Nov 9, 2015 | Customers, Sales
www.customerthink.com
Small and medium businesses usually struggle with the challenge of scaling their sales efforts. Most start with a group or network who know them, and their expertise, and are happy to use their services, but what next?
How do they build from the small base of the founders network?
Often someone on staff is turned into a ‘salesman’ usually reluctantly, or someone is hired who claims to have intimate knowledge of the market niche, and left to their own devices with little direction or discipline. Neither option works very well, and usually comes with a litany of hidden costs and problems.
Following are 6 of the biggest barriers I have encountered over the years that cause the greatest headaches.
- Compensation.
How you pay a salesperson is always front and centre, and is often a witches brew of trouble and unintended consequences. The default is usually a base plus some commission, depending on the business and its circumstances, but is often not the best option.
Within considerations about the compensation plan, there are a number of subsidiary questions that need to be asked.
- What behaviour are you motivating for? Is the objective new customer acquisition, retention of existing customers to reduce churn, increases in share of wallet of existing customers? Whatever it is, it makes sense to manage the compensation towards that objective.
- What are the capabilities of the personnel? Not that are they nice people, but are they able to deliver what is being asked. Sales people like all people have a range of behaviours and capabilities. In my experience an important axis of sales performance is what I call the “hunter/gatherer index”. Very simply, ‘hunters’ get their kicks from the chase, identifying an opportunity and chasing it down, once caught they move on. By contrast the “gatherers” tend to stay close to home and what they are familiar with, nurturing what they know without putting themselves at “risk” by inviting a “No”. Most sales organisations need a mix.
- What is the mix of behaviour drivers in the sales force? Here hides the minefield. People are motivated by different things to different degrees. In general once the basics are covered, and people consider that they are being “fairly” compensated, the absolute amount drops down the list of behaviour drivers. However, some are motivated more by money than others, some react to targets and thresholds differently to others, and some prefer non cash rewards more than others. However, everyone responds to acknowledgement of effort and achievement, this is deep in our DNA. In the absence of acknowledgement, the importance of the absolute amount of money paid increases geometrically.
- How easily understood and ‘gamed’ is the compensation plan? I have yet to see a compensation plan that will not be gamed by at least some sales staff, and that includes senior sales management staff. The answer to this is almost always simplicity and transparency, the simpler the plan is the better, and the more transparent the plan the better.
- Hunter Vs annuity is a common problem. A customer who was sold ages ago, is a loyal and repeat customer, yet the commissions paid for sales to him are the same as commissions on sales to a new customer that took time sweat and tears to prospect, research, engage and convert. Why? One is hard, challenging work, one is akin to babysitting. Flat rate commissions alone rarely work for this reason.
- Alignment.
Unfortunately this word has become a bit of a cliché. “Sales” has an inherently short term meaning for most, conditioned as we are by our experience, and the recognition that sales is about “closing”. Almost every sales training course I have seen has a module about the close and how important it is, which is not in dispute, but the standard tactics to generate a close by any means are inherently about “NOW” and is unfortunate. In most cases thinking beyond the transaction on the table currently pays great dividends. The key is to ensure that the effort is in every case aligned with the objectives and strategies of the organisation. It is surprising to me just how often there is a misalignment between what the board room wants to happen, and what is actually happening at the coal face.
- Induction
How often have I seen a new hire in sales being given a quick tour of the factory, being given a folder with product specs and prices, and a list of customers in the territory, the keys to the car and sent off into the wild blue.
Nowhere near enough. Not even remotely enough, even to be selling paper clips to blind men.
- Direction & governance
Managing a sales function is often like herding cats. It takes a combination of the carrot and stick motivation, as well as directing and mentoring the individuals and the group. The last thing you should allow to happen is “set and forget”.
There are a few things that can help with a bit of consideration.
- Defining the roles of sales people is crucial. Some people are naturally hunters, they want to be out there chasing, the thrill is in the chase, once caught, they get quickly bored. However, we often have these people doing administrative stuff that may be necessary, but that the hunter salesperson does badly. The converse is also true. Why do we think some-one who is a “nurturer” by nature is going to be happy and perform in a role that requires hunting?
