The Need for Asset Optimization Discipline

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When the going gets tough …  

… most business executives cut expenses.  Consultant services are among the first to go.  In tough economic times we consultants too-frequently hear some variation of, “Your proposal is great, but we simply don’t have the cash at this time to move ahead with it”.  And lest you consider this blog posting an appeal to businessmen to hire consultants, let me assure you right-out, it is not.  It is an appeal to businessmen to adopt an asset and investment optimization discipline and thus create a powerful force for growth, in both good and bad economic times.

By asset optimization I mean a process for assuring that every dollar of cash, every employee and every hour of time is aligned and consistently targeted at the best possible opportunity for growth – and if it isn’t, to re-target it.  A process for executing that optimization exercise follows and is offered for you to consider. Contemplative Businessman

Step 1: Make an initiative attractiveness wish-list

Identify 6 high-yield, high-probability-of-success bottom-or-top line growth initiatives you could embark upon if your organization had the cash, talent and/or the time.  Next to each item put the name of the best talent available to execute that initiative along with an estimate of the amount of cash and time (calendar months) it would take to execute that project.  Rank the initiatives on the list from highest to lowest in terms of most attractiveness.  Keep this list fresh by updating it no less than once a month.

Step 2:  Search internally for assets (time, talent and cash) to reallocate

Identify currently committed assets that are the least productive in your company.  I have found that a large percent of managers and owners do not want to confront this step, largely because it forces a look at non-productive employees, legacy initiatives and pet-projects.

As an example: If an owner has 100 employees, is it likely there are two that are marginally productive?  Assuming for the moment that their cash outlay is $40,000 each, eliminating their positions would free up $80,000 for alternative investment.

There are certainly other sources of potential asset re-allocation and making employment decisions is emotionally difficult, for certain.  Nevertheless, barring the emotional pain of confronting this particular an alternative, the list of potential resources that could be reallocated should be identified for each initiative.

Step 3: Make the tough asset re-allocation decisions

This step is why owners and GM’s get paid the big bucks – to make decisions on asset utilization.

A general on the battlefield does this all the time.  He is constantly looking for points in the line at which to target his battlefield assets.  He continually sends out patrols to discover opportunities to exploit to generate breakthroughs.  Assuming his orders are not simply to hold, the good general always knows which segments of his line to hold and at which to launch an attack

If there is anything I would wish for owners and managers it a decisiveness gene

I recently experienced a client who delayed a critical asset-reallocation decision for a year, only acting when an emergency arose.

Why is such an approach is not used more often?

Through the years I have discovered three primary reasons that small-to-mid size business owners and managers don’t practice this discipline: 1) they simply never thought of it, consumed by day-to-day crisis-driven issues, 2) they want avoid having to make the tough decisions it points them to and 3) no one has held them accountable for working through such an exercise.

A consultant can only help them with the first.

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Learn more about the QMP Group and how it can transform your organization into a powerful engine for growth

Why Employees Don’t Always Do What You Ask

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Are you pleased?

Pulling Out HairIf you are consistently thrilled with the responsiveness and results of important tasks you assign to your direct reports, there is no need to read on. On the other hand, if you are like the majority of business owners and executives we have worked with, you are probably frustrated at times by the lack of understanding, speed of response and quality of the results of those requests.

There are two major ingredients to getting what you request done well. The first is Motivation and the second is, what I will call the Assignment Dynamic – which of the two is much more complex but, actually, easier to manage.

 

Motivation: The Vroom Expectancy Theory

Many books have been written on the subject of motivation, but my favorite model was created by Professor Victor Vroom*, called the Expectancy Theory. It states that people are motivated by the product of three considerations: a) if they attempt something they will accomplish it, b) if they accomplish it there will be a reward and 3) the reward will be relevant to them. If any of these are “zero” there is no motivation. Before giving an assignment, particularly if the assignment is a major challenge, 10 minutes of thought on this motivational model might help,

 

The Assignment Dynamic:

The Assignment Dynamic takes over from the point at which the assignment is given. This Assignment Dynamic is shown in Figure 1. It has 3 major steps. The 3rd step delineates the 9 common barriers to progress.

Figure 1.

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1.   Clarity:  Be clear about what you are asking for. Describe clearly the acceptable form the answer or solution must take. Clarify the timing for the completion, the importance/urgency of the assignment and the priority of the request. If the result is numerical, collaboratively set the number.  Just this first step goes a long way in improving outcomes.

2.  Checkpoints:  Let the individual assigned to the task know you will be checking on progress on a scheduled basis. Set the schedule.

3.  Confronting Delays and Diagnosing Barriers:  During a checkpoint, if satisfactory progress hasn’t been made, don’t be afraid to confront it. I know, “confront” is such a hash word. In this case, however, “confront” simply means addressing the delay directly and professionally to discover the barrier-to-progress as quickly as possible, rather than simply letting it go with an “OK. I’ll check with you next week.”

The root causes of the lack of progress can almost always be found in the list below. When confronting a delay, discuss directly with the employee the potential barriers to progress. The following 9 items can be used as a barrier identification checklist.

  • Communication:  Stalls and delays can occur simply because someone failed, or forgot, to tell someone that something had to be done. All of the components mentioned in the section on clarity apply throughout the chain of all the people required to fulfill the request and achieve the goal and an objective is communicated.

Just hours before the attack at Pearl Harbor a small crew manning a newly installed radar site on a mountain near the harbor noticed a large swarm of blips. They did their job by discovering them and thought they had communicated it to headquarters. In actuality, due to breaks, oversights and inefficiencies in the communication chain, the note was not received by the harbor until the day after the attack.

  • Capacity: “I’m too busy,” is often the cry for why something is not getting done. In this case, managers must be clear about the priority of the task requested, and if the employee is simply at capacity, be specific about what needs to fall off the tailgate and be delayed in order to make time for this task. Capacity, more often than not, typically means unclear priority.
  • Capability: Occasionally an assignment isn’t completed as hoped because employees simply do not know how to accomplish it.
  • Criticality: “I just didn’t know it was that important,” is the response to a delay caused by this item. This can be avoided if the first step, “Clarity” is done well.
  • Courage: Some people, who have been asked to do something they have never done before, simply do not have the courage to attempt it. Fear of failure, and its consequences, is typically the reason.
  • Cooperation: If the employee is unable to elicit cooperation from other employees, departments or customers the manager can assist in breaking free that logjam.
  • Capital: Occasionally, funding is needed to enable the completion of a task. If this is the reason for delay, management simply approves the funding or the original task yields its first position to the enabling task of developing the economic justification for the investment.
  • Cognition: I don’t understand what you are asking me to do.
  • Credibility: Credibility means the person assigned the task doesn’t believe that the task is worthwhile, meaningful or will have the desired outcome.

Here’s a real example:  When asked how the economic benefit story for the firm’s new product was being received by customers and the distribution channel, Bill, a lead sales person, said he wasn’t telling the story, because he didn’t believe the numbers. This new product had a compelling economic benefit to customers and the company had collected customer testimonials confirming it. The management was perplexed by this lack of willingness and compliance to tell the economic story to prospects when selling this new product. A little bit of sales person re-education, coaching, clarification and re-explanation of the economic benefit was required to change his belief.

It changed. The result was a 28% increase in sales, in a year when the general economic activity in that sector declined 15%.

Conclusion:

To some, this organized approach to doling out assignments might appear a bit formal and cumbersome. However if the task is truly important, something that really needs to get done, the approach and checklist can prove a very useful tool.

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Jerry Vieira, CMC is the President and founder of the QMP Group, a Portland, based management consulting firm specializing in marketing & sales organizational transformations. For more information on how to use this Assignment Dynamic model call him at 503-318-696 or email to Jerry@qmpassociates.com.

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* In 1964, Victor Vroom developed the Expectancy theory through his study of the motivations behind decision making. His theory is relevant to the study of management. Currently, Vroom is a John G. Searle Professor of Organization and Management at the Yale University School of Management.[4] Source Wikipedia

Finding New Markets

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Where does one begin the search to find new markets?

The good news is: new high-potential market opportunities are typically discovered closer-in than you would imagine. Some await discovery hidden in the clutter of your current customer list. Others find you, not the other way around.  In either case, your task is to recognize and quickly assess their viability.

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The biggest barrier is not that opportunities do not exist, but rather that firms have not dedicated a resource, and put in place the discipline to continually explore, vet and test their viability. New market opportunities can quickly and positively impact the bottom line. So, the key to growth is learning a) how to consistently be on the lookout, b) how to recognize possibilities and c) how to test their reality and viability.

