Yesterday I received a sales letter that hit me like a breath of fresh, un-digitized air. I wanted to share it with my readers:
Dear Friend:
As we enter the new year, conditions are not very good for purchasing new supplies and equipment. However, there are some signs that this may improve as the year progresses.
Your responsibility as a department manager or property manager is to maintain your facilities in the best possible manner. I have three things to offer:
Excellent products
Good service
Fair prices
If the need arises this year for you to replace or add to your equipment, please don’t hesitate to give me a call. I will be happy to furnish you catalogs and written quotations for your consideration.
Sincerely,
My friend Stanley’s name follows below his hand-written signature.
Three paragraphs, two sentences each. There’s purity of form and a sincerity that rarely emanates from today’s marketing communications.
Stanley began his sales career before most of us were born, and he hopes to achieve the milestone of entering his ninth decade this year. He’s a retired CEO who is passionate about selling. He’s never stopped. When he started working, ‘personal selling’ meant . . . personal selling. Telephones, “snail mail,” and cars were the tools of the sales trade. Most of all, face-to-face dialogs created the trusted bonds between buyer and seller, and were an inextricable part of the sales process. Little wonder that Stanley’s letter says “I care” so clearly, without using those two words. He perfected that skill in the trenches, by looking at his customer in the eye.
In our Twittered, Blogged, and Web 2.0’d sales world, Stanley’s selling talent has become rare. The forces of information technology, product commoditization, and cost reduction have pushed legions of salespeople from the prospect’s office to the deep innards of the call-center cube farm. Millions must make their quotas using far more sophisticated tools than Stanley had—but without ever physically shaking hands with a customer.
As Stanley approaches his 80th birthday, he has become rare in other ways as well. He’s part of a shrinking population that will all but vanish in twenty years: a self-selected group of senior citizens that choose not to use a computer. He doesn’t use email or a have website for his company. He puts up with my e-marketing hubris when I rib him about not being able to accept orders online (FAX and phone work fine for him). The few times he needs Internet access, he taps an eager pool of knowledgeable grandchildren. It would be easy to dismiss his knowledge as outdated.
But the wisdom contained in his letter reminds me that when it comes to selling, seniors have a wealth of knowledge for the rest of us. Stanley has taught me how courtesy, respect, and sincerity have great power in sales. I wish Stanley many more great years in selling. I still have much to learn from him.
Friday, January 30, 2009
Friday, January 23, 2009
Money is Tight. Where's the Biggest Customer Experience Bang for the Buck?
By Andrew Rudin, Outside Technologies, Inc.
The VP of Sales at a software company I worked for frequently chided his sales force not to boast to prospects about recent wins. "Customers are always unhappy within the first 90 days of an install."
He was right in one way: our customers were invariably disappointed early. But he was wrong in accepting customer rancor as inevitable, and his myopia cost his sales force and the company substantial revenue. What was the company's strategic CRM blunder? I'll describe that in a moment.
If you graph customer expectations over time, one inarguable high point comes immediately following the sale. Why? Because salespeople have an understandable tendency to over-promise results, especially when quotas--and jobs--are on the line (been there, done that). On the customer side, harsh spotlights turn on the decision makers as anxious colleagues look for quick, tangible improvements, or detractors salivate for opportunities to say "I had serious doubts about the vendor choice." Meanwhile, the decision makers seek validation for why they made the best decision from a pool of qualified competitors. Word-of-mouth is in hyper-drive. My experience has been that a significant number of queries are exchanged immediately post-sale (Although I haven't taken formal measurements, I'm interested in learning if anyone has).
If there's ever a time you need to love your customer, it's right after you first shake hands when referring to your prospect as customer. Hugs all around--for 90 days! What better time to provide the decision makers with every reason that he or she made the best choice?
What did my employer do? Management scrutinized departmental financial performance for every part of the delivery, and customer satisfaction measurements were omitted from the equation. What did that mean? Revenue was split between departments: custom development, warranty support, packaged application sales, installation and training, and product management. Expenses were measured down to the penny. From a customer perspective, support was grudgingly parsed. Meters were ticking for every direct customer interaction--and behind the scenes as well--because no department wanted to "eat an expense," an expression that became well-worn at internal client meetings.
What dynamic does this problem create for a sales organization? Notwithstanding the incredible amount of time a salesperson must spend responding to calls and emails that open with "Before we bought this, you told me . . , " consistent service breakdowns destroy credibility. When that happens, sales don't repeat easily, and cannot scale--two must have's for growth-oriented strategies.
What should my company have done? Hindsight offers vivid clarity. A management planning horizon that extended beyond the current quarter would have helped. A business strategy that included in its financial calculus the lifetime value of the customer would have made general ledger expense silos less dysfunctional. At the very least, internal bickering would have been minimized as managers strategized how to create value for customers as well as themselves.
Business strategies have the best opportunity to work when a customer says "I made best choice given what I knew at the time, and if I had to make my choice again, I'd do the same thing."
The VP of Sales at a software company I worked for frequently chided his sales force not to boast to prospects about recent wins. "Customers are always unhappy within the first 90 days of an install."
He was right in one way: our customers were invariably disappointed early. But he was wrong in accepting customer rancor as inevitable, and his myopia cost his sales force and the company substantial revenue. What was the company's strategic CRM blunder? I'll describe that in a moment.
If you graph customer expectations over time, one inarguable high point comes immediately following the sale. Why? Because salespeople have an understandable tendency to over-promise results, especially when quotas--and jobs--are on the line (been there, done that). On the customer side, harsh spotlights turn on the decision makers as anxious colleagues look for quick, tangible improvements, or detractors salivate for opportunities to say "I had serious doubts about the vendor choice." Meanwhile, the decision makers seek validation for why they made the best decision from a pool of qualified competitors. Word-of-mouth is in hyper-drive. My experience has been that a significant number of queries are exchanged immediately post-sale (Although I haven't taken formal measurements, I'm interested in learning if anyone has).
If there's ever a time you need to love your customer, it's right after you first shake hands when referring to your prospect as customer. Hugs all around--for 90 days! What better time to provide the decision makers with every reason that he or she made the best choice?
What did my employer do? Management scrutinized departmental financial performance for every part of the delivery, and customer satisfaction measurements were omitted from the equation. What did that mean? Revenue was split between departments: custom development, warranty support, packaged application sales, installation and training, and product management. Expenses were measured down to the penny. From a customer perspective, support was grudgingly parsed. Meters were ticking for every direct customer interaction--and behind the scenes as well--because no department wanted to "eat an expense," an expression that became well-worn at internal client meetings.
What dynamic does this problem create for a sales organization? Notwithstanding the incredible amount of time a salesperson must spend responding to calls and emails that open with "Before we bought this, you told me . . , " consistent service breakdowns destroy credibility. When that happens, sales don't repeat easily, and cannot scale--two must have's for growth-oriented strategies.
What should my company have done? Hindsight offers vivid clarity. A management planning horizon that extended beyond the current quarter would have helped. A business strategy that included in its financial calculus the lifetime value of the customer would have made general ledger expense silos less dysfunctional. At the very least, internal bickering would have been minimized as managers strategized how to create value for customers as well as themselves.
Business strategies have the best opportunity to work when a customer says "I made best choice given what I knew at the time, and if I had to make my choice again, I'd do the same thing."
Wednesday, January 7, 2009
Look Both Ways Before Making 2009's Sales Resolutions!
In the past, making resolutions was a challenge that was easy for me to delay. After January 1, the world kept moving and I moved with it--resolution ready or not! But so much changed in 2008 that I felt a steadying resolution or two might help. So I grouped my 2009 sales resolutions into two Janusian groups (owing its name to the Roman god of gates and doors, Janus, whose vigil required him to look in two directions):
Things to continue doing
Things to do differently
Things to start doing
Things to stop doing
Before January’s calendar rolls into double-digit days, I wanted to share my list for my clients and other enterprises:
Things to continue doing (for some people, after 2008, this might be the shortest of the four lists!):
1. Setting strategic goals that push the envelope (sometimes called BHAG’s—Big Hairy Audacious Goals).
2. Exploiting social media communication to achieve corporate strategies.
Things to do differently:
1. Develop not just many social media connections, but those that provide the highest value to enterprises: innovation, revenue achievement, and knowledge for process best practices.
2. Reorganize marketing and selling processes to address redistribution of information power and changes in how people buy.
3. Trust, but more skeptically. As author David Berreby said, when writing about trust in the New York Times(March 30, 2008), Stanley Milgram’s famed electric shock experiments show “in difficult situations, when (people) wrestle with the line between trust and skepticism, trust often wins. Much of the time, that’s a good thing.” The aftermath of Bernie Madoff’s scheme suggests differently.
Things to start doing:
1. Ask a teenager for ongoing, in-depth tutorials about how to use Facebook, Twitter, instant messaging, and other social media tools (if you haven’t already done so).
2. Seek opinions from people, books and blogs that are controversial or even disagreeable.
Things to stop doing:
1. Flogging the sales force for more productivity and more revenue output without providing better tools, training, or process improvements.
2. Delaying strategy decision making “until we know what the economy is going to do.” The forces in world keep moving. Could the risks of indecision be greater than the risks from a wrong decision?
What’s on your list?
