This blog post is part of the series related to business key performance indicators (KPI). I will guide you through the most important metrics for any company and give you insights about the different options to automatize the data collection and calculation process with the help of SAP BW.
Introduction:
Sales performance is a hot topic for any company worldwide, irrespective of size and industry. In general, sales metrics seem to be very basic and intuitive, but the development of a full set of indicators for sales analysis is a hard task. This blog post reveals details about the importance of the Product Performance KPI. This metric can be calculated from many different perspectives – Sales, Finance, Controlling, etc. However, in this post we will be solely focusing on how this indicator fits into the company’s sales analysis.
Definition:
Product Performance is an important KPI, which helps you to rank your products based on the sales revenue they generate. The biggest benefit for the management is the possibility to actually assess the current sales strategy for the different products in the portfolio. As a result the company can take smarter decision to either continue or change the market approach for their product lines. There are different variations of the analysis of the product performance KPI – e.g. Top 5 products, Bottom 5 products, Top 20% of sales, top performers from the sales representatives, etc.
To evaluate product performance you would need to have a clear predefined goal. Otherwise you will likely analyze something, which has a limited business meaning. As a result you won’t be able to take the best possible management decisions that ensure long-term growth and success.
Keeping track of this KPI is especially useful for new products, which are just now starting on the market. By analysis you will be able to check the reactions of the customers to the product and how easily they accept it. This will either confirm or destroy your initial expectations. At this phase, the indicator is like a pulse-check that evaluates fast your sales strategy and helps you to adapt it better to the potential market.
Product performance for existing products is also quite interesting. With it you can check the sales development of your different product lines. Surely, a more detailed analysis will be able to point out the current phase of the product lifecycle. Another significant part of the analysis comes with regards to marketing campaigns. These are usually quite expensive and taking a bigger value for our money is business critical here. So, direct marketing campaign costs have to be always measured against the increase of the revenues of the targeted product. It sounds very easy in theory, but the truth is that a lot of the marketing activities are poorly evaluated and ROI of these is miscalculated.
The comparison of the performance for different products is another interesting topic. With the help of such an analysis you can easily see, which are the company’s strongest products and of course the weakest ones. However, it is crucial to analyze also the sales trend of the product, because this may reveal products, which are currently not the top ones, but have a potential for significant growth.
Product Performance Analysis in SAP BW:
The modern data warehousing system can automatize the process of data collection, harmonization and the subsequent calculation of the necessary KPI-s. Like this, you will be able to focus on the analysis and the decision-making process rather than the data processing. Moreover, you will be powered with BI functionality like navigation, dynamic filtering, drill down to important business characteristics, charting and more.
To automatize the ETL process in SAP BW for the Product Performance KPI you would need to get the source information from SAP SD (Sales and Distribution) and SAP CRM (Customer Relationship Management). The light-weight scenario will require the extraction of invoices data from SD-Billing with the line item details. Based on this data, you will also have the quantities per invoice, which will give you the possibility to calculate other indicators that support your decision-making process – for example, total quantity per product or average product quantity per transaction.
Once you have your data in SAP BW, then you have numerous options to make your queries fit exactly your business scenario. In addition to the dynamic navigation and filtering on the business relevant characteristics, you also have the options to define exceptions and conditions in your query. For example, you can easily define a condition to show the top 5 products by sales amounts or the bottom 5 by sales quantities.
Another interesting feature that is extremely useful for KPI-s is alerting. SAP BW gives you the possibility to create automatic alerting, when a specific threshold is breached. Moreover, you can make the alerting per business characteristic and alert only the interested parties. For example, you can set a threshold on the quantities of a product and specify an e-mail broadcast only to the responsible product manager and the sales director, if the threshold is breached. Like this, BW gives you the opportunity to automate the daily business monitoring.
In an SAP system landscape, you can also easily load into BW your marketing campaigns information. This will depend on the type of implementation you have, but generally the data can come from SAP ECC, SAP CRM or the SAP TPM (Trade Promotion Management). The last one is a specific module that organizes the work around marketing campaigns and requires a tight integration between CRM and BW. Irrespective of the different implementation possibilities for management of marketing activities, it is important to load this piece of information to your BW system. And the biggest reason to do so is to be able to analyze the real effects of the marketing strategy with regards to the product performance and take the right decisions on time.