Welcome to the complete B2B Sales Glossary for 2024

ACV refers to the average annual revenue earned per customer contract. It helps businesses with subscription models measure predictable revenue over time, offering insights into customer value and retention.

Formula:

ACV = Total Contract Value / Number of Years

Divide the total contract value by the number of contract years to find the average annual revenue from each customer. ACV provides a clear view of how much revenue each customer brings on a yearly basis.

AOV represents the average amount a customer spends in a single transaction. It helps businesses understand purchasing patterns and identify opportunities to increase the value of each transaction.

Formula:

AOV = Total Revenue / Number of Orders

To calculate AOV, divide the total revenue generated by the number of orders. This metric allows businesses to assess customer purchasing behavior and optimize strategies to increase transaction value.

Brand Equity

Brand equity is the value a brand adds to a product, often reflected in higher customer loyalty and premium pricing. Strong brand equity can boost profitability and market differentiation, making it a key business asset.

Brand Penetration

Brand penetration measures how many customers in a specific market have purchased a product over a set time. It reflects a brand’s market reach and consumer adoption rate.

Formula:

Brand Penetration = (Number of Customers Buying the Brand / Total Market Population) × 100

Divide the number of customers who bought the product by the total market population, then multiply by 100. This percentage indicates the brand’s market coverage.

Category Management

Category management involves treating a group of related products as a single business unit to maximize sales and profitability. Success in category management is measured through improvements in sales, market share, and profitability.

Category Share

Category share refers to the percentage of sales a brand captures in a particular product category. It’s useful for assessing competitive positioning and market performance.

Formula:

Category Share = (Brand Sales in the Category / Total Category Sales) × 100

Divide the brand’s sales in the category by the total sales in the same category and multiply by 100 to determine what percentage of the category’s sales your brand owns.

Channel Sales

Channel sales involve selling products through third-party partners such as resellers or distributors. This approach helps businesses extend their reach and leverage partner expertise without direct sales efforts.

Commercial merchandising consists of goods produced for sale to consumers, focusing on quality, branding, and presentation to drive sales. Effective merchandising strategies aim to enhance product appeal and profitability.

Consumer Behavior Analysis

Consumer behavior analysis examines why and how customers make purchasing decisions. It’s crucial for tailoring marketing strategies to meet consumer needs and drive conversions.

Consumer Insights

Consumer insights offer data-backed understanding of customer preferences, behaviors, and motivations. These insights help companies design better marketing campaigns, enhance product development, and improve customer satisfaction.

Cost of Goods Sold (COGS)

COGS represents the direct costs incurred in producing goods sold by a company. Understanding COGS is essential for calculating profit margins and setting competitive pricing strategies.

Formula:

COGS = Beginning Inventory + Purchases During the Period – Ending Inventory

Start with beginning inventory, add purchases made during the period, and subtract the ending inventory to calculate COGS. This provides a clear picture of production costs and their impact on profitability.

The CPG industry includes high-demand goods like food, beverages, and household products. These goods are typically sold quickly and at relatively low prices, relying on high sales volumes for profitability.

Cross-Promotions

Cross-promotions involve marketing two or more complementary products together to increase sales. This strategy leverages product synergies to boost average order value and encourage customers to make multiple purchases.

Customer Lifetime Value (CLV)

CLV estimates the total revenue a business expects to earn from a customer over the lifetime of their relationship. Understanding CLV helps businesses prioritize long-term customer relationships and retention strategies.

Formula:

CLV = (Average Purchase Value × Purchase Frequency) × Customer Lifespan

Multiply the average purchase value by the frequency of purchases, then multiply by the customer lifespan to calculate how much revenue a customer will bring over time.

Demand Forecasting

Demand forecasting predicts future customer demand for a product, enabling businesses to plan production and inventory levels accordingly. Accurate demand forecasting helps avoid stockouts and overstock situations.

Digital Shelf

The digital shelf refers to how products are displayed and marketed on e-commerce platforms. It’s essential for optimizing product visibility, boosting conversion rates, and driving online sales through effective presentation and reviews.

Direct-to-Consumer (D2C)

D2C is a business model where brands sell directly to consumers, bypassing retailers or third-party distributors. This model gives brands more control over customer experience, pricing, and marketing strategies.

Discount Rate

A discount rate is the percentage reduction from the original price of a product, used to encourage sales and clear inventory. Businesses often use discount rates to attract price-sensitive customers.

