Category Archives: Marketing & Sales Management

The Basics of Foundational Marketing

Posted on by

 

“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.

 *******

The Biggest Sales Myth

Posted on by

 

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.  .

*****

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

Posted on by

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.

*********

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

 

 

 

 

 

 

 

 

Common Sales Myth #2 – You’ve Lost to an Inferior Offering

Posted on by

When we ask salespeople in our workshops to raise their hands if they have ever lost a deal to an inferior competitive offering, they almost universally raise their hands – even though we have told them ahead of time, “It’s a trick question.” 

The truth is: No one ever loses to an inferior offering.

iStock_000010460151XSmall

“How can that be true?”, you ask. “How,” you may ask, “could anyone consider that crap, superior?” 

If you lost, all the evidence indicates it wasn’t really an inferior offering, after all. That truth of it lies in two facts; 1) the decision-maker’s perspective and the values from which the relative superiority and inferiority judgement arose both differed from yours and 2) the outcome satisfied only one person’s needs – and that person wasn’t you. But, ultimately, the outcome is the final proof. 

At the moment a customer, and/or the ultimate decision maker, makes a decision to buy another “inferior” offering instead of your “superior” offering, that other offering is being perceived as a superior alternative in the eyes of that decision maker  – by a unique, hidden or secret set of evaluation criteria that you simply don’t understand or chose to ignore. Your personal opinion doesn’t, and didn’t matter. Relevant value is only in the eyes of the beholder – not the seller.

There are several reasons we are led to self-deceptively believe this harmful myth.

1. We, in sales, think all value is economic. That’s the reason we put so much emphasis on price competitiveness. 

Perceived value can be economic, but it can also be emotional or physical. When my family was young, I remember spending a lot of time analyzing car models and test driving a half dozen or so, narrowing them all down to two finalists. I sequentially drove both of them home for my wife’s final OK. She ran out to the driveway, a new-born in her arms and our other child, a two-year old, clinging to her jeans. She sat in the first car while I held the baby. She didn’t drive it. No excitement.

I returned that car and came back with the other option – a different brand and model from a different dealer. We repeated the drill. While she was sitting in the second car, she reached down, ran her hand across the seat (not leather in those days) and said, “This is it. It feels right.” We bought that car. It had nothing to do with the performance, reliability, handling or any other criteria I was discussing with either sales person. I didn’t have a clue that a “feel” test was going to be the ultimate consideration and the final decision point. I thought, as the salesperson did, that I was acting as the “official” power purchaser and “ultimate” decision maker. 

This “feel test” was an obvious physical value – not an economic or emotional one – and it held importance in the criteria by a “hidden” decision maker. 

2. We don’t understand the real decision criteria. In the story above, I narrowed down the choices. However, there was another final hurdle that neither the sales person or the purchasing agent (me) knew of.

3. We don’t understand all the decision makers  (See my new car story, above)

4. We emphasize the wrong product (or service) strengths. Not all strengths are meaningful to all buyers – or with the same relative importance. There is nothing more irritating and distracting than a salesperson spewing data, stats and features when you are trying to focus on the one, two or three most important things in your personal decision tree. 

5. We try to sell to the wrong target customer in the wrong target market. We continually hear, particularly from inventors and entrepreneurs when we ask them who their target customers are, that “everyone” can use their new product, service or invention. This leads to inefficient use of sales time, and significant mismatches in message. Telling the whole story, while missing the relevant customer or market-specific benefits, is common and leads sales people to say things like, “They (the customers) just don’t get it.” 

We have witnessed a company that believed so strongly in the universality of their value proposition nearly go out of business as they scattered their message as broadly as possible. Panicked by their rapidly dwindling marketing and sales pocketbook, lack of success and anxiousness to avoid failure, they engaged us. We told them to focus very tightly on markets and customers where the value received was the greatest. They finally agreed and the business began to turn around in less than 3 months. That simple change resulted in a four year run of breakthrough growth.

6. We don’t understand our own value proposition and differentiation: Each of our products or services should have a clearly articulated value proposition and differentiation in all three value areas; economic, emotional and physical. These values must be enhanced by the corporate brand – the ambient light that our products shine in. Johnson & Johnson, 3M, GE  and Apple (to a somewhat lesser extent these days) all bask in the glow of that favorable corporate light. The corporate light typically shines an intangible emotional and implied physical light on products and services.

Don’t bail on price as a last desperate attempt to fix your perception mistake.

One final point: To think that price is the only variable available to trigger a buy is flat wrong. But that is the topic of another myth. Suffice it to say, if that were true we’d all be driving the cheapest cars on the road.

Watch our QMP Insights blog for Sales Myth #3: “It’s relationship business”

*****

Copyright  The QMP Group, Inc. 2013 All Rights Reserved

Click to learn more about the QMP Sales Process and Skills workshops or call us at 503-318-2696 or through our Contact Us page .

Common Sales Myth #3 – Sales is all about Relationships

Posted on by

It’s a Relationship Business!

That four-word phrase is probably the most common statement we hear when we talk to sales people about their business.  It is even more common than the statement, “It’s a Price-Driven Market” – though more often than not those two statements travel closely together.

Relationship

Do You Have Brothers and/or Sisters? The Limits of the Relationship

To challenge the assumption that businesses are primarily relationship-driven we ask salespeople the following questions.  Here they are, with the typical answers.

Q.  “Do you have a brother and / or a sister?”      A. “Yes.”

Q.  “Do you have a good relationship with your brother or sister?”     A. “Yes”

Q.  “If your brother or sister tried to sell you something that would be detrimental to your business, would you buy it?”     A. “No (expletive deleted) Way”

Q. “What if they threatened to would tell your Mom that you refused to buy from them, would it change your mind?”    A. Laughter.  “No”

Here’s the point: All relationships, even good ones, have their limits

Relationships are based on trust.

