Preparing a proposal is a costly and time consuming task. Before a company begins spending that time, money, and energy, decision-makers have to be certain they have a good chance of winning. The best way is to have a robust “bid/no bid” strategy.
Imagine receiving a request for proposal (RFP) late Friday afternoon. Although your company has been courting this customer for a few years, this project is a surprise. You will have to be the one pulling together this proposal – key people who understand the nature of the work are busy with other jobs. The deadline is only two weeks away and for several areas of the proposal, you are unsure how your company would tackle the work. You’ll need input from your production manager. You head out onto the shop floor and the process of preparing your proposal begins.
You submit the proposal on time, but a month later receive an email saying your firm was not selected. You were disqualified for not meeting the safety requirements.
What? Your company has decades of experience and has won awards for its safety record. Did the junior employee who pulled the documentation together make a mistake? Did you miss answering a question on the RFP?
Situations like this are common but avoidable. After significant marketing and sales efforts to ensure you are on the bid list, give the proposal process the attention it deserves. A two-week rush does not allow you to put your best foot forward in any submission to clients aimed at acquiring work, whether generic proposals, custom-solution sole-source proposals, qualification submissions, or responses to competitive-bid RFPs. The key is to focus on what you can control. A little preparation has a big influence on your chances of winning the work.
Saskatchewan’s Procurement Landscape
The way companies buy from each other in Saskatchewan is changing. We still take pride in doing business on a handshake, but governments and publicly traded companies have adopted formal procurement standards requiring detail, clarity, and information that suppliers never used to provide. This approach is filtering down and mid-size companies are also changing how they buy from smaller vendors. The trend is permanent; all companies must adapt.
Ruba Qaqish, a proposal management consultant with Banda Marketing Group in Saskatoon, describes what is unfolding. “The City of Saskatoon, the City of Regina, and the province are streamlining procurement and in some cases centralizing the function. They are listening to industry’s requests for standardization of processes and templates, and are including important considerations like focusing on best value over price.” Saskatchewan’s entrepreneurial community is quickly adapting to this new reality. “Companies are asking the right questions,” Qaqish explains. “How can we get a proposal out the door more efficiently? How can we make sure we give the client the information they need? When you focus on questions, you are more likely to win the work.”
The Uncomplicated Approach
Preparation is the key to making a proposal submission easy and effective. Don’t reinvent the wheel – there are proven ways of ensuring you are organized and ready to respond. Proposal management is an area of expertise in which people coordinate the preparation of proposals, quotes, or other information to potential customers. Qaqish explains the essential benefits proposal management can provide: “Your average time spent per proposal will go down, and your win rate will likely go up.”
Address the following key areas when approaching proposal management.
• Know your client
Understand your client’s general needs, such as their key initiatives and how they will use your service or product. Identify the priorities of key people involved in planning for, procuring, and using what you sell.
Seeking out information on upcoming work before it needs to be purchased will help you prepare your proposal. In some cases the potential client may ask you for information to help them determine what they require. This involvement doesn’t mean you will get the work, but it influences the client’s process and what they prefer to buy.
• Know your competitors
Most people think you need to have the lowest price to win a bid. Sometimes you do, but price is almost never the only factor. To understand how your customer perceives the value you offer, you need to know your competitive position, which is how your product’s strengths and weaknesses – including price – relate to competitors’ value. It’s how the potential client perceives you compared with your competitors. If you know the project budget, it’s relatively easy to follow your regular pricing process and set a price below or at that budget, though you still won’t know how your price compares to the competition’s. The question gets complicated when the client does not disclose the budget.
“Most entrepreneurs are unsure how to collect pricing information,” Qaqish explains. “One tactic is to gather the information published about similar bids and who won them. In public procurement, transparency is critical and clients often issue evaluation results, including scores for each category, prices, and how award decisions were reached. Consider this information when determining your price. Make gathering these details part of your process when closing a proposal, win or lose.”
• Be ready to respond
Knowing your potential clients and competitors will ensure you have much of the information you need when you prepare a submission. Taking care of a few other core areas that are actually fairly easy to deal with in advance of the RFP being issued will ensure you can work efficiently and effectively to prepare the submission.
“Deciding whether to bid on an opportunity is a crucial step,” says Qaqish. “Is it the right fit for you? Can you deliver what they’re asking for? There are ways to be organized in advance so you can answer those questions. It comes down to the “bid/ no-bid” strategy, which entails answering questions and having information at your fingertips.”
