3 Guiding Principles for Applying “Lean” in Marketing and Sales

Posted on April 12, 2015April 12, 2015 by Jerry Vieira

“Lean (as applied to marketing & sales) is the process of maximizing the value delivered to customers by eliminating any wasted activity or expense in the marketing or sales process that does not create or enhance relevant customer-perceived value.”

Depending on your market circumstances, Lean has the ability to reduce your marketing and sales expenses, while increasing sales and market share and enabling increases in selling prices and margins. Lean is not too good to be true. The benefits are real and borne out by strategic research and real life success stories.

Lean is not simply a slash and burn offensive on the sales and marketing budget. It needs to be applied strategically and in a targeted way. It requires the re-allocation of resources and assets to the most important customer-perceived values and away from non-value-delivering capabilities and activities.

So, here are three principles to use when considering the application of lean principles within your 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 economic, emotional, political or physical value from your product or service, than it costs them economically, emotionally, politically or physically to acquire and use.”©

Amazon got its foothold because the value of the traditional brick and mortar bookstore was irrelevant to a large segment of the book buying market. Bricks and mortar, attached Starbuck’s, store clerks and reading couches simply did not deliver value to buyers in that segment. Yet they cost book stores a lot to maintain.

Second: The Lack of Lean Creates Vulnerabilities in Your Business that Competitors Will Exploit

If there is any place in your product or service offering, marketing, 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 in a specific part of your Marketing & Sales function, use the first and second principles above to guide your decisions.

You can’t improve everything at once, so you must prioritize.

The order of priority?

First, re-balance investment and assets to enhance the most important customer-received value dimensions (economic, emotional, political or physical) in your most lucrative market segment. Shift resource from non-value delivering activities to relevant values.

Second, apply lean to reduce or eliminate potential and emerging competitive vulnerabilities.

Third: Apply Lean continually. Lean requires continual vigilance.

Why?

Because the lack of Lean deployment is directly indicative of your competitive vulnerability and the graveyards are full of failed companies and products that ignored or completely misunderstood how to apply resources in proportion to what the customers really considered most important.

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For more discussion on lean in Marketing & Sales, read our sister post entitled “Six Targets for Lean in Your Marketing & Sales Function”

To discuss Lean concepts with Jerry, call 503.318.2696 or email to Jerry @qmpassociates.com. Visit the QMP website at www.theqmpgroup.com

Diagnosing Stalled Sales

Posted on March 13, 2014June 21, 2018 by Jerry Vieira

Just Ignoring or Pushing Through the Pain is Not the Answer

As an entrepreneurial CEO or owner of a small or start-up company, you probably don’t have the economic safety net to tolerate long term losses or less than adequate speed and growth in the adoption of your new products. You also may not feel you have the time or cash to stop everything, pull the team together, and completely re-visit your base assumptions and offering design. This is where panic sets in. What do you do?

Typically, if you ask your marketing, sales and engineering team what should be done, they will come to you with a laundry list of quick fixes: requests for price reductions, funding approval for new marketing initiatives or even more complex and higher performance product features which, they claim, are certain to turn around the problem. As CEO how do you know what to bet on? How do you know if you’re throwing good investment dollars after bad? How do you avoid having to seek out more funding and perhaps dilute ownership?

A number of years ago, I was asked to assess the viability of a new product that was struggling to gain traction in the marketplace. The CEO of this high-tech, pre-IPO firm wanted to know whether the product line could be saved. Sales were almost non-existent – profits negative. There was no breakthrough in sight.

The product manager of this line was convinced that if the psychological price barrier of $1,000 could be broken, customers would flock. The current selling price was $1,100. In the meantime, while price reductions were being considered (not seriously), the product manager was spending his time and budget setting up new distributors around the country, building promotional materials, stocking shelves with minimum quantities, training sales reps on how to demo the product and, in general, “flogging” (his word, not mine) and constantly “badgering” (my word) the distributors to produce more sales.

Two weeks of field investigation revealed a strategic opportunity to re-focus the market strategy. Twenty four months after that refocus:

– the selling price had increased from a $1,100 to more than $4,000. (Yes, it went up, not down!)

– the largest single customer order went from $20,000 to more than a $1,000,000

– the number of customers (hospitals) grew from 2 to more than 150

– the product-line, and the people, were saved

– the story added to the attractiveness of the IPO

And all this was accomplished while spending less in marketing, not more.

