6 Targets for Applying Lean in Marketing & Sales

Posted on April 13, 2015June 21, 2018 by Jerry Vieira

Boosting Customer Received Value Through Lean

In our previous blog post, “3 Guiding Principles for the Application of Lean in Marketing & Sales”, we offered a trio of overriding Lean commandments. In this post, we point to specific Marketing & Sales targets for Lean that will simultaneously increase customer received value and marketing and sales ROI.

Target #1: Lean Applied to Market Focus

Face the facts. Your product or service offerings do not deliver the same economic, emotional, political or physical value to all market segments equally. Lean means focusing your products on market segments where the total value received by customers is its highest. If that situation exists, the Law of Economic Value is satisfied.

The Law of Economic Value 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.” ©

Research shows that the following benefits accrue to a firm if the Law of Economic Value is fulfilled:

the ability to garner price premiums
faster market penetration
higher customer satisfaction
more market peer-to-peer 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 and sales expense
improved sales win rate and faster time to close
reduced product design costs and a clearer product evolution path
greater returns from focused on line marketing investments

Market Focus is Lean in Action.

Target #2: Lean Applied to Product Requirements

Feature creep is the antithesis of Lean. It can be particularly nefarious in high tech firms where brilliant and creative engineers, encouraged and abetted by marketing and sales folks, attempt to stuff all the capabilities they can into a product to make sales as easy as possible.

The truth is, feature-stuffing typically causes delays in new product launches, ingrains price and profitability pressures in the product and results in a general market positioning of “everything to everyone in just one package”. Everything-to-everyone products inevitably lose market share to focused, niche offerings.

Focused Product Requirements are Lean in Action.

Target #3: Lean Applied to Marketing 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 budget arena. They believe that more marketing dollars across more expansive markets means more customers. Not so.

Research shows that communications of a new idea is best accomplished through peer-to-peer opinion leaders in a specific target market. That research revealed that peer-to-peer communication is 13 times more effectively than mass communication. Focused marketing communications programs that reach those opinion leaders, supported by value propositions achieved through market-focused product design, is the most economically productive combination that can be achieved.

Focused marketing communications is Lean in action.

Target #4: Lean Applied to Channel to Market

Your market share will eventually erode if your channel-to-market provides value only to you and not your customers. Marketers must be vigilant to assure their channel delivers meaningful and relevant value to customers and clients first.

Marketers must also recognize that the customer value the channel must deliver changes with the maturity of the industry. In a fledgling market the channel may be required to supply training, installation, configuration and integration services. In a mature market, those expensive services must be replaced by the channel’s ability to quickly deliver spare parts or service.

Evolving Channel Value Delivered is Lean in Action

Target # 5: Lean Applied to the Sales Process

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 to notbuy anything. The sales person has, in effect, wasted time and money pursuing something that was destined to never result in a sale.

We suggest a set of 5 criteria that can improve a sales person’s ability to qualify an opportunity and save time.

The intensity of the customer’s need or problem,
The degree to which the customer believes your product can meet that need,
The degree of the economic, emotional, political or physical value the customer will receive by buying the product or service,
The customer’s perception of your product’s relative competitive advantages ,
The existence of a customer champion for your solution

Good Sales Qualification Discipline is Lean in Action.

Target #6: Lean Applied to Market Intelligence Feedback

Sound strategy cannot be developed without current and accurate market intelligence. Rapid response to market intelligence feedback is critical to business success. That intelligence may comprise some or all: competitive moves, 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 of gathering this market intelligence. The sales team is the one company asset that is in the most frequent communication with customers.

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

Create a market intelligence section as part of your sales person’s weekly or monthly sales report or presentations
Train your sales people how to question, listen and observe when they are in front of a customer – not just spew the benefits of your product
include providing market intelligence in the sales compensation plan 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
Understand what pricing pressure means. Pricing is typically a symptom of a bigger strategic problem, centered on customer-perceived value. Make your actions value-delivery related, not pricing related.

Rapid Collection and Response to Market Intelligence is Lean in Action

Conclusion:

The application of Lean principles to marketing and sales requires no major cash investment. In fact it saves cash. A firm of any size and market can deploy Lean in marketing & sales and begin to reap the economic rewards quickly.

Lean principles assure that customers receive the best value possible – and in return, consistent with the law of economic value, your business optimizes its own economic performance.

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For more information on the application of Lean principles to Marketing & Sales, call Jerry Vieira, CMC at 03.318.2696 or visit the QMP Group website atwww.TheQMPGroup.com

Common Sales Myth #4 – It’s a Price-Driven Market

Posted on January 1, 2013March 13, 2014 by Jerry Vieira

I truly sympathize with sales people who are dealing with commodity managers in large corporate purchasing organizations. Those procurement specialists can be brutal in negotiation. More and more they are driven by corporate edicts to “source overseas” or “reduce commodity purchase costs by 3% per year” or to “reduce the number of suppliers by 20%”.

The truth is, classifying what they do as “Negotiation” is not fair to Merriam-Webster’s definition of the word – or to anyone for that matter.

Can it get any tougher for manufacturers? The Rock

These days, sales people and their parent manufacturing companies commonly find themselves confronting a series of “non-negotiable” buyer requirements that would be laughable, if they weren’t so real and becoming more common:

– 90 day payment terms

– Guaranteed cost-downs

– The lowest cost – period!