If you choose to submit a bid, having a repository of the information you need is crucial to make the process efficient and to focus your time on preparing answers to questions rather than running around trying to find someone who remembers details about similar projects you’ve completed in the past. “Content libraries contain information such as details on past projects, staff who worked on those projects, and testimonials. There are ways to ensure content libraries are relevant to the types of projects you intend to take on, are easily searchable, and are useful to the proposal submission process,” Qaqish explains.
It is also crucial to know in advance who will be on the team that prepares a submission. You need marketing and sales people, people who know the product or service you will be providing, plus people who will write and review the document before submission.
A Crucial Step Toward Winning The Job
Marketing, personal sales, and proposal management are all crucial phases of the business development cycle. Managing your proposal process calmly and effectively improves your win rate because it means you provide the potential client with relevant, more complete information tailored to what they need to hear.
An organized approach to proposal management has other benefits. Insight on win rates helps you understand where you are competitive and with which clients. And it allows senior staff to focus on managing the business rather than getting bogged down preparing proposals and allows you to present your company’s brand in a consistent, focused manner.
First published in the March 2019 edition of The Business Advisor.
Some new products are destined for success. When we see the product for the first time, we have a “why didn’t I think of that?” reaction. We’re impressed at the obvious solution to a common problem and how valuable we perceive the product to be.
What makes customers line up for some new products? The answer always comes back to the customer. People buy products or services that solve a problem. To understand the customer’s motivation behind a purchase, watch how the problem materializes in the real world. You might experience it yourself or observe others challenged by their situation. Either way, lived experience is the genesis of any new product.
An original idea for a successful product can come from a variety of sources. Here are a few sources that I’ve seen with my clients over the past few decades.
Great ideas tend to come during fleeting moments of insight. One of your employees may see a customer frustrated with a situation and think of something that would have helped that customer.
The challenge is to get employees to take ownership of the idea and run with it. This concept has come to be known as intrapreneurship – when employees act like entrepreneurs.
Technology companies offer wonderful examples for channeling ideas from employees. Amazon’s internal website contains a virtual idea box where employees can submit concepts for new products or services. One employee suggested free shipping, which became the successful Amazon Prime program. Other companies, such as Google and the stock photo company Shutterstock, set aside specific days for staff to work on new product ideas and present their ideas in a competition-style format similar to the television show Dragon’s Den. The goal is to encourage creativity, innovation, and collaboration.
Whatever process you use, make sure to create a culture that encourages innovation, regardless of whether every idea becomes a successful product. Intuit, the software company that owns QuickBooks, annually holds a company-wide award ceremony and presents an employee with the “failure award” for the unsuccessful product that provided the most valuable lesson.
Failed research and development projects can be a wonderful source of product ideas. One famous example is Post-it Notes. Scientists were trying to develop a super-strong glue for aircraft construction. They failed, and accidentally developed an adhesive that would not stick. There’s not much of a market for an adhesive that won’t stick so the technology was abandoned. The technology was later repurposed for Post-it Notes and the product is in most offices today.
When you’re wandering through the research and development graveyard, the key is to think about customer problems rather than the technology. The Post-it Note emerged when one of the scientists who knew about the not-very-sticky adhesive had problems with his hymn notes falling out of his church songbook.
Steve Jobs often worked in his own call centre speaking directly with customers who phoned Apple Computer for technical support. He would not tell people who he was, but he’d work with these users to solve their problems. He gained a deep understanding of how people use the company’s products, the problems they were having, and improvements that would make their lives easier. It’s a form of market research.
In a 1997 interview, Jobs said, “You have to start with the customer experience and work backwards to the technology.” This customer focus comes from a person who is arguably the most revered product-centric entrepreneur in modern history.
Kids see the world without a preconceived bias about what is possible. They ask questions that can highlight opportunities that others do not see.
Great products have been developed from a child’s observations. Sometimes, the kids themselves are the entrepreneurs. One of my favourite examples is an 11-year old boy on vacation in Hawaii who was frustrated that he could not talk with his dad about the beautiful things they saw while swimming underwater. He then started researching underwater acoustics, developed prototypes, and invented the Water Talkie, which allowed him to talk to other swimmers up to 15 feet away. He pitched his idea to Toys “R” Us and walked out with an order for 50,000 units.
Suppliers work with their product or service every day, so they typically have a narrow view of their technology (e.g., chemical manufacturing). They also work with your competitors and have a broad view of the industry (e.g., coatings for consumer packaged products). They answer questions, discuss growth plans with a variety of their customers, and see industry trends unfold. They have insight into what consumers may need.
A partnership-style supplier relationship with a high degree of trust and interdependency will naturally lend itself to a “what-if” discussion in which you talk about trends, the needs of the end user, and ways you can work together to solve a problem. Your focus must be on improving profit for both your company and your supplier rather than just managing the costs of a transaction. Some companies include this consumer-focused perspective directly in their culture of working with suppliers. L’Oreal holds a conference with suppliers of its cosmetics products to share consumer insights and ensure suppliers understand the products L’Oreal will need in the future.
