The most significant strategic decisions will define a company’s competitive fit in the marketplace (i.e., target market, brand image, distribution structure). Initiatives will then stem from strategic decisions. Each decision is different, and varied information may be required to support crucial decisions, such as whether to expand a division of your business.Read More
The following is a chapter from the book Pursuing Growth.
If your customers are going online for some of their information related to your product or service, you have the responsibility to ask yourself how you can be part of that process. I’m not saying that social media is the right answer. But it is prudent to ask the question.
Using social media effectively is incredibly difficult. A customer will seek out information silently from fellow consumers and also from potential suppliers.
Businesses have many different options to provide information online, but in most situations it is extremely unlikely that a potential customer will find that information. At most, your potential customer may use only one or two social networking sites for the purpose of researching your product, and you may not have access to your potential customer’s personal online network. The odds are stacked against you.
Social media as a tool is evolving and becoming a more important part of how people purchase most products and services. We need to learn as marketers. That does not mean we should be wasteful in our marketing expenditures. Rather, we should be careful about how we spend on social media, learn from what does not work, and build on the successes.
Let the conversation evolve
One challenge we face as marketers is that we do not control social media the same way we control traditional advertising. We’re used to controlling our message, such as when we place an advertisement in a newspaper.
Let’s say our company manufactures specialized software to help engineers design airplanes. It’s probably fair to say that engineers deeply involved in the aircraft design process are a relatively small and tight-knit community. We can assume that many of the people in this community share common interests related to work, and we have the opportunity to provide some useful information to them through social media sites such as LinkedIn or Twitter. One option may be to post an article or a video outlining some aspect of our software and share it through these sites.
In this example, what would we do if a person in that community watches our video and then comments that the software is ineffective? What recourse do we have? Many business owners are scared of interactions they do not control. That’s just part of the medium. Many people choose to ignore the odd negative comment (or reply to it directly, promptly, and respectfully) but are prepared to react to a crisis. There are different opinions on how to handle such situations, but the main point is that they will occur. Social media involves, after all, a discussion rather than a monologue.
Here’s the point. Effective use of social media stems from customers engaging in dialogue. Your promotions need to draw people into a conversation. Whether they simply forward someone else’s content or share their opinions, engagement is the goal.
Developing good content
Deciding how to connect with people through social media is very difficult. But once you understand how, the real magic happens when you create useful information for your potential customers. This is referred to as content.
The content you create must be directly relevant to your customer and be presented in an interesting way. That takes deep knowledge of who your customers are, what information they need, and what will appeal to them. It takes left- and right-brain skills. Developing good content that customers find useful is extremely difficult.
I have found three core questions to be highly valuable. First, what information do customers need? As a potential supplier, consider the questions your customers most often ask. Understand the information they are seeking out.
Second, where do customers get information? Just referring to the Internet is too broad. Consider whether they gravitate to customer-review websites, read articles and white papers on a topic, or seek information from their friends’ posts on Facebook.
Third, what content-based promotions can we create to get customers the information they need? The social media strategy will likely embody general awareness-building as well. But our goal should be to draw them to us in the purchase process. Tailor the promotions in a way that encourages people to interact, whether sharing the content with others or commenting on it.
There are many different types of content, each of which is well suited to a specific industry or company. Video is becoming extremely popular in many situations because it is so entertaining as a rich visual experience. White papers (basically, opinion papers a few pages long) can give valuable background to customers entering a purchase process. Infographics are usually highly visual onepage descriptions of a complex process or a few key pieces of information. There are many options, and they are constantly evolving.
Keep in mind that customers usually do not have a shortage of content. What makes your company’s content useful? Relevance. Embrace the principle that narrow is better and prepare content for a niche market. Don’t just produce a video on the top ten questions people ask when buying a new home. Focus the topic on the top ten questions that newlyweds ask when buying their first home. People are interested in content that is relevant to them.
You essentially have two ways to distribute your content. You can use a push or pull strategy.
A push strategy sends content out to people. In the realm of social media, this generally means you send a message or post content that is presented to a list of people who have chosen to connect with you through a social media site.
Push strategies can be highly effective. Some people have a large number of Twitter followers who are deeply interested in their opinions and the content they post. For example, an industrial robotic equipment manufacturer, Yaskawa Motoman Robotics, based in Ohio (@Yaskawa_Motoman), posts a variety of content on Twitter relating to robotics use. It has thousands of followers who are interested in keeping up to date with this information.
A pull strategy posts useful content that functions as a magnet to draw potential customers into your company’s sales process. This is difficult. The trick is that customers must be aware of the content. It’s a bit like setting up an information booth at the side of the road and hoping potential customers happen to stop by.
The strategy usually requires an exceptionally effective job of search engine optimization (SEO), which is ensuring search engines such as Google can direct people to your content. The process also involves posting the content where your customers can access it. Your own website is an obvious choice, but not all customers seek out useful information from their suppliers’ websites. Many customers search for information on YouTube or on consumer review sites. Or, in some cases, they rely heavily on content distributed by their friends on sites such as Facebook and Twitter. Each situation is different. You need to know where your customers go for information and find creative ways for customers to engage with you.