Places for discovery:

Here are six places that have created the biggest up-sides for our clients.

  • Current customer list: it’s the small customers, not the big ones
  • Fulfilling customers’ unrecognized needs: the iPad and the SUV are good examples
  • Your competitors’ current markets: they are not as homogeneous or impenetrable as you might believe
  • Channel-to-market: is your channel providing more or less value to your customers than your customers need?
  • The sales pipeline: most sales people are poor at assessing an opportunity for its real, bigger-picture potential
  • International: some international demographics and economics are compelling

If you think you’ve already looked in these places, you might want to check again after reading this blog post.

Your small customers:

Some of the most significant growth opportunities we have seen have come from analysis of small, unexpected customers that have, under the radar, slipped into a firm’s customer list.  They are typically considered insignificant and/or outliers for two reasons: 1) the revenue amount represented was relatively low and 2) they came from outside the primary market targets of the firm. However, a quick analysis in several cases revealed that these customers were actually representative of much larger markets – markets with large numbers of customers with the same significant unmet needs that were already being satisfied by the firms’ product lines better than any other offering available.

In one case, the small “insignificant” customer was representative of 20,000 similar organizations nationwide, none-of which had as good a solution to their problem as was being delivered by the firm’s software. This new market opportunity was tested and validated within 90 days. Growth over the next two years in that market more than doubled the company’s revenue

Well-known business thought-leader, Peter Drucker, in his book “Innovation and Entrepreneurship”, named this phenomenon “the unexpected success”. “Unexpected successes” are characterized by customers buying your product from markets you had not considered, getting benefits you had not conceived because your solution was inherently better than alternatives they had to consider.

This common dynamic means that someone in your firm should always be asking your “unexpected-success” customers these four questions:

  • Why did you buy our solution?
  • How many more people like you are there, out there?
  • How many of those other people have a good solution now?
  • Where do these people hang out?

The lack of a consistent asset dedicated to this analysis, delays the discovery of breakthrough new opportunities.

Your customers’ unmet needs:

The iPad, the SUV and the microwave oven are examples of new product ideas that were formulated to meet customer needs that were “subconscious” or simmering just below the surface of a customer’s “experience” with current solutions. The key words in this sentence are “subconscious” and “experience”.

Typically, in smaller companies, not enough time is dedicated to thinking about the subconscious needs of customers and the customer use experience.  Most product development roadmaps we have seen are driven by; a) urgent responses to competitive moves, b) the drive to reduce product costs, and c) evolutionary feature extensions to current offerings. None of these create new market breakthroughs.

New market breakthroughs come from insights into customer behaviors, problems and product usage.

Your competitors’ current markets:

In the 1970’s GM (50%), Ford (25%) and Chrysler (15%) collectively owned 90% or more of the United States automobile market. Now some 40 years later, imports represent a huge portion of that same market. The lesson learned is that if you do not fragment your own market, a competitor will do it for you.  The caveat: In each segment of the competitor’s market you target, you must have a relatively advantaged solution.

Imports won their initial US auto market share by fragmenting the US automaker’s markets and offering a value proposition that represented a significant value proposition improvement in one specific segment – the industry’s most vulnerable – small, economic compact cars. After establishing that foothold and clinching their quality reputation in the compact segment, they then stepping-stoned through the other segments – leveraging that quality reputation.

Your new market opportunity may simply be created through a focused initiative at a segment of your competitor’s markets that is most vulnerable due to that competitor’s neglect of the segment. This is particularly effective if the competitor is much larger.  You should never attack a competitor on all fronts at once.  However, all competitors are vulnerable to fragmentation and differentiation aimed at dissatisfied or under-satisfied customers in some sub-segment of their business.

Your channel to market:

Most firms decide on their channel-to-market based on what benefits it provides in market coverage. The market (customers) really only care about the services the channel provides to them – not the exposure it provides to the firm. If the channel is under-satisfying the needs of the customers’ this represents an opportunity for a) increasing value delivered and compensation received, or b) increasing market share based on service.

Amazon was launched as a channel alternative to brick and mortar book stores.  It didn’t capture all book customers – but it did exploit a vulnerability and weakness of the then current book stores by offering convenience and in-home browsing. It created the on-line-bookstore market.

Your sales pipeline:

A sales person’s effort in pursuing an opportunity is typically influenced by three factors: a) the anticipated initial purchase amount, b) the magnitude of the long-term opportunity as communicated to the sales person by the customer’s purchasing department and c) the commission rate associated with the opportunity.

The first thing to recognize is that customer predictions of ultimate volume activity (part b above) are typically overstated – many times to hold up a carrot in order to exact the best pricing for whatever it is you are going to quote. More important than the volume prediction, is its logic. It should never be accepted at face value. Discovering the logic is what separates pursuit of a typical opportunity from discovery of a breakthrough market.

To test the validity and logic of a large prediction the savvy sales organization pursues a revealing question chain:

  • What ultimate economic, regulatory or demographic market factors will drive such high demand for your customer’s product?
  • Is this product introducing a whole new revolutionary value concept that no one has offered before (like the first microwave oven) or is it an evolutionary product (like current microwave oven offerings) – just bouncing along an incremental improvement curve?

Purchasing managers almost always over-predict the anticipated adoption of their new products. However, the answers to the two questions above may reveal a truly large and compelling market opportunity. For example, a firm that makes metal fabricated parts for military and aerospace customers may find in its pipeline an opportunity for a part for a medical device.  That opportunity may represent a number of situations: a) someone looking for a competitive quote to replace their current supplier, b) the need for a part for an evolutionary incremental product or c) a breakthrough new product.  Looking at the face value of the opportunity may not reveal the truth behind the opportunity.  Only by delving deeper can the truth of new market opportunities be discerned.

International:

The demographics and economics of India and China are intriguing. The average age of the population is much lower than in the United States, their educational levels are growing, their income per capita is growing and their middle class is also growing.  Indra Nooyi, the current CEO of PepsiCo, when asked where her company will be investing in the near future stated those facts – along with two population statistics that clinched the answer.  India has a population of 1.1 Billion people and China a population of 1.5 Billion people. (Current stats are 1.2 Billion and 1.3 Billion people respectively).  For PepsiCo the investment decision is made.

Those investments will require infrastructure and support – a “demand-halo” – from smaller companies, creating an opportunity for international expansion.  Navigating the local laws, regulations, cash repatriation and other idiosyncrasies of international expansion is a bit of a challenge but it can be done.  If you don’t do it, someone else will – likely some competitor.

Conclusion:

Given the incredible amounts of money spent today on branding, websites, Search Engine Optimization, sales promotions and tradeshows it is sad that a small portion of those funds do not find their way to support a “market opportunity sleuth” (MOS).  Even if your firm has only 10 people in it – assigning the job of MOS to even one-half a person would be wise.  That person should be responsible for scouring the areas listed above and reporting monthly on findings. After all, even if only one breakthrough opportunity is discovered in the course of a year – the investment would be worth it.

Read our related posts “Diagnosing Stalled Sales” and “Foundational Marketing – and please send us your comments.

For more information about Finding New Markets and Assessing their Viability call QMP at 503.318.2696 or eMail Jerry Vieira at jgv@qmpassociates.com

Copyright Jerry Vieira and the QMP Group, Inc., 2012

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Networking from the front of the room

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There are two statements I hear repeatedly when speaking with professional services firms. The first is, “It’s a relationship business.” The second is, “We generate the majority of our new business through networking and referrals.”

In fact, service professionals (attorneys, bankers, financial advisors, IT service providers, consultants, brokers and accountants), tell me that they are encouraged (if not by their bosses, by everything they read) to attend a lot of networking events, engage in conversation, not drink too much and hand out business cards.

They are, in effect, being encouraged to play a numbers game. The more events attended and the more cards handed out, the more new clients. Why this approach? Because, it has worked in the past – and if it is not done, new client opportunities dry up. With all the hype in recent years about branding, eMarketing and social media – networking still ranks as a top priority for generating new clients for professional services firms.

But, think about this kind of networking for a moment. In the 30 minutes or so before an event speaker is introduced on the dais, you are supposed to: a) meet as many new people as possible, b) demonstrate sincere interest in who they are and what they do, c) identify their key challenges, d) empathize and e) build up enough mutual trust to get them to remember you well enough to agree to an appointment in the the next, oh let’s say, 3 months. There must be a better way.

