Possible Reasons of Declining Sales

The truth is I prepared this blog post to publish it as a part of mini question-answer series. The question was “Our sales volume is going down! What may be the reason?” However, while writing it, I realized that it became longer and detailed to be a part of mini q&a series. Thus, I decided to post it as a part of “Strategy Guide” category. Actually, it is more detailed and longer than mini q&a series post and shorter and less detailed than my regular blog posts. The blog post will include several reasons of declining sales.

Please note that, there may be many reasons of declining sales. Thus, one can not expect the list below to be complete. However, it will provide the main reasons. Besides, possible reasons presented below are not mutually exclusive, since they might be related to each other.

Before going over the reasons, I want to note something here: You will the terms “increasing performance” and “decreasing performance” in the reasons. Here is what I meant:

*Increasing Performance:

Increasing value via a better price and/or more benefits
Increasing quality and/or size of marketing efforts,
Decreased perceived risk of purchasing the product
Increasing availability of the product,
Better presence at distribution channels (displays, shelf space, eye-hand level etc..)

will result in an increasing performance.

**Decreasing Performance:

These will result in a decreasing performance:

Decreasing value via a worse price and/or less benefits
Decreasing quality and/or size of marketing efforts,
Increased perceived risk of purchasing the product
Decreasing availability of the product,
Decreased presence at distribution channels (displays, shelf space, eye-hand level etc..)

will result in a decreasing performance.

OK, let’s start!

External Reasons:

Customer:

Change in needs of the customer (Change in customer’s value perception)
Decreasing size of target segment
Decreasing frequency of purchase or use
Relationship problems with some customers

Substitutes:

New substitutes
*Increasing performance of existing substitutes

Complements:

**Decreasing performance of existing complements
Declining industries of complements

Competitors:

New competitors
*Increasing performance of existing competitors

Supply Problems: Supply chain and logistics problems

Underlying market: Declining underlying market (i.e. Hypothetically speaking, if limousine market is declining, limousine spare parts market would also decline)

Regulatory Forces: Changing legislation and tax/tariffs.

National/International Economy:

Changing consumer confidence (i.e. a recession might decrease consumer confidence and hence, might decrease consumer consumption)
Changing income level
Changing employment rate
Changing interest rates
Changing exchange rates (this might be a short-term reason as well)

Population Demographics: Changing population demographics

Social Structure: Changing social structure

Environmental issues:

Climate change (a warm winter will decrease energy consumption)
Changing pollution level

Internal Reasons:

Products/Services: Change in product/service mix being offered

Perceived price:

Price changes (I am using “changes in price” rather than “increasing price” because in some cases, a price increase could increase sales volume – Giffen goods)
Increasing transaction costs
Increasing life costs

Perceived Quality

Change in quality of the product/service
Change in positioning of the product/service
Decreasing customer service
Decrease in elements that signals quality (may be because of shortening warranty period, cancelling a money back guarantee program etc.)

Perceived Risk