- Sales management is not sales. Too often we promote our best salesman to be sales manager, only to find the results are lousy, and neither party is happy. Many valuable sales professionals fail to be managers, they do not make the jump. In my experience the most common cause of the failure of a good sales person to be a good sales manager comes from 3 sources:
(a) The new sales manager wants to “keep his hand in”, so keeps an account or territory so as well as being the manager, he is the sales competitor to the rest of the sales team.
(b) The second reason is the tendency to micro manage the sales force, to get them to do things the way that was successful for them as a sales person, rather than being a coach, mentor and manager.
(c) Inadequate leadership being directed towards the new sales manager. In most growing SME’s this is almost a given, as the “Boss” is usually very functionally oriented, not having had a lot of exposure to sales, so in effect is learning on the job as much as the new sales manager is.
- Customer relationships
Building relationships with customers is like building any other sort of personal relationship. It takes time, effort, and commitment, as well as there being strong mutual benefit as the foundation. However, unlike personal relationships, B2B sales relationships almost always involve multiple people in the customer organisation, and a procurement process that needs to be administered. Mapping out these relationships and processes in some sort of sales plan is essential, and for the small group of strategically important customers, those who will generate the 80% of the profits of the future, it should be an exacting process. I usually call this process ‘SKAP’ for Strategic Key Account Planning, but the importance is in the development of a process by which to manage the allocation of resources across the tasks of paying the bills today, as well as into the future.
- The sales model
The choice of sales model is simply a function of the business model, but differing models require differing selling infrastructure and capabilities and collateral and marketing material.
Selling to distributors is a different animal to selling to end users. The former is usually interested only in margin, and what you as the principal are going to assist them to move stock, whereas selling direct is about delivering value to the end customer. When you identify these challenges in your business, we should have a coffee and come up with a plan.
Don’t ever forget that the success of the business depends on the ability of the sales function to deliver, and everyone in the business makes a contribution to the sale.
Nov 2, 2015 | Customers, Sales
Strategic Key Account Planning
SKAP, or Strategic Key Account Planning will enable general management, sales management and account executives to develop a comprehensive and measurable plan that will facilitate the development of relationships that identify, develop, win and keep business.
Clearly however, the first step is to identify just what characteristics are present in a “strategically important’ customer. Rarely will it be the top 10 customers, you need to look forward and determine who might be your top customers in 3-5 years, and work on them.
There is a fundamental assumption made that has held true of the 20 years I have been working with businesses developing ‘SKAP’, that there are only three ways you can effectively sell a product in B2B situations. You can work with your customer to:
- Increase their sales
- Reduce their costs
- Increase their productivity.
In one way or another, every consideration from IT implementations to OH&S come under one or more of these three headlines.
To sell in the competitive and digitised markets we now compete in, you need to be delivering on at least two of these fronts to be able to win a competitive situation, and three is geometrically better than just two.
The size and nature of the business does not matter much, any B2B oriented business can benefit by an intelligent SKAP process.
There are a number of elements that build on each other, all contributing to the picture of the manner in which you can approach the delivery of your value proposition to a potential and ongoing customer.
Of vital importance is to be able to see the customer’s problems and opportunities through their eyes. To do that you need detailed intelligence of the customers and their competitive environment
There are a number of areas of information; usually it takes an upfront effort followed by an incremental building of intelligence as the relationship develops. The more input the customer has to the process, the better. Developing a SKAP in collaboration with a customer is the ideal situation.
The information needs fall into a number of areas.
Corporate information.
- Ownership
- Key personnel
- Business processes such as purchasing, capital allocation and budgeting
- Organisation structure
- Informal communication and power structures
- Operating mechanisms, such as sites, internal communication systems.
