The Linearity of Sales and its formula

linearity of sale is most commonly found in FMCG industry

Linearity of Sales is a graph which denotes the variable consumption of products and the demand of the product which is affected by such variation.

This concept largely depends upon the products which have seasonal demands, example- blankets.

Understanding the linearity of sales helps the business companies to analyse their retail sale values and purchase expenditure over the years.

The linearity of sales is better valued in context of Fast-moving Consumer Goods or FMCG.

These products are sold very quickly and at relatively low cost, example- chocolates.

The demand of FMCG products is very highly disorganized and collection of sale data is difficult for each commodity.

Understanding the linearity of sales takes time, it may probably take you around a full year to understand the linearity of a single category of product.

However, there are ways to calculate the linearity of product within a month of time, and that requires skill.

There are a lot of questions that people ask on our blog like how does purchase and demand of a product change within a month? Or how can linearity of sales change so easily in such less time?

There are different ways by which we can understand the sale linearity change of products and these ways are becoming more popular and important with passing time.

Sale Linearity of a specific product can denote the merchandising strategy of that product sale and also can help us understand the shopping pattern of people and what impact does purchase influencers have on them.

It is very important for the business companies to study linearity of sale over different categories of products like cosmetics, men grooming, tea and coffee, oral care, snacks, beverages, biscuits etc.

This categorical distinction can effectively help us understand the different geographies and shopper behaviour patterns.

Linearity of Sales Formula

Analysing and measuring the skew of demand can be done by IMS which is Intra Month Skew.

This is the ratio between top and bottom 3 3-day moving contribution windows.

On graph, IMS 1 would indicate equal demand for everyday whereas IMS 2 would denote that highest purchase phase has double the sale of bottom purchase phase.

IMS values on graph are shown by different sizes, shapes and curves depending upon the categorical outlets.

This IMS graph can tell us much more about the linearity of sale of a particular product than a qualitative research.

In studies, it is shown that IMS values show promotional activities and the categories involved show certain similarities between the shopping pattern and purchase behaviours of the products.

Now you may have a question in mind regarding the beneficial essence of studying and understanding the IMS graph to learn about the linearity of sale.

The answer to this can be used as a solution to boost the linearity scale.

By identifying the peak phase of purchase for a particular category of products, the business company can boost their promotional activity for that particular peak period of time and that would benefit the brand so much even across less number of stores.

This peak period can also be used to take corrective measures to improve the linearity graph.

This information after analyzing the IMS graphs can be used by businesses to design a stock area for themselves, where they can refresh stocks every month, whichever category’s products are currently in the peak purchasing phase.

This way, maximum customers can be provided with the products and boost the profitability of the business.

Compiling and organizing products which come under the similar categories or have similar linearity of sales is also a benefit of understanding the IMS graphs.

By using this method, maximum retail service provider can be reached to achieve maximized distribution levels.

One of the most important benefits of analyzing the linearity of sale graph is that it reveals individual performance of each brand competing in the market.

We can compare every brand and list the top ones which are currently doing best in the market and study their strategy for reference.

 By reading the changes in the curves and linearity of lines on the graph, one can anticipate the changes in consumer behavior and analyse the perception of the consumers about that particular brand as well.

The linearity of sale graph can be very useful for new start-up companies in analyzing the best brand to refer from when their strategies are deemed successful in it.

To know more about different sales indicators, let’s connect !