If you own a retail store that sells running gear, your Facebook site likely will have information that builds the brand relating to an active lifestyle. You might post information on new products or recipes for healthy meals. If you offer free information (e.g., a downloadable article on preparing for your first marathon) to people who Like your page, this could be considered a pull tactic because you are creating an opportunity for customers to engage with your company. There are several variations to this qualifying-step tactic of Liking or Following your company on a social media site, such as offering electronic coupons or entering the person’s name in a contest.
Advertising on social media
In addition to posting useful content, companies like yours can pay to advertise on social media websites. But companies often lack clarity on how to advertise on social media. One reason is that advertising options on the social media sites are constantly evolving.
Banner ads were the popular form of advertising online in the early days, but now they are generally perceived to be less effective and several other options now exist. Each of these can be tailored to your marketing objectives, and many times the cost is directly related to measurable results. Twitter, for example, allows you to choose an objective for a specific advertising campaign. Your objective may be to engage with more people (e.g., you pay for your ad when people re-tweet information you sent out), to direct people to your website (e.g., you pay when people click on your tweet to be directed to your website), or to generate leads (e.g., you pay when a customer sends you their email address to get information on a product).
Although the cost of advertising on social media is generally based on results, it can be frustrating and confusing to price these advertising campaigns. Most social media sites use a bidding system to price their ads. You can set parameters such as the maximum you’ll pay for someone to click through to your website, or the maximum per day you’ll spend on the campaign. But the process is different than traditional advertising and takes some practical use to understand how to use it effectively for your own business.
Like all other forms of advertising, clarity improves results. Know what you want to achieve from your social media advertising campaign. Then you can choose your budget and tailor your message accordingly.
Brent Banda comments on one of the many complex decisions that often face business owners... how to link the company's sales force with its overall marketing effort.
The following is a chapter from the book Pursuing Growth.
Branding is a term that all business owners come across but few truly understand. Branding in business is similar to branding on a ranch. You leave your mark on your customer’s mind.
What is a brand?
A brand is a reputation. This reputation is often represented by a name, term, symbol, or special design (or some combination of these elements) that is intended to identify a company or its product. The most effective way to accurately describe the strength of a brand is by the feeling you get when you see or hear all components of the company’s image truly represented within the brand. For example, McDonald’s has established a strong brand identity by evoking feelings representative of a fun and cost-effective family dining experience. The phrases, “Two all-beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun” and “I’m loving it!” have staying power because they invoke similar feelings of what McDonald’s represents.
The company’s personality can also be considered a brand. It is shaped by corporate culture and defines what a company stands for. This is essentially the company’s internal brand. Often, the branding effort starts internally because employee contact with customers greatly defines a company’s external reputation.
When developing marketing strategy, external and internal brands are inseparable and we must view them as two sides of the same coin.
Purpose of branding
A strong brand identity is an effective way to stand out from competitors. If you do your job right, potential customers will know what you have to offer and think of you when the time comes to make a purchase. Your product’s name may even become universally used. Take Kleenex as an example. The actual term for the product category is facial tissue, but nearly everyone refers to facial tissue by the most popular brand name on the market.
A successful brand can provide benefits such as enhanced brand loyalty or an ability to charge a price premium. Owner-managed companies often find that they have built a strong following of customers who receive tremendous value from a company they have come to trust.
Defining your brand
Branding is the action of portraying the image you believe will attract your target market. When defining what your brand should be, consider why your customers purchase from you. Doing so is much more complex than it first appears. The trick is to clearly define what is important to your customers and then build your competitive advantage around meeting those needs more effectively than the competition does.
Once you have defined and established your competitive advantage, it should then be communicated through an appropriate message and tone and reinforced in all contact with the target market. For example, McDonald’s communicates its fun family atmosphere and fast, affordable food in everything from advertisements and layout of the store to the company’s pricing strategy.
How do I build a strong brand?
When branding a company, product, or service, consider all elements that will influence the customer’s buying experience. Strategic marketing decisions such as the prices you set, your product attributes, and even where you choose to sell your products can have a direct impact on a customer’s opinion.
Brands are built largely through personal experience rather than promotions, because customers tend to trust their own experiences more than advertising.
Therefore, a significant component of your marketing strategy should relate to customer experience. You may be justified spending your marketing budget within your own company to help “live the brand.”
There is no doubt that advertising often influences the formation of a brand, but it can also play a role in sustaining the brand over time. This type of advertising is usually broad, image-based advertising. Walmart, for example, advertises everyday low prices instead of weekly specials.
When making advertising decisions, carefully consider how people will view your company. Imagine if BMW were to show a 16-year-old driver with green hair and a nose ring in a TV ad. This would not fit with the image of a typical BMW owner and could cause current BMW owners some concern that their status symbol is in jeopardy. BMW targets high-income adults and must reinforce this with every experience their customers have with the company.