Competitive information
- Primary competitors and relative strengths
- Key markets & profit pools
- Collaborators
- Relative strength of their value proposition
- Trends and regulations impacting the business
- Business model
Operational information
- Mechanics of their business model
- Personnel Capabilities in key areas
- Operational capabilities & processes
- Financial management
- Product development capabilities and processes
Market operations
- Sales and marketing processes
- Key customers
- Share of wallet
- key competitors
Customer SWOT
A SWOT analysis is usually very useful way of identifying and prioritising opportunities and threats faced by the potential customer. Looking at their market from their perspective is a vital ingredient in a successful sales effort.
Account plan
With all the above information in place, you can develop an account plan that details the activities
- Objectives
- Issues
- Actions to be taken, by whom, by when
- Expected outcomes of each action and follow up sequences
None of this is easy, or to be undertaken lightly, as there is an opportunity cost in the allocation of scarce resources. When you need a bit of help, call me.
Oct 19, 2015 | Customers, Marketing, Sales, Small business
Strategic Key Account Planning
Almost every organisation I have dealt with uses some variation of the accepted sales funnel model.
Start by gathering as many leads as possible, then progressively whittle them down through the funnel until you have a customer. The practice is always way more chaotic than the nicely drawn funnel, as leads enter and exit the funnel at various times for various reasons. Chaotic is usually an appropriate expression.
When you think about it, there is a huge amount of waste in the process.
You start with many, and expend considerable resources to turn leads, of which a large majority are unlikely ever to be customers, into prospects, into hot prospects, (or whatever creative name you call them) then create a transaction, then hopefully to build a relationship.
In most B2B situations, this simply does not make sense.
Would it not be far better to spend a fraction of the resources identifying your ideal customer based on your value proposition, then identifying the decision makers and their procurement processes in those ideal customers, then setting out to engage them with personalised marketing?
This is in effect turning the funnel upside down, but recognising that prospect behaviour is unpredictable if not chaotic, it may be that the pyramid, in what ever orientation is the wrong metaphor.
Why not use a cycle of some sort, with the central objective of creating a relationship with the key customers and prospects in your industry.
Digital technology is making this easier by the day to execute, but the foundations of good marketing have not changed. Digital technology cannot change those foundations, the things you simply have to get right to earn the confidence of a prospect to give you their money.
Oct 16, 2015 | Collaboration, Customers, Marketing, Small business
local business is your business
Small business owners seem always struggle to find the ways to build their business. B2B, B2C, does not matter, the challenges are similar.
How do you identify, engage, then build towards a transaction and relationship with people to whom your product or service solves a problem, and adds value too their lives?.
In my local area, there are a significant number of networking groups, ranging from community based ones to expensive franchise operations. I am a member of two groups, plus a local chamber of commerce. It takes work, but they do deliver results. In observing the behaviour in these groups of those who are successful, there are some pretty common things that can most small businesses can learn to do better.
1. Elevator Pitch. It amazes me how few can state in a few words what they do, what problems they solves, what outcomes can be achieved, and why their services are worth consideration. It should not be hard, but it is. Developing a good elevator pitch should be a priority.
2. Think local. Most small businesses find most of their business in the local area. It seems therefore to make sense to invest in the activities of the local area, from being a voice in the community groups such as Rotary, to sponsoring the local kids sporting teams with playing gear. A little bit of time and effort, but very little money can go a long way in a community.
3. Be vocal. Communities offer all sorts of ways to engage and make it clear what you stand for. A builder might be a protector of the architectural heritage of an area, the local sports store agitate to turn the local dump into playing fields, a bike shop might be the lead voice in having some waste land rezoned to enable building a bike track. The list can be as long as your imagination.
4. Collaborate. Locasl can build scale by collaborating, cross promoting, and assisting each other in all sorts of ways. Again, being open to ideas and opportunities can reap large rewards. My local bottle shop holds tastings on a fairly regular basis. They secure the time of the winemaker of a high quality small winery, who then takes a small group through the current releases, a vertical tasting, or whatever is appropriate, and over the course of the evening, the Japanese café next door delivers some terrific ‘nibblies’ Everyone wins.
5. Leverage the network. Local networking groups of various types do deliver value, but like all things of value, success only comes with work. Others need to understand what you do, how you deliver value, why they should use you instead of an alternative, they need to find common ground and build some trust. Going to the meetings is just the start.