Things to continue doing
Things to do differently
Things to start doing
Things to stop doing
Before January’s calendar rolls into double-digit days, I wanted to share my list for my clients and other enterprises:
Things to continue doing (for some people, after 2008, this might be the shortest of the four lists!):
1. Setting strategic goals that push the envelope (sometimes called BHAG’s—Big Hairy Audacious Goals).
2. Exploiting social media communication to achieve corporate strategies.
Things to do differently:
1. Develop not just many social media connections, but those that provide the highest value to enterprises: innovation, revenue achievement, and knowledge for process best practices.
2. Reorganize marketing and selling processes to address redistribution of information power and changes in how people buy.
3. Trust, but more skeptically. As author David Berreby said, when writing about trust in the New York Times(March 30, 2008), Stanley Milgram’s famed electric shock experiments show “in difficult situations, when (people) wrestle with the line between trust and skepticism, trust often wins. Much of the time, that’s a good thing.” The aftermath of Bernie Madoff’s scheme suggests differently.
Things to start doing:
1. Ask a teenager for ongoing, in-depth tutorials about how to use Facebook, Twitter, instant messaging, and other social media tools (if you haven’t already done so).
2. Seek opinions from people, books and blogs that are controversial or even disagreeable.
Things to stop doing:
1. Flogging the sales force for more productivity and more revenue output without providing better tools, training, or process improvements.
2. Delaying strategy decision making “until we know what the economy is going to do.” The forces in world keep moving. Could the risks of indecision be greater than the risks from a wrong decision?
What’s on your list?
Tuesday, January 6, 2009
Why Sears Customers Continue To Suffer
(first published March, 2007)
Sears--the retailing powerhouse that broke down paradigms for how consumers purchase hardgoods hasn't figured out how to maintain their visionary edge. Many would argue that they lost it many years ago. Today they are the poster child of companies that say--no, shout--to their customers: "We're happy to take your money. After that, we don't care."
Here's the evidence: last August, we purchased a relatively inexpensive refrigerator to replace our failing 15-year-old unit, which had been housed in our garage. We found it on the Sears website and engaged in a conversation to clarify a few questions with Sears customer service before placing the order. At the appointed time, two men in a Sears delivery truck arrived and, delighted that this stop didn't involve taking the new refrigerator around the back and up 4 flights of stairs, happily placed the new unit in the spot in the garage location formerly occupied by the old one. They thanked me for the order, took our old refrigerator, and drove off less than 15 minutes after they arrived. I paid about $20 for this service, which was fine.
The refrigerator worked well until this winter, when the freezer mysteriously stopped keeping our frozen food frozen. The refrigerator was still under warranty, so I contacted the service number printed on the manual. After over 90 minutes of phone hold "press 1, press 2, press 3" agony, I persevered and spoke to a customer service representative who blandly asked me to open my manual and to read some text embedded on a paragraph on page 12 that indicated my refrigerator was not built for use outside of the temperature confines of a typical American home. Therefore, garage and back porch installers need not apply! I informed him that this information was not shared with me--not by the Sears website (which didn't state "Not designed to be installed in unheated areas in colder climates), not by the order desk personnel I spoke with before ordering (I told the representative the unit would be installed in my garage), and not by the delivery crew (who PUT it in the garage)--and I also told him that Virginia, in fact, experiences freezing weather in the winter. He further impugned Sears by saying that this issue comes up all the time. "So why doesn't the website provide the appropriate information?" I asked. "I guess nobody outside of tech support really knows this," he responded. At this point, I asked him what is the process for resolving this problem resulting from what I felt was an irresponsible omission of key product information--times 3! He said they would have to send a service tech to my home to see if it could be fixed. "FIXED--How? you just told me it won't work, according to page 12! What is your service tech going to do or tell me that you haven't done already?" He responded that that is his process and he's sticking to it.
A few days later, according to Sears Plan, I received a friendly automated recording from Sears informing me that a service tech would arrive at my home the following Saturday--somewhere between 8 am and 5 pm. Not being exactly overjoyed at the prospect of spending the entire day at home further contaminated what little expectation I had of achieving any positive result from this "process." I called Sears back and firmly committed that I would make no commitments to staying at home all day on a Saturday (did Sears think I had nothing else to do?). In fact, a service tech did show up when I wasn't at home. Little wonder. A few days later, exactly according to the Sears "process" script, another friendly recording arrived in my voicemail inbox, offering another window of opportunity for a service call--this time during the week between 8 and 12, which I accepted.
On the scheduled day, a friendly, but jaded, service tech arrived and confirmed what I already knew: the compressor on the freezer wasn't designed to operate in temperatures below 50 degrees. "I'll write this up in a case and let them know what I found. At this point, there's nothing I can do." Who is "them?" I asked. He said the store manager at our local Sears. "But I purchased this online," I said. No matter, he told me--the local store would have to resolve my issue. "I see this all the time," he said. "I don't know why they they sell these and install them in this climate. They should know better. So many people buy these in the summer and they are happy. Then winter hits and they don't know what happened. I see it all the time." All this information about how preventable this misfire was didn't leave me with a warm feeling.
Contributing to the evidence of how pervasive is the ineptitude at Sears is this fact: the refrigerator cost less than $450. Did it even occur to the product planners and buyers at Sears that such a low-price model might be utilized by someone in the United States as an auxiliary appliance, and therefore might be installed in a location other than a kitchen? Clearly, that question was never asked by people who should have asked it. (Although I sardonically envision a lowly Sears intern voicing concern, but quickly dropping the idea after withering in the conference room before the pompous glares of his superiors.) Like most systemic customer support problems, the organizational partitions that managers faithfully create lose their utility when the challenge becomes "how do we demonstrate to our customers that they matter to us?"
After 3 weeks,I haven't had time to contact Sears to figure out what to do about the appliance they so flagrantly misrepresented. And as for the Sears resolution "process:" No follow up call from Sears, no resolution, no anything. Maybe they'll give me another automated call--this time with a synthesized voice saying "Hi! This is Sears! We just want to let you know we care. Goodbye."
It's still winter in Virginia, and all of my outdoor freezer stuff is in my indoor freezer so it won't spoil. I can't wait till the weather turns warm so that my freezer will work again. Then I'll call Sears to let them know--in the vain hope that someone cares.
Clearly Sears is adept at completing the sales transaction: my credit card payment and delivery order were processed quickly and efficiently. They still haven't figured out how to make the customer experience satisfactory. It's the last product I'll ever buy from them. Oh, and that includes Land's End, too! I can't wait to show my friends how well my Sears refrigerator works! Maybe I'll spoil some sales to go along with my spoiled food!
Sears--the retailing powerhouse that broke down paradigms for how consumers purchase hardgoods hasn't figured out how to maintain their visionary edge. Many would argue that they lost it many years ago. Today they are the poster child of companies that say--no, shout--to their customers: "We're happy to take your money. After that, we don't care."
Here's the evidence: last August, we purchased a relatively inexpensive refrigerator to replace our failing 15-year-old unit, which had been housed in our garage. We found it on the Sears website and engaged in a conversation to clarify a few questions with Sears customer service before placing the order. At the appointed time, two men in a Sears delivery truck arrived and, delighted that this stop didn't involve taking the new refrigerator around the back and up 4 flights of stairs, happily placed the new unit in the spot in the garage location formerly occupied by the old one. They thanked me for the order, took our old refrigerator, and drove off less than 15 minutes after they arrived. I paid about $20 for this service, which was fine.
The refrigerator worked well until this winter, when the freezer mysteriously stopped keeping our frozen food frozen. The refrigerator was still under warranty, so I contacted the service number printed on the manual. After over 90 minutes of phone hold "press 1, press 2, press 3" agony, I persevered and spoke to a customer service representative who blandly asked me to open my manual and to read some text embedded on a paragraph on page 12 that indicated my refrigerator was not built for use outside of the temperature confines of a typical American home. Therefore, garage and back porch installers need not apply! I informed him that this information was not shared with me--not by the Sears website (which didn't state "Not designed to be installed in unheated areas in colder climates), not by the order desk personnel I spoke with before ordering (I told the representative the unit would be installed in my garage), and not by the delivery crew (who PUT it in the garage)--and I also told him that Virginia, in fact, experiences freezing weather in the winter. He further impugned Sears by saying that this issue comes up all the time. "So why doesn't the website provide the appropriate information?" I asked. "I guess nobody outside of tech support really knows this," he responded. At this point, I asked him what is the process for resolving this problem resulting from what I felt was an irresponsible omission of key product information--times 3! He said they would have to send a service tech to my home to see if it could be fixed. "FIXED--How? you just told me it won't work, according to page 12! What is your service tech going to do or tell me that you haven't done already?" He responded that that is his process and he's sticking to it.
A few days later, according to Sears Plan, I received a friendly automated recording from Sears informing me that a service tech would arrive at my home the following Saturday--somewhere between 8 am and 5 pm. Not being exactly overjoyed at the prospect of spending the entire day at home further contaminated what little expectation I had of achieving any positive result from this "process." I called Sears back and firmly committed that I would make no commitments to staying at home all day on a Saturday (did Sears think I had nothing else to do?). In fact, a service tech did show up when I wasn't at home. Little wonder. A few days later, exactly according to the Sears "process" script, another friendly recording arrived in my voicemail inbox, offering another window of opportunity for a service call--this time during the week between 8 and 12, which I accepted.