Although it can take years to successfully build a brand, it can be easily destroyed. If Walmart suddenly started to sell high-end premium-priced furniture, its loyal customers would become confused and perhaps think that everyday low prices may not apply to everything in the store. Strategic marketing decisions such as price and advertising message are almost always interconnected.
Know your customer
The more you know about your customers, the more effective you will be at making marketing decisions. Who are you trying to attract as a customer, and what is important to that person? These questions are fundamental to your marketing effort whether you are selling industrial equipment to Brazil or cutlery in a mall retail store.
Why do these people buy? What is motivating them to purchase? Once you know the few key factors that influence purchase decisions, you can build those traits into your brand.
Knowing why customers buy has implications for companies planning to target new segments. If you plan to attract a new type of customer, should you adjust your brand image to include traits that are important to the new market segment? Ideally, yes. But practically this may not be possible. Honda faced this problem when launching a line of luxury vehicles in North America.
The Honda name was well respected as an economy car and likely would not be suitable in the luxury segment. The solution was to launch an entirely new brand under the name Acura. Most Acura owners realize they are driving a Honda product, but the fact it’s an Acura adds some credibility to the vehicle as a luxury car.
Know what is important
Define what your brand should mean to the customer. Again, it seems like a simple step but few business owners have a clear understanding of what they want their customers to know about their company. A company or product’s brand should emphasize a few key traits. Sure, you can emphasize many traits that might be valuable over time (e.g., quick delivery, competitive price, or great service) but a select few will truly differentiate you from the competition and will also be valuable to the customer.
Remember, different people view brands in different ways. Too often, marketers speak about their brand as if all customers in one market segment are clones. Every person walking down the street has been influenced in different ways. Some people have had good experiences with your company, and others have not. Some have seen your advertising and others have heard of your business only through word of mouth. Keep an open mind when trying to understand how the market views your brand.
Whether you sell a service or a product, expansion often requires decisions about how you plan to connect with new customers and get what you sell into their hands.
Let’s start with an unusual example: a law firm. Consider the situation facing a firm with expertise in the legal and regulatory requirements governing export and import activity. A business such as this may represent and advise clients on issues such as trade and economic sanctions, export control laws, and anti-terrorism controls.
If the partners in this firm intend to attract clients for this niche service, there is a limit to how fast it can scale up through promotion, referrals, and networking. What alternative methods might be used to generate revenue? One option is to work as a contractor with other law firms that lack this narrow expertise. Essentially, working through a different law firm is a new method of distribution.
The law firm is no different than an industrial company preparing to sell outside its home market. Both have options for working collaboratively with other companies to distribute products and services.
Strategy requires trade-offs
At the heart of the question of how to expand your market is whether to sell directly to the end user or through another company. Selling through an intermediary requires trade-offs. You will have to give something up to get the benefits you seek.
Let’s use an equipment manufacturer as an example. The company can sell directly to customers and it will take on 100% of both the risk and the reward. It also takes full responsibility for all functions of the business, such as financing the expansion, sales and marketing strategy, and production. A lower level of involvement could involve selecting a local company to resell products. This company would be a local dealer. In that scenario, the equipment manufacturer is taking on far less of the frontline responsibility to run a profitable business in that new market. Essentially, the equipment manufacturer is giving up some profit to work with a competent partner that brings different strengths to the table.
In some industries, there is another intermediary layer between the manufacturer and the customer. In this scenario, manufacturers sell to distributors that can store product and distribute to local dealers. In many industries, the terms “dealer” and “distributor” are used interchangeably, but the point is that your business must determine what specific value it is best suited to provide as a product or service moves through the chain of companies that lead to the end user. Your strategy, built around this insight, must embrace trade-offs, such as giving up some margin for a specific required benefit.
To evaluate trade-offs, it is crucial to properly understand the benefits of a potential arrangement. Selling through an intermediary puts you in touch with customers quickly. Usually, most of these new customers would never have the opportunity to buy from you directly. Intermediaries can also provide crucial knowledge related to what motivates customers and the process they follow when buying your product. Convenience is another valuable benefit. For example, as an alternative to hiring an experienced sales rep with an existing network, a local dealer can provide an immediate established presence in a local community with sales and service infrastructure.
Selling through an intermediary also has several drawbacks. It almost always provides lower margin because of the need to allow for a reasonable markup on the product or service. But other, more subtle disadvantages also emerge, such as losing direct contact with the end user. This loss could be a real problem for a manufacturer that has traditionally closely tied product development to customer feedback. Lack of customer contact may also result in commodity-style price competition with other suppliers.
Know your strengths
The arrangement between your company and an intermediary can be structured in several ways but should be appropriate for both companies’ strengths.
Some highly technical companies, such as those in the life sciences, choose not to market a technology or product themselves. In some cases, the cost of building a manufacturing facility and marketing the product may be prohibitive. One option is to license the technology to a strategic partner with existing production and marketing infrastructure. In this arrangement, partners pay a fee to use a technology in the manufacturing of their own products.
