used when the simplicity of implementation is more important than speed.

In real life sales, brute force is usually used not when the simplicity of implementation matters more than speed or when the problem is constrained to few variables, but rather when urgency or lack of resources occur. Do you have too many boxes of product ACME in the warehouse? Brute force sales through discounting will do the trick. Did you run out of marketing budget for product X? Brute force sales with your oldest, best sales rep will do the trick? Is this market down in sales and you need a quick pick me up? Brute force sales with your sales manager and watch the numbers grow!

Or not…

I am beginning to see that brute force sales are – just as in programming – a limited tool for your sales strategy. It works in a limited set of occasions when short-term results will help alleviate short-term problems. But it will never help streamline structural problems of your overall sales or company strategy.

I have seen it many times. Companies believe they can push for ever higher sales targets pushing promotions, discounting, or just sending their best sales reps to lunch with accounts and execute sales through sheer courage. It works the first or second time, but managers begin to puzzle after the third time why the diminishing returns. The surprise is that managers keep insisting on brute force sales despite its ineffectiveness long-term.

Do not get me wrong, I know that salespeople need to continuously push for sales. I do it all the time, and I use brute force sales now and then. The case is I know how and when to use it in an effective way. The brute sales force will not solve a major category or product problem. If your product became obsolete brute sales force will not help. No matter how hard you push, you will never be able to sell 3 ½ inch diskettes. No matter how hard you try, some brands lose their positioning and appeal and the target consumer moves on to another. Then it becomes a marketing problem, an innovation problem, an advertising problem, but not one that can be solved thru brute force. It’s not about attacking the symptoms, but rather truly overcoming the illness.