On the scheduled day, a friendly, but jaded, service tech arrived and confirmed what I already knew: the compressor on the freezer wasn't designed to operate in temperatures below 50 degrees. "I'll write this up in a case and let them know what I found. At this point, there's nothing I can do." Who is "them?" I asked. He said the store manager at our local Sears. "But I purchased this online," I said. No matter, he told me--the local store would have to resolve my issue. "I see this all the time," he said. "I don't know why they they sell these and install them in this climate. They should know better. So many people buy these in the summer and they are happy. Then winter hits and they don't know what happened. I see it all the time." All this information about how preventable this misfire was didn't leave me with a warm feeling.
Contributing to the evidence of how pervasive is the ineptitude at Sears is this fact: the refrigerator cost less than $450. Did it even occur to the product planners and buyers at Sears that such a low-price model might be utilized by someone in the United States as an auxiliary appliance, and therefore might be installed in a location other than a kitchen? Clearly, that question was never asked by people who should have asked it. (Although I sardonically envision a lowly Sears intern voicing concern, but quickly dropping the idea after withering in the conference room before the pompous glares of his superiors.) Like most systemic customer support problems, the organizational partitions that managers faithfully create lose their utility when the challenge becomes "how do we demonstrate to our customers that they matter to us?"
After 3 weeks,I haven't had time to contact Sears to figure out what to do about the appliance they so flagrantly misrepresented. And as for the Sears resolution "process:" No follow up call from Sears, no resolution, no anything. Maybe they'll give me another automated call--this time with a synthesized voice saying "Hi! This is Sears! We just want to let you know we care. Goodbye."
It's still winter in Virginia, and all of my outdoor freezer stuff is in my indoor freezer so it won't spoil. I can't wait till the weather turns warm so that my freezer will work again. Then I'll call Sears to let them know--in the vain hope that someone cares.
Clearly Sears is adept at completing the sales transaction: my credit card payment and delivery order were processed quickly and efficiently. They still haven't figured out how to make the customer experience satisfactory. It's the last product I'll ever buy from them. Oh, and that includes Land's End, too! I can't wait to show my friends how well my Sears refrigerator works! Maybe I'll spoil some sales to go along with my spoiled food!
"On My Honor, as a Salesperson . . .": Why Sales Ethics Matter
(first published April, 2007)
Which business risk represents the greatest threat to shareholder value? Natural disasters? Terrorism? Product defects? Piracy? Patent infringement? Lack of ethical boundaries?
If you answered anything but the last choice, think again. The massive collapse of market capitalization at Tyco, Worldcom, and Enron underscores the grave dangers posed to shareholder value when employees lack an ethical compass. The cumulative decline in market capitalization resulting from fraud at these three companies was $136 billion, according to Public Citizen's Congress Watch.
These scandals originated in the executive suite and required an ecosystem of compliant people to execute. What about ethical problems that originate elsewhere? What happens when ethical violations spiral from what are euphemistically called "aggressive sales practices?" In 1998, ethical violations at Prudential Insurance became so pervasive that the company's management eventually estimated its liability from the pending class-action lawsuit at $2 billion. Among the voluminous courtroom testimony from the case was this nugget: "Your judgment gets clouded out in the field when you are pressured to sell, sell, sell."
Could ethical problems affect your company? No company is immune. How might your company's reputation or your personal reputation be affected? How real are the ethical risks you face, and what, if anything, should you do about them? These are risk-related questions that one company should have asked—but didn't. As a result, the indiscretions of a person I'll call Travis Doe cost MegaCorp (not the company's real name) more than $1 million.
Travis Doe was a reseller account manager for MegaCorp. He was affable and gregarious, and his compensation plan enabled him to earn a comfortable six-figure package. But Travis had a revenue scheme that would make his day-job earnings pale in comparison, and it paid him very well—before he was caught. When the dust began to settle a year later, the total estimated cost to MegaCorp was more than $1 million. That's before adding the 40 percent revenue loss of the diverted direct sales. What about the greater cost of diminished employee morale and broken customer trust?
The loss was buried in the income statement of MegaCorp's financial report, away from the eyes of investors. No mainstream publication or trade journal carried the story. What was Travis's scheme? I'll get to that in a moment.
Unethical
Any discussion of ethics involves drawing boundaries. But drawing boundaries for sales ethics is much easier said than done:
"I'll sell an early version of my software that isn't fully tested, but I won't sell anything that I know doesn't work."
"I won't bring up the fact that I'm missing a key feature, but I won't lie about its absence."
"At the end of the quarter, I will commit resources I don't control so I can win the sale, but I won't promise my prospective customer anything I know cannot be delivered."
I won't overcharge anyone, but I won't sell at the lowest possible price, either."
I'll look out for my client's best interests but only if doing so doesn't jeopardize my business."
As author David Quammen writes in Wild Thoughts From Wild Places (Scribner, 1998), "Not every crisp line represents a triumph of ethical clarity." What causes this obfuscation? Individual ethical interpretations are a function of a person's current emotions, situation, values, experience, logic and personality. What do blurry interpretive boundaries mean for sales? They mean that ethical practices and behaviors are difficult to define.
Travis's plan
Travis executed his plan by setting up a bogus reseller account. When prospective clients sent requests for quotes, Travis sent the requests to his bogus company instead of sending them to a legitimate reseller. Because the bogus reseller purchased from MegaCorp at a 40 percent discount, Travis made a significant profit on every order his bogus company processed. Only when an order administrator on the West Coast spotted a benign part number anomaly did Travis's ruse begin to unravel. She phoned the "reseller" with a question, and the person who answered stated that "our vice president, Travis Doe, will contact you tomorrow with an answer." The order administrator blew the whistle. An embarrassed MegaCorp quietly fired him about a week later.
The evidence on the laptop exposed how far the ripples from the scam had traveled. There were copies of letters and proposals bearing the name, "Travis Doe, Vice President," on fake letterhead. Under the guise of a legitimate reseller, Travis had created price lists, spreadsheets that tracked the status of quotes, customer lists, marketing material and more.
Surprised colleagues (and some not-so-surprised) came forward to describe how Travis had pressured them to send orders to his bogus reseller rather than place them directly with their employer. Betrayed customers who had unwittingly placed orders with the reseller loudly expressed their woes because Travis's company had no capabilities to support them. Legitimate resellers were particularly irate because they had been deprived of valuable orders.
No one else was terminated, but except for the alert order administrator, Travis's indiscretion created no winners. Where were the boundaries of ethical responsibility? MegaCorp utterly failed by not having adequate controls to prevent Travis's scheme. If Travis's immediate boss knew about his dishonesty, why didn't he stop him? If he didn't know, why not? You know it's a bad day at the office when any answer you provide isn't a good one.
Ethical risk presents vexing challenges for organizations because ethical standards must first be defined, then documented, communicated and followed. In addition, the subjectivity of what constitutes good ethics, and resulting interpretive challenges, defy standard-setting. Senior managers should not avoid this problem. Instead, they should embrace it by creating an environment for open, candid discussion about ethical challenges that will encourage salespeople, and those who support their efforts, to identify issues and confront them before they spiral out of control.
Establishing an ethical culture requires strong leadership; expectations for ethical behavior must be visible and consistent throughout the enterprise. Similar to many operational risks, the likelihood of ethics problems is magnified when multiple risk conditions coexist. When high financial incentives for dishonesty, lax audit controls and non-integrated processes exist simultaneously in an organization, a shrill alarm should sound in the boardroom or executive suite indicating a condition ripe for exploitation. Ethical lapses can irreparably undermine the best business plans, corporate reputations, and brand building. There are too many opportunistic Travises in the world, and too much value at risk, to ignore the alert.
© 2007 Andrew Rudin
Which business risk represents the greatest threat to shareholder value? Natural disasters? Terrorism? Product defects? Piracy? Patent infringement? Lack of ethical boundaries?
If you answered anything but the last choice, think again. The massive collapse of market capitalization at Tyco, Worldcom, and Enron underscores the grave dangers posed to shareholder value when employees lack an ethical compass. The cumulative decline in market capitalization resulting from fraud at these three companies was $136 billion, according to Public Citizen's Congress Watch.
These scandals originated in the executive suite and required an ecosystem of compliant people to execute. What about ethical problems that originate elsewhere? What happens when ethical violations spiral from what are euphemistically called "aggressive sales practices?" In 1998, ethical violations at Prudential Insurance became so pervasive that the company's management eventually estimated its liability from the pending class-action lawsuit at $2 billion. Among the voluminous courtroom testimony from the case was this nugget: "Your judgment gets clouded out in the field when you are pressured to sell, sell, sell."
Could ethical problems affect your company? No company is immune. How might your company's reputation or your personal reputation be affected? How real are the ethical risks you face, and what, if anything, should you do about them? These are risk-related questions that one company should have asked—but didn't. As a result, the indiscretions of a person I'll call Travis Doe cost MegaCorp (not the company's real name) more than $1 million.
Travis Doe was a reseller account manager for MegaCorp. He was affable and gregarious, and his compensation plan enabled him to earn a comfortable six-figure package. But Travis had a revenue scheme that would make his day-job earnings pale in comparison, and it paid him very well—before he was caught. When the dust began to settle a year later, the total estimated cost to MegaCorp was more than $1 million. That's before adding the 40 percent revenue loss of the diverted direct sales. What about the greater cost of diminished employee morale and broken customer trust?
The loss was buried in the income statement of MegaCorp's financial report, away from the eyes of investors. No mainstream publication or trade journal carried the story. What was Travis's scheme? I'll get to that in a moment.
Unethical
Any discussion of ethics involves drawing boundaries. But drawing boundaries for sales ethics is much easier said than done:
"I'll sell an early version of my software that isn't fully tested, but I won't sell anything that I know doesn't work."