How was this accomplished?

This turnaround was made possible by discovering what, up to that time, was an ignored sector of the current customer base, where the product’s value proposition was significantly greater than for other customers. The business was then refocused on that smaller, yet more lucrative, group of customers. Focus allowed a reduced marketing budget. The result was greatly accelerated adoption, revenue growth and profitability.

Peter Drucker in his book, “Innovation and Entrepreneurship” calls this, leveraging “the unexpected success”. It’s accomplished by digging through the customer lists, examining the motivations of a customer that bought (that you didn’t expect to buy), and discovering that the value proposition they received was well beyond both what you imagined and/or what other customers receive. If you then discover that there are a lot more customers out there like that one, with the same problem to solve, you have a great place to begin your refocus efforts.

There are basically two phases to these kinds of turnarounds. The first is a high level diagnostic exercise and the second is a process for assessing and selecting a lucrative alternative target market.

Phase I: The Diagnostic Exercise:

In this phase we encourage a simple hierarchy of 5 diagnostic questions to start.

Question 1: Does The Target Market Have Momentum?

A dead man in a canoe will make forward progress if the stream is flowing fast – and a strong current makes up for a lot of inefficiencies in rowing, and can even compensate for inexperienced rowers rowing backward. Momentum covers a lot of sins. Inherent market momentum arises from fundamentals in the marketplace – demographics, economics or regulations.

Question 2: Is the Economic Value Proposition Valid?

In B2B, both new and mature products must provide meaningful and calculable economic value from the perspective of the customer. Customers buy for their reasons, not yours – and even though you may be convinced that your product’s value proposition is universally meaningful, it does not mean your customers see it the same way. And not all customers in all markets receive that value to the same degree. So it’s important to get your team to honestly validate the economic value proposition through visits to target market customers in specific and different market segments.

Question 3: Is the Competitive Position strong?

The fundamental value proposition may be provided equally by any number of competitive offerings or alternatives in the market place. Unless target market customers can easily see your competitive advantage and recognize it as meaningful to them – you will not be able to break through the competitive noise.

Question 4: How effective is the channel in Communicating both the Value Proposition and Competitive Differentiation to the target market?

If you want a quick way to assess this, simply ask any of the team (marketing, sales, or engineering or channel partners) to calculate the economic value proposition (benefit) of the product or service offering to a typical target customer. Ask them to do it on the spot… back of the envelope. I am continually amazed how major product development and marketing initiatives are embarked upon without the slightest consideration to this critical success factor.

It is the natural instinct of marketing teams to spend a lot of money at this level and they typically believe that a magic combination of branding, promotion, websites, trade shows, collateral, promotions et al will somehow turn around a troubled product line. If there is any indication of a fundamental problem in the three primary diagnostic levels that come before this one – spending on level four will be fruitless.

We’ll take the canoe-and-stream metaphor one step further. A dead man in a canoe floating down a stream with strong momentum will actually make more progress than a live man in another canoe rowing backwards. So not only do you need a solid market to support a valid economic value proposition, and a competitive advantage to communicate, you have to have people trained in how to communicate it… and do it well.

Question 5: Can You Consistently Deliver the Value Proposition?

Production and quality problems may be the cause of stalled success, but we rarely find that we have to go this low in the diagnostic hierarchy before we find the real cause of a market adoption problem.

Phase II: Evaluating and Selecting a More Lucrative Target Market

In each of the major turnarounds we have experienced in the last 10 years, the real key was not so much the lack of a meaningful economic value proposition, but rather a lack of focus on the segments of the market that would receive the highest economic, emotional or physical value from using the product.

All economic value transfer to your company starts with a customer believing that there is sufficient reason (economic, emotional or physical) to write a check to buy your offering. Different market segments will perceive and receive different levels of benefit from the same product. Markets with the highest value received will yield the highest selling prices.

The 12 basic evaluation criteria for assessing and selecting the most lucrative markets to focus on:

1. Market Momentum: By this we mean the degree to which the market has fundamental demographic, economic or regulatory factors driving its primary demand. Here’s a caution: many firms and marketing teams get seduced by this factor alone – mesmerized by the lure of big numbers. Even large companies fall prey to this lure. But remember, the largest markets always attract the largest and highest number of competitors. Most of the time, it’s a better strategy to focus on a secondary market. It usually less competitive, less risky, less painful and penetration is quicker.