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The professional services marketplace is much more competitive these days. A lot more people are handing out a lot more business cards at a lot more events. In addition, a swarm of unemployed executives, and there are many, are buzzing the networking circuit. The bottom line is that professional services firms need a better way than traditional networking to stand out and find new opportunities in this market. They need a more effective way than traditional networking to generate the essential credibility and trust that precedes all new client opportunities.

Front of the Room Networking

Front of the room networking is the act of being the headline speaker at networking and other business events. It has incredible power to attract new prospects and many advantages over crowd surfing. The following list of advatntages illustrates the power of this approach:

1. An intriguing title will attract the right kinds of prospects with the right kinds of problems

Picking a title which addresses and offers approaches to problems commonly faced by your clients is a way to garner interest in your talk. In fact, if done well, the people attending will self-pre-qualify simply by demonstrating enough interest in the topic to attend and listen.

I recently offered a topic to an organization of management accountants for their October monthly meeting entitled, “How to Judge the Reality of your Marketing and Sales Team’s 2012 Forecast”. October, being coincident with most firms’ annual planning efforts, was perfect timing, and the topic being relevant attracted a good amount of attention.

2. Offer to speak at a venue that attracts, by function and title, the key decision makers or influencers for the service you provide

While it may be flattering to be asked to address the local Boy Scout troop, and you may get a feeling of civic and professional pride in doing so, if your professional services are bought or recommended by B2B CFOs, you may want to reserve some energy and your best jokes for the latter crowd.

3. Insight is Essential

Assuming you are addressing the right crowd, with the right topic, with an intriguing catchy title, your talk must provide insight. To be effective it must have the effect of causing people to tilt their head, look up toward the ceiling and say to themselves, “I never thought of it that way.”

or

“ Wow! That’s a clever approach.”

or

“Wish I had thinkers like that in my organization.”

or, best of all …

“I MUST to talk to this guy/gal after he/she finishes.”

4. The hosting / sponsoring organization typically does all the logistics work

They invite the people, promote the event, reserve the venue, arrange and pay for the breakfast, lunch, snacks, coffee, beer or wine (depending on the time of day), provide you a flattering introduction and assure that the place is cleaned up afterwards.

5. You speak (and consequently network) to the whole room at once

Being the featured speaker at a monthly meeting typically permits you to address 25 to 100 people simultaneously, instead of engaging in chit-chat one-on-one for 10 minutes with each of 3 people. As mentioned above, typically networking and association get-togethers allow 30 minutes for that kind of chatting before the speaker starts. That allows time for meeting 3 new people – if you don’t waste time catching up with your buddies first and talking sports, books or politics

6. You have their uninterrupted attention for 45 minutes

For this networking approach to work, you must be an engaging speaker and deliver value. You cannot take advantage of the opportunity and try to sell. You must be willing to share.

Many people feel they will be giving too much away if they do this. As a consultant, my experience is that you can give someone your complete process binder and they will not be able to deploy it without your help. The caution is that you can really only share so much. You must protect your Intellectual Property – but do not fear to share a lot. It builds your credibility, demonstrates your expertise, illustrates your commitment to help and provides more opportunity for your listeners to want to talk with you afterwards.

7. It helps you continue the development of your ideas, products and intellectual property

The compelling need to think and develop your talk after you have committed to it, has the added benefit of forcing you to take thinking time. This thinking time always generates new ideas that you can test with the new audience.

And here are some tips for giving a great talk and getting great results:

1.  Assure you have an audience of decision makers or highly placed (by title) recommenders  

As a colleague of mine said, “Pick your talks by who you want to listen to you, not by who accepted your talk”. Before i recognized this, I wasted more than one evening giving great talks to very interested attendees who weren;t anywhere near the decision to decide on using my services

2. Make your presentations interactive

Another key point is the need to engage interactively with your audience versus lecturing. Small exercises that illustrate key concepts are very helpful. One of the most effective tools is some sort of self-assessment which illustrates key gaps in the current situation of the attendees.

3. Make frequent eye contact with individual people in the room.

It gives listeners a feeling of a personal conversation and intimacy with you even though there may be 100 people in the room.

5. Don’t forget to smile

If people see you are enjoying yourself, and excited about talking with them, they will enjoy themselves and be excited about talking with you.

6. Exchange business cards after your talk

If the sponsoring organization does not provide for it, offer to make (and personally deliver) copies of your presentation to the attendees if they provide you a business card. Also ask if they would mind being on your mailing list when you get their card. At the accountant meeting mentioned in Point 1 above, out of 50+ attendees, I collected 12 business cards after the talk by people coming up to me, expressing their appreciation for what I had to say and requesting the presentation. Within the next few days, I had scheduled four appointments.

7. Follow up quickly, when they ask you to

A final point is worth repeating: Remember, you are never selling when you give one of these talks. You are providing information and insight. The sense the audience feels of you as an expert is what creates the magnetic attraction for you to come and solve their problems.

Summary:

Speaking in front of crowds is an integral part of Thought Leadership and an active Thought Leadership effort is essential for a professional service providers’ business development efforts. A well constructed Thought Leadership effort builds brand, reinforces your individual and firm’s reputation as experts, piques client interest, builds web traffic and provides opportunity for price premiums.

For a good book on the pillars of Thought Leadership, grab a copy of “The Expert’s Edge” by Ken Lizotte (McGraw Hill)

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Networking from the front of the room and other Sales and Consulting business development practices are part both the QMP Sales Skills and Process Workshop and the QMP Consutlancy Navigator Program offered by The QMP Group. Click on their titles to learn more.

 

Lazy Due Diligence: Improve the Analysis, Improve the Outcome

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Too often, acquisitions don’t deliver the results expected

You are probably as perplexed as I am, at the repeated difficulty that acquisitions have in delivering on their promises of growth.

The title of a June 2006 survey report from Accenture says it clearly, “Executives Report that Mergers and Acquisitions Fail to Create Adequate Value”. The subtitle was, “Deals Often Come Up Short on Delivering Anticipated Revenues, Expected Cost Savings and Successful Integration of Information Technology”, caps the point.

When asking acquirers what causes these shortcomings, there are usually a handful of common responses.Sales_Failure

• “The integration is not going smoothly.”

• “Their market took an unexpected dip”

• “Their new product isn’t coming out as fast as we’d like”

Few will admit that the culprit may have really been an inadequate due diligence process – one that failed to reveal some fundamental weaknesses in the market position or capabilities of the target company.

The “Dead Man in a Canoe” Model of Acquisition Due Diligence

The canoe model begins with the premise that even a dead man in a canoe will make great progress downstream, if the current is flowing fast enough. In fact, a dead man in a canoe will make even more progress than a live man rowing backwards. But, if the water level in the stream is so low that the bottom of the canoe is hitting the stream bed, no one – a good rower, a dead man or a backwards rower – will make any progress at all, no matter how much someone paid for the canoe.

Five factors can be used to asses the reality of the growth potential and the marketing and sales capabilities of an acquisition target.

• How does the acquisition select their target markets and where to invest their development resources? (How did they select the streams to put their canoes in?)

• What is the fundamental health and momentum of the primary markets they participate in and depend on? (How fast are the streams flowing that they currently have canoes in?)

• How valid are both their claimed value proposition and competitive advantage? (How good are their canoes?)

• How healthy (really) is their sales pipeline? (How fast are they moving downstream?)

• How talented and capable are their people? (How strong are their rowers?)

Few investment analyses dig deeply enough to understand these factors. Yet, they ultimately portend long-term success or failure.

The Five Under-Acknowledged Assessment Factors

1. What process do they use for selecting their target markets and investments?

Most smaller acquisition targets simply don’t have their own good process for selecting markets to target. If the acquisition target is currently successful, it may have been through rapidity, responsiveness and informality in the organization that allowed quick adjustment when a market was not responding. Rapid trial and error eventually resulted in the discovery of a “savior” market before cash ran out.

If the acquisition target does use a good target market selection process, then it is probably being validated by their growth history. But, if their growth is temporarily stalled, take it as a red flag. Putting the acquisition’s markets through your own process for identifying lucrative target market opportunities provides a quick sanity check.

If the acquisition target doesn’t have a good process, then that upgrade is the first thing to do when, and if, the acquisition is completed. Leaving this upgrade incomplete after acquisition, assures future stumbles.