Any activity that violates trust, violates and detracts from the relationship.

Let’s look at the Trust Equation, developed by David Maister, Charles Green and Robert Galford in their wonderful book “The Trusted Advisor“.  According to Maister et al,  Trust equals the sum of= (Credibility + Reliability + Intimacy) divided by (Self Interest).

 T = (C + R + I) / SI

Anything a sales person or their company does to lower Credibility, Reliability or Intimacy, lowers Trust and damages the business Relationship.  As you can also see from the equation, anything that blatantly demonstrates your, or your firm’s, Self-Interest also damages Trust and thereby the Relationship.

Nothing in the equation can affect Trust more than the amount of your self-interest perceived by the customer.  The higher the Self-Interest perceived, the lower the Trust.

Here’s the point. Depending on the Relationship alone can be perceived by the customer as inherently demonstrative of high Self-Interest.  In Relationship terms, “They want me only for my money.”

What Relationships Can and Can’t Do

Relationships can:

  • Get you an audience to make your case
  • Buy you some time and patience when you or your company screw up
  • Get you early, but not necessarily exclusive, notice of a new opportunity at an account

Relationships can’t:

  • Make up for a significant competitive shortcoming in your product or service offering
  • Repeatedly cover for your operational team’s inability to deliver
  • Make up for poor product or service quality
  • Find and win completely new accounts
  • Provide you more than a few percent price premiums
  • Make up for poor market targeting
  • Make up for fundamentally slow market momentum
  • Fix functional short-comings in your products

Here’s the Point: Don’t get complacent because you have good relationships.

Don’t Shoot Yourself in the Foot

Believing that your relationships give you enormous power is, for the most part, fallacious thinking, and can actually ill-inform you on what you and your company need to do. Here are some examples:

  • If it’s all about relationships, what impetus will your engineering team have to design better products?
  • If it’s all about relationships, why should your firm ever reduce prices or negotiate terms?
  • If it’s about relationships, why should operations need to worry about quality? Or delivery?

Here’s the point: Bragging about the customer relationships you have can simply provide unjustifiable cover for others in the organization to not execute their job as effectively as they should.  Remember, it’s still a very competitive world out there.

One More Point: The Fallacy of the Rolodex of Relationships

More often than is advisable, a client will enthusiastically recruit a sales person based on the contacts that sales candidate has amassed during their illustrious sales career.  Sales people treasure and protect to the death, their sales contacts and consider that list as a strategic personal asset.  It becomes a key feature in the personal selling proposition they use in seeking a new job.

Rolodex provides a great tool for managing those.  However, even the best list of Rolodex or CRM-managed contacts, can rarely, for the long term make up for business shortcomings in product, service, delivery, quality, competitiveness and value.

Let me illustrate.  In 1970, General Motors had roughly a 50% share of the US auto market.  That market share was supported by an incredibly, well-established national network of dealers and sales people.  Everyone knew everyone.

Since 2000 General Motors had lost roughly 50% of that 50% share.

Here’s the Point: Relationships aren’t everything.

Recommendations:

As much as has been written in this blog about the fallacies and dangers of dependence on customer relationships, let me make a final few points.

  • You must continue to develop your business relationships
  • You must continue to nurture those relationships based on paying close attention to each of the key elements of the trust equation
  • You must not, for a moment, let the rest of your business team off the hook by bragging and convincing them they only need to depend on your ability to develop and maintain good customer relationships

*****

Copyright 2013 The QMP Group, Inc.   All Rights Reserved

Click to learn more about standard and tailored QMP Sales Skills and Process Workshops or Contact Us at 503-318-2696 to discuss your sales and sales management challenges.

Common Sales Myth #5 – Closing Techniques are Effective

Posted on by

Let’s start this discussion with a stipulation that all successful sales have to go through some sort of closing stage.  Nothing happens until a customer or client agrees to pay your company for the delivery of a service or a product.  So, in the strictest sense, I guess we can call that a “close”.  We can also imagine that all commerce in the world would come to a screeching halt unless some kind of transaction closing happened. Sales Person

So, good closing techniques are essential – right?  And if that’s so why am I targeting closing techniques as a myth?

A Closing Process is Different than a Closing Technique

A “Closing Process” is likely to be mechanistic.  Get the quantity and delivery dates correct, get the PO issued and confirm with the customer your ability to meet the delivery schedule.  These days that process may be enabled by all sorts of mobile systems, and field inventory accessibility tools.  That’s mechanistic closing.

“Closing Techniques” are something different all-together.   Closing Techniques are many times designed to manipulate the emotions of the buyer, or to create a sense of urgency, guilt or fear, toward the end of triggering a commitment to buy.  At one level, an example might be a car salesman saying something like, “Well, these models are going fast.  In fact, there was a guy in here earlier that test drove and liked the exact car you just expressed an interest in.  He said he was bringing his wife back this evening for a final decision.”  Or, in a business-to-business environment, “We are just about at capacity and if you really need delivery in July, we need to get your order committed and on the schedule no later than end of this week.”

Well before you assume that closing techniques are cool, perhaps even having been indoctrinated by the training your own sales management required, consider the following information – then decide for yourself.

The Impact of being “Closed” by a “Closing Technique” 

Neil Rackham in his book “SPIN Selling” reveals the results of 10 years of research done by the Huthwaite Center into high $-value sales success, analyzing 10,000 sales people and 35,000 sales calls in 27 countries.  They studied 116 factors that might contribute to sales success.  