2. A Common Compelling and Significant Problem: It’s common that if one customer in a market segment has a problem, many others, to varying degrees, will be facing the same problem. If the economic benefit of solving that problem is significant, it’s likely that the willingness to pay a premium for solving it will be present.

3. Economic Benefit to the Customer: Calculate the economic benefit for a typical customer in each market segment. The likelihood is that you’ll get the highest selling prices in those segments where the economic benefit-received by the customer is the highest.

4. Financial Wherewithal of the Customer: Do potential customers in this market have the flexibility to buy and capture funding should the economic value proposition be significant? For example, the University market segment is typically characterized by hand-to-mouth funding availability and long research approval cycles.

5. Profitability of the Transaction: This factor assesses whether transactions in this market segment can be inherently profitable. Factors affecting profitability might be geographic, customization required and willingness to pay for economic value received.

6. Match of Company Assets and Capabilities: The annals of failure are replete with stories about companies who were seduced into attempting to penetrate large emerging markets for which their basic capabilities, assets, culture and structure were mismatched.

7. Accessibility: To what extent are the market, the channel and the key decisions makers readily accessible to your channel and sales process? You can’t communicate a value proposition to someone you can’t get to.

8. Lots of Unfilled or Under-Satisfied Sockets: A socket is a potential customer with the problem and the possibility of receiving economic benefit form solving it. Customers may have one or multiple “sockets”. In assessing market attractiveness we want lots of sockets – most of them still unfilled – or filled with a less-than-satisfactory solution.

9. A Well-Established, Vibrant Intra-Market Network: Studies of the diffusion of innovation reveal that the communication through the intra-market network is 13 times more significant in the adoption of an innovation than mass media.

10. Level of Competitive Turmoil: This factor gets rated opposite to the others. If there is a lot of competitive turmoil, rate this low. If not much, rate it high.

11. Experience and Reputation Match: If the market you are assessing already knows who you are, and your value proposition is consistent with whom you are, your brand name and your differentiators – then you can give this segment a high rating. This is the factor that many marketing people believe that “Branding Programs” can fix. But even the best branding program can’t make up for a poor economic value proposition or poor market momentum – and branding programs are typically very expensive

12: The Availability of a Relative Perceived Quality Leadership (RPQL) Position:Research from the Strategic Planning Institute, concludes that the single most significant factor affecting a business unit’s performance is the quality of its offerings relative to its competitors. The degree to which an RPQL-position available, unclaimed, or vulnerable (if someone already owns it), is a key factor in the selection of a segment on which to refocus.

Conclusions and Recommendations:

If you happen to find yourself in a situation of a stalled product line or business – our experience tells us that the last thing you need to do is spend more on marketing. In general, a business refocus is a much quicker and less expensive road to success.

A quick assessment of the customers that have already bought usually reveals those for whom the value proposition is significantly higher. Assessing the attractiveness of the market segment that they represent can reveal your opportunity to break out to success.

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Learn more about strategically improving low sales performance here, call us at 503.318.2696, email to qmp1@qmpassociates.com or connect through our Contact Us page

The Key Components of a Thorough Marketing & Sales Audit

Posted on January 10, 2014June 21, 2018 by Jerry Vieira

The word audit can strike fear into the heart of almost any person or organization that is its target. “Audit” conjures up images of someone in a position of authority digging through paperwork and records looking for evidence of malfeasance, mistakes, incompetence or non-compliance.

However, when a business performs an audit on their marketing and sales function, they typically just want to answer two basic questions:

What can we do to improve our sales results?
What can we do to improve our marketing and sales ROI?

At its purest intent a marketing and sales functional audit should not conducted to uncover incompetence, to fix blame or to penalize, but rather to discover opportunities to make both marketing and sales more effective. If the motivation of an audit is solely to find a scapegoat or assign blame, the problem is not in the firm’s marketing and sales function, but rather in its culture and leadership.

Step 1: A Quick Starting Point – The Self-Audit

We, at QMP use an 8 dimension, quick 50-question self-audit or self-assessment approach to determine whether there is need for deeper investigation. The output is a simple spider graph which illustrates the impressions that the executive team has of its marketing and sales organizational capabilities and effectiveness.

Figure 1

The shape of this figure provides a general idea of where performance gaps are perceived to exist. However, this is a chart which reflects executive impressions and personal observations – not a formal, detailed analysis of processes and capabilities. If the chart reveals high capabilities, but sales performance is actually poor, there is strong misperception among the executive team. But if both the chart output and the firm’s performance are satisfactory, the need for a detailed audit is probably not compelling.