– The highest possible on-time delivery

– Impeccable quality

– Unlimited time frame on returns

– “No-questions asked” returns

– No-charge, collaborative up-front engineering and/or marketing cost sharing

– Transparent margin calculations

– And the requirement to keep a buffer inventory of finished parts in the factory – owned, of course, by the supplier

The not-too-thinly veiled threat hidden among those requirements is, “If you can’t meet these terms, we can always find someone else to supply that part/service in Mexico, Asia, Brazil, India” or even, “We’ll build those parts here – ourselves, inside”.

We talked about the Rock above. Here’s the Hard Place.

In the banker’s office the CEO and CFO of the small manufacturing firm are hearing:

– Your cash flow is slowing

– Your margins are slipping

– Your credit line needs to be reduced and renegotiated

– We need to see your financials, monthly

– We need to tighten up our loan portfolio because of the lending debacle of 2008

– and… “No, you can’t have any more leeway”.

So, between the banks pushing for higher prices and margins on your products to improve cash flow (or you lose your financing), and your big customers pushing for lower and lower prices, what’s a small manufacturing firm to do? And, how does a sales person make a living if he isn’t price competitive. Isn’t some margin, albeit low margin, better than losing a customer?

What Price Competition Really Means

Price-driven competition means that one or more of the following statements are true:

The buyers in your target market perceive no meaningful performance or value differences between products from different suppliers – including yours
Your product offering actually has no real and meaningful differentiation compared to your competition for those customers in that target market segment
You, as a sales person, or your marketing team, are doing a very poor job of communicating your meaningful, market-specific differentiation to customers in that market
You are unable to economically quantify the value your product can deliver to customers in that market
You are aimed at the wrong market and customers – a market for which your differentiation does not actually deliver meaningful, economic, emotional or physical value

We have seen all of these situations in our client engagements – typically disguised and drowned out by the sales person’s pleading and cries to “drop the price”.

So What Can Be Done About This Kind of Situation?

The simple, yet most effective answer is: Decide which of the five statements above are true – then set about fixing them.

It is actually easier than you might imagine.

A Case in Point 1: Wrong Market Targeting

A client of ours had a new product that wasn’t selling well. It was price disadvantaged by a factor of 3 over competitive offerings in the general market!! In spite of this, the new business development team was hustling to set up general distributors across the country. They were counting on a major price reduction they were politicking for with corporate to spur sales – when in fact corporate was quietly considering shutting the product line down.

We were asked to determine whether the product line was worth saving.

What little sales there were, were focused in two very narrow markets. Simply by asking customers that bought the few units that were sold in each of these markets why they bought this “over-priced” alternative, a set of inherent, here-to-fore un-promoted competitive advantages were revealed.

Then simply by pivoting the sales team to focus on the market in which the most compelling benefits were revealed the following results were realized:

– Not only did the price not have to be reduced, the market’s desire for added features quickly brought the average selling price of the top model to 4X the original price!

– The single largest order for this product had been $20,000 – now with focus and a re-promoted and re-emphasized set of market-specific benefits the largest order from a customer exceeded $1,000,000

– The number of new customers buying this product quickly rose from 2 to over 150

– Price reductions were no longer discussed

– The effort to saturate the market with distribution outlets was no longer considered necessary and saved a ton of money

Case in Point 2: Poor Economic Benefits Communication

In another instance a client was puzzled by the slowness with which their new product, designed specifically to help customers save substantial amounts of money, was not selling better. The root cause was discovered to be the distributor sales manager who simply “.. did not believe the economic argument” and refused to promote it – in spite of the customer testimonials to the effect of the savings realized.

A rapid individual re-education was required, followed by a re-training of the distribution sales force, and the product’s sales turned up shortly afterwards.

Case in Point 3: The CEO Gap

I once asked a group of 12 B2B CEOs to take out a blank sheet of paper and write down what they perceived as their best product offering, the product that they thought customers should appreciate the most. I also asked them to identify an ideal customer for that product.

I then asked them to identify the factors and calculate what economic benefit that ideal customer was likely to receive from that product. They stumbled. None of them could do it in the 15 minutes allotted.

If they can’t do it – can their sales people?

The Point:

Price-driven markets and situations are often a symptom of; a) misdirected market targeting or b) a lack of understanding of, and poor ability to communicate, market-specific economic, emotional or physical benefits of your product offerings to potential customers.

Customers buy for their own reasons, not yours. No matter what you have convinced yourselves about the value customers should see, they saw what they were looking for when they decided to buy. Sometimes it’s not what you want them to see, but if it worked it is delivering real value.

So, if your sales people are screaming for price reductions and you have customers buying when you are not the cheapest price – those customers are seeing something you are not. You need to find out what that is and why. And if they are not buying when the economic case is real, independent of the price, your communication is broken somewhere along the line.

Oh yeah, one final point. If price was truly the ultimate deciding point for decisions, we’d all be driving Versas. If it helps, here’s a link to Car and Drivers article on the 10 Cheapest Cars

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If you’d like to learn more about dealing with price-based competition call Jerry Vieira, CMC at 503.318.2696 or email to jgv@qmpassocites.com. The QMP Website is at www.TheQMPGroup.com and more insights can be found at The QMP Insights Blog

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

Posted on December 31, 2012March 20, 2014 by Jerry Vieira

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 Targets

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 6^th 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:

the strategy used to penetrate them,
the “enlightened partnership nature” of their corporate procurement,
the centralized or decentralized nature of their decision making,
the strength of your IP and the economic value proposition it delivers, and
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.

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