The results of that study concluded that customers with which “Closing Techniques” were used (emotional, urgency or fear) were:

  1. Less likely to buy
  2. Less likely to re-buy
  3. Less likely to be satisfied after the buy

Admittedly that is an extremely brief description of his work and its conclusions.  But it is compelling – and I strongly recommend all sales managers read “SPIN Selling“.  It may alter, for the better and forever, your thoughts about training your sales people to use “Assumptive” closes, the “Standing Room Only” close, the “Alternative” close, or any other trick closing technique.

The Huthwaite SPIN model offers an excellent, and more effective, sales process alternative.  SPIN is an achronym, and stands for Situation, Problem, Implication and Need-Payoff.  The SPIN selling process trains people how to use questions of each type to win a sale.

So, Why is So Much Emphasis Still Placed on the Training and Use of “Closing Techniques”?

Today, the pressure on Sales Managers to produce sales results is higher than it has been in years.  Foreign and price-based competition, combined with a still iffy and sluggish economy is resulting in significant pressure on small-to-mid-sized firms.  The result is that CEOs, Owners and Sales Managers believe that closing techniques will somehow move a sale forward more quickly.  But, in my experience I find that they are, for the most part, ignorant of what the data from the Huthwaite study reveal – and ignorant of other more effective sales techniques.  And, they may be pressed to find the time or money to embark upon such a change of direction and approach in mid-stride.

Curling

Customer and Client Collaboration Works Much Better

So rather than disenfranchising your sales prospects with slick closing techniques, consider a sales approach more like the Winter Olympics sport of curling.  A good sales person is like the “sweeper” who, through patient and detailed questioning, problem solving and collaboration leads the customer to the best answer to help them achieve their goal.  

*****

Common Sales Myth #6 – The Biggest Accounts are the Best

Posted on by

Here is the last in the series of Six Common Sales Myths.

For small to mid-size businesses, the decision to commit resources to target a large account should considered carefully. The primary considerations are: “What are the implications of winning?” and “How, should we go about it?”

So let me provide you both sides of the story.

 

Why the Largest Accounts are NOT the Best Sales TargetsWhale

The Competition is the Highest: Sales managers and sales people almost universally drool over the thought of landing the big account. Some folks call them “Whales”. With these whales come visions of top line revenue waves carrying on their crests big commission checks and bonus trips to Bermuda for exceeding sales production quotas. The bad news is that every competitor’s salesperson is striving for that same, beach-front room in Bermuda.

It Reduces Your Negotiating Power: Have you ever been presented with 90-day or 120-day payment terms by your large customers? Have you been confronted by corporate edicts from your large customers to buy overseas, or forced to share your product cost models or had to make a pledge of cost-downs (targeted and contracted cost reductions delivered directly to the customer). All of these can be relentless.

You May Become Too Dependent on Them:  Bankers, these days, have tightened their requirements for business loans. One of the things they look closely at is the vulnerability associated with one customer presenting too large a proportion of a firm’s business. Having a hefty chunk of business from one large customer may also make one complacent.

 

Under What Circumstances Can Large Clients be Good?

When You Are Selling a Unique Value Proposition That Is IP Protected: This greatly relieves the pricing pressure and competitive threats – but it is likely short-lived.

When you are adding desperately needed capacity to overheated market demand for your product/service commodity: When there are overall industry shortages of the product or service commodity you deliver, because of very high market demand for your customer’s products, those large “whales” swim a lot farther to find the krill they need to survive.  They also become a lot less demanding. Again, this somewhat relieves the discomfort associated with working with large customer accounts – but heated up industry demand does not last forever. 

When Your Large Customer is Enlightened: Enlightened means they have embraced the concept of true partnership – recognizing the need for mutual investment, mutual trust, mutual innovation and mutual ROI.

When Decision Making is De-centralized: De-centralized decision making increases the probability that you will find either: a) an enlightened decision maker in one or more of the myriad divisions of the “whale” or, b) divisions and circumstances to which you can deliver significant value from your company’s specific combination of value proposition and differentiation.

When They Spur You on to Innovation or Breakthroughs: The promise of a big payoff, with lots of business from a large customer, can spur creativity and product innovation. What it should not encourage is gambling. By gambling, I mean taking a long-shot that requires stretching beyond reason the laws of physics or the organization’s overall capabilities. Such gambling can quickly destabilize the financial safety net of the firm.

 

How to Eat a Whale

Yes, yes. No surprise. The answer is one bite at a time.  But where you bite first is the real question. Here are some guidelines on selecting where your bite will be most productive, profitable and nourishing.

There are 6 basic strategies in war and business – 3 F’s and 3 D’s, and no, these F’s and D’s in no way reflect my 6th grade report card. Here are the strategies, by name:

–          Frontal

–          Fragment

–          Flank

–          Defend

–          Depart

–          Develop

The subject of strategy is simply too large to cover in this blog post, so suffice it to say that 5,000 years of military history and 75 years of marketing science have demonstrated, unequivocally, that the most productive strategic combination from the list above is the combination of Fragmentation (segmenting) & Flanking (differentiation). History and research have also demonstrated that frontal assaults can lead to disaster even in the case of great initial success. Remember Napoleon in Russia, Lee at Gettysburg, the English at Gallipoli, the German army in Russia and the Charge of the Light Brigade in the Crimean War.  Or, in business terms, think Texas Instruments’ frontal assault on the watch market, Raychem in fiber optics and IBM in PCs. All were frontal assaults by large, highly confident organizations with huge assets behind them. All failed miserably. 