2. What are the health and momentum of the primary target markets the acquisition participates in and depends on?

Market demand and momentum are driven by a combination of three fundamental factors; demographics, economics and regulation. There isn’t much anyone can do about the first. However sometimes simply shifting market focus from one segment of the market to another catches a subcurrent of demographics that accelerates demand.

For example, the number of hospitals in the U.S. is declining. The Philips defibrillator business can keep trying to sell into emergency rooms in a saturated hospital market or move to the consumer/commercial market fueled by the demographic of aging baby boomers and government mandated emergency preparedness initiatives.

The economics factor is more complex than demographics. There are macro trends, micro (market specific) trends and, what I’ll coin as, nano-economics (the economics associated with the individual customer sales transaction). If all three are flowing in the right direction, the results are positive. However, streams usually slow down top to bottom. First, macro economics fail, then micro, then nano. For the experienced executive, finding and evaluating the macro and micro level momentum factors should be relatively easy.

Too many acquisitions are bought for product reasons (complementary offerings, new technology, brand name et al) vis-à-vis solid market momentum reasons. Market momentum covers up a lot of inadequacies, at least at the beginning. Its better and easier to have market momentum on your side when the inevitable challenges of acquisition integration arise than not.

3. How valid are both the acquisition’s value proposition and their competitive advantage?

Here’s a sad, but not surprising, story. At a mini-workshop for a group of a dozen CEOs and owners of small-to-mid-sized B2B businesses, they were given a simple challenge. They were asked to imagine their ideal target customer prospect and match it to their best product or service offering. Then they were asked to calculate the typical five year economic benefit that the ideal customer would receive from that offering.

Not one person in the room could do it in the 15 or so minutes available!

In an article by this author published in the December 2007 IndUS Business Journal entitled, “The Seven Laws of Performance Excellence”, the first is the Law of Economic Value. It states, “The source of all economic value in any business is a customer’s belief that they will receive favorable economic, emotional or physical value in return for the cash they are willing to spend with your company”.

There must be a customer-perceived imbalance in the economic, emotional or physical value equation, in favor of the customer. It is what drives nano-economic momentum. This is the true nature and reality of the acquisition target’s value proposition. It drives new product adoption. How well it is delivered vis-à-vis competitors is the true measure of competitive advantage.

A number of years ago, I was asked by a capital equipment companyto review their acquisition rationale for a target firm. I asked, “Can you state how the acquisition of this firm will ultimately provide increased economic value to either your, or your acquisition target’s, customer base?”

Stunned silence answered the question.

If an acquiring company cannot somehow tie its target acquisition investment to the Law of Economic Value, the natural selection forces of the marketplace will ultimately depreciate the value of that investment. Value to a customer ultimately rules.

4. How healthy is the sales pipeline?

Does the acquisition target have, and use, a good disciplined sales process?

Sales opportunity pipelines (or, as some call them, sales funnels) are common support documents in the due diligence process. Rarely does an acquiring firm have a good process for assessing its validity.

Here are six suggested criteria for assessing each major opportunity in the pipeline:

1. Compelling Need: To what degree does the customer have a critical need to solve the problem that the company’s product addresses? Is this awareness from the customer’s perception or our own? Can that potential customer do nothing? Sales research shows that between 30 to 50% of all pipeline opportunities are lost to “nodecision”.

2. Match: How closely do our capabilities match that customer’s need?

3. Economic Equation: How strong, from the customer’s perspective, is the economic value proposition for fixing this problem? Has this value been demonstrated to, and believed by, the key customer decision makers at this account?

4. Competitive Position: How do the firm’s competitive capabilities compare, from the customer’s key decision-makers’ perspectives, with other possible solutions?

5. Champion: How strong is the internal champion at the customer account? How politically powerful, influential, receptive is the champion in the decision process?

6. Leverage: In addition to a sale, what else is gained if the account is won? Does the opportunity open up a new market or help develop a new capability? Does it provide a referral and great testimonial?

It may seem that this kind of effort for each of the target customer’s sales people and each major opportunity in the pipeline is a lot of work. Well, it is called due “diligence”, isn’t it.

The truth is that, if you use a pipeline validation process like this, pipeline “fluff” falls away quickly and the real value of the sales opportunity pipeline is revealed.

The second factor to be considered in sales function assessment is whether the acquisition target has, and utilizes, a good sales process.

A good sales process is recognizable by its ability to not only win a high percentage of opportunities in the pipeline, but also do the following:

• Produce frequently updated, easily visible pipelines

• Create accurate bookings forecasts

• Help formulate sound account opportunity strategies and action plans

• Collect, communicate and process account, competitive and other market intelligence • Sell economic value, and

• Optimize a sales person’s time

5. How talented and capable are the marketing and sales people?

When embarking on an acquisition and beginning to meet the people at the acquisition target, those employees can usually be sorted into three types.

The first are the “fearful-skeptics”. These people are simply trying to keep their jobs, stay under the radar and do whatever it is they need to survive the acquisition integration.

The second type are the “hostiles”. They fear loss of power or influence, the coming discomfort associated with an upset of the status-quo, exposure of their incompetence and/or visibility given to their lack of progress.

The final types are the “eager-embracers”. They are the ones that usually say something like, “I’m looking forward to this. I can really see the benefits. I’ve been formulating some innovative ideas for some time, that I’d like to share with you. How can I help?”

These last are the few who will already have developed their own process, who continually want to see things improve and who simply can’t stand ineffectiveness, slowness and inefficiency. Just a few of this type is critical to have in a good marketing and sales organization.

In assessing the people and talent there should be two key roles represented.

One Good Marketing Strategist: One good, talented marketing strategist can create programs that launch firms into incredibly rapid growth opportunities.

A Few Good (Sales) Men: In sales there should be a few very good and influential sales people that can act as internal opinion leaders. In this role they provide support for the transition with peers and customers, and, through their example, help other sales people learn how to manage the acquisition integration and its incumbent changes.

Conclusion:

There are many reasons for acquisition.

Venture Capital and private investment firms look to discover and increase value for extraction at some future pointand commercial businesses typically look to acquisitions to accelerate growth, capture IP, open up new channels or gain rapid entrance into a new market.

Independent of the type of acquiring firm or the ultimate purpose of the acquisition, those embarking upon the due diligence process are encouraged to adhere two basic principles:

• Be cautious not to violate the Law of Economic Value — the negative consequences of violation may not be immediate, but they are inevitable, and

• Put more “diligence” into the due diligence process when it comes to the evaluation of the marketing and sales functions of the acquisition target.

One final point: Should the good revelations outweigh the bad in this 5-factor analysis and the deal close anyway, by virtue of having dug deep enough to discover the acquisition target’s weaknesses, the acquiring firm has already laid out before them the roadmap for improvement.

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To learn more about the QMP approach to due diligence click here.

Lean Marketing and Sales: The Art of Optimizing both Customer and Company Value

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“Lean is the process of maximizing the value delivered to customers by eliminating any wasted activity or expense marketing or sales process that does not create, communicate or enhance customer-received value.”

In this QMP Insights blog we offer an approach for improving both top and bottom-lines through the application of “Lean” principles to six key areas in the marketing and sales function of a firm.

 

Getting Started with Lean in Marketing and Sales:

iStock_000023705897XSmallThere are three foundational principles that must guide any application of lean principles to the marketing and sales function

First, the law of economic value is always at work. That law states: All economic value accruing to your firm has as its source, the customer’s perception that they will receive more value (economic, emotional or physical) from your product or service than it costs them (economically, emotionally or physically) to purchase, acquire, set up and use.

Second, avoidance of the application of lean concepts creates growing breaches in your business that competitors will exploit. If there is any place in your product or service offering, customer service process or sales approach that customers consciously or subconsciously perceive as not providing the highest value possible, that gap will be the place you are most vulnerable to competitive attack.

Third, when assessing the relative importance and value of deploying a specific lean initiative, use the first and second guiding principles above. Considering the deployment of lean principles in your product and service portfolio or your marketing and sales function only as an opportunity to reduce costs can result in customer backlash. Bank of America felt that backlash recently when they instituted debit card user fees and we all feel the frustration when we can’t reach a real person in customer service.