(Click here to request this free self-assessment tool)

Step 2: The Detailed Audit:

If a detailed audit is indicated, the model in Figure 2 provides a framework for conducting that audit. Each of the 8 dimensions of the spider graph will be evaluated within that model.

Figure 2

he Marketing & Sales Engine™

All gears must turn efficiently and together for optimum revenue generation. If any gear is broken or stuck, the engine stalls – and it can only turn as fast as its slowest gear. If a marketing and sales audit is going to identify opportunities for breakthrough or discover where things are malfunctioning, an audit must assess the systemic working of all the gears – even the little ones. One must even include in the audit the oil in the oil pan – which we call Performance Excellence, or the Culture of the firm. A healthy corporate culture can grease, or an unhealthy corporate culture grind to a halt, the firm’s marketing and sales engine.

Auditing the Gold Gear: Market Strategy:

“Even the best soldier becomes a casualty when engaged in unwise battle strategy.”

Audits of Market Strategy often lead to the greatest sales breakthroughs. It is common that a strategy audit reveals a lack of market focus. And though it may seem counter-intuitive to consider narrowing rather than expanding one’s market range, a redeployment of resources to a more tightly-defined, more economically lucrative market segment, almost always results in accelerated growth and less cost.

In one case, prior to a strategy analysis, a rather smug marketing and sales executive said, boasting “I don’t care who buys them (his products) or for what reason. All I care is that they buy a lot.” His attitude reflected itself in the highly unfocused efforts of his sales team. This manager did not expect significant impact, nor did he believe much would be revealed, from a strategy audit. In actuality, the audit triggered a strategic market re-focus which triggered strong double-digit growth for a handful of years while enabling price premiums along the way.

Opportunities for sales breakthroughs are available by looking into other aspects of the firm’s strategy as well, not just its strategic focus. Breakthroughs can be found in analysis of the channel-to-market, pricing policy and the alignment (or rather misalignment) of all the components of the strategy together.

Auditing the Blue Gear: New Business Development

The Business Development gear comprises what most people consider to be classic, tactical marketing. It includes the firm’s e-commerce process, web presence, advertising, sales tool kit, lead generation process, print collateral, trade shows, branding, press relations, publicity and social media. Contrary to the intuition of many – more emphasis on this gear is not always better. Conflicts arise when the strategic intent is to focus while the tactical marketing team is hell bent on “getting our name out there” to as many people as possible.

A Business Development audit can reveal such things as: a) misaligned messages and focus, b) opportunities for shifting resources from expensive promotional efforts (trade shows, advertising) to more effective and less expensive targeted publicity and press relations, or c) a poorly conceived sales tool kit.

One of the most common gaps in a firm’s Business Development program is the lack of a “Thought Leadership” program. In general, thought leadership is the process of building a highly visible industry presence and reputation for your firm and your people, as industry experts. When people look for a solution, they often seek out the experts first – most of the time these days, with an internet search. Thought Leadership is typically the role of technical specialists, marketing spokespeople or senior executives of your firm – the people with enough technical or industry knowledge to be considered experts. “Thought Leadership” involves public speaking, writing and publishing articles, writing blogs, participating in industry association panels, conferences and committees and even involvement in community issues. That activity is heavily reflected in internet presence.

Auditing the Red Gear: Sales Process Disciplines

Within the sales function, the audit checklist is long. Here’s a sampling:

the reality, quality and current value of the sales pipeline
the usefulness of the sales tool kit
the relevance, effectiveness and currency of the sales training program
overall sales process effectiveness
the discipline of providing, and quality of, market intelligence feedback
the sales person’s understanding of the value proposition, differentiation and ideal customer profile, particularly for new products
the alignment of the compensation plan to the strategy

Something as simple as re-establishing focus on the Ideal Customer Profile can achieve rapid and significant results. While running a mini-audit, one of our clients discovered their sales people did not have a clear idea of the types of opportunities they should be pursuing. Sales sent in everything they dug up for a bid, swamping the quote department.

We took the client through a focus exercise and profiled the ideal opportunity. It took only a couple of hours to formulate. Within 9 months of this re-focus, their win rate had increased by more than 15% while the number of quotes generated decreased by nearly 33%. They won more of the right kinds of profitable opportunities. It was that simple. Less waste. More success. No blame.