By Fragmentation we mean, finding a business segment or Division of the “whale” to which your value proposition provides disproportionate economic value compared to its cost.  By Flank we mean identifying, matching, communicating and demonstrating your differentiated value to the fragmented business segment that gets the most value from it, in effect, multiplying your overall value proposition.

 

A Case in Point:

Long before I was a market strategy and sales consultant, I was involved in a business that sold factory automation software. The division was attempting to sell this software solution to some of the largest, multi-site, multi-divisional manufacturers in the United States. We were spurred on by the knowledge that every large manufacturer we spoke with had active, funded corporate programs to find solutions to the common manufacturing challenge extant in all their manufacturing business units.

Talking with these corporate types, our software team energetically began to design and add capabilities to our system to assure we could handle all of the needs they had identified. 

Unbeknownst to us, a competitor had been making inroads with what we perceived as a vastly inferior, inconsequential, less complete offering.   They were selling low level, simple solutions into the divisions where decisions did not require corporate “influence”.  They were, in effect, fragmenting the account -taking lots of little bites of the whale.  By the time we had developed our comprehensive solution, the low level competitive solution had penetrated so expansively, in so many fragments of the business, that retrofitting was out of the question. 

This is just one example of how subversive fragmentation can be used to penetrate a large account – one small bite at a time.

 

The Take-Away:

Large accounts are not inherently good or bad sales targets. They are good or bad sales targets depending on:

  1. the strategy used to penetrate them,
  2. the “enlightened partnership nature” of their corporate procurement,
  3. the centralized or decentralized nature of their decision making,
  4. the strength of your IP and the economic value proposition it delivers, and
  5. whether or not you are adding industry capacity to overheated market demand

 That’s the long and short of it.

 

For more information regarding QMP’s Sales Process and Skills Improvement Workshop or Sales Improvement Consulting Services, call to 503.318.2696 or connect through our Contact Us page.

*****

Revitalizing Stalled Sales

Posted on by

 

As the economy continues to bounce along, (some say showing signs of a small movement off its bottom while others disagree), business owners and managers are getting impatient to find ways to boost revenue.  Not only are we seeing evidence of this within our own client base, but also our “Insights” blog post on “Diagnosing Stalled Sales”, published in June of 2011, has re-surfaced recently as the top-read posting on the all time QMP blog popularity-list.  The second most popular blog on that list is “The Marketing and Sales Audit”.  Business leaders are looking for revenue answers.  Standing idly by and waiting for the economic recovery is no longer a reasonable option.

As I re-read that “Diagnosing Stalled Sales” post, I realized that it was too diagnostic and not prescriptive enough.  After all, what good is a diagnosis without a treatment? Apologies to those readers who came away from that post less than satisfied. This post makes up for that shortcoming. 

Deciding What to Do

The first thing to recognize is that all revenue increases must come from one or more of the following four sources: 1) introducing new products, 2) stealing market share from competitors (new account wins in your current markets), 3) the natural momentum of your current markets or 4) penetrating new markets.

New Products:

If you have a new product-development initiative in the works, good for you.  But pursuing this option for increased revenue typically takes time and money.  Both are in short supply these days for small to mid-size businesses, exacerbated as our clients currently relate, by the challenge of tightened banking requirements.

New product development initiatives typically fall into one of three categories: a) improving what you already offer, b) meeting some new customer requirement or c) launching a breakthrough.

Meaningful overnight revenue upsides are rare from new products as it takes time to develop, tool, test and introduce a new product.  It then takes time for the market to become aware of it, understand it, change their old ways of doing things (and who they may be buying from) and begin to adopt your new product.  There are ways of accelerating this adoption rate, but only if the product is a breakthrough – something that fundamentally turns the market on its ear.  Even in that case, time is the challenge.  Twenty-five years into its existence, I still meet educated people who don’t own a personal computer, and it took 50 years for the automobile to be completely adopted by consumers.

Don’t get me wrong, new products are strategically important for a firm. I strongly encourage new product development, particularly if the product fills some need the customer didn’t even know they had – a real breakthrough.  Breakthrough products typically bring sustainable growth, give customers a meaningful reason to change and provide higher margins.  (More on this subject in a future blog post on the subject of Innovation).

So, keep developing; keep considering new ideas; just don’t expect the heavens to open and revenue to come raining down quickly.

Stealing Market Share from Competitors:

One of the fundamental principles of military strategy is, “The hardest ground to capture is the ground that is occupied. It typically takes anywhere from 3 to 6 times superior resources to take over a position from an occupier.  Interestingly, most of the initiatives that small to mid-size companies attempt (unwisely) to increase sales fall into this, the most challenging category.

These days, there are a number of popular marketing initiatives that are all the rage – search engine optimization, the use of AdWords, re-branding, social media and database marketing – to name a few.  These are not inherently bad or good.  However, the key to achieving significant growth with any of them is to assure their use in a focused way combined with growth options #1 (Introducing New Products) or #4 (Penetrating New Markets).  Using them in a focused way assures maximum return for minimum investment.

Some of you may decide that this option, stealing share from competitors, is the only one available to you and that you don’t have time and money for new product development or to try to penetrate a completely new market.  If you do, the road will be difficult and certainly take more resources and time than you anticipated.  If you can’t be dissuaded, here are some tips to make it easier:

a) Try to fragment your competitor’s market: Find and target sub-sets of customers that have a common dissatisfaction with the competitors’ offerings.  The Japanese didn’t attack the US auto market all at once on all fronts.  They focused first on the most vulnerable and receptive set of customers with a quality small car offering.  After establishing this foothold they expanded based on their proven quality reputation.

b) Tailor a market-specific benefits story to the customers in the specific target market fragment you wish to penetrate.  You may even wish to set up a separate website for that specific market. At minimum you will need a focused sales presentation.

c) Focus your sales team on that segment and train them to tell that market-specific story.  Make a concentrated effort for 90 days with frequent feedback from the sales team to see if the story is gaining traction.  The test of traction is a growing sales pipeline.

d) Never lead the penetration effort with pricing reductions.  You’ll hurt yourself.