 

The Six Targets for Lean in Marketing and Sales:

Market Focus

Face the facts. Your product or service offering does not offer the same set of economic, emotional or physical values to all market segments equally. Lean means focusing on those market segments where the value-received by customers is the highest. If that situation exists, the law of economic value is satisfied and research shows that the following benefits accrue to your firm:

  • the ability to garner price premiums
  • faster market penetration
  • higher customer satisfaction
  • more peer-to-peer, word-of-mouth customer communication of that value proposition
  • higher interest in your product from channel partners
  • higher probability of achieving market share leadership in that segment
  • reduced marketing expense
  • improved sales win rate and faster time to close
  • reduced product design costs and a clearer product evolution path as a keener awareness of the customer needs in that specific market are revealed
  • greater returns from focused social media and website investments

Market focus is Lean in action.

 

Market Communications

The wisdom of lean and focused market communications is the toughest principle to convey to marketing and sales teams. The common fallacy is that, “more marketing expenditure is better than less”. Marketing and sales teams typically will fight tooth and nail to avoid reductions in this sacred arena. They believe that more marketing dollars across more expansive markets means more customers. Not so.

Research (Everett Rogers, “The Adoption of Innovations”) shows that communications of a new idea is best accomplished through opinion leaders in a target market. Peer-to-peer communications, accelerated by opinion leaders, is 13 times more effectively than mass communications. Focused marketing communications programs to reach those opinion leaders, with focused value propositions achieved through market-focused product design is as effective as can be achieved. Social media can help – as long as it is focused.

Focused marketing communications is Lean in action.

 

Channel to Market

Your business will begin to erode if your channel-to-market provides value only to you and not your customers. Marketers must be vigilant to assure their channel continues to deliver real value to customers and clients. Let’s take Amazon.com as an example.

Amazon.com is, at its most basic level, merely a channel-to-market. They do not write books or build any product. Even the manufacture of the Kindle is outsourced. Amazon’s growth was the result of tapping into an under-satisfied customer value (convenience) and leveraging an emerging technology (the Internet).

By building an on-line bookstore coupled with an efficient order fulfillment process, Amazon stole the customer segment of the book market motivated by convenience, not couches. Relevant value to that segment is: browsing at home, saving gasoline, saving time, the use of peer reviews and comments to facilitate decision-making, fast customer service, the opportunity to contribute reviews and comments, and avoidance of the “out-of-stock to be supplied by another store across town and we’ll call when when it’s in” situation. The introduction of “Whispernet” (the wireless purchase and instant delivery of e-books to the Kindle) further enhanced this basic value set. And taking this value proposition even one step further, Amazon has now added free, unlimited on-line storage of your complete media library (music, books, movies) in the cloud with the Kindle Fire®. Wow!

All this value provided by basically a channel-to-market. Amazon understood how to find untapped needs and use technology to meet them efficiently. This is Lean in action in the channel-to-market

 

Sales Process Discipline

An oft cited statistic claims that 30% to 50% of the opportunities in the average sales person’s pipeline won’t close because the customer makes a decision not to buy anything. The sales person has, in effect, wasted time and money pursuing something that was destined to never result in a sale. How can one really know if a specific opportunity will actually result in a purchase?

The answer has several parts.

First, if Lean principles are applied in the previous steps (strategy, channel and communications), there is a much higher probability that a purchase will occur, because the value proposition and its communication are more efficient, focused and aligned with customers that are likely to receive the greatest value from your product or service.

Second, if the firm has developed an ideal customer profile that describes that buyer type, it enables the sales team to quickly identify a good potential prospect and politely decline continuing involvement with a poor prospect.

Third, there is a simple set of 5 criteria that can improve a sales person’s ability to quickly qualify an opportunity.

  • intensity of the customer’s need or problem,
  • degree to which the product offering can meet that need,
  • degree of the economic, emotional or physical value the customer will receive by using the product or service,
  • customer perception of the relative competitive advantage of the product or service solution
  • the existence of a customer champion for the solution

These principles put Lean in action in the sales process.

 

Market Intelligence Feedback

Market intelligence is critical to success. Sound market strategy depends on current and valid market intelligence. That intelligence may comprise some or all: competitive intelligence, customer satisfaction, barriers the sales people keep running into, the health of the customers’ markets, usage idiosyncrasies and a host of other informational tidbits. The sales team must be at the forefront in gathering this data, because the sales team is company asset that is in the most frequent contact with the customer.

The most efficient way to gather market intelligence is through weekly or monthly sales reports. Contracting market research firms to gather market intelligence from the same customers the sales people talk to each month anyway, is admitting to un-Lean practices and indicative of other organizational or culture problems.

Here are some thoughts about making your Lean market intelligence gathering:

  • make a bullet-point market intelligence section a required part of your sales person’s weekly or monthly report
  • train your sales people how to question and observe – not just spew the benefits of your product
  • include providing market intelligence in the sales compensation plans and sales position descriptions
  • provide the ability to award spot bonuses for the most timely and important pieces of information that come your way
  • read the market intelligence reports; think about and acknowledge them by calling back the sales person who provided the information, thanking them and getting more information

Listen carefully when sales people talk about gaps in the customer’s perception of your product’s value delivered. The first comment is inevitably pricing-related. Pricing-related value gaps are more about market targeting, product design and the customer’s perception of value received than actually about pricing. Pricing is only a symptom of a bigger strategic problem.

 

Conclusion:

The application of Lean principles to marketing and sales is easy and inexpensive. A firm of any size and market can deploy Lean. Lean principles assure that customers get the best value they can – and in return, consistent with the law of economic value, your business optimizes its own economic return.

Click here to talk to QMP about Lean Marketing and Sales

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Accelerating the Market Adoption of an Innovation

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The Product Development and Management Association Glossary of Terms defines failure rate as the percentage of a firm’s new products that make it to full market commercialization, but which fail to achieve the objectives set for them. By that measure, it is not surprising that a quick internet search on the subject of product failure rate yields studies that claim anywhere between 50% (commercial) and 90% (retail food) of new product or service offerings fail.

iStock_000009333210XSmallFailure can mean some or all of lost time, wasted money, missed opportunity, damaged credibility, tainted brand reputation, enhanced competitive vulnerability, lost jobs, truncated careers and a host of other unpleasant outcomes. So, whether the real failure rate is closer to the lower (50%) or higher (90%) end of the estimate is not as important as recognizing that discovering ways to improve it is essential.

For the past 15 years a good part of our work at QMP has centered around helping business-to-business clients turn around under-performing businesses and products. Many of them were struggling with getting new offerings off the ground or gaining traction in the marketplace. We’d like to share with you a bit about what we have learned, in hopes that it may improve your probability of success and help you avoid the myriad consequences of failure.

 

The Empirical Science Basis of the Adoption of Innovation:

In 1962, Everett M. Rogers wrote a breakthrough work entitled, “The Diffusion of Innovation” (republished in its fourth edition in 1995 by The Free Press). In it he compiled a number of studies documenting adoption successes and failures of all types of innovations over the past 100 years — from sociological to scientific. He included varied research findings, such as the struggles of the Chilean health department with getting Andes mountain villagers to adopt the habit of boiling water for health reasons, Iowa farmers adopting hybrid seed corn and Pittsburg school system principals adopting new math.

While the lessons learned from reading such a remarkable book are many, two items stand out above all others; 1) the adoption or diffusion of an innovation is not a linear phenomenon (meaning it does not gain its energy and momentum just one isolated customer at a time across a wide range of groups), and 2) adoption is significantly accelerated by the dynamics of the intramarket communication network (how buyers in a market or group meet, discuss and communicate ideas).

In fact, one of the most amazing conclusions coming from the research is that communication through the intramarket network is roughly 13 times more effective than mass communication in the adoption of an innovation. This interesting research conclusion predates the emergence of social media, blogging and Tweeting which, by now, are well recognized as an effective internet-powered intramarket communication vehicles.

 

Mass Communication and Struggles with Adoption

One of the most common problems we find with innovations struggling to gain a foothold in the marketplace is the parent firm’s unwillingness to focus. Rather than taking a chance on a focused launch initiative, they believe it’s better to try a broad one and see what sticks. In addition, the management team and product people are typically so convinced of the universal applicability of the innovation, that it leads the firm to believe that “getting our name out there” quickly, to masses of potential buyers, will be all that is required for success. This is rarely the case.

In pursuing such a course of action, it is not uncommon for a firm to find they have spent valuable economic resources on grand branding schemes and exposure initiatives with a minimal real impact on market penetration. Applying for a second round of dilutive funding to finance a second run at that same holy grail is an option—and some select it – with the same results.