"I won't bring up the fact that I'm missing a key feature, but I won't lie about its absence."
"At the end of the quarter, I will commit resources I don't control so I can win the sale, but I won't promise my prospective customer anything I know cannot be delivered."
I won't overcharge anyone, but I won't sell at the lowest possible price, either."
I'll look out for my client's best interests but only if doing so doesn't jeopardize my business."
As author David Quammen writes in Wild Thoughts From Wild Places (Scribner, 1998), "Not every crisp line represents a triumph of ethical clarity." What causes this obfuscation? Individual ethical interpretations are a function of a person's current emotions, situation, values, experience, logic and personality. What do blurry interpretive boundaries mean for sales? They mean that ethical practices and behaviors are difficult to define.
Travis's plan
Travis executed his plan by setting up a bogus reseller account. When prospective clients sent requests for quotes, Travis sent the requests to his bogus company instead of sending them to a legitimate reseller. Because the bogus reseller purchased from MegaCorp at a 40 percent discount, Travis made a significant profit on every order his bogus company processed. Only when an order administrator on the West Coast spotted a benign part number anomaly did Travis's ruse begin to unravel. She phoned the "reseller" with a question, and the person who answered stated that "our vice president, Travis Doe, will contact you tomorrow with an answer." The order administrator blew the whistle. An embarrassed MegaCorp quietly fired him about a week later.
The evidence on the laptop exposed how far the ripples from the scam had traveled. There were copies of letters and proposals bearing the name, "Travis Doe, Vice President," on fake letterhead. Under the guise of a legitimate reseller, Travis had created price lists, spreadsheets that tracked the status of quotes, customer lists, marketing material and more.
Surprised colleagues (and some not-so-surprised) came forward to describe how Travis had pressured them to send orders to his bogus reseller rather than place them directly with their employer. Betrayed customers who had unwittingly placed orders with the reseller loudly expressed their woes because Travis's company had no capabilities to support them. Legitimate resellers were particularly irate because they had been deprived of valuable orders.
No one else was terminated, but except for the alert order administrator, Travis's indiscretion created no winners. Where were the boundaries of ethical responsibility? MegaCorp utterly failed by not having adequate controls to prevent Travis's scheme. If Travis's immediate boss knew about his dishonesty, why didn't he stop him? If he didn't know, why not? You know it's a bad day at the office when any answer you provide isn't a good one.
Ethical risk presents vexing challenges for organizations because ethical standards must first be defined, then documented, communicated and followed. In addition, the subjectivity of what constitutes good ethics, and resulting interpretive challenges, defy standard-setting. Senior managers should not avoid this problem. Instead, they should embrace it by creating an environment for open, candid discussion about ethical challenges that will encourage salespeople, and those who support their efforts, to identify issues and confront them before they spiral out of control.
Establishing an ethical culture requires strong leadership; expectations for ethical behavior must be visible and consistent throughout the enterprise. Similar to many operational risks, the likelihood of ethics problems is magnified when multiple risk conditions coexist. When high financial incentives for dishonesty, lax audit controls and non-integrated processes exist simultaneously in an organization, a shrill alarm should sound in the boardroom or executive suite indicating a condition ripe for exploitation. Ethical lapses can irreparably undermine the best business plans, corporate reputations, and brand building. There are too many opportunistic Travises in the world, and too much value at risk, to ignore the alert.
© 2007 Andrew Rudin
How Humor and Eavesdropping Combine To Win Sales
(first published October, 2007)
I was in midway through writing an article with the dour title "Prospecting Doesn't Matter" (owing to Nicholas Carr's 2003 Harvard Business Review article "IT Doesn't Matter") when I serendipitously uncovered something that debunked my premise--at least for now.
A New Jersey company, Hammerhead Advertising (www.hammerheadadvertising.com), has created a campaign for new business by combining time-worn voice mail technology with an edgy message. After listening to the six samples available on the company's website, I was stunned by the power of the deceptively simple--but wildly innovative--approach. What makes the messages so powerful? It's not what you might think. There's no "value message," no glowing customer references, no gratuitous branding. It exploits an unvarnished, visceral approach that combines subtle humor with voyeurism.
The messages are delivered to the voice mailbox of the intended recipient, the Chief Marketing Officer, but are created to sound as if the CMO is actually eavesdropping on a recording of his or her company's receptionist thwarting yet another unwary and untalented ad agency salesperson. (It's worth five minutes: go to the company's website, and click on "our work" and then on "radio" to play the messages.)
What does Hammerhead's innovation mean for CRM? In our buttoned-down, ROI-obsessed, prove-the-business-case, new media, B2B sales world, the connections that we have with others are often closer than we think, and it's possible to use these connections productively if we can break out of our cultural and technological boxes. Many salespeople bemoan that they "can't get through the gatekeeper," and some develop compensating tactics that violate ethical boundaries. It's great to know that it's possible to exercise the adage "If you don't have it, feature it!" so effectively.
I was in midway through writing an article with the dour title "Prospecting Doesn't Matter" (owing to Nicholas Carr's 2003 Harvard Business Review article "IT Doesn't Matter") when I serendipitously uncovered something that debunked my premise--at least for now.
A New Jersey company, Hammerhead Advertising (www.hammerheadadvertising.com), has created a campaign for new business by combining time-worn voice mail technology with an edgy message. After listening to the six samples available on the company's website, I was stunned by the power of the deceptively simple--but wildly innovative--approach. What makes the messages so powerful? It's not what you might think. There's no "value message," no glowing customer references, no gratuitous branding. It exploits an unvarnished, visceral approach that combines subtle humor with voyeurism.
The messages are delivered to the voice mailbox of the intended recipient, the Chief Marketing Officer, but are created to sound as if the CMO is actually eavesdropping on a recording of his or her company's receptionist thwarting yet another unwary and untalented ad agency salesperson. (It's worth five minutes: go to the company's website, and click on "our work" and then on "radio" to play the messages.)
What does Hammerhead's innovation mean for CRM? In our buttoned-down, ROI-obsessed, prove-the-business-case, new media, B2B sales world, the connections that we have with others are often closer than we think, and it's possible to use these connections productively if we can break out of our cultural and technological boxes. Many salespeople bemoan that they "can't get through the gatekeeper," and some develop compensating tactics that violate ethical boundaries. It's great to know that it's possible to exercise the adage "If you don't have it, feature it!" so effectively.
Your Cutting-Edge Strategy Won't Cut It in 2012
(First Published December, 2007)
Demographic and Financial Trends Will Change the World of Buying and Selling
Which of the following two definitions more closely reflects your beliefs? "Salesmanship is a battle of organized knowledge against unorganized knowledge or ignorance" or "salesmanship is the ability to make a mutually profitable exchange of values"?
In fact, both definitions appear in a book first published almost 100 years ago, Salesmanship and Business Efficiency by James Knox. The second definition is relevant, but the forces of social and technological change have rendered the first definition all but obsolete. Laws, theories, ideas and assumptions become stale at different rates. The force of social change is marked in another way: In 389 pages, the book includes no references to women.
Will your strategies become stale—or obsolete—in the next five years?
By 2012, will familiar terms such as "cold calling," "individual contributor" and "lead lists" mean anything to sales and marketing professionals? Will "word-of-mouth marketing," "collaborative teams" and "integrated marketing databases" be our buzzwords?
Based on interviews with industry experts and scholars, here is what I predict will happen demographically, financially and technologically to the world of buying and selling. In a companion feature, I will discuss how social networking, environmental responsibility and the redistribution of information power will redefine sales.
Trend 1: Retirement of the early baby-boom generation
The cascading retirement of the baby boomers, whose most senior members will be 67 in 2012, has significant implications for selling, including how to transfer knowledge and how to staff future sales organizations. Because much of sales knowledge is tacit, organizations will need first to define knowledge and then systematically capture and share it, or the knowledge will leave the enterprise along with the worker. The exodus will create a dearth of highly experienced sales professionals—at least initially.
‘Organizations will need first to define knowledge and then systematically capture and share it.’
At the same time, new entrants to the workforce in 2012 will change the culture of buying and selling. Those individuals, born in 1994 and after, will bring technical competencies that the retiring generation learned only recently—or never at all. The new generation of workers is growing up in a digital culture and comfortable in an environment of near-ubiquitous and instantaneous mobile communications, information and video. Today organizations encounter challenges because younger workers may have developed skills on new software that employers haven't yet adopted. This skills imbalance will alter one change-management paradigm: Many organizations will be required to update their technology and processes to accommodate their incoming workforce—not the other way around.
Trend 2: Growing use of product virtualization
Ten years ago, the prevailing wisdom was that meeting face to face and satisfying the visceral need to "get the product into the hands of the customer" were correlated with successful sales outcomes. But the trend for product virtualization—a visual representation of something that emulates its physical properties—is very much driven by the financial needs of business and is not just a fad made possible through technology. That's because virtualization creates an emotional connection with a product and can generate demand before physical products are available.
That early demand enables many companies to profit from the cash-before-delivery outcome that Dell famously unleashed. Second Life, a web site known for virtualization, has promoted this capability to manufacturers from Adidas to Mazda. Through avatars—representing individuals in Second Life's virtual world—Mazda made it possible for anyone to test drive its Hakaze concept car, even though only one physical model existed. Once the virtual drivers demonstrated an appropriate level of online handling mastery, they could keep the virtual concept car and re-use it in subsequent activities on Second Life. By the time the first Hazkazes reach the dealerships, the benefits for Mazda's financial strategy will be huge: reduced time to financial break-even, increased demand, lower supply chain costs and improved forecast accuracy.