The Natural Momentum of Your Markets:

This is the primary problem most small-to-midsized businesses are dealing with. It is true that all boats rise and fall with the tide.  That doesn’t mean that some boats don’t move around the bay faster than others, whatever the tide situation.  There are always segments of a market that trend opposite, or move faster than, the overall economy.  If the economic momentum of your primary target market has slowed, and doesn’t look like it will return quickly, then it’s time to consider growth option #4 – penetrating new markets.

Penetrating New Markets

The requirements for a successful penetration of a new market are: a) a good set of target market attractiveness assessment criteria, b) a high degree of focus in your attack on the market and c) rapid feedback and re-targeting process to use as required. You need not make a big, costly production of launching an initiative at a new target market.  Assessing attractiveness, focusing and gathering intelligence about receptivity (basically validating the market’s attractiveness) is not a big deal.

For each of the following questions, start with the phrase, “To what degree..” and score on a scale of 1 to 10.

… does this market exhibit sustainable economic, demographic or regulatory momentum?

… do customers in this market have a compelling problem that can be solved by our product?

… does our product offer a clear competitive advantage in solving that problem for the customer?

… does solving that problem reap a meaningful reward for the customer – economically, emotionally or physically

… is there a competitive leadership position available in the market?

… can we easily reach customers in this market?

… is there strong intra-market communication between peers in this market?

… can we sell into this market profitably?

These criteria will provide a starting point for a relative attractiveness assessment. You may wish to use more, or different, criteria.

Doing it:

It is common in slow economic times for sales teams to increase their activity in trying to sell to a wider range of prospects, try to penetrate large accounts that competitors own, campaign for price concessions to win new business and chase opportunities that are a marginal match for the firm’s capabilities.  As driven by the survival instinct as these activities may be and as resourceful as they may appear on the surface, they are typically non-productive.  In fact, they can be hugely counter-productive.  The results of such efforts are typically depressed profitability, unsustainable success and trapping the firm into businesses and/or products it cannot maintain.  Such activities can also dilute customer support resources, jerk around product development and operations resources, damage the firm’s quality reputation, start price-wars and cause a distraction of the business from what it does best.  It can take many years to recover from the negative consequences of impulsive sales actions taken in the fever and panic of an economic crisis.

I state the case in a dire scenario because the real key to success is focus and feedback.  Focus means staying focused on the target market you decided upon using the criteria above.  Feedback means monitoring progress, receptivity and success frequently and adjusting quickly.

The discipline of a limited number (one or two) highly focused initiatives targeted at specific new markets, followed by rapid sales feedback, has consistently produced good results.  When followed-through with discipline the results have been significant.  Our subject firms have won new clients, avoided price competition, found new ways to provide additional value to customers, increased selling prices, reduced the hysteria associated with trying to respond to every quote that comes within 100 yards of the door, achieved double-digit increases in win rates and made rapid strategic adjustments that saved them from economic disasters.

The approach we suggest requires the adoption of three basic process disciplines: 1) rapid market assessment, 2) rapid and focused launch initiatives and 3) disciplined and frequent field sales feedback.  While these disciplines may be different than what your organization has used in the past, they are easy to learn, cost-effective to deploy and yield a higher probability of success – in both challenging and healthy economic times.

***

We invite you to read our related blog posts “Diagnosing Stalled Sales” and “Finding New Markets“

Getting Things Moving: What to do when progress is stalled

Posted on by

Program delays challenge management in all types of enterprise – profit, non-profit, public and private. Stalls, stumbles, delays and barriers seem to randomly and inconveniently attach themselves to all types of organizational initiatives. Whether a firm is struggling with a critical initiative intended to dig its way out of a stuttering economy or dealing with the challenge of quickly responding to unprecedented growth in customer demand for its new product, all initiatives hit roadblocks.

Pulling Out Hair

Some suggest that roadblocks are simply a way of life in business – inevitable. That may be true. But if these banes are inevitable and ubiquitous, shouldn’t the management tool kit and training programs of the firm include an effective method for dealing with them?

I am not going to tell you that I have discovered some magic formula for the total avoidance of stalls, stumbles, delays and barriers. Rather, I will share a process and 12-point checklist for rapidly discovering their root cause and overcoming them.

From a Fiddler, comes insight

My insight into this common challenge came from the following scene in the movie Fiddler on the Roof.

Tevia, a poor Jewish farmer in Czarist Russia, is attempting to deliver fresh milk to the townspeople from his farm on the outskirts of town in time for the Sabbath. Tevia is pulling a heavy, wooden two-wheeled cart ladened with cans of milk, the harness around his own neck because his horse has come up lame. He is determined to fulfill his obligation to deliver – leaning forward and pulling in the summer heat on a dusty, gravel-strewn road.

I pondered Tevia’s circumstances. Should a pebble in the road find its way into the path of one of the cart wheels, progress would immediately come to a halt. Tevia would be faced with a choice – either attempt to lift a 400-pound cart over the pebble, or, simply remove a pebble.

The business insight?

Discovering and removing pebbles is the true challenge in making progress on a stalled business initiative ~ not pushing harder or lifting.