Sometimes a person’s frustration in their own life can lead to an idea for innovation. The interesting thing is that this is almost always not a new insight. Much of the population may have similar frustrations, but it takes a creative mind and entrepreneurial instinct to solve the problem. Sometimes that solution materializes as a new product, and other times it’s as a new business model.
In 2011, two friends discussed how frustrated they were with the high price and inconvenience of purchasing disposable razors. The barriers to entry when competing with multinationals such as Gillette and Schick are significant, and the market had low competition despite the frustration of consumers. It was ripe for someone to turn the industry on its head. The friends launched their own brand of razors, named Harry’s. Consumers purchase this product online directly from the manufacturer and can sign up to receive regular shipments of replacement razor cartridges by mail. The company now has a foothold in the market with over US$100 million in revenue.
The core idea for your product must stem from your understanding of the customer. Consider who has a line of sight into the customer’s situation and who understands the customer’s problem. Maybe it’s you, your employee, or your supplier. Start with the customer experience and you are more likely to hear someone say, “Why didn’t I think of that idea first?”
First published in the December 2018 edition of The Business Advisor.
Failure exists in any business. Creating a company culture that nurtures the ability to manage risks, learn from mistakes, adjust, and improve is key to high performance.
To learn how to create and maintain this culture, download the discussion paper Building Off Failures.
If Saskatoon And Regina Were Countries, Here’s How A Trade War Might Unfold.
A trade war occurs when two or more governments impose a series of escalating barriers to trade to protect local companies.
Here’s how such a war might unfold.
Let’s say Saskatoon and Regina are neighbouring countries. Their citizens can purchase freely from either country. Companies in both cities manufacture electric cars; competition is fierce. To encourage immigration, Regina’s government decides to grow its economy and attract workers by subsidizing local electric vehicle manufacturers that invest in research and development. Companies normally increase prices when costs increase, but with the subsidy, Regina manufacturers can sell a better product (improved through R&D) at the same price as vehicles manufactured in Saskatoon.
Saskatoon’s electric car manufacturers protest in the streets! They can no longer compete! Saskatoon’s government tries to negotiate, but Regina refuses to change the subsidy. Saskatoon retaliates and imposes a 25% tariff on electric vehicles imported from Regina: for every Regina-built vehicle sold in Saskatoon, the Saskatoon government collects a 25% tax. But Saskatoon does not actually collect much money, because Regina electric vehicles are now more expensive than those manufactured in Saskatoon. Most Saskatoon residents now buy from local manufacturers. Facing declining sales, Regina manufacturing companies are forced to lay off employees.
Regina manufacturers pressure the Regina government to fight back against this unfair tariff. Regina imposes a trade quota on saskatoon berries. This drastically reduces the volume of berries that can be imported into Regina from Saskatoon. Berry producers in Saskatoon are caught off guard. They have commitments to fill with bakeries in Regina, but cannot export the product. The laws of supply and demand apply, and the price of Saskatoon berries soars in Regina.
Berries are rotting in the fields of Saskatoon. With no customers, some berry producers go out of business, but savvier entrepreneurs know never to waste a crisis. They begin selling in Calgary, targeting Albertans who had fled Saskatchewan in the 1990s. Sales skyrocket. The madness continues. Saskatoon imposes new trade restrictions to defend its manufacturers, claiming it needs to ensure the safety of residents: companies selling electric vehicles in Saskatoon must now submit a lengthy form verifying that the batteries do not leak acid. Regina companies, burdened by red tape, give up on the Saskatoon market.
Politicians decide to begin negotiations. Both sides make concessions, and they emerge with the Saskatoon-Regina Free Trade Agreement (SRFTA). Barriers to trade are lifted, but the economic landscape is forever changed. The berry sector now has fewer competitors, but they are much larger companies that serve multiple export markets. Laid-off Regina employees found other employment, and without access to its skilled labour, Regina’s electric vehicle industry never fully recovered. Entrepreneurs from both cities, however, are undeterred. They launch new ventures and companies expand aggressively into new markets, happy to leave the great trade war of 2018 behind.
First published in the September 2018 edition of The Business Advisor.
Many trade disputes are going on. Some are between Saskatchewan and other provinces; others are between Canada and other countries. Some have escalated into trade wars.
Saskatchewan is affected when other countries enter a trade war largely because global supply chains and markets are tightly integrated. Changes to the international trading environment affect all aspects of business, including consumer demand, pricing, and the competitive environment.