Trend 3: Increased predictive insight into customer behavior
Exploring ways to more accurately identify and reach valuable prospective customers will continue—even in the face of privacy concerns and regulation. Why? Investor-backed companies require lower selling risk and more productive demand generation for improved cash flow and rapid business growth. These financial imperatives are unlikely to diminish.
Companies will convert from low-productivity marketing activities—like mass mailings and telemarketing to broad markets (derisively called "smiling and dialing")—to tools providing unprecedented sophistication in targeting and reaching the most likely buyers. Average sales cycles will shorten into timeframes once thought anomalies, and results from measurements such as close ratio (the number of prospects completing a purchase transaction divided by the total number of prospects contacted) will improve dramatically. What underpins this capability is a combination of improved predictive analytics and what Stefano Grazioli of the University of Virginia's McIntire School of Commerce calls the growing use of the universal identifier. (Think of it as a large digital bucket that can collect lots of information about a person.) This powerful combination makes it possible to derive meaning from a rich trove of artifacts about an individual from disparate databases containing his or her personal information. Consider the predictive accuracy regarding a person's lifestyle and buying habits when data from his grocery purchases, warranty card registrations and motor vehicle records are combined versus just looking at grocery-buying habits.
The wave is already forming. The Wall Street Journal reported in October 2007 that a company called Acxiom has a database of 133 million U.S. households divided "into 70 demographic and lifestyle clusters." Two married women who are next-door neighbors can visit the same financial services web site at the same time and see two different ads. Differing lifestyle-related content will follow these individuals as they visit other sites, and software services to support immediate purchases will accompany the ads.
How will today's strategies evolve in light of the forces that are changing our culture and world? In Part 2, I'll look at how social networking, environmental responsibility and the redistribution of information power will redefine sales.
Demographic and Financial Trends Will Change the World of Buying and Selling
Which of the following two definitions more closely reflects your beliefs? "Salesmanship is a battle of organized knowledge against unorganized knowledge or ignorance" or "salesmanship is the ability to make a mutually profitable exchange of values"?
In fact, both definitions appear in a book first published almost 100 years ago, Salesmanship and Business Efficiency by James Knox. The second definition is relevant, but the forces of social and technological change have rendered the first definition all but obsolete. Laws, theories, ideas and assumptions become stale at different rates. The force of social change is marked in another way: In 389 pages, the book includes no references to women.
Will your strategies become stale—or obsolete—in the next five years?
By 2012, will familiar terms such as "cold calling," "individual contributor" and "lead lists" mean anything to sales and marketing professionals? Will "word-of-mouth marketing," "collaborative teams" and "integrated marketing databases" be our buzzwords?
Based on interviews with industry experts and scholars, here is what I predict will happen demographically, financially and technologically to the world of buying and selling. In a companion feature, I will discuss how social networking, environmental responsibility and the redistribution of information power will redefine sales.
Trend 1: Retirement of the early baby-boom generation
The cascading retirement of the baby boomers, whose most senior members will be 67 in 2012, has significant implications for selling, including how to transfer knowledge and how to staff future sales organizations. Because much of sales knowledge is tacit, organizations will need first to define knowledge and then systematically capture and share it, or the knowledge will leave the enterprise along with the worker. The exodus will create a dearth of highly experienced sales professionals—at least initially.
‘Organizations will need first to define knowledge and then systematically capture and share it.’
At the same time, new entrants to the workforce in 2012 will change the culture of buying and selling. Those individuals, born in 1994 and after, will bring technical competencies that the retiring generation learned only recently—or never at all. The new generation of workers is growing up in a digital culture and comfortable in an environment of near-ubiquitous and instantaneous mobile communications, information and video. Today organizations encounter challenges because younger workers may have developed skills on new software that employers haven't yet adopted. This skills imbalance will alter one change-management paradigm: Many organizations will be required to update their technology and processes to accommodate their incoming workforce—not the other way around.
Trend 2: Growing use of product virtualization
Ten years ago, the prevailing wisdom was that meeting face to face and satisfying the visceral need to "get the product into the hands of the customer" were correlated with successful sales outcomes. But the trend for product virtualization—a visual representation of something that emulates its physical properties—is very much driven by the financial needs of business and is not just a fad made possible through technology. That's because virtualization creates an emotional connection with a product and can generate demand before physical products are available.
That early demand enables many companies to profit from the cash-before-delivery outcome that Dell famously unleashed. Second Life, a web site known for virtualization, has promoted this capability to manufacturers from Adidas to Mazda. Through avatars—representing individuals in Second Life's virtual world—Mazda made it possible for anyone to test drive its Hakaze concept car, even though only one physical model existed. Once the virtual drivers demonstrated an appropriate level of online handling mastery, they could keep the virtual concept car and re-use it in subsequent activities on Second Life. By the time the first Hazkazes reach the dealerships, the benefits for Mazda's financial strategy will be huge: reduced time to financial break-even, increased demand, lower supply chain costs and improved forecast accuracy.
Trend 3: Increased predictive insight into customer behavior
Exploring ways to more accurately identify and reach valuable prospective customers will continue—even in the face of privacy concerns and regulation. Why? Investor-backed companies require lower selling risk and more productive demand generation for improved cash flow and rapid business growth. These financial imperatives are unlikely to diminish.
Companies will convert from low-productivity marketing activities—like mass mailings and telemarketing to broad markets (derisively called "smiling and dialing")—to tools providing unprecedented sophistication in targeting and reaching the most likely buyers. Average sales cycles will shorten into timeframes once thought anomalies, and results from measurements such as close ratio (the number of prospects completing a purchase transaction divided by the total number of prospects contacted) will improve dramatically. What underpins this capability is a combination of improved predictive analytics and what Stefano Grazioli of the University of Virginia's McIntire School of Commerce calls the growing use of the universal identifier. (Think of it as a large digital bucket that can collect lots of information about a person.) This powerful combination makes it possible to derive meaning from a rich trove of artifacts about an individual from disparate databases containing his or her personal information. Consider the predictive accuracy regarding a person's lifestyle and buying habits when data from his grocery purchases, warranty card registrations and motor vehicle records are combined versus just looking at grocery-buying habits.
The wave is already forming. The Wall Street Journal reported in October 2007 that a company called Acxiom has a database of 133 million U.S. households divided "into 70 demographic and lifestyle clusters." Two married women who are next-door neighbors can visit the same financial services web site at the same time and see two different ads. Differing lifestyle-related content will follow these individuals as they visit other sites, and software services to support immediate purchases will accompany the ads.
How will today's strategies evolve in light of the forces that are changing our culture and world? In Part 2, I'll look at how social networking, environmental responsibility and the redistribution of information power will redefine sales.
Six Ways Companies Promote Sales Failure
(First published January, 2008)
It’s a new year! There’s a new sales quota and new ways to stub your toe making the number. If you’re like me, you’d rather avoid the pain and learn from someone else’s difficult experience. So, pull up a chair while I share the latest 2007 Sales winners of the We-Have-Met-The-Enemy-And-It-Is-Us Awards.
#1. Create commission incentives that reward the wrong results.
This winner comes from a software company that used a declining commission reward for increased revenue levels. Here’s the schedule from the company plan:
Up to $60 K revenue = 6% commission
$60 K to $100 K = 4% commission
$100 K + = 3% commission
I know. You’ve already done the math, and realize that a $50K deal will net a salesperson $200 more than if he sells a $70K deal. I can hear a salesperson saying to a customer “You want to spend $70,000, but Christmas is coming up—can you make it $50,000 so I can buy my kids a Wii?” When I asked the company’s VP of Sales about this possible absurdity, she remarked “Our view is that ‘it takes a village’ to close larger-sized deals. We pay less commission to reflect that.” Translation: A CXO at her company doesn’t want salespeople driving a later model Lexus than he does.
Solution: Champion the salesperson’s Lexus if meeting quarterly revenue objectives is part of your business strategy. Whatever your strategy, build your sales incentives around achieving it.
#2. Provide no-value “special offers” for prospective clients
This company broke sales rapport by offering purchase incentives that were plainly hollow. The company compounded their misery by insisting their sales force push the incentive to every prospect each month—even though the monthly deadlines were asynchronous with the customer’s buying pattern. Customers resisted, and the more astute salespeople covertly abandoned the promotion. The company committed what author Tony Parinello calls a “reload.” Shoot yourself in the foot, reload, then shoot yourself in the other foot.
Solution: Listen to your customer and to your sales force. If customers aren’t buying the promotion, there’s a reason for it.
#3. Measure and manage unproductive sales activities.
Holding steadfast to the simplistic view that sales is a “numbers game,” this company rated salespeople on how many prospecting calls they made and how many software demonstrations they provided to prospects. Since efficiency wasn’t part of the measurement, it’s worth pausing a moment to think about what behavior they encouraged—and got—from their sales team. It’s called indiscriminate prospecting. Jennifer’s numbers looked great because she averaged 70 calls a day last month. Steve was a bum because he averaged 38. Steve’s revenue is 3% lower. But who is working smarter?
Solution: Measure and manage efficiency. Ask yourself whether you want to reward more activity, or better activity.