6. Referrals. An adjunct to the networking activity, it pays to ask for the job, or referrals. Network theory clearly demonstrates that the networks of those in your network are the most potent source of leads there is. Many people feel that asking for a referral is not good form, remove that notion from your mind. Members of a networking group are all there for the same reason, to build their business, so they will not mind, and so long as you are prepared to reciprocate.
7. Offers. Offering an incentive of some sort always helps. A friend runs a small suburban bistro, open 6 days a week. He is booked solid Friday, Saturday, and Sunday evenings, but has to carry the overheads of being open and able to provide services at other times. He is always creating offers of his slow times, two for one, a bottle of champagne on the table, cakes for birthdays, on and on, in order to get bums in seats in the slow times, and as a result has a thriving business, with many repeat customers across the week.
All this stuff can be done as a part of your general marketing activities, it adds a critical personal dimension very challenging and expensive to achieve with any form of media. The range of options for small businesses has never been wider, and never forget that people buy from people far more than they buy from businesses.
Oct 13, 2015 | Customers, Marketing, retail, Sales, Small business
Innovation in supermarkets
Small business suppliers to supermarket chains are substantially compromised by the lack of resources to innovate.
Peter Drucker stated 50 years ago that innovation is the only really sustainable competitive advantage, and the passage of events have proved him correct.
Commercial survival requires that you are able to continually innovate, or you rapidly find yourself left behind, simply because everybody else is.
Knowing this does not however, make the challenge any less daunting, especially in an environment like FMCG where the retail gorillas stamp on variation as a source of transaction costs, and are actively seeking to reduce SKU numbers by pushing housebrands.
Lets define what we mean by innovation for the purposes of this post.
It does not include business model and process innovation. Both are terrific ways towards commercial sustainability, are paths every business must follow, but have little to do with innovation from the customer perspective, at least in the short to medium term.
By contrast, product innovation is concerned with new stuff that adds value to consumers.
Pretty simple definition, that precludes line extensions, which are just a fact of life, and product changes, which are again a fact of life. We are seeking to talk about the things that really make a difference, and how and why that happens.
Following are some thoughts on the nature of the strategic environment we find ourselves competing.
Innovation Paradox. Big businesses get big by being able to reproduce things without variation, their processes ensure consistency, and reject the outliers. This goes as much for people as it does products, so generally large businesses have more difficulty seeing and acting on something new than small ones. There are obvious exceptions, and large businesses everywhere are seeking ways to overcome the innovative inconvenience of their scale, with greatly differing levels of success. Nevertheless, the generality holds, but the small business end of the FMCG supply chain has been decimated, perhaps almost eradicated by the scale of the supermarkets and the power of their business model. Where is the innovation going to come from I wonder.
Risk. The risk profile of every business is different, but as a generality small businesses have a greater capacity to take risky decisions, but a less capacity to absorb them when they go pear-shaped. Large businesses survive on consistency as noted, and success for individuals in a large business is usually counted by their successes, failures are frowned upon, so the tendency to take risks is reduced, hence, their inability to innovate. Again there are notable exceptions, but they always occur when there is a leader who mandates and lives risk tolerance.
Wide view. Any organisation, no matter how big, only has a small proportion of the people thinking about the categories they compete in, so why do you think you will come up with the great ideas? Those using what I have always called “Environmental Research” always do better. This has nothing to do with hugging trees, and everything to do with understanding the context in which the behaviour of your consumers happens. When you understand the context, and see shifts, the opportunities suddenly become more easily identified.
Habit. Consumers are driven by their own habits, and once formed, it takes a lot of effort to break them. Habits work because they make our lives easier, and we are loathe to risk what we know works, for that for which there may be a question.