Trade happens when companies in one country (or province) sell something to companies in another jurisdiction. Canada tries to protect Canadian companies from foreign competition by creating barriers that make it harder for foreign companies to sell into Canada. Fees called tariffs make foreign goods more expensive, and policies such as quotas (limits on the amount of a commodity that can be imported) restrict what can be brought into the country. All countries do this. It’s called protectionism.
Free trade is the absence (or near absence) of trade barriers. The idea is that two countries adopt a free trade agreement so that companies can easily do business across borders. Companies have access to many more customers, but they also now face foreign competition. Companies that survive increased competition tend to produce better products, provide better service, and sell at lower prices.
What’s Happening Now
The global system of trade is in disarray. Largely driven by dissatisfaction with globalization, some of the world’s largest and most influential western countries – historical advocates of open market economies – have voted in governments with a protectionist mandate. After its citizens voted to leave the European Union, Britain faces economic uncertainty as it negotiates its new trading relationship with its neighbours. The US has initiated the renegotiation of trade agreements and has imposed sweeping tariffs and other trade barriers on select products with almost no exceptions for its economic and military allies. Countries around the globe are reacting by imposing tariffs on US goods. The US is responding with additional tariffs on a wider range of products. The escalation continues, and a trade war is now underway.
No company in modern times has had to deal with trade policy risk of this magnitude. Our most relevant example is from 1930, when the US initiated protectionist policies against Canada and other countries, which retaliated in kind. Those tariffs are seen as having aggravated the Great Depression and as initiating a chain of retaliatory protectionist measures around the world that led to the decline of global trade. What will unfold in today’s economic environment, where so many of the goods people purchase cross multiple borders? Nobody knows – we’re in new territory.
Adjusting To The Situation
The effects of trade changes on Saskatchewan depend on two main issues.
First, the economy will undergo a transition. Whether there is a long-term shift to protectionism globally (or even just in the US) or if recent trade barriers are a tactic to negotiate favourable free trade agreements, real damage is being done to businesses around the world. Higher costs, limited market access, and ambiguity around the rules of trade have caused companies to rethink their business plans.
As a result of this trade war, Saskatchewan will produce new goods and services for different customers than we serve today. Capital will be invested in different areas and we will require different employee skills. There will be a great deal of change.
Second, the ability of local companies to be nimble will define how we emerge, either after a few rough years or after a long-term return to protectionism. Trade with companies in other countries over the next decade could be full of ambiguity and uncertainty.
As an entrepreneur, it is difficult to know the impact the trade war will have on your business. But rest assured, your competitors are confused and scrambling too. Now it’s time to identify your options and work on strategy. Some of the steps you take will be defensive as you mitigate risk. Keep in mind that it’s difficult to prosper when you are hoarding your assets. As the competitive landscape shifts, consider where pockets of opportunity exist.
Consider Your Options
The difficulty in knowing what will unfold, and adapting to it, stems from a lack of information. How can you make decisions in your business with no clear understanding of how trade relations with other countries will change? In a period of uncertainty, the most effective step is to map out the information you have that can serve as a basis for strategic decisions. This requires asking the right questions. Start with these.
1. Do you understand how your value chain will be affected?
To understand how trade changes will affect your value chain, you need to track the various companies involved, from the final consumer product right back to the first step in production. How do you think each company will be affected? What risks do you face in your supply chain and with market access? How will consumer behaviour trends influence demand for your products?
2. Have you exercised caution with suppliers?
If you are working out a supply contract now, given the current political environment it would be wise to consider a relatively short timeframe or flexible conditions that would accommodate changing trade rules. For example, if a price is fixed, do the terms of the contract allow for costs related to trade barriers such as tariffs?
3. How will you leverage your advantages?
It is possible that your company has a new advantage over competitors in this evolving economic landscape. For example, on the list of 1,333 Chinese products that the US announced in April would be subject to tariffs, 20% were referred to as “parts.”[i] That means American finished goods manufacturers will be open to replacing Chinese suppliers. Depending on Canada’s market access to the US once NAFTA negotiations wrap up and on the length of time tariffs imposed on China are in place, Canadian companies may have a cost advantage over China and could fill the void.
4. Can you identify new markets?
Most Canadian companies do not take advantage of the various Canadian trade agreements. Which countries have customers that need what you sell? How is the competitive environment in those countries evolving?
5. Are you looking for quick wins?
Search for situations where American companies will be hamstrung by tariffs and other trade restrictions. If your primary competitor manufactures in the US and ships to Canada, you may have a window of time to capture that competitor’s Canadian customers.