As well, some technical companies lack certain expertise, such as local market knowledge. I see this fairly often when a company begins expansion outside its home market. This may be an appropriate situation in which to sell through a dealer network of local companies with an established sales and service market presence. Alternatively, it may be wise to sell through sales agents, which are essentially local independent salespeople willing to work on contract.
Focus on your strengths and shore up your weaknesses. Ideally, your company would develop the skills it needs to expand independently. But it may be less expensive, quicker, and more effective to work collaboratively with a different company.
You're getting married
Distribution partnerships require close relationships. Many entrepreneurs describe the relationship as being similar to a marriage. There is a courting stage, during which you learn about the partner. And it can be difficult and painful to get out of the contractual relationship. But when a distribution relationship is working well, you wouldn’t trade it for anything.
As with marriage, seeking a partner to help you access a new market is difficult. It is most often a long process involving personal contact with many people. Spend time in the local market to understand who the good performers are. Depending on the industry, this may involve meeting directly with end users or walking through potential dealerships. Personally, I find it tremendously helpful to speak with customers and ask which local dealers they prefer to buy from.
A distribution partnership with another company is appropriate if you are open minded about growing the pie rather than focused on capturing all possible value in the market for yourself. For a partnership to work, your company will have to trade some of the margin for something of value that you do not possess. The result can be highly profitable, but the key to success is often the effort put into making the relationship work.
Customers often have a problem that can’t be solved by current suppliers. These situations can provide your company with a valuable business opportunity.
To be clear, we need to look deeper than customer service problems. For example, when shopping for a computer you may become frustrated if the retail store clerk is uninformed, rude, and disinterested in helping. If poor service is limited to that employee, it can be addressed through training and coaching.
But if poor service is systemic in the company or industry, this indicates structural problems that are likely ingrained in the business model. They are so severe that customers may assume their problem is not solvable and may not search for other options. To the customer, this frustrating situation is just something they have to live with.
This inherent frustration is exactly the situation that faced the personal computer industry when mainstream consumers were first adopting computers. People found it intimidating, confusing, expensive and inconvenient to purchase from a retail store. In the 1980s and 1990s, Dell Computer identified this problem and was successful with a revolutionary direct-to-consumer model. Dell was able to charge competitive prices, but also provide the impression of a ‘customized’ product delivered directly to your door.
You have options
Owner-managed companies capitalize on similar opportunities every day. Imagine a situation where a small business has designed a software product that allows parents to coach their young adult children on managing their personal finances.
Assume one customer finds it difficult to teach the principles of finance and often contacts the help desk for suggestions. Friendly employees coach the customer, but she remains frustrated and believes this is a problem that can’t be solved by the software program.
If this customer’s experience is typical of a portion of the broader user base, there is a business opportunity to increase perceived value of the software. For example, the help desk could develop videos that explain how to teach finance in a fun and interesting way.
Another potential change to strategy may point to a product solution, where the software compliments a parent’s effort by coaching the child using interactive games. These changes have potential to be expensive and difficult to implement. But either of them may provide a meaningful competitive advantage in the marketplace.
As a business owner, you have options for how you address the situation. The first step is acknowledging the problem from the customer’s point of view. This is the seed of opportunity.
Know your customer
Where do we start in our effort to identify customer problems? It’s not always easy. Customer problems are frequent in all industries, but not all relate to broader strategy decisions. The types of situations we’re looking for take true insight. What is structurally wrong with how suppliers are managing customer needs?
It all starts with the customer. Just knowing your customer’s name is not enough. You have to know what makes them tick. You have to know what motivates them and the series of steps they follow when making a purchase. Interview them. Ask them why they made the decisions they have, what they find frustrating, what they would like changed in how suppliers work with them.
I can’t overstate the value of this research. When I develop a marketing and sales plan for a client, the first step is usually for me to interview my client’s customers. The insight gained will provide a foundation for strategic decisions.
Designing your strategy
At some point, you will know enough about your customers to begin making strategic decisions. At first you may or may not have the epiphany you need to create structural change. Eventually you’ll see what needs to be done, and be excited about how to build your business around this opportunity.
Once you see the customer’s problem, think about new ways of approaching the situation. What can you do differently? Is it a pricing solution? A distribution solution? Maybe you need a new product design. Your strategy will fall into place as you consider how to provide value to the customer.
Making it happen
Most established entrepreneurs have a solid, well-run business, and they have become used to maintaining the same course. But this type of change may require a dramatic shift in direction with a different level of risk than historical day-to-day business. When implementing your strategy, keep the following tips in mind.
Understand what your company is capable of accomplishing and the risk of failure. If you see a market opportunity that your company has not been capitalizing on, chances are you won’t have all the skills in house that you need to do the job right. For example, if your company does not have expertise to design new customer-focused systems in your help center then consider who to hire that has that expertise. Usually, the gaps can easily be filled once you are aware of them.