#4. Maintain a long, agonizing “exit strategy” for under-performing salespeople
Under the guise of a “Performance Improvement Plan,” this company mandated underperforming sales people hold monthly meetings with a manager so they could receive instruction on how to improve. What’s absent from the process? For one, mining any value from the salesperson’s point of view. The “Plan” held no requirement for the manager to gain and report on insight regarding the difficulties the salesperson was experiencing. And there was a lot of it—the company churned almost 30% of its sales force every year. When I asked a sales manager if any sales person ever became productive after being on “Plan,” the answer was, “Well . . . no.” The duration of the documented “Plan” was four months.
Solution: If your company has no resources to elevate the performance of the bottom of your sales staff, make the exit short and sweet. Also, remember that you can learn as much from your underperformers as they can learn from you. Ask yourself “what was missed in the hiring process? Did we provide the right sales support? How can we avoid making this mistake again.”
#5. Disconnect your new account capture team from your installed account team
This company took “silo” to a new dysfunctional height because management felt that New Account reps would become “complacent” if they received an annuity for renewals. When a software subscriber failed to renew, the account was considered “lapsed,” which meant that after four months, it reverted to a “new account” status for sales credit purposes. You’ve probably already figured it out—this company’s new account sales team craved “lapsed” accounts, because they were easier to sell to than cold call leads. In fact, New Accounts regularly monitored subscriber activity for such upcoming “low hanging sales fruit.” You can be sure that no New Account salesperson ever called Inside Sales to share information.
Solution: Complacency is a risk for any employee, so share the wealth. Encourage your sales force to sell to valuable customers, not just to many customers. When salespeople can reap rewards for establishing long-term relationships, they will seek better prospects, and support them better, as well.
#6 Build rapport-breaking statements into your sales scripts.
This company found a way make alienation scalable. When asked for a reference, telemarketers were scripted to advise the prospect that they were obligated to protect their client’s time and they couldn’t provide reference information. Most of those calls went to the “not interested” branch on the process flow chart. “I’m sorry, my other line is ringing. In any case, please don’t call back.”
Solution: Take your sales scripts on a trial run before you distribute them to your national sales team. Bring your best nay-sayers into the conference room and write everything that could go wrong on the white board. Most important, ask yourself “how will our communication be perceived?”
It’s a new year! There’s a new sales quota and new ways to stub your toe making the number. If you’re like me, you’d rather avoid the pain and learn from someone else’s difficult experience. So, pull up a chair while I share the latest 2007 Sales winners of the We-Have-Met-The-Enemy-And-It-Is-Us Awards.
#1. Create commission incentives that reward the wrong results.
This winner comes from a software company that used a declining commission reward for increased revenue levels. Here’s the schedule from the company plan:
Up to $60 K revenue = 6% commission
$60 K to $100 K = 4% commission
$100 K + = 3% commission
I know. You’ve already done the math, and realize that a $50K deal will net a salesperson $200 more than if he sells a $70K deal. I can hear a salesperson saying to a customer “You want to spend $70,000, but Christmas is coming up—can you make it $50,000 so I can buy my kids a Wii?” When I asked the company’s VP of Sales about this possible absurdity, she remarked “Our view is that ‘it takes a village’ to close larger-sized deals. We pay less commission to reflect that.” Translation: A CXO at her company doesn’t want salespeople driving a later model Lexus than he does.
Solution: Champion the salesperson’s Lexus if meeting quarterly revenue objectives is part of your business strategy. Whatever your strategy, build your sales incentives around achieving it.
#2. Provide no-value “special offers” for prospective clients
This company broke sales rapport by offering purchase incentives that were plainly hollow. The company compounded their misery by insisting their sales force push the incentive to every prospect each month—even though the monthly deadlines were asynchronous with the customer’s buying pattern. Customers resisted, and the more astute salespeople covertly abandoned the promotion. The company committed what author Tony Parinello calls a “reload.” Shoot yourself in the foot, reload, then shoot yourself in the other foot.
Solution: Listen to your customer and to your sales force. If customers aren’t buying the promotion, there’s a reason for it.
#3. Measure and manage unproductive sales activities.
Holding steadfast to the simplistic view that sales is a “numbers game,” this company rated salespeople on how many prospecting calls they made and how many software demonstrations they provided to prospects. Since efficiency wasn’t part of the measurement, it’s worth pausing a moment to think about what behavior they encouraged—and got—from their sales team. It’s called indiscriminate prospecting. Jennifer’s numbers looked great because she averaged 70 calls a day last month. Steve was a bum because he averaged 38. Steve’s revenue is 3% lower. But who is working smarter?
Solution: Measure and manage efficiency. Ask yourself whether you want to reward more activity, or better activity.
#4. Maintain a long, agonizing “exit strategy” for under-performing salespeople
Under the guise of a “Performance Improvement Plan,” this company mandated underperforming sales people hold monthly meetings with a manager so they could receive instruction on how to improve. What’s absent from the process? For one, mining any value from the salesperson’s point of view. The “Plan” held no requirement for the manager to gain and report on insight regarding the difficulties the salesperson was experiencing. And there was a lot of it—the company churned almost 30% of its sales force every year. When I asked a sales manager if any sales person ever became productive after being on “Plan,” the answer was, “Well . . . no.” The duration of the documented “Plan” was four months.
Solution: If your company has no resources to elevate the performance of the bottom of your sales staff, make the exit short and sweet. Also, remember that you can learn as much from your underperformers as they can learn from you. Ask yourself “what was missed in the hiring process? Did we provide the right sales support? How can we avoid making this mistake again.”
#5. Disconnect your new account capture team from your installed account team
This company took “silo” to a new dysfunctional height because management felt that New Account reps would become “complacent” if they received an annuity for renewals. When a software subscriber failed to renew, the account was considered “lapsed,” which meant that after four months, it reverted to a “new account” status for sales credit purposes. You’ve probably already figured it out—this company’s new account sales team craved “lapsed” accounts, because they were easier to sell to than cold call leads. In fact, New Accounts regularly monitored subscriber activity for such upcoming “low hanging sales fruit.” You can be sure that no New Account salesperson ever called Inside Sales to share information.
Solution: Complacency is a risk for any employee, so share the wealth. Encourage your sales force to sell to valuable customers, not just to many customers. When salespeople can reap rewards for establishing long-term relationships, they will seek better prospects, and support them better, as well.
#6 Build rapport-breaking statements into your sales scripts.
This company found a way make alienation scalable. When asked for a reference, telemarketers were scripted to advise the prospect that they were obligated to protect their client’s time and they couldn’t provide reference information. Most of those calls went to the “not interested” branch on the process flow chart. “I’m sorry, my other line is ringing. In any case, please don’t call back.”
Solution: Take your sales scripts on a trial run before you distribute them to your national sales team. Bring your best nay-sayers into the conference room and write everything that could go wrong on the white board. Most important, ask yourself “how will our communication be perceived?”
A Tsunami of New Social Connectedness Is on the Way
Five years from now, which sales strategies and tactics will matter? Will familiar terms such as "cold calling," "individual contributor" and "lead lists" ultimately vanish, replaced by "word-of-mouth marketing," "collaborative teams" and "integrated marketing databases"? Will viral potential and page views become the currency we use to persuade others to accept our products and ideas? Or will other yet-to-be-developed tools emerge and become dominant?
In the second part of this two-part series, I'll show you how industry experts and scholars say social networking, social responsibility and the redistribution of information power will link to sales strategy beyond the year 2012. Read Part 1, Demographic and Financial Trends Will Change the World of Buying and Selling.
Trend 4: Development of social networks and word-of-mouth marketing as sales tools
For marketers, the challenge of leveraging informal social networks—which have existed as long as organizations have—occupies center stage. As automated tools manage more transaction-level sales, expensive sales resources have been directed toward more profitable—and more complex—large-system and enterprise sales, which transcend organization boundaries and sometimes blur distinctions between buyers and sellers.
Early in my sales career, the prevailing theory was that meeting with a C-level executive increased the likelihood of a successful sales outcome. But there were many tenuous assumptions inherent in that idea, not the least of which was that C-level executives were influential within their organizations. Rather, when a C-level executive said, "Send me the proposal and I'll give you our decision," it meant that once a proposal was sent, heretofore unknown forces acted on the purchase process.
‘Will closer connections mean shorter decision cycles or longer ones?’
Then, things began to change. Rather than be misled by the deceptive pathways on organization charts, salespeople recognized the need to understand the informal and unofficial connections among individuals. The realization changed selling strategies because it meant that networks of people influenced sales and that people played different roles than their titles or hierarchical placement suggested. CRM software tools and other services such as LinkedIn and Facebook became not only available but also, for some, indispensable as aids to navigate sales processes that relied on connections as much as chronological events ...
And a tsunami of new connectedness is on the way, according to Limor Schafman, an expert in the commercialization of emerging technologies and founder of Keystone Technology Group. According to Schafman, converging developments, such as IPv6—the newest version of the Internet protocol—make it possible to create unique address profiles for billions of devices, each of which can be individually linked to one or more other devices. This connectedness will change social networking—but it's not entirely clear how. Will closer connections mean shorter decision cycles or longer ones? How will new personal connections affect assumptions about decision rights in an organization? What even constitutes an organization?
Today, the power of social networks has extended to word-of-mouth marketing, a set of methodologies that mean concomitant changes for sales strategies and tactics. No longer governed by the metrics of the past, the viral value—how likely a message is to be passed from individual to individual—of a campaign or message has now come into prominence. MPowerPlayer, a Northern Virginia-based start-up, used social networks to promote its library of trial mobile game software. According to CEO Michael Powers, through word-of-mouth and viral marketing alone, the company has delivered more than 8.5 million gaming software demos since 2006.