6. Are you looking to identify threats?
How are your core customers affected by trade changes? Imagine a Saskatoon-based information technology services company that generates 50% of its revenue from two local manufacturers that export nearly all of their product to the US. If those two manufacturers need to scale back operations, will they reduce or stop purchasing services from the local IT company?
7. Are you working on predicting changes in the competitive environment?
What are your competitors and potential competitors likely to do to adapt to trade barriers? Germany began courting the iconic American brand Harley-Davidson after Harley’s announcement in July that it was moving more of its production out of the US to avoid US steel tariffs and subsequent retaliatory tariffs imposed by the European Union. Another example: US tariffs increased the price of washing machines imported to the US from China by 19.9% in three months.[ii] Will the Chinese manufacturers aggressively pursue customers in Canada, where they can be price competitive? What does this mean for Canadian appliance retailers? This change may distort the current market price in Canada. It may also mean opportunities – Canadian retailers may be interested in taking on new lines of equipment manufactured in China.
8. Will you be able to predict trade policy moves?
Nobody knows what will happen next in global trade relations, but it’s in your best interest to try to predict the future. The current trade situation seems like it came up overnight but there were actually clues about major changes like Brexit (Britain’s exit from the European Union) and the US’s tariffs on China. Inform yourself. What’s being said about industries you sell into? For example, the Canadian government’s purchase of the Trans Mountain Pipeline from Kinder Morgan must pass a US national security review. This means the American administration has the authority to block the purchase, which would negatively affect Saskatchewan’s steel and oil industries.
9. What will you do if you can’t travel to a particular country?
Trade agreements define labour mobility rules. There are implications for Saskatchewan companies that may want to send a mechanic to another country to install equipment or an engineer to a branch office to work on a project. When NAFTA was first signed, it reduced barriers for travel between Canada, the US, and Mexico. But rules are applied subjectively. Access can depend on a customs agent’s interpretation, seemingly influenced by that person’s mood of the day.
Recent American immigration policies oppose labour mobility. Consider the consequences to your organization if you are unable to hire American employees to work in Canada or if your Canadian employees are unable to travel freely across the US border. Could travel restrictions be imposed, even temporarily, as an American negotiating tactic? If so, doing business in the US would become extremely difficult. The same situation applies to markets in other countries you may be trying to access.
10. Do you conduct scenario analyses?
Analyzing scenarios really means considering how your situation might unfold in a few different ways, under different circumstances. In a period of uncertainty, strategic plans tend to be fluid and it’s best to identify options rather than sticking to a rigid plan that may quickly lose its relevance. What are the most likely scenarios if a specific chain of events were to unfold? How will you address subsequent issues, such as managing internal costs, replacing customers, and locating alternative suppliers?
A recent example of changing circumstances can be seen in China’s 25% retaliatory tariff on US soybeans. At first glance it seems that Canada’s soy price should rise now that China will have to consider new suppliers. However, Brazil’s soy production is much higher than Canada’s, and Brazil is more likely to fulfill Chinese demand. Also, Canada’s commodity price is tied to the US and there is potential for US product to be redirected from China to compete with Canada for customers. As a result, the Chinese tariff caused the price of Canadian soybeans to decrease.[iii] Then in late July the European Union and the US announced an intent to work toward a comprehensive trade deal. One primary driver seems to be that Europe would purchase American soybeans that were previously destined for China. Where does this leave Canada? Supply chains and markets are integrated. It can be difficult, but valuable, to think a few chess moves ahead.
Most businesspeople are paralyzed by ambiguity. In the absence of clarity, it’s human nature to avoid a decision. What we know for sure is that the current trade war is a catalyst for shifts in the competitive environment. Keep in mind that when the competitive environment is changing, there is opportunity. Asking questions such as these will shed light on your situation and help you identify the core decisions facing your business.
[i] Chad Brown. “The element of surprise is a bad strategy for a trade war,” Harvard Business Review,April 16, 2008.
[ii] Bob Bryan. “Hold on to your wallet: Trump’s trade war with China is about to start hitting the goods you buy most,” Business Insider UK, July 12, 2018.
[iii] “‘China has crashed the price’: Canadian farmers collateral damage in China-U.S. trade war,” National Post, July 10, 2018.
First published in the September 2018 edition of The Business Advisor.
As entrepreneurs, we are focused on closing the deal. With experience, we take a broader view and put the customer’s best interest ahead of our own, knowing that what is best for the customer is also best for our own business.
The key to acting in our customer’s best interest is to know what they need at various points in the buying process. If an entrepreneur makes a mistake here, it’s almost always because they see the world from their own point of view rather than from their customer’s. Look at the buying process, not the selling process.