 

Fragmenting the market to gain a profitable foothold

Buyers, particularly commercial and business-to-business buyers, invest in an innovation because they believe the economic value they will receive from that innovation will exceed the amount they have to pay for it. The market success of an innovation requires that the market which you’ve targeted has a significant enough proportion of customers with a big enough common problem to create a compelling argument for an investment to solve it. The key is, not all market segments have the same problem to the same degree. Focusing your launch on a particular sub-segment of the market where the economic value proposition of the innovation is compelling, creates a much higher probability of success than a broad approach.

 

If it’s that simple, why don’t more businesses focus?

There are many reasons: First, investors prefer firms that are moving after big markets with big payoffs. The bigger the market envisioned, the bigger the potential payout. Secondly, the inventors have a sincere belief that “everyone” can eventually use their innovation—and eventually they may be correct. Third, innovators and marketers alike get caught in the excitement, glitz and hype of launching a major market initiative launch. It can be a very heady experience. And, fourth, they simply have too much marketing money in the budget and don’t know how to manage it well.

Trying to stand in front of the innovation-launch train as a voice of reason, as it barrels down the track of a well-funded general market launch is fruitless. It’s best to wait till the train burns out its fuel and then catch up to it further down the track when it has stalled.

Not withstanding the previous explanations, there is a more fundamental reason why people don’t focus for success, they simply don’t know how to select the best markets to focus on.

 

Criteria for Target Market Attractiveness:

Over the years of working the challenge of assessing and selecting the target market segment that will yield the highest probability of success for an innovation, we have developed a series of criteria that seem to work effectively.

Market Momentum: Different market segments have different economic, demographic and regulatory factors which affect its basic momentum. When selecting a market, we want our investments to be lifted and propelled downstream as much as possible by inherent momentum factors in our favor.

Compelling Need: This factor refers to the extent the problem the innovation is designed to resolve is compelling from an economic, safety or regulatory standpoint. Take the Segway for example, the innovative two-wheeled, gyroscopically-balanced personal transport scooter. It’s general market launch, after much early hype, has been less than hoped for by investors and its inventors alike. It is, however, finding its way to higher success rates in mobile security markets, on campuses, malls, large commercial complexes, inner city tourism, and in a slightly modified version, golf courses.

Match: The extent to which the innovation matches and completely resolves the compelling need it was designed to fix. A perfect match will increase customer satisfaction and improve the ability of potential customers to rapidly make the innovation-to-problem-fix mental link.

In the early days of flat panel monitors, when they were expensive compared to bulky CRTs, one of our clients attempted to penetrate the general desktop market with this own version of a flat panel monitor. At a $1,000 selling price, compared to a $249 monitor price, the effort failed. However, when the effort was refocused on hospital rooms (a much smaller segment of the market but with a more compelling set of needs), the monitor was wildly successful. In hospital rooms, space is constrained, electromagnetic interference from CRTs cannot be tolerated around sensitive medical monitoring equipment and sparks from high static CRTs can’t be permitted in oxygen rich environments. The client’s initial adoption failure was turned to success simply by redirecting the market focus—and there were no changes required to either the average selling price or inherent product features. In fact, the selling price increased as, over time, hospitals requested additional features to increase the basic capabilities of an already good solution.

Socket Count: A socket is a potential place where the innovation can be installed. For example, a first estimate of the potential sockets for the microwave oven at its inception would have been the number of households without one. Today, the number of sockets available for new microwave oven innovations is going to be limited to those sockets that either don’t have a microwave already installed (very few) or those for which the innovation solves a compelling need or significant shortcoming with their existing solution.We want to find a market to target our innovation at that not only has a compelling need and positive momentum factors , but also a lot of unfilled or under-satisfied sockets.

Value Quotient: Closely related to the magnitude of the compelling need is the balance of the value quotient from the customer’s perspective. This relates to the value of the benefit to the customer of solving their problem with your innovation, divided by the cost of acquiring, installing, learning and using it. There may be a significant compelling need, but if the cost of the innovation needed to repair the compelling need is prohibitive, adoption will be slow. A rule of thumb is that within three years of purchase the innovation should pay back at least 5 to 1 in bottom line cash flow for the customer. A further note on this point: Value received is not completely economic. Value comprises the complete suite of benefits encompassed in the Economic, Emotional, Political and Physical realms of what your product/service delivers.

RPQL Position Availability: RPQL stands for Relative Perceived Quality Leadership. Forty plus years of research in the Strategic Planning Institute PIMS data base (Profit Impact of Market Strategy) indicates that the single most important factor affecting a business unit’s success is the market’s perception of the relative perceived quality of its goods and services compared to its competitors. One important point to remember—perceived quality is related to the segment of the market. Not all segments perceive quality in the same way. Charging after a market that already has an RPQL leader is equivalent of a military frontal assault on an entrenched position. Not a wise decision.

IntraMarket Network: As mentioned earlier, innovations diffuse more rapidly if there is a strong intra-market network through which the value proposition of the innovation can be communicated—person-to-person, customer-to-customer. The intra-market network comprises two parts a) its venues (events, forums) and vehicles (journals, publications, websites) and b) its intra-market opinion leaders.

Opinion leaders are the real geometric multipliers of the value proposition message. For opinion leaders to be most effective they need to have four important characteristics. First, they need to be rabid believers in the innovation and its value proposition. Secondly, they need to be well-networked. Third, they need to be highly credible in the network of interest and finally, they need to be natural sales people—anxious and completely un-shy about communicating new ideas to friends and colleagues alike.

The next five target market attractiveness assessment criteria are important as well, but if the market isn’t attractive after an analysis of the first seven the second five are not worth working through.

Profitability: Selling the innovation must be inherently profitable. If you feel you have to reduce price to gain traction, it may simply be that you have a questionable value proposition or your perception of the customer’s compelling need is misunderstood. It certainly should bring into question your thoughts about the economic equation factor. Sometimes simply changing the target market can change the profitability by allowing pricing in proportion to unique benefit—as in the flat panel terminal example stated earlier.

Competitive Turmoil: The higher the competitive turmoil the more expensive it will be to create a successful presence. The exercise of focusing down to a smaller, less competitive market segment, will provide a higher probability of surviving any inevitable market shakeout.

Brand Leverage: It’s easier to gain market attention for your innovation if your brand speaks innovation. Apple will easily get media and intra-market opinion leader attention for a new consumer, music or creative computing idea. Volvo will get attention for an innovative auto safety related product—like a car seat or anti-roll stabilizer for an SUV. Neither will get brand traction if they introduce a pillow or dinner ware.

Accessibility: Sometimes markets may be attractive but relatively inaccessible because of sales channel limitations, aggressive competition for limited shelf-space, import/export restrictions, licensing requirements or other considerations.

Perceived Value of Differentiators: This last factor comes into play when the competitive turmoil factor is less than optimum. It assesses the degree to which your differentiated position for the innovation, compared with your competitors’ approaches, has meaning and economic value in the target segment under assessment.

 

Conclusions:

What we have learned in years of helping our clients with the market introduction of their innovations is this: Focusing on those markets that exhibit the best composite results on the listed assessment factors results in:

  • More rapid adoption
  • Higher average selling prices
  • Higher profitability
  • Higher degree of customer satisfaction
  • Lower market launch expenses
  • More defensible positions
  • Higher probability of surviving shakeout
  • Learning how to do it consistently in the future
  • Less ownership dilution

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Copyright 2006 The QMP Group, Inc.   All Rights Reserved

 

For more information about how to accelerate the market adoption of your innovative product, contact QMP at qmp1@qmpassociates.com or 503-318-2696

 

The Basics of Foundational Marketing

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“You can’t build a durable building on a weak foundation.”

 

We’d like to share an insight that has helped executives and business owners sort through all the hype and claims over the last several years about an ever growing list of “gotta-do” new marketing and sales techniques.

If you’re a General Manager, business owner or C-level executive, your marketing team probably approaches you annually with a laundry list of funding requests to support their critical marketing and sales programs for the coming year. Those requests may include any or all of; a website upgrade, a branding program, a social media expansion program, a blog, a publicity and PR program or maybe even a new six-figure trade show booth – not to mention the additional staff to help manage it all. How do you decide what to approve? How do you sort through all the hype and enthusiasm about each program and decide what will truly give you the best return for your investment?

The graphic below illustrates an alternative approach to selecting marketing initiatives.

Foundational-Marketing-JMost people think of marketing as one or more of the items listed on the right side of the graphic — in the grey, typical-marketing circle. Stop a moment and consider the list. Is this what you think of when you think of marketing? If yes, join the majority club. If not, join the other group. It has fewer members – but they are the ones who have found the secret to getting greater return on their marketing buck.