Trend 5: A growing link between environmental responsibility and business development
The challenge for marketing professionals and salespeople will be how to sell under a new set of rules that include environmentalism and corporate ethics in the sum total of product value. Twenty years ago, prospective customers never asked me whether my employer, a manufacturing company, had a renewable energy program or initiatives to reduce carbon emissions. I never discussed such issues in a sales call or included related documentation in a sales proposal. But today, Subaru North America proudly proclaims that its Indiana plant produces less waste in a year than a single newspaper its ad appears in.
This trend means re-engineering the components that provide transferable value to customers. No company will be immune.
The mass-market retailer Patagonia is a notable example of a company that has created a business by embedding environmental values into its products. "The notion of [environmental] sustainability is becoming more mainstream. . . Consumers are getting closer to the earth," says Jerry Savage of ResearchSight. Even mid-market firms like Ikea and Wal-Mart have announced initiatives to offer organic products and ensure ethical sourcing of raw materials.
Trend 6: Redistribution of information power from providers to consumers
"Could you send me something about your products?" In 1990 that question most often meant placing an envelope containing printed materials in a U.S. Postal Service mailbox, or sending it FedEx, if the prospect's need appeared imminent. Vendors—not prospects—controlled the flow of documents. My colleagues and I debated whether it was better to send full technical documentation or to parse the information to avoid overwhelming the prospect.
Those debates around the water cooler don't occur anymore. Web 2.0, Internet search engines, e-marketplaces, blogs and easy-to-retrieve product reviews took information power from vendors and gave it to customers.
The shift of information power from vendor to consumer has profound importance for sales because it has fundamentally changed not only buying processes but also information-gathering processes. In 2006, fully 46 percent of business-to-business buyers initiated their product search via an online search engine—well before a salesperson prospected their organization, according to Redmond Channel Partner Magazine. The modern prospective customer is already very well-informed about a product or service before the first sales contact is ever made.
Beds.com has embraced the Internet's transparency by enabling any visitor to its web site to read about its customer-service problems along with its customer accolades. The airing of the full thread of the online conversation makes it possible for Beds.com to showcase its commitment to customer satisfaction, a trend that Marcel Goldstein, senior vice president of Ogilvy Public Relations Worldwide, expects other companies to emulate.
Which strategies will succeed is unclear. What is clear is that, as the fulcrum of information power continues to move in favor of the consumer, agile companies that adopt processes based on an empathetic view of how people ask questions for discovery, gather and manage information—and are moved to buy—are the ones who are most likely to enjoy the profits.
In the second part of this two-part series, I'll show you how industry experts and scholars say social networking, social responsibility and the redistribution of information power will link to sales strategy beyond the year 2012. Read Part 1, Demographic and Financial Trends Will Change the World of Buying and Selling.
Trend 4: Development of social networks and word-of-mouth marketing as sales tools
For marketers, the challenge of leveraging informal social networks—which have existed as long as organizations have—occupies center stage. As automated tools manage more transaction-level sales, expensive sales resources have been directed toward more profitable—and more complex—large-system and enterprise sales, which transcend organization boundaries and sometimes blur distinctions between buyers and sellers.
Early in my sales career, the prevailing theory was that meeting with a C-level executive increased the likelihood of a successful sales outcome. But there were many tenuous assumptions inherent in that idea, not the least of which was that C-level executives were influential within their organizations. Rather, when a C-level executive said, "Send me the proposal and I'll give you our decision," it meant that once a proposal was sent, heretofore unknown forces acted on the purchase process.
‘Will closer connections mean shorter decision cycles or longer ones?’
Then, things began to change. Rather than be misled by the deceptive pathways on organization charts, salespeople recognized the need to understand the informal and unofficial connections among individuals. The realization changed selling strategies because it meant that networks of people influenced sales and that people played different roles than their titles or hierarchical placement suggested. CRM software tools and other services such as LinkedIn and Facebook became not only available but also, for some, indispensable as aids to navigate sales processes that relied on connections as much as chronological events ...
And a tsunami of new connectedness is on the way, according to Limor Schafman, an expert in the commercialization of emerging technologies and founder of Keystone Technology Group. According to Schafman, converging developments, such as IPv6—the newest version of the Internet protocol—make it possible to create unique address profiles for billions of devices, each of which can be individually linked to one or more other devices. This connectedness will change social networking—but it's not entirely clear how. Will closer connections mean shorter decision cycles or longer ones? How will new personal connections affect assumptions about decision rights in an organization? What even constitutes an organization?
Today, the power of social networks has extended to word-of-mouth marketing, a set of methodologies that mean concomitant changes for sales strategies and tactics. No longer governed by the metrics of the past, the viral value—how likely a message is to be passed from individual to individual—of a campaign or message has now come into prominence. MPowerPlayer, a Northern Virginia-based start-up, used social networks to promote its library of trial mobile game software. According to CEO Michael Powers, through word-of-mouth and viral marketing alone, the company has delivered more than 8.5 million gaming software demos since 2006.
Trend 5: A growing link between environmental responsibility and business development
The challenge for marketing professionals and salespeople will be how to sell under a new set of rules that include environmentalism and corporate ethics in the sum total of product value. Twenty years ago, prospective customers never asked me whether my employer, a manufacturing company, had a renewable energy program or initiatives to reduce carbon emissions. I never discussed such issues in a sales call or included related documentation in a sales proposal. But today, Subaru North America proudly proclaims that its Indiana plant produces less waste in a year than a single newspaper its ad appears in.
This trend means re-engineering the components that provide transferable value to customers. No company will be immune.
The mass-market retailer Patagonia is a notable example of a company that has created a business by embedding environmental values into its products. "The notion of [environmental] sustainability is becoming more mainstream. . . Consumers are getting closer to the earth," says Jerry Savage of ResearchSight. Even mid-market firms like Ikea and Wal-Mart have announced initiatives to offer organic products and ensure ethical sourcing of raw materials.
Trend 6: Redistribution of information power from providers to consumers
"Could you send me something about your products?" In 1990 that question most often meant placing an envelope containing printed materials in a U.S. Postal Service mailbox, or sending it FedEx, if the prospect's need appeared imminent. Vendors—not prospects—controlled the flow of documents. My colleagues and I debated whether it was better to send full technical documentation or to parse the information to avoid overwhelming the prospect.
Those debates around the water cooler don't occur anymore. Web 2.0, Internet search engines, e-marketplaces, blogs and easy-to-retrieve product reviews took information power from vendors and gave it to customers.
The shift of information power from vendor to consumer has profound importance for sales because it has fundamentally changed not only buying processes but also information-gathering processes. In 2006, fully 46 percent of business-to-business buyers initiated their product search via an online search engine—well before a salesperson prospected their organization, according to Redmond Channel Partner Magazine. The modern prospective customer is already very well-informed about a product or service before the first sales contact is ever made.
Beds.com has embraced the Internet's transparency by enabling any visitor to its web site to read about its customer-service problems along with its customer accolades. The airing of the full thread of the online conversation makes it possible for Beds.com to showcase its commitment to customer satisfaction, a trend that Marcel Goldstein, senior vice president of Ogilvy Public Relations Worldwide, expects other companies to emulate.
Which strategies will succeed is unclear. What is clear is that, as the fulcrum of information power continues to move in favor of the consumer, agile companies that adopt processes based on an empathetic view of how people ask questions for discovery, gather and manage information—and are moved to buy—are the ones who are most likely to enjoy the profits.
Getting to "No" U: The Higher Education of Qualification Strategy
“There’s nothing wrong with getting a ‘no’ answer on a purchase decision as long you get that answer early in the sales process.” This admonition came from a VP of Sales I worked with. He wasn’t being glib. “No” answers are a sales fact of life. The VP recognized the strategic importance of knowing how to vet opportunities before the scarce resources of time and money were committed.
The common term for this process is qualification. What’s uncommon is thinking about qualification from a strategic perspective, and then managing the associated risk. Many companies leave qualification to the tactical discretion of the sales force. The results are clearly mixed. Some salespeople languish by pursuing unknowingly risky opportunities that other salespeople might quickly reject. Some salespeople may readily reject opportunities that might be valuable for the company because their commission plans don’t provide an adequate reward. In any case, when a sales force is experiencing disparate achievement results, qualification processes should be on the radar as one probable cause.
The symptoms will be manifest in statements like these, taken from my own selling past:
“They would have purchased, but they told me they couldn’t afford my proposed solution.”
“They selected a vendor whose Senior VP is the brother-in-law of their VP of Operations.”
“They postponed their decision. It’s not a priority for them now.”
“They can’t buy anything until they replace their legacy IT infrastructure. They expect to change over in about two years.”
Successful sales organizations understand that vetting the best sales opportunities requires the same strategic visioning and thought as how to invest in new product development or how to fund expansion. Why? Because selling requires the commitment of significant scarce resources—mainly time and money. Companies that excel at managing sales risk early in the process possess a key advantage over those that don’t.
How do companies formulate qualification strategies and the questions that follow? They begin with understanding the value their products and services provide. That understanding yields insight into what prospect companies and opportunities might benefit from them the most. Those insights are converted to profiles of organizations or persons, and those profiles can be further described by more detailed attributes. From there, qualification questions can be created.