Map out the steps your customers follow when they purchase. The following are general stages in the buying process that apply to nearly all products. Adjust them to your own situation as you see fit.
The customer is not yet ready to buy, but what happens at this stage will influence future purchases.
Let’s use purchasing a car as an example. A consumer may have been quietly contemplating buying a new vehicle for three years. They see advertisements, although they don’t acknowledge that they pay attention to them. They observe what their peers are driving and are influenced by comments people make about certain brands. They are gradually forming a short list in the back of their mind of vehicles they would consider buying.
The entrepreneur’s goal at this stage is to make it onto the customer’s short list. Your brand must be present and relevant. The tricky thing is that your customer could have any number of experiences with you and your competitors over a few years.
Be where your customers are. Be present when they are experiencing your product. If you sell family-oriented minivans, be associated with children’s sports and the lifestyle of young families. Sponsor events. Run contests that engage with your target market. Ensure the messages in your advertisements speak to the frustrations your product can solve and to the joys of parenthood. Be relevant to your community.
Here’s the catch. You won’t be able to directly measure the impact of these efforts through sales. You can measure the number of people who enter a contest. But is it realistic to track those names over a five-year period to see how many purchase your minivan? Probably not. But ignoring this step simply because it’s difficult to measure is illogical. Your customer is deciding who makes it onto their short list. What can you do to be visible?
This phase is where the customer actively reaches out to get information from potential suppliers. They are still not ready to buy. They are learning.
Back to our car example, consumers spend hours researching vehicles on the internet and they know what they want before they arrive at the car lot. There is more price transparency. They know the features. In many cases, they visit the lot only to test drive the vehicle.
Planning to answer the phone is not good enough. Here, your marketing and sales effort should generate leads. For the purpose of this article, let’s define a lead as a potential customer who is actively engaging with companies. Every industry is different, but here is an example. A project-management software company might advertise that a free white paper on project management best practices is available on the company’s website. As is typical in this industry, people would be required to enter their contact information to access the report. It’s fair to say a large portion of people who submit the request potentially need the product.
Many companies make a considerable content-marketing effort through which they provide valuable information to potential customers. In many cases, your firm being known as a subject matter expert will lead to a sales discussion with your customer.
Keep in mind that at this stage, you are dealing with a potential customer who wants information. Answer their questions, collect their contact information (if possible), invite them to purchase, but be careful not to pressure them for a sale because you’ll turn them away. Many times it can be helpful to place the customer on a drip marketing campaign where you provide them with resources over time (e.g., seminars, articles). When they are ready to engage in a sales transaction, they’ll reach out to you.
This stage is where the customer finalizes what they will buy, from whom, and at what terms.
In every industry, there are one or two points in the personal sales process where the salesperson has tremendous influence. Every industry is different. For example, when consumers are buying a new phone they are faced with the hurdle of committing to a multi-year contract. Cell phone retailers know that if the consumer leaves the store the chance of a sale drops dramatically. It’s a sensitive situation, and well-trained staff can help reduce the customer’s anxiety.
If you convince a customer to buy something they don’t need, you will almost always be worse off in the end. The customer won’t be happy and you may face any number of hidden costs, such as product returns or negative word-of-mouth. Helping the customer overcome anxiety is different than convincing a customer to buy something they do not need.
After the sale, a customer will reflect on their experience and the value they received. Buyer’s remorse is real. Avoid returns and negative feelings by following up with the customer. Many times there is no problem at all, and they will appreciate a business that did not take their money and run. But if there is an awkward situation, working through it can build goodwill.
Chances are actually high that the customer will be pleased with their purchase. This is an opportunity to generate repeat business. It also creates an opportunity to earn referrals. Paying customers for referrals rarely works. Most of the time customers feel their relationships with friends and family are more important than the incentive you offer. If you have an incentive program, consider how your customers may interpret it.
To earn referrals, it usually is enough to say you appreciate the customer’s business. Customers support companies that make sure they are satisfied and show appreciation. In some situations (e.g., professional service firms) it can be useful to explain to your recent customers what constitutes a good referral. What type of situation would that potential customer face?
When you are creating your marketing plan, consider these four steps from your customer’s point of view. Then switch to your own perspective and consider how to structure your business around the needs of the customer.
First published in the June 2018 edition of The Business Advisor.
Salesperson effectiveness directly influences your company’s profit. But there is no one-size-fits-all approach to building a sales force. Every industry, competitive environment, and company is unique. Entrepreneurs must consider their own situation when making decisions on whom to hire and how to organize, prepare, and motivate sales employees.
Although every sales force is unique, the sales management structure will naturally evolve over time as the company’s scope of operations increases and its management structure matures.
