BUSINESS LENS: "Why Has My Sales Stopped Growing?"

Have you, as manager, ever looked at the graph of your sales for the past five years and asked the titular question? you may wonder, "what has gone wrong? why have we reached a "halt"? is there something i should be doing which i am not doing?" These and many more questions may cross your mind and leave you startled. This kind of situation can be especially frustrating for a small and medium scaled enterprise because you want to grow and become a big business but have suddenly found your self stunted after a blistering start to the business. In a desperate bid to get their sales up and running again, some managers have pumped a lot of money into marketing and advertising efforts with the hopes of jolting sales out of his slumber, but the sad news is that sales is still fast asleep. In this part of the world Africa, where we are very quick to attribute a situation that seems inexplicable to the supernatural, an SME manager in this situation may be quick to ascribe the "halted" growth of his business to bad competitors who may have used uncanny means to attempt a destruction of his business. While things like that do happen, it is not always the case; there are many things that happen logically and can be explained. So what is the logical explanation for my stunted sales? you may ask.

The truth and reality of the matter is, nothing can grow forever. Everything must always reach a halt or equilibrum at some point. Business is not immune to the reality of that fact. There are two unseen forces that act out the "inexplicable" drama of stunted sales growth; they are "positive" feedback loop and "negative" feedback loop. These loops are positive and negative not in the dictionary meaning of the words, but in the sense that one is reinforcing, and the other is balancing. Positive feedback loop is when variables compound, amplify, or reinforce themselves. This causal loop of the perfect business illustrates a positive feedback loop

Sales causes satisfied customers; satisfied customers spread the word about your business and products which further reinforces sales. This is a very utopic scenario, because it is unrealistic to believe that life will continue like this. Remember, nothing can grow forever due to presence of the negative or balancing feedback loop. The negative feedback loop is a goal-seeking and stabilizing loop that works in opposition to the positive loop, that is why nothing is capable of perpetual exponential growth. The diagram below illustrates the interaction between the positive and negative feedback loops in sales

When you launch a new product in a market, especially a product for which substitutes are not common, people may be eager to try it out; and if they detect that the product has great value, they are quick to introduce it to their friends, family members, workmates etc. Therefore, adoption rate of the product increases which causes more people to spread the word about it to others which in turn drives more people to to adopt the product. At this stage, the positive loop is the dominant loop; your sales appear to be growing exponentially and you can't see why it shouldn't. However, one fact seems to elude many managers, and that is, the more customers you have for your product, the less potential customers you have. This is because as more and more people are adopting your product, the market is getting saturated; your product is no longer new to people as almost everybody knows and uses your product; there are no new adopters. The situation gets even "worse" when a competitor produces a similar product to your own which, perhaps, delivers identical value to buyers.

At this point, the negative loop becomes the dominant loop of the two, forcing the market for your product to reach an equilibrum or "halt".

As you can see in the graph, initially the number of adopters of your product (which translates as sales) is growing exponentially as time passes. But, the graph reaches an inflection point where there is a change in dominance as the negative loop counters the positive loop and drives the system to an equilibrum or saturation point. So, your sales become static because you don't have new people adopting your product. The question now is, what can be done to change the situation, so that sales begin to grow again? A suggestion is, you, as manager, should try to get your product into a new market where it is unknown. There are different strategies for penetrating new markets such as penetration pricing, where you introduce your product at a low price to stimulate interest, and price skimming, where you introduce your product at a high price in order to assure its quality. For a virgin market, it is possible your initial entry strategy can work again. A new market for an unknown product with value means new wave of sales.

The second suggestion is to modify your product, enhance its features, make it deliver increased value so that it is almost like new to existing users. This time, the selling point for your product will be its improved features rather than its pervasiveness; then the cycle can begin all over again. The key to the continuity of a business is recognizing and understanding the dynamics and loops driving your business and responding accordingly. And when you do, you will stop asking questions like "why has my sales stopped growing?"
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