As you've heard me say previously, Annual Sales Planning is a lost art.
For many of you, a new fiscal year begins on or around February 1. Your Finance department demands an air-tight financial forecast for the year.
Your job is to provide the air-tight financial forecast. Here are five things to avoid.
Avoid This: Do not put a "merchandise productivity" factor in your forecast. Just because the merchandising division believes that this year's assortment is "trend right" doesn't mean that you "put belief in the bank". Do not add a 5% factor to your forecast, or you are likely to miss plan, causing you to liquidate merchandise, causing you to miss your gross margin forecast, causing a lot of employees to not get bonuses, causing your business to be less profitable, potentially causing employees to lose their jobs.
Avoid This: Do not put a "conversion rate scalar" in your forecast. Just because you are working with a wizard who knows how to improve homepage or landing page conversion by 11.3% doesn't mean you are smart enough to forecast the improvement eight months ahead of time. Too often, improvements are "short lived", meaning that the customer becomes bored with the change, or the competition catches up with you, or you improve conversion rate but that only reduces visits (i.e. the customer would have purchased across two visits --- and now purchases in just one visit). Allow the changes to work, then "beat your plan", and let everybody look good.
Avoid This: Do not put a "creative factor" in your forecast. Your creative and marketing organization might feel strongly about their new initiatives. Never bank on these initiatives! How could anybody ever know if new imagery will result in a 4% sales increase, six months before the new imagery is to appear?
Avoid This: Do not put an "economic uptick factor" in your forecast. How the heck do you know that the economy will be 7.2% better in Fall 2010, compared with Fall 2009? Let people talk about this, but protect your company from buying inventory to cover a theoretical economic improvement that may never happen.
Avoid This: Do not put a "marketing improvement factor" in your forecast. How does anybody know that the October 6, 2010 e-mail marketing campaign is going to outperform a comparable campaign in 2009 by 13.4%? Focus on what you know, and what you know is how things performed last year.
I've seen entire profit and loss statements ruined, not because of customer productivity issues, but because of terrible planning assumptions that caused a company to over-buy merchandise, requiring markdowns and liquidations and gross margin erosion. Don't go there! Stick to the facts, please!
Yesterday we talked about a classic, outstanding catalog customer ... and how that customer needed MORE mailings on an annual basis. ...
Look at the first four rows of our life table (values of 0/1/2/3). These are the first 12-15 weeks after a customer buys for the firs...
In our simulation, we learn that there are different definitions of Carrying Capacity. If the CFO demands that we maximize profit o...
You probably run Life Tables for your customer file, right? Right? They've been around forever ( click here for a reference f...