A process for discovering and removing pebbles:

The process we offer has four parts: 1) the nurturing of a Culture of Immediacy and sense of urgency around identifying, diagnosing and fixing delays 2) the discipline of having frequent Checkpoints, 3) immediate Confrontation of the stall and 4) a Checklist of 9 C’s for quickly diagnosing and overcoming the real barriers to progress.

All steps begin with the letter “C”.

Culture: An organization’s culture usually reflects the CEO’s vision and personal example. A disciplined drive to get things done, supported by a culture of immediacy and a sense of urgency will keep the momentum going.

Checkpoints: Frequent Checkpoints is the second most important “C”. Checkpoints are not micro-management. The purpose of a checkpoint is to discover and address barriers and enable progress – not target and fix blame. Barriers and pebbles are discovered quickly and time loss is minimal with frequent Checkpoints.

To punctuate the point, we recommend clients change the company vocabulary by striking the words “Meeting” and “Review” from all company communication and replacing them with the words “Working Session” and “Checkpoint” respectively. These new words imply a strong need for, and set the uncompromising expectation of, the active participation of all members of the team to drive to make progress. These changes in lexicon create a new cultural baseline if this drive didn’t exist prior to the vocabulary change and reinforces it if it did. Participation replaces passivity. Passively sitting back and watching someone present becomes forbidden.

Managers and leadership must demonstrate hands-on participation in these working sessions. They must lead problem solving, knock down barriers and be decisive. Working sessions should end with the following questions: Who is specifically going to do what, by when, to remove the discovered pebbles? Does anyone see any additional barriers or pebbles immediately ahead of us in the road? When is our next checkpoint?

Confrontation: Confrontation does not mean argument. It suggests immediacy, persistence and determination in overcoming a barrier. It means seeing a discussion through until a solution or path-to-a-solution is agreed upon – and not giving up until it is.

People are not confronted in working sessions – barriers are. A combination of objective tough-mindedness and social courage is required to confront a delay discovered during a working session.

In 20 years of consulting, I have found the lack of these two C’s (Checkpoints and Confrontation) are extremely common at all management levels. If the CEO or leader demonstrates a lack of discipline for checkpoints and a reluctance or fear of confronting barriers, the organization will reflect that “looseness” of good management discipline and process.

The 9 C’s Checklist

The list below identifies the most common root-causes of delays in business initiatives.  Once you have identified the correct root cause “C”, you can jump to the only “C” that is not on the list – Correct It.

Communication: The importance of this first “C” cannot be over-emphasized.  Communication-related delays   occur because someone has overlooked the need to communicate something that needed to get done, when it needed to be done and why.  It’s difficult to communicate too much.

Capacity:  Insufficient personal or organizational time available to complete important tasks can cause delays.  Most of the time critical task delays that are laid on the doorstep of Capacity are really related to inappropriate or misaligned priorities.

Capability: Occasionally a team member’s lack of understanding of how to tackle the task at hand creates a delay.  In such a case, outside expertise or training will break through the barrier.  This is a particularly nefarious “C” because individuals rarely want to admit that they simply don’t have the skills or knowledge to get around the problem – which brings us to the next “C” – Courage.

Courage: Progress often requires personal behavioral change.  We all know how difficult it is to accomplish behavioral change – personally and organizationally.  Personal courage comes into play most often, when an individual does not have Capability but is afraid to admit it.

A second type of Courage is organizational.  We have a good historical example from the 1980’s – the adoption of Total Quality Management disciplines by most major manufacturing firms in the country.  This change represented a major shift and courageous commitment made by executives.  One of its primary tenets was to first “drive out employee fear”.  Honest, open communications, generated from data and fact, and rewarding people who identified and overcame barriers earlier rather than later, helped drive out the fear of enable the desperately needed change.

Co-operation:  Typically, what appears as a delay caused by a lack of cooperation, either from an individual on the project team or from a support department, is actually caused by a priority misalignment.  Management Clarification and Communication quickly overcome these barriers.

Cognition: Ever been caught in a “deplaning jam”?  It’s the experience of de-boarding quickly from an airplane only to be jammed-up in the terminal by Grandma hugging all her six grandchildren right in front of you?  People scurrying on their way to catch a cab or to baggage claim start crashing into one another as they stop short – preferring that collision to crushing Grandma and the youngest granddaughter wrapped around her leg.  Grandma has stopped and stalled progress – oblivious to the consequences of her behavior.

Sometimes people simply don’t know they are in the way of progress by their inaction or that what they are doing is counter-productive.

Criticality: The negative economic implications of delays (and the positive economic implications of rapid success) should be visible to all members of a project team.  Creating and sustaining a sense of urgency is essential by the manager ultimately responsible for the P&L impact of the program.  When a delay is on the critical path it must be confronted immediately.  Again, sometimes people just don’t realize the critical nature of a task assigned to them.  Setting deadlines helps punctuate criticality.

Credibility: Do the team members really believe there is a need for the change initiative? Do they trust the judgment of the management team?  Has the management team’s judgment proven itself in the past, demonstrated by a good track-record of success?

Trust doesn’t happen overnight and a lack of trust may linger just beneath the surface, as a pebble that is difficult to see – perhaps buried in a small puddle of passivity.  In such a puddle, you can’t see the pebble, but you can feel, see and hear its effect.  You may be afflicted by a Credibility pebble if you hear the phrase, “Program du jour”, notice a roll-of-the-eyes in the ranks of the team when the objectives are described, or recognize a blasé attitude..

Capital: Sometimes funding is needed to overcome a barrier.  In some cases there is an ingrained philosophy, or unspoken rule of not asking for funding.  To overcome this hesitancy, set expectations at the beginning of an initiative to make capital-related issues visible immediately.