Be patient. Major, structural change often happens over a long period of time by taking small, incremental steps. Instead of shutting down your help centre one morning and rolling out an entire new system, test these changes on a small group of customers. Learn what works and what does not work. Make adjustments. You will de-risk your strategy by building off your knowledge gained from each test experience and creating a way forward that you know has a high likelihood of success.
Your company’s growth opportunities stem from your customer’s situation. Design your strategy around the customer, and build off your existing competencies as you roll out these changes.
Success in sales used to be based on personality more than substance. Gone are the days where carrying a box of donuts in the door will get you a sale. Consultative sales became the new norm, and in fact the most successful salespeople now do more than just solve customer’s problems. They are able to anticipate a customer’s problem before it occurs, relying heavily on a deep understanding of their customer’s business and extensive product knowledge.
Sales training can increase revenue, increase the profitability of closed sales, and increase market share. Training also improves employee satisfaction and engagement and can help with recruitment and retention.
Effective Sales Managers are great leaders. Although a Sales Manager is responsible for the structure of the sales force (i.e. nature of the sales positions, allocation of territories, establishing budgets), the Sales Manager is also responsible to get the greatest performance out of each salesperson. As Sales Manager, you are responsible to help your staff develop the knowledge and skills required to do their job. The following are some of the considerations that often emerge when I help a company design a training program.
Developing training content
Training usually falls into two categories
· General training for all staff; and,
· Employee-specific training that is based on that employee’s skill gaps.
For general training, companies typically have a standard training program for new hires and an ongoing training program for all staff. For employee-specific training, the performance appraisal process often identifies areas for improvement.
The categories of information in the training program can be diverse. You have to know aspects of your industry such as background on competitors and relevant trends. You also have to know your customer, such as which potential customers are part of your target market and how those customers buy. Company policies and procedures as well as product or service knowledge is also commonly part of the training program.
Obviously, sales skills are important. Salespeople need to know how to plan their effort, and how to manage communication with potential customers. This might include planning a sales-call and follow up. It might also include conversation skills related to managing the dialogue with a customer. Or it could involve the soft skills related to negotiation or even training on price theory.
The way you train
Most companies choose multiple methods of training, based on the type of information that must be conveyed and the learning styles of the salespeople involved. The following are a few common methods used:
· Product or Service Knowledge. For salespeople to truly understand what they are selling, they need hands-on knowledge of the product or service. Have salespeople spend a day in a manufacturing facility with staff that build the product or in the field with staff that deliver the service.
· Peer Sales Calls. Have salespeople shadow each other during sales calls. People will learn from others who have a different way of interacting with customers.
· Resource Materials. Use a variety of books, podcasts, seminars and webinars. Exposure to a variety of perspectives will help people understand the style and techniques that work best for them.
· Industry Events. People learn subtleties about their industry from trade shows and supplier information sessions.
· One-On-One Coaching. A closed door, private, and in-depth dialogue with a salesperson helps ensure training material is related directly to that person’s situation.
· Sales Meetings. Even in smaller companies where the salespeople work together regularly, these meetings help by airing concerns, addressing sensitive issues, providing a forum for training sessions, and making sure people are on the same page.
· Off-Site Training. A day away from the office can help people leave the activity of servicing customers behind and focus on a certain training topic.
· Use An Outside Voice. Compliment the information you provide directly to your salespeople with a guest speaker or trainer.
The role of coaching & evaluation
Coaching is the process of working one-on-one to help a salesperson learn and develop, with the intent to meet his or her individual goals. Coaching is part of the training process. People can learn skills from courses and books, but the coaching experience allows for discussions about the material in the context of the salesperson’s job and allows for a rich discussion about how that specific salesperson can change his or her own behavior.
Provide feedback on how well salespeople are learning from your company’s training program. Be specific. Are you measuring their process (i.e. number of training videos they have watched) or on results (i.e. how they have scored on an exam based on a training video)? Give people feedback early in the process, and frequently throughout the year. If performance is lacking, have a candid conversation about why.
The training mindset
It can be difficult for someone who has performed well as a salesperson to become a Sales Manager. You are no longer responsible to close the sale. Your job is to help someone else learn to be effective. A big mistake is slipping into the mode of showing the new recruit how it’s done. You’re not there to show off; people learn by doing. They learn from making mistakes, understanding what they could have done differently, and making adjustments. The sooner you can adopt a training mindset, the sooner you will help your people develop.
To keep your salespeople inspired and focused on producing results, you have to create an environment where every team member desires success and where continuous improvement is viewed as a contributing factor to the team’s success. By building a sales culture where training and education is valued, you send a message that success matters and that everyone is able to improve and develop.
An effective way of building this culture is to ensure every salesperson participates and benefits from training, including the company’s highest performers. The best salespeople are always trying to learn, and if your training program is genuinely valuable they will embrace it whole-heartedly. To ensure training is valuable, ask the salesperson what they need from you to increase sales. Experienced salespeople are generally self-aware and will know where they need help.