Low-to-no-cost adjustments to issues discovered in an audit are common and can significantly increase sales productivity.

For example, research has shown that 35% to 50% of the customer opportunities in a sales person’s pipeline will never reach a “buy” decision. These are costly, unproductive investments of sales and support resource that have ended up in the “No Decision” bucket.

The likelihood of an opportunity ending in a “No-Decision” is inversely proportional to the degree of the “Compelling Need” a customer feels about solving their business problem. If a customer is not faced with a compelling need to fix their problem they will not buy any solution – yours or your competitor’s. A quick audit of the sales opportunities in the “No Decision” bucket brings cold reality to bear on the need to do a better job of qualifying customers.

Auditing the Soil: Performance Excellence, aka the Culture:

Think of a company’s culture as its soil. At its best, it is nutrient rich and encourages growth. Think of strategy as the seed. Even a genetically perfect seed will not grow in nutrient starved soil. On the other hand, a genetically inferior seed, planted in nutrient rich soil, will at least yield some crop. Culture is everything.

The nutrients in a firm’s culture are its values and its behavioral norms. In our experience, the best cultures exhibit the following characteristics:

the setting of clear expectations
individual and organization accountability
clarity of ownership of initiatives and results
measurements and metrics
rewards and consequences tied to performance
honesty and openness in communications
periodic progress checkpoints (at minimum, monthly)
a sense of urgency to deal with barriers and challenges to progress
teamwork
a creative problem-solving orientation focused on solutions not blame

In our engine model the culture is the oil in the oil plan pan in which the gears move. The culture lubricates and sustains a healthy engine. Without oil the engine seizes up. Without a solid culture of performance excellence, your business seizes up.

Conclusion:

A marketing and sales audit is simply a periodic analysis of what’s working and what’s not. It is a discipline that requires digging into the marketing and sales process to look for opportunities, barriers, bottlenecks and trends. We know from experience, that initiating an audit and analysis, with the discovery of root cause as its objective can spark sales breakthroughs and improve marketing & sales ROI.

A Final Note: A Marketing & Sales Organizational Self-Assessment is not the same as a Marketing & Sales Audit

A Self-Assessment is an organized compilation and scoring of your perceptions about the capabilities of your marketing and sales organization and processes. An Audit is a validation or invalidation of those perceptions from a deep dive into weaknesses and root causes of performance gaps. Self-Assessments record perceptions. Audits discover reality.

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Learn more about what kinds of growth opportunities a QMP Marketing and Sales Effectiveness Audit can reveal. Or, request a free QMP Marketing and Sales Organizational Capabilities Self-Assessment through our Contact Us Page. We’re here to help.

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

Posted on April 7, 2013August 25, 2014 by Jerry Vieira

“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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Revitalizing Stalled Sales

Posted on January 26, 2012June 13, 2013 by Jerry Vieira

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.

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

The Big Deal: Sorting Fact from Fiction in the Sales Pipeline

Posted on August 4, 2011August 25, 2014 by Jerry Vieira

The Big Deal

Every sales manager, business owner, general manager and CFO, at some point in their careers, have been entertained by the overly-enthusiastic sales person describing the “Big Deal” that was about to close. And unless those managers were completely naïve and inexperienced, a twinge of skepticism should have arisen. Was what they were hearing, in fact, real?

When hearing about a “Big Deal”, managers must confront the challenge of what to do about it – ignore it, or prepare. Preparation may comprise some or all of capacity planning, inventory commitment, equipment capacity increases, cash planning and workforce planning. Failure to anticipate these factors can result in an inability to deliver to the customer what they want, on time, should the deal actually break. On the other hand, a knee-jerk financial commitment based on the potential of the deal, can leave the firm with a lot of unusable inventory should the deal fail to materialize.

So, how does a manager judge the reality of the “Big Deal”?

Here’s an old joke that serves as a guideline for the most skeptical.

Question: How do you know when a sales person is exaggerating?

Answer: His lips are moving.

While this approach may appear easy, it is not dependable. There is a better way to sort through the reality of the “Big Deal”.

Ask Six Basic Questions:

The likelihood of closing a “Big Deal’ can be assessed by answering six basic questions. As you answer these questions, keep in mind is that the answers to the first five are only valid from the customer’s perspective.

Question 1: Compelling Need

To what degree is the prospective customer confronted with a real, compelling problem or challenge that needs to be addressed quickly or can the customer do nothing?