Formula:

Discount Rate = (Original Price – Discounted Price) / Original Price × 100

Subtract the discounted price from the original price, then divide by the original price and multiply by 100 to get the percentage discount offered.

Distribution Channel

A distribution channel is the route through which goods pass from manufacturer to end consumer. Effective distribution channel management ensures timely delivery, broader reach, and minimized costs.

E-commerce Sales

E-commerce sales refer to transactions conducted online. Success in e-commerce is measured by metrics like conversion rate, average order value (AOV), and customer acquisition cost (CAC).

Field marketing involves face-to-face promotions or events that directly engage consumers to boost brand awareness and sales. Success is often measured through lead generation and conversions.

Field Sales

Field sales are conducted outside the office, where salespeople meet clients in person. This sales model is common for complex or high-value deals, where building relationships and trust are key to closing sales.

Gross Margin

Gross margin measures the percentage of sales revenue that exceeds the cost of goods sold, indicating profitability.

Formula:

Gross Margin = (Revenue – COGS) / Revenue × 100

Subtract COGS from total revenue, then divide by total revenue and multiply by 100. This provides the percentage of revenue remaining after covering production costs, which helps businesses understand their profitability.

Gross Sales

Gross sales represent the total value of all sales before deductions like returns or discounts. It serves as a broad indicator of a company’s sales performance before adjustments.

Formula:

Gross Sales = Total Units Sold × Unit Price

Multiply the total number of units sold by the price per unit to get the gross sales figure. This gives a top-line view of revenue before any adjustments.

Inside sales involve remote sales activities conducted over the phone or online. Inside sales teams focus on lead generation, follow-ups, and nurturing prospects through digital channels, often for smaller or less complex deals.

Market Basket Analysis

Market basket analysis examines purchasing patterns to identify product affinities. It helps retailers understand which products are frequently bought together, informing decisions on product bundling and in-store product placements.

Market Share

Market share measures a company’s sales as a percentage of total industry sales for a specific product category. It is a critical indicator of a company’s competitive position.

Formula:

Market Share = (Company Sales / Total Market Sales) × 100

Divide the company’s sales by total market sales and multiply by 100 to calculate the percentage of the market that the company captures.

Merchandising

Merchandising involves the strategic promotion of products to maximize sales. This includes everything from product placement in stores to digital merchandising efforts online. Successful merchandising increases visibility, boosts sales, and enhances brand appeal.

MOQ is the smallest quantity of a product a supplier is willing to sell in a single order. This requirement helps suppliers manage production costs and ensure profitability.

Net Sales

Net sales represent a company’s total sales revenue after deducting returns, discounts, and allowances. This gives a clearer view of the revenue that the business actually retains.

Formula:

Net Sales = Gross Sales – (Returns + Allowances + Discounts)

Subtract any returns, allowances, and discounts from gross sales to calculate net sales. Net sales offer a more accurate view of a company’s actual revenue performance.

New Product Launches

A new product launch refers to introducing a product into the market for the first time. Success is typically measured by early adoption rates, sales growth, and market share gained during the launch period.

Operating Margin

Operating margin shows what percentage of revenue remains after covering operating expenses. It’s a key indicator of profitability and operational efficiency.

Formula:

Operating Margin = (Operating Income / Revenue) × 100

Divide operating income by revenue, then multiply by 100 to find the percentage of revenue left after accounting for operating costs.

Out-of-Stock Rate

The out-of-stock rate measures how often a product is unavailable for sale. High out-of-stock rates lead to missed sales opportunities and customer dissatisfaction.

Formula:

Out-of-Stock Rate = (Number of Out-of-Stock Items / Total SKUs) × 100Divide the number of out-of-stock items by the total number of SKUs and multiply by 100 to get the percentage of items that are unavailable for sale.

Outside sales involve sales activities conducted outside of a company’s office, often requiring face-to-face interactions with prospects and clients. It’s commonly used for high-value products or complex sales processes that benefit from personal contact

A planogram is a visual layout or diagram that defines the placement of products on retail shelves to maximize sales and meet merchandising objectives. It ensures consistent presentation across store locations.

RMA is a process that authorizes customers to return a product for a refund, repair, or replacement. An RMA number is often issued, allowing companies to track and manage returns efficiently.

SFA refers to software tools that automate repetitive sales tasks, such as lead tracking, customer data management, and follow-up reminders, to enhance productivity and streamline sales processes.

Visual merchandising involves designing retail displays and product presentations to attract customers and enhance the in-store experience. Effective visual merchandising uses color, lighting, signage, and layout to boost product visibility and drive sales.