The following are the general stages that naturally materialize over time, along with tips on how to ensure your sales effort is effective.
Stage 1: Entrepreneur as salesperson
Early-stage entrepreneurs tend to take on many roles. But nobody is great at everything. If the entrepreneur is a natural salesperson, the “owner as salesperson” system will work well. But if the entrepreneur’s strengths fit best with other areas of the business, such as production or finance, the sales process is likely to suffer and to hold back growth; the sales effort is an uncoordinated inconvenience. The company approaches business development by relying on the company’s reputation to draw in work.
Stage 2: Entrepreneur as sales manager
At some point the owner decides to hire a salesperson, usually because the owner is too busy to do the work themselves or realizes the value of having someone with a different skill set.
The first challenge in this stage is that the entrepreneur becomes a sales manager. Sales management is extremely complex. It involves designing the sales management structure (i.e., territories, compensation structure, job descriptions, training programs, forecasting and reporting processes, and performance evaluation systems). It also involves coaching and mentoring salespeople to improve performance. Effective sales managers are great leaders. The sales manager is responsible for getting the greatest performance out of each salesperson by helping them develop the knowledge and skills required to do their jobs.
Some sales management decisions are straightforward when you have only one sales employee. For example, there is only one territory. The key is to understand what is important to your employee’s success and to make decisions that improve employee effectiveness. If training is important, will this include both technical training on the product and training on the process of personal selling? Who will deliver the training, when, and at what cost? Will this be an ongoing process or a one-time event?
The second challenge of Stage 2 is that hiring a first sales employee is difficult, because the entrepreneur likely has no experience recruiting salespeople and does not know what skills and experience to look for. Don’t settle for people at the bottom of the pack. You need a quality hire to have any chance of success.
Stage 3: Process changes drive performance
With some success in place, the owner begins to realize that the sales process can be adjusted to be more effective. Often the natural changes are to put a proper customer relationship management system in place, establish training programs for salespeople, and develop a reporting structure that provides key information to management.
These changes have a dramatic effect on the salespeople’s effectiveness and are the first few stages toward putting a proper sales management structure in place. However, the changes are often made piecemeal rather than being coordinated toward a common goal. Eventually the entrepreneur realizes that the sales management structure has a direct impact on performance. At this point decisions are coordinated in areas such as the nature of the sales positions, allocation of territories, and budgeting.
Usually at this stage the entrepreneur realizes that marketing has a role in supporting the sales effort. When it’s coordinated, marketing draws in leads for salespeople and makes the sales effort more effective.
Stage 4: The sales force expands
The stage related to process improvements to the sales management structure never really stops – adjustments are typically made to account for evolving company priorities and a shifting competitive landscape. However, as the company scales up, the sales management process must occasionally adjust sales positions and also the way territories are allocated. At the most basic level, the company must decide on the mix of inside salespeople (typically taking calls, preparing proposals, and processing orders) and outside salespeople (visiting potential customers to drum up business). These positions require different skills and compensation structures. As the company grows and the sales force matures, positions become specialized, so people can focus on what they do best.
Stage 5: A sales manager joins the team
A sales force is only as good as its management. The right time to hire a sales manager is different for each company. Generally, it is when the entrepreneur no longer has time to manage the salespeople or lacks the skill to do so.
When hiring a sales manager, best practice is to avoid hiring your best salesperson. A sales manager needs different skills than a salesperson. The manager’s purpose is to lead and improve the competency of the salespeople. It’s a complex role. A more sophisticated sales manager will also have the skills to design the sales force management structure, as mentioned above.
Stage 5 can be a difficult period of change. It is common for some longer-serving salespeople to leave when a sales manager joins the organizational chart. Some salespeople will view the manager as an intrusive, unnecessary micromanager. Generally, the higher performers understand the value of a manager and see that the benefit to them is improved performance, which leads to higher compensation.
Stage 6: Territory managers join the team
When a sales force is ready to scale up significantly, the next step is usually to hire territory managers, who have responsibility for salespeople in a certain territory. Typically, these are competent people who supervise salespeople and report to a centralized sales manager. This position typically is appropriate when salespeople are not centralized in one office.
The sales force is large enough at this stage that it is typical to refine decisions around job specialization, territory allocation, and compensation structure.
As an entrepreneur, you need to understand where your business is in the sales cycle. A sales management structure must evolve over time and what is ideal for your company at $10 million in revenue simply won’t work for when you reach $50 million. Make sales management decisions that are right for your business and you can expect to see a direct impact on the bottom line.
First published in the March 2018 edition of The Business Advisor.
