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Economics and finance concepts for sales

In this article we will look at some key concepts in finance and economics that all sales people need to understand

Wants versus Needs

economics-and-finance-concepts
People at all times need and want goods and services. In order to get this they have to buy it. Which by definition means that somebody has to sell it to them. Therefore, there will always be a need for sales people as long as people want goods and services.

Let’s look at how we can categorise what people want and need.

Human Beings have three basic needs – food, clothing and shelter. If you really think about it we don’t need anything more than that.

However, beyond these needs we may have an infinite amount of “wants”.

For example, we have many companies and organizations selling food and clothing. A person may buy basic food items such as bread and milk but a person will also have wants such as chocolates, soft drinks and so forth. A person may buy basic clothing to clothe himself. But his wants will motivate him to buy designer clothing. And if you think about it, designer clothing is not just about the “need” for clothing oneself. It is more about how you want people to perceive you e.g. you want to look good, want to have a higher status and so on.

Lets take another good – property sold by real estate agents.

A person may buy or rent a simple house or flat but his wants motivate him to buy a luxury house to live in. Here the luxury home is not just about having shelter but is about fulfilling deeper emotional needs e.g. the need for status in society. A smart real estate agent will understand this.

From the above we can deduce that needs are limited whereas wants are truly unlimited.

This concept of needs and wants goes to the beginning of time.

Why we need to do market research

In order to understand what the market wants and what sales potential there is, a businesses should do market research for the given area or country. Today millions of dollars are spent in developing a product – be it for the mass market or the luxury market.

A salesperson needs to understand these basic concepts. He also needs to understand the needs and wants of a particular group of people that he is selling to. What people want changes all the time and a good salesperson will adapt to a customer’s requirements.

It is imperative that a salesperson has good product knowledge of what he is selling.

Different goods and services are sold differently. How we sell daily consumables like groceries, cosmetics, washing powder and other supermarket lines is very different from selling motor cars.

And even all motor cars are not sold the same way. For example there are vehicles which are manufactured for the mass market and there are vehicles manufactured for the luxury market. In order to target a specific group of people, a survey has to be done. Is the area you targeting consisting primarily of young people (for example, from the ages of twenty years old to thirty years old)? This will give you an indication of what their tastes are like. Also, what are the average incomes which will tell you about affordability.

Today technology is a major industry. Think about computer hardware, computer software, computer tablets, cell phones. Technology is constantly changing because manufacturers of technology are in a never-ending competition for share of the global market. As this happens sales people need to constantly update their knowledge of new products.

There are products well established in the market. One reason is that these products may be very long in the market e.g. over 100 years old. A good product will win the trust of customers – especially over time. Once the trust of a customer is achieved the customer will repeatedly buy the product over his life which makes the customer very valuable.

Sales are also generated by word of mouth i.e. the good experience of one person is generally passed on to another customer. To have a sustainable business, there has to be repeated sales.

Why we need to understand financial concepts

A salesman must also understand the bigger picture of a business. For any business to survive, it must sell its products and services at a profit. This profit is usually called the gross profit. Very often, salespeople are paid commissions on the gross profit number. From the gross profit all operating expenses are deducted to get to the net profit or loss.

This net profit or loss is referred to as the “bottom line”. If the business makes a net profit it becomes a feasible business to operate and it will be easy for it to continue to exist. But if the business makes net losses on a continual basis it will get to a point where it may not be feasible to operate.

However, it should be quite clear now that a business cannot have a “bottom line” i.e. without selling first. Sales, by the way, is often referred to as the “top line”.

From this we can see how important the sales function is to any business.

You can learn some basic concepts by searching on the internet. For example here is a wikipedia article on Profit Margins

https://en.wikipedia.org/wiki/Profit_margin

However,to really improve your financial knowledge to the level it should be its a good idea to attend a training course such as a Finance for Non-Financial Managers Course.

You can learn more on the following page:
https://financefornonfinancemanagers.wordpress.com/