Example: A Persistent Barrier Falls to 3 of the “C” Questions

A number of years ago I was working with a client to rebuild their weak sales pipeline.  When I asked the sales manager what he thought the barriers were, he answered, “Time”. In our vocabulary that “C” is Capacity.  He continued, “We have to baby-sit every project opportunity from birth to death – including project coordination.  This makes us too busy to look for new business.”   I suggested that they document the customer engagement process, divide it into phases and assign different phases to different departments– freeing up their time to engage more new customers and new projects.  Stunned silence was the response.  No one had thought to solve the bottleneck by looking at it as a process capacity issue instead of a sales problem

I asked, “Is there anything else in the way? He said, “Training. We don’t know how to use the pipeline management system.” In our vocabulary that “C” is Capability. We scheduled training for the next sales meeting.

“Anything else”, I asked?  He said, “The CRM system isn’t designed for our business”.  They ordered a new, easy-to-deploy system that fit the business better.  It could be installed in the next 45 days in time for the next sales meeting and would cost only a few thousand dollars.  That “C” is Capital.

Anything else? “Nope”

I then suggested a series of working sessions, (Checkpoints), over the ensuing several weeks to assess progress on these pebbles and identify any new or additional barriers.

These pebbles had been jamming their cart wheel for more than two years.  In one hour, using our list of “Cs” we identified and began the process of removing them.  You can too – if you have the Commitment and the Courage to Confront them.

*****

Learn more about a QMP program for deploying a culture of Performance Excellence and Getting Things Done

Don’t Give Up on the Top Line (no matter how tough things get)

Posted on by

 

The Most Common Reaction to Economic Turmoil: Expense Reduction

There’s a line in the Willie Nelson tune “Nothing I can do about it now” that goes like this:

I’ve survived every situation
Knowin’ when to freeze and when to run.

Two years into the current economic downturn, there is plenty of evidence that companies are trying to do both. Firms continue to take aggressive steps in reaction to reduced demand. Cisco just announced layoffs of 6,500 employees. Other big name firms such as Merck, Lockheed and Boston Scientific also announced staff reductions.  Borders finally threw in the towel, closing its last 400+ stores.  It once had 1,200 outlets, employing more than 35,000.  And most recently, HSBC indicated it will let go between 25,000 and 30,000 employees.iStock_000009708062XSmall

Small to mid-sized company layoffs typically don’t make a lot of news. But a quick informal survey at the other end of the corporate spectrum, showed that smaller firms, particularly those without an international earnings contribution to their performance, have experienced a down-turn in revenues of anywhere from 25% to 40% from their peaks in 2007 and 2008. They’ve aggressively cut expenses and conducted layoffs as well.

Of course, there are exceptions. Companies with specialized innovations targeted at niche market problems are doing much better than firms depending only on their traditional products and markets. But by-and-large, corporate “economic adjustment” initiatives focus on operational expense reductions.

Instability in Europe continues, the DOW is down more than 1,500 points since July 1, unemployment and underemployment in the U.S. remain high, Asian demand for US exports will decline as a reflection of reduced US demand for their imports, and the US Congress is mired in finger-pointing politics vis-à-vis problem solving. Under these economic conditions, can you blame anyone for immediately reaching in the first aid kit for the expense reduction tourniquet?

Taking a Second Look at Revenue Upside Options:

Stemming the bleeding is crucial under these economic conditions. However, in the frenzy to cut expenses, the potential for revenue upsides gets short shrift. Why? Expense reductions can be swift and easily seen in reduced cash outlays. Revenue upside strategies, on the other hand, even in good times, carry with them risk. Financial executives and conservative CEOs will opt, almost every time, for the less risky, faster impact, sure thing. Revenue-upside options fall to the side of the road.

Nonetheless, there are a handful of strategies for realizing revenue upside in a down economy. Due diligence and responsible managerial behavior should compel managers in serious economic times like these to, at least consider the revenue-upside options that follow. An impulsive, headlong rush into any one of them would simply be unwise. Rather, we suggest a serious vetting exercise, followed by execution of the best.

Upside Potential #1: Market Focus

Focus is typically rejected, out of hand in tough times. When the business is hurting why would anyone in their right mind “narrow” their focus? Shouldn’t we be casting the net further?

Not necessarily.

Spending time to reconsider the market segmentation of your customer base and the unique conditions extant in each of those segments helps you identify areas that might benefit from additional focus and re-deployed resources.

Not all the market segments served by your business are affected equally by the economic winds. Not all market segments have adopted your products and services to the same degree. Not all market segments are afflicted with the same competitive infestation. And most importantly, not all segments of the market receive the same economic value from your product offering.

For example: Let’s say that, in general, customers in a particular market segment garner a 10X economic benefit from your product in a relatively short time frame. That is, the economic return on what they buy from you is 10 times more than they paid. In other segments, the return may be less. It is more likely that focusing additional effort in the market for which your product yields the highest return to the customer would have a higher probability of success than expenditures in other areas where that return is less.

In contrast, broad-brush marketing initiatives intended to expand a firm’s reach are less efficient because they: a) dilute resources, b) dilute the economic return differentiation of your brand, c) begin to encompass more competition in each new segment and d) don’t adequately leverage your greatest successes. Focus is likely to be more effective and profitable.