Share best practices to foster engagement. Recognize what is working and share these insights with others. For example, if one salesperson had success reducing a customer’s sales cycle time then have that person share his or her approach with other members of the sales team.
There are many technological and social trends impacting the role of marketing and sales. But for most companies, personal selling still does the heavy lifting when it comes to generating revenue. An effective sales training program can have a positive impact on a company’s performance.
Success requires both a practical strategy and effective implementation. Once you develop your strategy, take steps to manage risk as you manage the various activities in your business that will drive a period of growth.
Allocate appropriate time and budget to support an initiative. For example, most advertising campaigns need a certain level of consistency to build adequate exposure. Cutting a budget in half may eliminate all benefits from an otherwise appropriate campaign.
Involve staff in developing the company strategy. Employees can provide wonderful information and insight in the earlier stages of the process before the final strategic decisions are made. You’ll get a better strategy out of the process, and people are more likely to buy in to the final plan.
Acknowledge progress toward completion of tasks. This is important if your company’s culture does not value accountability. For example, if managers are always late to meetings and work is never completed by the assigned deadline, the chances that your growth strategy will be implemented as planned are next to none. Post the to-do list, the deadlines, and the person’s name that is responsible for each task. Reward people for following through on promises.
These suggestions are common sense, but few companies actually follow these principles. Take these to heart and your strategies will grow your bottom line.
As business owners, we buy insurance to mitigate the negative consequences of unexpected events such as a fire. But we cannot purchase insurance for all risks. For example, when launching a product we face the risk of lower than expected sales. Another common scenario is the need to safeguard against reputation risk in the age of social media. How do we deal with risk that we cannot insure against?
Uncertainty and risk
Uncertainty means a situation has multiple possible outcomes. We can assign a probability for each possible outcome. As a simple example, let’s assume that our construction company is submitting a bid on a large project. Based on our understanding of our competitive position in the marketplace, we might estimate that there is a 75% chance we will be unsuccessful and a 25% chance we’ll get the work.
Risk builds off this concept. It’s a state of uncertainty where at least one of the possible outcomes involves a loss. If our construction company mentioned above spends $20,000 in employee time and expenses to prepare the bid, then we can say the risk of bidding on this project is $20,000 if we don’t win the bid.
In general, higher risk scenarios should have potential to yield greater returns. For our example with our construction company, it’s possible the reward is a project with $2,000,0000 in gross margin. Larger projects with greater gross margin tend to require more time and expense to submit a bid.
So what makes a project risky? Generally, people consider situations risky where the chance of success is low or where the scope of loss is high. But one other consideration is ambiguity. When we have difficulty predicting the outcome of a situation or the scope of our loss, our perceived risk increases.
How do I stack the deck in my favor?
No, I’m not talking about doing anything unethical. My reference to stacking the deck means altering your situation to create a higher level of certainty in your outcome (avoiding risk) or lower the potential loss related to an undesirable outcome (mitigating risk).
Reduce ambiguity. Information helps us understand the possible outcomes and the possible magnitude of loss. Most important, being informed helps us understand why a situation may occur. Knowing what causes situations to unfold gives us something to work with. We can use our skill, experience and judgment to adjust our approach. Our approach is our strategy. It might be how we structure our sales force, explain the value we offer customers, or set our price.
Let’s assume we’re expanding into a new market. The advertising campaign we use successfully in our home market promotes product features. But will that message resonate with our potential customers in this new market? Possibly not, if those customers want something different than our existing customers. Or maybe a competitor is already providing the same thing we plan to sell, and our message does not differentiate our product. Information about the customers and operating environment would provide insight that we can use when making strategic decisions.
Adjusting how to manage risk
There are two things you can do.
1. Get the customer and industry information you need to make good decisions.
This typically involves talking to customers, suppliers, and peers. Don’t be a hermit. You need a lot of information to build a practical strategy. I see this often when a company develops a new product. An entrepreneur might see a product at a trade show and say ‘I can sell that!’ Maybe. But complement your instinct with customer feedback before making the investment.
2. Build in process, policies and procedures to reduce uncertainty.
Entrepreneurs tend to push back against structure, but in this case don’t look at it as a pair of handcuffs. It’s a way of improving the odds that your desired outcome will materialize.
Let’s say our greatest perceived risk is the uncertainty of customer acceptance regarding a new piece of equipment we are launching into the mining industry. One way to address this involves adopting an iterative launch process, where we release a simple version of our product to a test market. We aim for success, but we also learn from this initial experience and use that information to build on what is working. We may adjust the product or service or aspects of our marketing strategy such as the price we charge.
Reputation risk is top of mind as social media continues to influence business. Our younger employees frequently post their opinions online about companies they buy from. What are they saying about you, their employer? A frustrated employee describing her workday on Facebook can leave a lasting impression with potential customers. There are ways to monitor your company’s reputation online. But many employers are also creating social media policies to guide behavior while respecting the rights of employees.