Before those of you in the smaller, enlightened group get smug, remember “typical marketing” programs aren’t completely useless. Let’s be realistic. These days, unless you operate a lemonade stand that will only be open for two weeks in August, everyone needs a website. So let’s agree that, to some degree, typical-marketing expenditures are necessary – and in fact, required, once the foundational marketing base is laid.

But, back to the point – the hidden secret about marketing and what the people in the smaller group know that others may not is this; Rarely will any typical marketing initiatives produce truly breakthrough results — and they can tie up a lot of money! What really sets up top and bottom-line breakthroughs is Foundational Marketing. Foundational Marketing is the stuff in the oval on the left. Foundational Marketing is inexpensive and the primary, required ingredient in every major success.

For any typical marketing expenditure to be productive, Foundational Marketing must be done well. In our experience, foundational marketing tools and techniques have produced remarkable results. For example:

  • A software firm earned 1,000 new clients in just a little more than two years
  • A fledgling medical product landed 150 hospital placements in its first two years, with some orders exceeding $1M. Prior to using Foundational Marketing techniques, this product was in only two hospitals, with the largest single order only $20,000.
  • An electronics firm achieved a 50%+ growth rate for six years straight
  • A components firm increased their win rate by 15% while investing 33% less quoting time
  • A wholesale distributor generated a 47% increase in regional sales in 1½ years

None of these breakthroughs required a significant investment in typical marketing.

To contrast the effectiveness of the two types of marketing even further, in one of those cases above, after the success had been achieved using Foundational Marketing techniques a new management team invested in a mid six-figure re-branding typical-marketing program that didn’t move the needle a bit – losing the discipline of Foundational Marketing along the way.

Why don’t more firms adhere to Foundational Marketing disciplines?

They don’t know what they are: B-school educators are fantastic at teaching principles and concepts, but in general, weak at delivering a practical approach to moving those principles and concepts into practice. I speak from experience as, at different times, both an MBA student and MBA-level university instructor. Concepts and principles education does not equate to skills, tools and process disciplines. Most B-school graduates do not come out newly-minted with a honed skill set and tool kit.

They haven’t developed a standard tool kit: You are more likely to find a dozen carpenters that use the same field-proven tools and processes for their trade, than a dozen top B-school graduates that use the same tool kit and process for strategy development. Coming to the job site, most marketing practitioners have to create their own tools and processes, convince the executive team to learn, trust and use them and support the execution discipline to see the resultant strategies through to success. Not to place all the blame on the practitioner, many firms simply haven’t developed a Foundational Marketing process and tool kit.

It’s tougher to do: Typical marketing programs are an easy way out – particularly if everyone in the industry is “doing something”. They can be delegated and the deliverables are easy to see: a new web site, a new logo, a bigger show booth.

They don’t have the discipline to do the Foundational work first: Unless the top-dog insists that Foundational Marketing receives first priority and is the right way to do marketing, it won’t get done. Foundational Marketing is a “think-before-doing” approach.

They think it takes too much time: Building a good foundation doesn’t take long if you have the right tools. We have witnessed strategic decisions made in a few days with execution and success in as little as 90 days.

They don’t believe in it because they’ve never seen it work: Using and trusting Foundational Marketing principles does take some faith and practice, but the track record is proven.

Under the Hood of Foundational Marketing:

Practicing Foundational Marketing is really not difficult if you have the right tools. Good and sound foundational marketing tools are based on empirical marketing science. Even non-marketing people can learn and succeed using them. In a way, a good Foundational Marketing tool is like a cell phone. You don’t need to be an electrical engineer with an understanding of electromagnetic field and communications theory to use a cell phone. All of that has been done for you and integrated into the cell phone. Good Foundational Marketing tools have already integrated sound empirical marketing science into them.

Success with Foundational Marketing does require – and this is the difficult part – transforming the way your organization thinks and the way your team executes marketing and sales. It really comes down to a battle of the mind – more than a battle of the wallet. When your organization understands Foundational Marketing – and begins to use its tools and techniques, both the probability of success and the return on investment of your marketing programs skyrocket.

A complete Foundational Marketing approach has four components:

· Market Strategy: A proven and steadfast way to decide what market segments to focus on and what differentiated position to carve out for your firm and each of its products.

· Business Development Initiatives: These are about how you will approach the segment(s) of the market you have decided to target. While components of tactical (typical marketing) are included, emphasis here is on specific customers to target, specific messages to communicate, the customer’s buying process, channel-to-market decisions and leveraging the intra-market customer-to-customer communication network in the target markets of choice.

· Sales Disciplines: There are two parts of the sales disciplines component of Foundational Marketing. Both require training and consistency. First, an effective, consistent sales process is a must – one which qualifies, discovers needs, proposes good solutions, and wins/sustains long-term clients. The second part is a differentiated sales story that is meaningful to customers – one which assures that your unique benefits story is told consistently through all channels to all target customers. It’s a story that emphasizes the economic, emotional and physical benefits in the right priority, for the right customers, in the right market. Sounds obvious, but many clients actually fail in these two fundamental requirements.

· A Performance Driven Culture: Think of the components of Foundational Marketing as the gears of an engine, the culture of a firm is the oil in the oil pan. (See the figure below). To consistently achieve your goals, the organization’s culture must encourage teams to communicate, execute, adjust, think, make decisions and lead in an honest way. A culture of performance excellence is defined by: accountability, clarity of expectations, measurements and metrics, ownership, open and honest communication, fact-oriented, sense of urgency, rewards and consequences, frequent checkpoints and the ability to quickly and constructively confront barriers and problems. With a culture of performance excellence lubricating Foundational Marketing, the engine hums. Without the oil of a culture of performance excellence, the gears seize.

Can Foundational Marketing fail?

Foundational Marketing programs do fail – for one of three reasons: First, if an organization does not have the discipline to execute and follow through, any program will fail. Foundational Marketing programs are no exception. Secondly, it is possible that some firms are too far gone to be saved by a Foundational Marketing program. However, in 20 years of consulting, we have witnessed only one firm in the second category. They required a complete change of their business model to survive. They did survive, but at a much lower revenue level.

Finally, we have witnessed firms that have relapsed. Relapse is characterized by success with Foundational Marketing, followed by a reversion back to sole dependence on those items in the typical marketing list. Relapse is very costly in money, time and lost opportunity. A relapse typically occurs when a new, uniformed marketing and sales or C-level executive enters the picture.

A Final Word:

A good example of the need for foundational discipline is in the weight loss arena. The basis of all weight loss programs is discipline: discipline to eat better, discipline to exercise more and discipline to adhere to a healthy lifestyle. The latest exercise machine does not obviate the need for discipline.

So it is with Foundational Marketing. Good tools and processes are needed – but organizational discipline fuels the best results. Foundational Marketing, supported by a culture of performance excellence has proven again and again to lower marketing and sales costs, increase market share, achieve more rapid adoption of new products and increase significantly the firm’s return on investment.

To learn more about Foundational Marketing call the QMP Group at 503.318.2696, email us at qmp1@qmpassociates.com or connect with us through our Contact Us page where you can detail your challenges.

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The Biggest Sales Myth

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A sure bet on what sales people believe…

One of the first topics commonly included in sales training programs and books is a discussion of “Sales Myths”.  Over the years I have heard a number Pulling Out Hair of these myths and have my own favorite set of a half-dozen or so that we use in our sales training program.

The myth that is particularly revealing is implied in this question we ask to sales people:

How many of you have ever lost to an inferior offering?

When I ask this, I always accompany it with a warning that it’s a trick question. In spite of the warning, a nearly unanimous show of hands is the response.

That’s when the trap closes.

It’s all about perspective

The truth is that you never lose to an inferior offering.  It may appear inferior in your eyes, and from your perspective.  You may even be able to show the specification inferiority in absolute provable, numerical or physical terms.  But, it’s not your eyes and perspectives that matter.  The only eyes and perspectives that matter are those of the customer.

So, what is the real story?

Losing to an offering that is inferior in your eyes really means some, or all, of the following:

  1. You didn’t truly understand the criteria the customer used to make the decision until it was too late.
  2. You didn’t ask what the criteria were.
  3. You didn’t develop enough trust with the customer for them to share the criteria with you.
  4. You didn’t understand the circumstances that influenced the customer.
  5. You didn’t understand, or were unable to advise the customer to re-consider the decision criteria.
  6. You were selling into a poorly qualified opportunity, one that didn’t match the strength of your offering.