Do you remember when salespeople used to put their home phone number on their business card? Rarely did a customer phone them at home, but it was a sign that the salesperson was always available. Instead of phoning salespeople for information, customers now search the Internet. Customers in all industries now expect to connect at some level 24 hours a day, 7 days a week, 365 days a year. So businesses must always be accessible.
As consumers, we are spoiled. An auto dealership website that allows customers to book service appointments online at 3:00 AM would be viewed as progressive. Companies in a business-to-business industry may not be expected to take a phone call in the middle of the night, but it is entirely possible for an entrepreneur to be searching at 3:00 AM for information on software systems to manage production on the shop floor. By the time the software system vendors are open for business, that entrepreneur may have finalized a short list of companies to call.
In addition to search engines, customers often have a list of go-to websites for ideas or information on products and services. Some are fairly well known, such as houzz.com for home renovations. Others are obscure but have loyal followers in a niche community. A great example is DCrainmaker.com for products used in the sport of triathlon. This is an information-heavy site operated by an engineer and triathlon enthusiast. Both these sites influence consumer buying decisions. The Internet has provided transparency to buyers.
As customers, we don’t even have to speak to a salesperson to find information such as which companies provide a certain service, the price, and differences related to features. More customers are well informed before entering the sales process.
Even in industries where companies do not post price information online, such as commercial construction, competitors have to be more transparent than in the past. It’s entirely possible that a potential customer will review construction company websites to learn what type of work those companies have done and who they have worked for and to get a feel for their competency before contacting a short list for quotes or to be included on the bid list. It’s not that a construction company will necessarily be selected based on its website, but an online information search is now ingrained in the way people make purchasing decisions.
Let’s also examine how social media may have a role in our commercial construction example. A more progressive construction company may post photos of higher-profile projects on social media sites such as Twitter, Facebook, or Instagram. Few potential customers for commercial buildings will see these feeds. But some will. This type of information provides a window into the company culture. It adds a human touch to the company’s brand, essentially its reputation in the marketplace. Visit instagram.com/stratadevelopment for an example.
So what are the implications on strategy? Consumers are emboldened by having greater access to information. They are able to make better-informed decisions and to increase their demands on suppliers. The following are a few considerations for adjusting strategy to suit changing consumer behaviour patterns and an evolving competitive landscape.
Know how your customers buy
Listen to your customers and understand what they want and how they buy. Let’s examine a retail example. A common term used these days is “omnichannel” marketing. A clothing retailer, for example, may sell through a traditional bricks-and-mortar channel and also through an online channel. But the customer just flips back and forth, perhaps viewing products on the website and then walking into the retail store to try the clothing on and make the purchase. In this case, the online store had a crucial role in the purchase decision, despite the fact that the product was purchased through the traditional retail store.
Be the expert
In a world where too much information is available online, customers are overwhelmed and gravitate to brands they trust. Customers want to connect with a servant-leader. They respect subject matter experts that provide resource information to the market at no charge. Education builds trust, which leads to a purchase, repeat purchases, and loyalty. For example, companies that sell water purification equipment for remote locations typically offer product information sheets. But customers do not want detailed product information early in the process. A background document on the various forms of purification methods available to customers would be more valuable and would position the company that authored the document as an industry expert.
Interact with the customer
Have a dialogue. In some situations, that means a genuine personal conversation. At other times, it means the customer reads your content or interacts with your website and brand. They may never actually speak to a person, but interacting with the website or with the brand in a retail store can be similar to forming a relationship. For example, Allen Edmonds is a respected shoe manufacturer in the US. The company has a loyal following, partly because it offers a variety of widths and models that ensure a good fit. Customers can get extensive product information, including help with sizing, from the website. Customers can also provide reviews directly on the site. Although few customers ever speak to an Allen Edmonds employee, customer comments provide the feeling of a dialogue.
Predict the customer’s next move
If you understand the purchase process, and a customer behaves like they’re in a certain stage of the process, you can predict what their next steps might be. Consider the example of a home painting company. A customer who subscribes to an e-newsletter featuring design ideas has a high likelihood of taking on a painting project within the next few years. If they download a document titled “10 Considerations When Hiring a Painting Contractor” you can bet they are further into the buying cycle. That knowledge might encourage you to work more closely with these active leads. If your document suggests that one of the steps is to visually confirm that the contractor’s paint sample suits the decor of the home, your document could mention that a paint sample can be ordered online from your website and mailed to the customer’s home.
That final step takes them one step closer to a purchase.
We can expect to see companies continue to build their marketing and sales strategies around the needs of their customers. Company strategies are centring on delivering relevant products and services, providing useful information before engaging in the sales process, and nurturing customer relationships rather than just closing the sale. All of this is good news for customers.
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.