Boundaries. Innovation efforts need boundaries, or they tend to wander off into irrelevancy. I have found it far better to provide those boundaries in the pre-workshop, if that is what you are doing, material. It is necessary to encourage people to as the cliché goes, “think outside the box” but it is counter productive to have people thinking outside the municipality. Far better to ground the process in a context that is familiar, where there is market and customer knowledge available to feed the process. Without such grounding you tend to get uncertainty and irrelevancy, and ideas and conversation that skates across the surface rather than digging deep to where the problems and opportunities that provide the fodder of successful innovation are buried. I love the metaphor of Classical music and Jazz in the context of innovation, the score provides the boundaries. To be a good classical music player, you need to be a master of your instrument, and be able to reproduce note perfectly what the composer has written, the allowable variation is very small, the emphasis is on technique. Jazz by contrast requires that you are a master of the instrument, as well as the music to the extent that you can take what a composer has written and innovate around the base rhythm and melody, so you need to be not just a master technician, but a master of the music. Great innovation in a commercial environment has exactly the same characteristics.
Think different. The great 1997 Apple advertisement said it all, but how many corporate entities will tolerate the crazy ones? Very few. If you are to truly be an innovator, somehow you have to accommodate some crazy ones. Generally they are tough going, irreverent, unconcerned with status and the status quo, constantly irritating the nice smooth flow of processes that deliver the consistency that corporates thrive on.
Problem definition. Innovation occurs when a problem is solved. Often it is an old problem solved in a new way, sometimes it is a problem unrecognised until the solution comes along, the classic example being the post-it-note. A huge part of the challenge of innovation is the identification of the problem. Rarely does a problem emerge with a fully-fledged solution, but as Einstein, in my view one of the greatest marketing thinkers who never receives any credit at all once said, “if I had an hour to solve a live changing problem, I would spend the first 55 minutes defining the problem, the rest is just maths.”
Margin maintenance. This is tangled up with risk profile, but is separate. Over the years I have done many proposals for new products killed at the gate by the margin problem. “If we launch this, it will erode our margins” often true, but the standard response I give is “better us than someone else”, but it is often a futile response when the ultimate decision maker is compensated by short term considerations. After all, Kodak managed to survive for 40 years after they invented the digital camera in1975, several generations of CEO had passed through in that time, all taking their packet, it was just the last in the line who had a problem.
Value not just price. Consumers look for “value”, but way too often that is translated by suppliers and the retailer into “price”. Price is just one way of reflecting value, but it is the most obvious, and easiest to articulate.
Barriers. Every industry has its own set of barriers to innovation in addition to the more general ones above. In the case of the Australian packaged goods industry, they are several, all associated with the concentration of power in the retail trade.
Margin squeeze
Speed of house brand copying the successful products
Timing of distribution and advertising
On shelf management of facings, cut in, position, promotional programs and stock weight
13 week “live or die” time
On shelf upfront costs
Category management if you are not the category captain, and few small businesses are, you are at a significant disadvantage
Risk averse retailers
Habit. Everyone is used to doing business in a certain way, so that is the way it is done.
Opportunities for suppliers.
Similarly to barriers, every industry has its own unique set of opportunities that when seen are open for businesses to chase.
Social media. FMCG suppliers have not yet solved the problems of how to best use social media to market their process in supermarkets.
Mobility. Engagement with the web and its tools is now mobile, a majority of net interactions are mobile, and most people have their smart phones with them all the time. Using this capability and the geo-location capability to foster a direct relationship between the brand owner and the consumer with the supermarket playing the distributor role is a real opportunity currently under-recognised and utilised.
Food service and ingredient. These are fragmented markets, where innovation, service and brand can still play a real role, and getting a return on your investment is still up to the quality of your business, not the whim of a buyer in a gorilla suit. Depending on whose numbers you use, sales outside the major chains of ingredient and to food service outlets from fine dining to fast food, is north of 60 $billion.
Digital coupons. Retailers in Australia have ensured that the redeemable coupon, so prevalent in the US does not get a start here, too much transaction cost, but a digital coupon? Why not? There have been several tries of various types, Groupon being the most obvious, but smartphones make it so much easier to collect coupons and redeem them in some way, not necessarily even associated with the retailer.