Test yourselves:

If you are a sales person, or someone who has access to the sales pipeline of your firm, select the top six opportunities in the pipeline.  For each of these opportunities list the top four to six criteria, in decreasing order of importance, that the customer will use to decide what to buy – or even if to buy at all.

When we use this exercise in our training programs, the stunned and embarrassed faces in the crowd are something to see.

Not too long ago, we were working with a client sales person on his pipeline.  He was proudly sharing page after page of opportunity strategy worksheets.  On every sheet the decision criteria, a section we strongly encourage sales people to document and use in formulating strategies and action plans, were exactly the same.

I had to ask how that could be – and if that was truly what the customers were telling him.  If it were so, it would have been the most incredibly homogeneous market I had ever seen.

He replied, “No, the customers didn’t tell me those criteria.  I know how my customers make their decisions.  I don’t have to ask.”

Was this response arrogance?  Laziness?  Fear of asking? Lack of belief that decision criteria expressed by the customer is relevant?  Whatever the reason, this poor sales person embarrassed himself in front of his peers and management?

Phrasing the question effectively

Much of the value that sales people receive from sales training is in learning key phrases and techniques for asking tough questions.  These questions might be about funding availability, decision-making power, the competitive situation, gaining access to other folks involved in the decision, or, in this case the decision criteria.

One of the common traps sales people fall into with respect to understanding decision criteria is assuming that while they are talking with the customer, decision criteria are naturally being revealed in the normal course of conversation.  Sometimes they are.  Sometimes they aren’t.

The safe stance is to assume that they aren’t revealed.  So, here are some questions to assist in revealing the real decision criteria:

Assuming you are not the exclusive decision maker, would you feel comfortable sharing what you believe other members of the committee are concerned about and would use in selecting the final solution?

If you feel uncomfortable speaking for them, what benefit do you think there might be in gathering the decision makers and influencers to work through and collect all the decision criteria and perspectives?

Have they compiled their concerns, needs and preferences in any sort of document?

Is there a vendor’s guide that would help assure that we will meet or exceed all your criteria?

Of course, there is always the option of asking directly, “What are the decision criteria”?

In reality, based on the responses of the hosts of sales people attending our training programs, that last question is rarely used.  The more common scenario is that sales people believe that they know everything about the customer’s decision process simply by having had a discussion.

A final check…

Even if you haven’t broached the subject of decision criteria directly, and believe you know enough from the conversation, it is helpful to run through the following routine to review what you understand the criteria to be.

“Thanks for taking the time with me, Paul.  Before we break up here, would you mind if I spent just a moment to confirm that I understand the criteria you will be using to make your decision.  Here’s what I inferred from the conversation. (Re-cap here).

When you finish, ask, “Is there anything I missed?  Is there anyone else that we need to speak with who might have additional criteria?”.

Explicit, Implicit and Hidden Criteria

If you follow that dialogue you get only explicit criteria.  It’s certainly better than not knowing anything – but it’s incomplete.

Implicit and hidden criteria are best revealed through keen observation.  While much is said in sales literature about listening skills, keen observation skills are equally, if not more important.

Observing and noting the physical surroundings, the personalities of the buyers, the organizational and political situation in the customer’s firm, the personal ambitions of the buyers and body language can reveal approaches which meet implicit and hidden criteria.  If the office is highly organized and neat, so should be your proposal, your meetings, your presentations and your communications.  If the customer works in teams, package your offering as a team effort.  Implicit and hidden criteria / requirements can be met at the sub-conscious, as well as the conscious behavioral level.

Keep in mind what Yogi Berra is purported to have said,

“You can see an awful lot just by observing”

A final point:

In the hands of the skilled sales person, dialogue and observation must work closely together to identify customer buying criteria.  The more the criteria are understood the higher the probability of winning and the lower the risk of losing to an apparently inferior offering.  .

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Learn more about the QMP process for understanding customer decision making and creating winning sales strategies.

 

Common Sales Myth #1 – A Sales Person’s Job is Just to Sell

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After many years of both conducting sales training workshops and personally selling, I have come to recognize six popular misconceptions about selling. And, I must say, every time I broach those myths during a sales training session I get push-back, disbelief, the wagging of heads and several audible “No Way!’s”. So I am braced for your blog comments.

I have chosen to address each myth as a separate blog post, to make it more convenient to get through in the smaller and smaller free time chunks we all seem to be experiencing these days. Here’s the first.

Myth 1: A Sales Person’s Job is Just to Sell

We understand that sales people are under a lot of pressure to spend time face-to-face with customers and on the road – rather than behind a desk.  But pushing, or allowing, a sales person to only sell is counterproductive. That approach would be the equivalent of saying, “A soldier’s job is just to shoot and kill the enemy.” Good soldiers do a lot more than simply shoot. They are part of a team that sometimes requires them to play different roles and take on different duties. Here are some examples, along with their contrasting business function.

They collect and report field intelligence: Good soldiers are trained, not only to shoot, but also to observe and report on the enemy (competitors), their armaments (competitive advantages and value propositions), their location (markets and customers) and their strong points (where they have impenetrable positions – be it markets or accounts). Soldiers also report on the enemy’s weaknesses and gaps in their lines (under-serviced customers and under-served markets).

Any General, coming onto the battlefield needs, first and foremost, intel – to be able to formulate a strategy. Business managers need intel as well, for the same reason.

They report on the effectiveness of their own, and the enemy’s, weapons: The business equivalent is reporting on customer receptivity to the sales tools in use, the sales approaches, product capabilities, product reliability, product effectiveness, installation problems, quality, training problems and a host of other relevant experiential aspects of selling, delivering and using the product.

They dig in and defend the ground already captured: In business terms they defend their current accounts through disciplined customer service and make sure they are secure.

They exploit a victory, charging after a retreating enemy, or pouring through a breach: When something works in the field they use it again and again, winning repeatedly over weak competitors and landing new customers until the territory is “owned” and they move into a temporary “hold and defend” mode – until the next opportunity for an offensive.

BocageBuster

They share techniques and victories: In World War II, shortly after the Normandy invasion, the allies, having driven off the beaches into western France found themselves in bocage country . Bocage country is best described as countryside spotted with crop and grazing fields that are edged on all sides by 6 foot earthen walls entangled with scrub brush, vines and trees. These barriers have been built up over hundreds of years, a result of field-tending by farmers. From the air, bocage resembles a bunch of egg-cartons set side by side as far as the eye can see – each carton with deep, rectangular recesses. (Though at the time of the invasion, aerial observers did not recognize the impenetrable nature and height of the actual barriers.)

Capturing each field required soldiers to climb up one side of the barrier wall, scramble through the brush, trees and tangled vines, enter the field and charge across it to the bocage wall on the opposite side of the field. Tanks could not climb and penetrate these natural walls. The soldiers had no cover when entering the field. Casualties were high. The enemy simply placed machine guns at the opposite side of the field and mowed down any soldiers coming over the opposite wall. Progress in liberating France, ground to a halt.

That was, until some innovative engineer found that welding a fork-like scoop on the front end of a tank allowed it to tear through the walls, enter the fields ahead of the Allied soldiers and place heavy covering fire on the enemy gun emplacements on the opposite bocage wall. The success of that technique quickly spread to other infantry units. The casualty rate dropped. Progress accelerated. Eventually France was liberated.

When a sales person finds, discovers or invents something that succeeds and creates breakthroughs – it must be shared with all.

They train: To think that basic training is all that soldiers go through is a myth. Soldiers constantly repeat their training and hone their skills to a razor’s edge. They train on new techniques, new weapons, new systems and capturing obstacles and enemy positions in different terrains. Then they re-train on what they learned in their first training. Sales people, sadly, might train once a year. New sales people joining the team, may have to wait as long as 11 months before undergoing their basic training. Lack of training puts the team, the company and the product reputation at risk.

One more point: Training has two parts: basic physical conditioning (sales skills and disciplines) and weapons training (product and sales tool training).

Yes, there is more …

We could go on with the “good soldier” analogy, but by now, if you are a salesperson, you’ve probably reached your reading time-limit and need to run to do something else.

Have a good day.

Read the complete set of  The 6 Common Sales Myths.

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Click to learn more about the QMP Sales Process and Skills Training, call us 503-318-2696 or connect through our Contact Us page