Research has shown that between 30% to 50% of all opportunities in a sales person’s pipeline never actually close. The customer simply never buys anything. These are called “No-Decision” outcomes. The sales person seems to be the only one convinced that there is a customer compelling need that will result in a buy. No matter how convinced your sales person may be that the customer has a need, the only opinion that counts is the customer’s.

To further pursue this line of inquiry, you might continue by asking: Is there a deadline by which the customer problem must be fixed? Is there a significant economic penalty, safety consideration or other obvious consequence if the customer problem isn’t fixed? Another revealing question is, “Can the customer do nothing?” Or, “What is the economic or other consequence to the customer of doing nothing?”

The lack of a compelling need, leads to the large number of “no Decisions” in a sales persons pipeline.

Question 2: Economic Benefit

To what degree is there a significant economic benefit to the customer if the problem / challenge is resolved or the need filled?

Businesses, too often evaluate the economic value of a sales opportunity only from their own perspective. How much revenue or commissions will it bring to us? While this is a good way to evaluate attractiveness in terms of the bottom line, how much money your firm can make is completely irrelevant to the likelihood of the deal closing. In most business-to-business environments, decisions to buy are made by customers based only on the degree to which “they” believe that “they” will make money. In other words, there must be a significant economic benefit in their favor, well beyond the cost of purchasing your product or service, for the deal to close. The economic balance must be disproportionate in favor of the customer. This is the basis or all ROI.

Question 3: Match

To what degree do your capabilities (products and services), precisely and completely meet the needs of the customer?

As convinced as you may be that you have a significantly well matched solution which solves every dimension of their challenge, you only score closing points if the customer believes it.

Question 4: Competitive Position

To what degree does the customer believe your solution is the best of all the alternatives available?

While a number of competitors may provide a reasonable match to the problem or need, all alternatives are rarely equal. Let me repeat for emphasis. Convinced as you may be that you have a significantly advantaged solution, you only score points if the customer believes it with the same conviction. And unless you can translate that differentiated position into a differentiated economic benefit to the customer, you miss a great opportunity to solidify your advantage in the customer’s eyes.

Question 5: Champion

To what degree do you have a high-level, influential and authoritative decision maker believing your solution is best?

A “Champion” is a person in the customer organization that likes your solution, believes it is in the best interest of their company to select it, wants it to win and is working toward that end. All Champions are not equal. The only Champions that really count are those with the highest composite score on three dimensions: Influence, Power and Affinity.

Influence is the degree to which they can influence a decision. The degree of influence may arise from technical expertise, seniority, family influence, organizational rank or some other source. Authority is the degree to which they can unilaterally make the decision and Affinity is the degree to which they are attracted to your solution.

Champions that are likeable, who like you, and are always willing to have lunch with you, are not “real” Champions unless they score high on the Influence-Power-Affinity scales.

Question 6: Leverage:

To what degree does winning this opportunity bring additional benefit to your company?

This is the only one of the six criteria that; a) doesn’t increase (or decrease) the credibility of the opportunity and b) is only important from your perspective, not the customer’s.

Leverage may exist in several forms: straight out earnings, a new first-time market capability, a first-win at a new account or a technological breakthrough that can be leveraged to other customers.

Even though it’s not customer-centric this factor is good to evaluate, so you can assess the benefit of concentrating and/or redeploying assets to winning this “Big Deal”

Getting to Reality:

The word confrontation can have a bad connotation, but for purposes of analyzing the “Big Deal”, let’s agree that confrontation simply means getting to the reality of it in a respectful, yet determined, way.

Some managers find it difficult to confront a sales person about the reality of a “Big Deal”, particularly when others are in the room. Presumably this is out of respect, to avoid the embarrassment of seeming confrontational, or to avoid appearing not to trust an employee. One way or another, these emotional barriers to assessing reality need to be overcome.

A highly respected local CEO was participating in panel on Performance Management recently. He was asked how he avoided hesitating and how he handled the discomfort associated with confronting these and other kinds of important issues. His response, “I was always more afraid of the consequences of not confronting the issues.”

There’s typically a lot riding on a “Big Deal”. The six areas of inquiry listed above will help you and your organization stay focused, concentrate where the opportunity is truly best and allocate scarce resources appropriately.

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Learn more about the QMP sales process for accurately qualifying and closing sales opportunities.