Range optimisation. Category management as it has evolved has always been data intensive, and from a retailers perspective, the objective has been margin optimisation. The next step I suspect will be range optimisation which is really just margin optimisation with a far greater understanding of consumer behaviour thrown into the mix. We have all operated with the view that our various research tools and their data gave us enough to work with, and they did, but suddenly there is the “big data” behaviour mining opportunity offered by social media and geo location, in addition to the fragmentation of times we shop, and how we place and receive orders. Range optimisation to accommodate all these changes just became in my humble view, the FMCG marketing challenge of the decade.
Innovation from the waste. Until very recently, produce that was outside the specs for appearance was consigned to the waste bin, juicing, and other marginal uses, it was not deemed good enough by retailers to sell, not because it was nutritionally or organolepticly deficient, but because it looked crook. Along came the idea of highlighting the products visual imperfections, “Imperfect pick” is the term Harris Farm have used, Canadian chain Loblaws has successfully rolled out “ugly fruit” in Canada, and both Woolies and Coles appear to be tinkering with the idea currently. There are a myriad of opportunities to utilise undervalued product to build a category, for example, shin bones are the foundation of Osso Bucco, many of us will sample great Osso Bucco at an Italian restaurant, but never cook it at home, when it is an easy, tasty meal with a very low meat cost. Pretty simple marketing I would have thought.
Innovation is tough, but it is also fun and makes the future. Those who just wait for the future to happen will be overwhelmed by it, those who take a role in shaping it will at least have the chance to do well.
This post is the 8th in the series examining the means by which small businesses can deal with the retail gorillas.
The one that started it, back in October 2014, is a summary of the 10 ways to beat the gorillas at their own game, a summary post that generated a lot of interest, so I expanded the individual points in subsequent posts.
The first expanded post was the 3 essential pieces of the business model
The second, 5 ways to compete with data
Third, 6 category management ideas for small business at Christmas
Fourth, 9 imperatives for small businesses to build a brand
Fifth deals with the reality for all supermarket suppliers, that they have two customer types, requiring different approaches.
Sixth, deals with the least understood large cost impact on small businesses: Transaction costs.
Seventh suggested ways for small businesses to collaborate for scale,
Sep 28, 2015 | Branding, Customers, Marketing, Social Media
courtesy: Hugh McLeod Gaping void
Social media presents enormous opportunities for small businesses to connect with their customers in ways not imaginable just a few years ago.
However, like every new tool that comes along, it can be misused and certainly abused, and is certain to be touted by carpetbaggers. Considering the following list may save you some heartache.
- It will not address failings in your band positioning and execution. Get those right, and Social media can be a great addition, but it will not backfill the failures of creative, customer and problem focused strategic thinking.
- It will not make your brand interesting to potential customers who are not interested in what you have to offer.
- It cannot help you when all you talk about is yourself. People are more interested in themselves than in you, and unless you grapple with and answer the “What’s in it for me” question, you will end up talking to yourself.
- It cannot guarantee to go viral. Very few things go viral, it is like winning the lottery, the more tickets, the greater the chance, but each ticket has the same chance as all the others.
- It will not make up for poor content. In fact, poor content can kill any potential success your strategy may have, stone dead.
- It does not operate in an objectiveless world, so cannot deliver on objectives you have failed to articulate and plan for.
- It will not compensate for poor customer service. In fact, one of the great things is that those with poor customer service will be exposed quicker than ever, and go broke, reducing the ‘noise’ in the market.
- It rarely seems to ignore the things you may rather have it ignore, like lousy customer service.
- It will not change the world, although there is evidence that it can make a major contribution in that direction.
- It is not free. Posting of social platforms may be free, but there is considerable effort and many challenges before you will have any chance of being noticed. That effort will incur at least opportunity cost if you do it yourself, or professional costs if you outsource.
- It does not just happen. Being good at leveraging the opportunities of Social media is like anything else, you can only get out after you have put in. Success always takes take considerable effort.
The message is that social media is not the panacea for anything, not a silver bullet for any problem, it is just a tool in the marketing toolbox. It might be new and shiny, and seemingly changing daily, and being touted as the next big thing, which to some extent it is, but it remains just a means to an end, not the end itself.