Upside Potential #2: Pricing

This alternative has two options: 1) holding prices and 2) increasing prices

Holding Prices: The competitive nature of tough economic times inevitably presents opportunities for price cutting, particularly as a means to close hotly-contested deals. The reasons for this are many. First, weak, undifferentiated competitors are starting price wars. Secondly it’s the easiest option for the sales person and requires the least amount of sales effort. Third, it typically doesn’t make much of an impact on sales commissions, unless the commission is tied directly to the profit margin of a deal. Fourth, sales people are not trained or disciplined enough to sell on value. Fifth, in tough times customers (particularly purchasing managers) know they can request price concessions and “work” one vendor against another. Finally, owners and managers frequently don’t have enough good first-hand information or a well-enough established relationship with the key customer decision-makers to mitigate price discussions.

The truth is, allowing price cutting, even in tough economic times, is really an admission of several foundational weaknesses. The product is may not be providing a differentiated economic value to the customer (wrong target customer). Management may be out of touch with customer decision makers. The strategic market segment focus is one that has too much competition. Or managers don’t understand how to direct their sales team on how to avoid price-based competition.

In a mini-workshop, I asked CEOs of small to mid-sized B2B firms to imagine their best product being purchased and used by their best customer. I then asked them to pencil out what they thought the 3 year economic impact would be on their customer – that impact being the amount of profit their product would drop to the customer’s bottom line. For example, if their product was of very high quality, what would the economic impact be to the customer for purchasing the high quality product vs. a lower quality product from one of their competitors?

In this 15-minute exercise, not one CEO was able to arrive at an answer. If the CEO can’t describe it, how can they expect their sales people to? If the sales people can’t explain it, how can price-based competition be avoided?

Raising Prices: A number of years ago we were working with a client whose new product adoption was stalled, gaining virtually no traction in the marketplace no matter their continuing effort to increase distribution agreements. It was priced 3X higher than the most popular competitive approach. Of course, the sales people thought their job was futile and continually pleaded for significant price reductions.

A brief assessment showed that a certain portion of the tiny installed base went to a segment of the market whose needs were unique. Only this product could meet those needs, for a myriad of reasons. (Interestingly, initially the market had found my client, not the other way around.)

Rather than reduce prices we suggested the business refocus their efforts to this one segment, highlighting to potential customers the unique fit and match of the product to their unique needs. After focus and redeployment of time, money and energy (no increases), adoption took off, with no accompanying price reduction.

Now some people would call this just another version of Revenue-Upside, Option #1 – Market Focus. That’s largely true. However, the rest of the story is that while focused and penetrating this particular segment, customers began to request additional features and functions – which in turn led to increased selling prices. In the end, the average price point rose to 4X its original. (Remember, the original was 3X the competitive approach).

At no time was there a need for a price reduction and the business turned completely around, growing much faster than anyone had anticipated. By focusing on market segments where the economic value and unique characteristics of your products are understood, the opportunity exists for improved performance products at increased prices.

Upside Potential #3: Fragmenting Offerings

Sometimes fragmenting your offering into more affordable pieces makes it more digestible for clients. Increased revenue accrues when decisions that otherwise would have been delayed can be made with smaller financial commitment by the customer. This provides your firm at least a small amount of revenue vs. none. It also sets the groundwork for follow-on purchases.

When fragmenting your offering, selling prices of the fragmented pieces need to be set so that the sum of all the pieces of the fragmented offering sum up to more than what would be charged were the product/service sold all at once. Is this “sum-of-the-parts pricing” gouging? No. The costs of doing business associated with the planning, coordination, administrative management and handling of multiple orders justifies the increased pricing – and you can be honest with customers about that price penalty. They understand that it costs more to do business that way and might even be encouraged to buy larger chunks to avoid paying that premium.

Depending on the type of product or service, fragments or phases might be identified as any on the following list: planning, design, testing, tooling, manufacturing, test, integration, set-up, training, service and/or recycling. The bottom line is that fragmenting your offerings should make it easier for customers to buy something rather than not buying a more costly nothing.

Upside Potential #4: Adding Services to Product Lines

Have you noticed that, these days, nearly every durable-good purchase comes with an offer to buy a replacement or service contract? Last week I bought a 16GB PC thumb-drive for $27.99. The checkout clerk asked if I wanted to buy the replacement warranty. I declined, but certain types of renewable service warranties can be very profitable add-ons.

Upside Potential #5: Acquisition or Licensing

Opportunity to acquire businesses and intellectual property during major economic downturns increase as companies struggle and values are depressed. However, as with any acquisition at any time, there is reason to be cautious.

Buying a competitor’s business to capture their customer base (barring SEC denial) is not necessarily a coup, even at a bargain price. Your competitor’s customers may be receiving a technologically obsolete, poor quality or functionally inferior solution. In such a circumstance, you would be wiser to boost investment in your own product development effort vis-à-vis buying your competitor.

Opportunities for acquiring intellectual property may arise more frequently in tough economic times as well, as challenged companies look to find sources of cash. Turning IP (purchased or licensed) into products and then into cash, however, doesn’t typically happen quickly. A better way to ensure a speedy IP-to-cash transition is to acquire IP that can be integrated quickly into your current product offerings, increasing their functionality, their value to the customer and their selling price.

Just Don’t Do Something, Sit There! Think!

In most businesses the ratio of execution-driven people to strategic-thinking people is low. Of the two roads to survival in a downturn, expense reduction and top-line, the expense reduction road is best travelled by the tactically driven, the top-line by the strategy-minded.

The strategy-minded are often those at the top of the organizational pyramid. So, it’s only self-discipline and personal values that will compel people at the top to consider revenue upside.

George C Scott in the movie Patton said this to his troops.

“I don’t ever want to hear we’re holding anything. We are advancing all the time.”

Be brave. Seriously consider the revenue-upside options in the face of adversity.

*****

Learn more about the QMP Marketing and Sales Engine and how it can revitalize both top and bottom-line growth