“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:
There 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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