Managing risk involves increasing the probability of a positive outcome and decreasing the potential loss. You do this by informing yourself, and by implementing certain processes. It allows you to capture the upside of an opportunity while reducing the ‘riskiness’ of a situation.
The following is a chapter from the book Pursuing Growth.
When setting a price, you can adopt simple tactics that work in other industries. Remember, every industry has its own nuances, and not every tactic will work for your company. Take what fits and modify it to your situation.
Give price a voice
A high price says that your product is better than a competitor’s product. Imagine you must choose between two brands of glue to repair your broken antique china teapot, one priced at $10 and the other at $12. The value of the teapot far outweighs the $2 price difference. If the teapot is important, you will pay 20% more for the possibility of better glue.
If you cannot charge a premium, make price silent by charging the same price as your competitor. Customers focus on price when they cannot tell the difference between two products. If you are negotiating with a customer, protect your gross margin and offer concessions on less-costly variables such as delivery time.
Selling a higher volume often has a dramatic impact on gross margin. Service companies often find small and large jobs result in similar costs. In the banking industry, the transaction cost of providing a $5,000 loan is nearly identical to that of a $50,000 loan. Some manufacturers can almost double their price for twice the volume with only a minor increase in production cost.
For this to work, quantity must be important to your customer. In the teapot example, selling 16 oz. for $15 and 3 oz. for $10 may not increase your total sales revenue. Most people do not repair fine china often, and they would have no need for the larger bottle.
Package your price
Salespeople often introduce a premium product and then show the mid-market option. The customer references everything against the premium product, and chances are they will spend more than they planned.
Imagine shopping for a mountain bike. The salesperson first shows you the most expensive bike in the store. You will now compare every other bike against what you truly want, and most likely upgrade your purchase. There are many ways to package your price. Telephone companies bundle local phone service, high-speed Internet and long distance. Bundling works in part because it takes the customer’s eye off the individual price of each service.
Customers are happy with a slight discount and the convenience of a one-stop shop. Tiered pricing is also commonly used. Charge a basic price for a basic product and higher prices for a product with a clearly defined additional benefit. For example, some airlines increase prices as a flight date approaches. Consumers are willing to pay higher prices for the convenience of a short-notice flight.
Use wasted capacity
Work you can schedule during traditional downtime is like found money. The key is to price the work properly. Imagine a manufacturing facility that shuts down Fridays in July because orders are traditionally slow. Use this time to schedule lower-priced work. Assuming your overhead is accounted for through regular sales, this additional production only needs to be priced higher than variable costs. Be careful when using this strategy. Will your core customers be offended that they do not receive the same discounted price? This approach works best when selling to a different region or a different customer base.
Everybody loves a deal. For many industries, sales promotions that discount price, such as coupons, can move inventory, generate short-term profits, and introduce your product to new customers. But if you sell a premium product, protect the integrity of your brand by providing a different benefit (e.g., free furniture cleaner with every kitchen table purchased) rather than discounting the price. In the long term, price discounting can also work well when used as a tool to strengthen relationships. A high-end men’s clothing store that holds a special sale exclusively for existing clients is saying thank you to the people who purchased in the past year.
Getting your foot in the door can be difficult. Companies that rely on longterm customer relationships, such as software companies that require future product upgrades, often initially set a discounted price and retain customers through non-price factors such as reliability and exceptional service.
Offering a drastically reduced price with a “door crasher” feel to the promotion is one of the most effective pricing tactics used today. Most often a true discount strategy involves presenting the lower price as a deep discount and also providing a clear reason why such a low price is being offered. For example, clearance sales to move old stock or limited-time sales to celebrate seasonal holidays are commonly used methods of justifying drastic discounted prices.
The scope of the discount that is required to significantly increase demand depends on your company’s situation. Some industries never discount prices and any decrease is perceived as a deep discount. However, other industries, such as clothing and vehicles, require a significant reduction in price to capture the attention of consumers. The key here is that the consumer will reference the discount against what they feel is an alternative purchase situation.
As with any tactic, discount pricing should be used appropriately for each situation. Companies can face problems when they permanently offer deep discounts. Many retailers have built their entire business around a segment of the market that is addicted to artificially low prices. It can be very difficult to charge appropriate margins regularly when customers are constantly watching for the next big sale.
Pricing a product at $29.99 rather than $30 is certainly a gimmick, but it can work in some situations when selling to consumers. Many times when customers view price as a crucial factor in their purchase decision, they will view an odd number used in the price as a special deal. Intellectually, people realize the company simply chose this number as the sale price. But subconsciously people seem to gravitate away from round numbers.
When to charge for extras
Most owner-managed businesses intentionally allow hidden value to creep into their customer experience. By not charging for every little thing, such as rush orders, international shipping, and training, they offer something small that means a lot to the customer. The trick is to realize which free extras are beneficial. If these extras are not important to your customers, recapture lost gross margin by adding these costs to your price. However, if your customer recognizes the value and you need to distance your company from competitors, be generous. New customers may be willing to pay a premium for your standard service if you offer a complimentary benefit, such as free shipping.
Few business owners think through their prices. Paralyzed by indecision, companies often simply adopt industry standard prices and hope for the best. Take the time to consider how simple changes to product pricing can influence the way your customers buy.
The following is a chapter from the book Pursuing Growth.
Theoretically, marketing and sales should be naturally aligned. Marketing defines many fundamental aspects of your business model, such as selecting a target market, defining the core value you will offer the market, and shaping how that value will be communicated to customers. The sales force management process then organizes salespeople to provide any necessary personal contact and helps facilitate a sale.
Reality is much different. Salespeople often lack a clear understanding of the value their employer is trying to offer. Marketing strategies are often overly complex and have little chance of being implemented because they lack coordination with the sales effort.
Take a close look at how your sales force interacts with your overall marketing effort. Consider how the following concepts would apply to your company.
Explain the big picture
A well-functioning sales force is just like any other major system in your business, such as production. For a manufacturing company’s production floor to function at peak efficiency and effectiveness, the people involved must understand what they are working toward. They must understand how their actions relate to a broader goal, such as improved quality or reduced material cost. Systems and processes impose controls and direction, but human judgment is often the magic that drives performance.
The sales management system is no different. Salespeople make frontline decisions every day. They represent your company to the customer and choose which points to discuss and which points to avoid. Ultimately, they craft the reputation your company has in the industry and directly affect the volume of products and services produced. Understanding the company’s broader objectives allows salespeople to focus effort on products and customers that are crucial to the company’s long-term future.
Imagine your salespeople ignoring your new product line because it distracts from traditional technology that is easier to sell. Salespeople may have revenue targets to meet, but no direction or understanding of the importance of this new product to the company. They may have no idea if this product is a passing fad that will not be a priority next year, or if the company is betting its future on this technology and needs to establish a foothold in the market. It is crucial that salespeople understand how their actions relate to the company’s long-term vision.
Listen to your salespeople
Your salespeople have access to remarkable information. They interact with your competition and customers daily. This information can be valuable in crafting marketing decisions such as setting prices and developing your company’s brand image.
Useful data is often overlooked, such as customer feedback on new products. You may have a centralized technical support system in place, but customers will still call their salesperson because of the existing relationship. It would be useful for those in charge of marketing to have some understanding of the number of calls received and the nature of the technical questions that emerge.
Salespeople are busy, and expectations for them to collect information must be realistic. Simplified reporting systems have the best chance of being implemented. Also, it can be useful to reward salespeople for digging up information that has a meaningful impact on future strategic decisions.
Compensate your sales force properly
Compensation format is a fundamental component of sales force management. It is crucial to design sales force compensation to align with your marketing goals.
Let’s return to our previous example of a company involved with a product launch. One of the major decisions will be to determine the selling price. Many companies consider discounting price as a way to inspire consumer demand in the short term. In some situations, focusing the salesperson’s effort has a far more dramatic impact on success than lowering the selling price. It may make sense to maintain the original selling price while increasing sales force compensation.
When implementing this approach, provide financial incentives to salespeople for meeting specific goals. For example, certain technical products require salespeople to invest time in educating customers during the launch process. This may reduce the salesperson’s compensation during the launch period, because they spend less time promoting traditional products and there may be a delay in sales volumes as customers begin to adopt the new product. One solution can be to provide a bonus or a larger commission on the new product for a short-term introductory period. A bonus helps the salesperson justify spending the additional time on customer education, while also ensuring the product is embraced as a priority.
Support your sales force
Marketing is often responsible for building awareness and ultimately is far removed from the sales effort. Instead, use your marketing effort to enhance the sales effort or to replace steps in the sales process that are a poor use of your salespeople’s time.
Some companies have successfully replaced cold calling with sophisticated direct marketing campaigns that can generate qualified leads from a large number of prospects. Seminars can educate clients in a social and credible environment while allowing salespeople to use their client visits more productively. White papers on difficult technical issues can be posted on your website for customer reference and used as a reference tool for salespeople during sales visits or when following up on a sales call.
Agree on what makes you unique
Business owners often choose to focus on a niche market. They focus on offering something unique that is important to those customers. Surprisingly, salespeople and marketing staff often disagree on what is important and will promote entirely different benefits. This split confuses the customer and can be detrimental to sales.
Perhaps the salesperson is right and marketing decisions were made without properly understanding the customer. Perhaps marketing is right and salespeople are too focused on what has worked in the past or do not properly understand the unique benefits of the product. Whatever the problem, marketing and sales staff are most effective when they base their decisions on the same information and work together to close a sale.
Any department that operates in isolation rarely makes profitable decisions consistently, and your sales and marketing staff are no different. Tie the sales force closely to the marketing effort and you’ll benefit from satisfied customers and a more profitable business.