Executives should ask themselves “Do we have a set of qualification questions that is consistently effective for identifying the most valuable opportunities for us to pursue? What are the greatest selling risks that we face? How do our top performers qualify opportunities? Are we disqualifying potentially valuable opportunities? And last—but not least—“Does our sales incentive plan encourage our sales team to pursue opportunities that are valuable to our organization? ”
But building effective qualification doesn’t stop there. Qualification questions are never static; they are refined by reviewing sales losses and wins. For losses, the top question is “What didn’t we know at the time the purchase decision was made?” (With that in mind, it’s not difficult to determine the questions that should have been asked early from the list of sales outcomes above.) For every win, the questions should start with “Why did this customer buy?”
What are the best questions to ask? In over twenty years of selling of high technology products and services, I uncovered risks in sales outcomes that can be mitigated through asking the following set of questions, which I term the Four Green Lights. (Note that all questions have a ‘yes’ or a ‘no’ answer.)
1. Solution fit: Does my prospective customer have a strategic challenge or operational issue that can be solved using my product or service?
2. Access: Can I get access to the person or people who have the authority to commit and spend the financial resources to procure my product or service?
3. Money: Will my prospective customer pay me what I am likely to charge for my product or service?
4. Timeframe: Will my prospective customer purchase from me within a timeframe that matches my planning horizon?
How should your company manage the risk? The answer depends on your appetite for it. Even four “yes” answers doesn’t begin to address all the sales risks that could be encountered. But one or more “no” answers might represent a risk level that is clearly higher than a company can financially accept. For example, if I don’t have access to the people most influential in making a purchase decision, the likelihood of a successful sales outcome is very small (based on my experience). Today, I wouldn’t pursue such an opportunity, so it’s imperative that I uncover that condition through early qualification. A situational analysis of your company’s competitive position might cause you to eliminate some of these qualification questions and add others.
How does your organization view the connection between strategy, risk management, and sales opportunity qualification? Are your processes related? Do your qualification steps support your business strategies? What do you believe are some best practices?
The common term for this process is qualification. What’s uncommon is thinking about qualification from a strategic perspective, and then managing the associated risk. Many companies leave qualification to the tactical discretion of the sales force. The results are clearly mixed. Some salespeople languish by pursuing unknowingly risky opportunities that other salespeople might quickly reject. Some salespeople may readily reject opportunities that might be valuable for the company because their commission plans don’t provide an adequate reward. In any case, when a sales force is experiencing disparate achievement results, qualification processes should be on the radar as one probable cause.
The symptoms will be manifest in statements like these, taken from my own selling past:
“They would have purchased, but they told me they couldn’t afford my proposed solution.”
“They selected a vendor whose Senior VP is the brother-in-law of their VP of Operations.”
“They postponed their decision. It’s not a priority for them now.”
“They can’t buy anything until they replace their legacy IT infrastructure. They expect to change over in about two years.”
Successful sales organizations understand that vetting the best sales opportunities requires the same strategic visioning and thought as how to invest in new product development or how to fund expansion. Why? Because selling requires the commitment of significant scarce resources—mainly time and money. Companies that excel at managing sales risk early in the process possess a key advantage over those that don’t.
How do companies formulate qualification strategies and the questions that follow? They begin with understanding the value their products and services provide. That understanding yields insight into what prospect companies and opportunities might benefit from them the most. Those insights are converted to profiles of organizations or persons, and those profiles can be further described by more detailed attributes. From there, qualification questions can be created.
Executives should ask themselves “Do we have a set of qualification questions that is consistently effective for identifying the most valuable opportunities for us to pursue? What are the greatest selling risks that we face? How do our top performers qualify opportunities? Are we disqualifying potentially valuable opportunities? And last—but not least—“Does our sales incentive plan encourage our sales team to pursue opportunities that are valuable to our organization? ”
But building effective qualification doesn’t stop there. Qualification questions are never static; they are refined by reviewing sales losses and wins. For losses, the top question is “What didn’t we know at the time the purchase decision was made?” (With that in mind, it’s not difficult to determine the questions that should have been asked early from the list of sales outcomes above.) For every win, the questions should start with “Why did this customer buy?”
What are the best questions to ask? In over twenty years of selling of high technology products and services, I uncovered risks in sales outcomes that can be mitigated through asking the following set of questions, which I term the Four Green Lights. (Note that all questions have a ‘yes’ or a ‘no’ answer.)
1. Solution fit: Does my prospective customer have a strategic challenge or operational issue that can be solved using my product or service?
2. Access: Can I get access to the person or people who have the authority to commit and spend the financial resources to procure my product or service?
3. Money: Will my prospective customer pay me what I am likely to charge for my product or service?
4. Timeframe: Will my prospective customer purchase from me within a timeframe that matches my planning horizon?
How should your company manage the risk? The answer depends on your appetite for it. Even four “yes” answers doesn’t begin to address all the sales risks that could be encountered. But one or more “no” answers might represent a risk level that is clearly higher than a company can financially accept. For example, if I don’t have access to the people most influential in making a purchase decision, the likelihood of a successful sales outcome is very small (based on my experience). Today, I wouldn’t pursue such an opportunity, so it’s imperative that I uncover that condition through early qualification. A situational analysis of your company’s competitive position might cause you to eliminate some of these qualification questions and add others.
How does your organization view the connection between strategy, risk management, and sales opportunity qualification? Are your processes related? Do your qualification steps support your business strategies? What do you believe are some best practices?
The Hidden Risks of Social Networks
Not to throw cold water on anyone’s exuberance, but social networks could destroy your sales strategy, and your company along with it.
Why? Because technology and the Internet propel unplanned situations and events at unprecedented speed. So it’s important to recognize that the same social forces that create significant value also have the power to annihilate it. How you manage the risks will determine whether history will judge you to be a New Media Ninja or another unprepared victim. While new media and social networking present boundless opportunities, no discussion is complete without asking what could go wrong, and what actions should be taken.
Risk Silos
Consider the catastrophic outcome that Bob Furniss shared in which a disgruntled 15-year-old started a FaceBook group called "ACME Tied to Kill Me."
As he described it, “She outlined her dissatisfaction. Suddenly, there were others who joined the group. Soon there were hundreds of links to personal and business blogs and complaint sites.” Twenty years ago, an unhappy teenager would have limited capacity to disseminate a product grievance, and would not have posed a measurable threat. That was then. This is now. The CRM breakdown likely led to a significant financial problem for the company. How many times do you think Acme’s Director of Customer Support said “Woulda . . . Coulda . .. . Shoulda” when he met with the company’s board?
How did ACME blow it? By failing to manage risks across the organization. CRM risks ARE financial risks. Unfortunately, many organizations like ACME silo risk management in the same way as they do business processes and information. Could this problem have happened if ACME’s VP of Customer Experience warned their CFO that through the Internet, an unhappy customer could singlehandedly undermine her best cash flow projections? Or, if the CFO had considered how events outside of market cycles and interest-rate fluctuations might put her imperil her financial planning? What preemptive actions could ACME have taken? In the absence of such strategic planning, the unprepared ACME managers must have appeared like deer in the headlights to this media-savvy kid.
For companies that value brand identity, social networks create unique risks as well. For example, a vexing trend is for consumers—not marketers—to use social networks to define product and brand attributes. While social media create the opportunity for products to better match required consumer outcomes, this shift in information power underscores the importance of asking the right risk-related questions:
• If we lose control of product designs and life cycles, what strategic risks would we face?
• What if the resulting product design or image is one we don’t want, can’t support, or both?
• What operational challenges could occur if we can’t manufacture the desired products in the right quantity at the right time?
While the operational questions highlight risks that companies have faced and managed for many years, social networks have rendered past mitigation strategies obsolete, so new strategies must be developed.
Strategy risk
In his article, Like On-Demand, the Social Web May Have Unintended Consequences for Businesses, Denis Pombriant highlighted another set of risks. He writes, “My bet is that social computing will provide us with an avalanche of new data from customers that must be analyzed, and that's where I think we can look for unintended consequences.”
Those unintended consequences are the associated risks of implementing the wrong strategy, or implementing the right strategy the wrong way. According to Denis, one risk is “that we take the new information we collect too seriously and that we fail to perform analysis and challenge the results. If that happens, look for companies running off in strange directions chasing what amounts to unicorns. The odds are that some companies will fall into this self-baited trap...”
Reputation Risk
If you’ve worked in sales for few years, you’ve probably heard a manager in your company say “If we can just get meetings with the right people, our product sells itself.” Clearly, the best products in the world can’t be widely sold if influential people don’t know about them.
Based on that imperative, it’s easy to understand why social networking tools are vital for reducing sales risk.
John Todor explained why in his CustomerThink article, Social Networks and Online Communities Create Elastic Ties and Surprisingly Powerful Pay-Offs: “The power of online social networks comes, not from whom you know directly, but from the people the people you know know. People who actively pursue weak-tie relationships stand to gain substantial benefits. They can quickly take advantage of emerging opportunities, find collaborators, find jobs, find employees and build a pool of advocates.”
Barry Trailer’s blog provides empirical proof:
“For a test, 30 sales executives were selected to interview. Using LinkedIn members of our network were asked to facilitate an introduction to these people we had never met. Surprisingly, 29 of these individuals accepted the request and passed it on to their contacts with a personal note of introduction. More surprising, 23 of those targeted executives (including people in Europe and the Far East) accepted our request, and offered to consider helping our research effort.
In follow up, 18 of the 23 participated – a 60% hit rate! A much more favorable result compared to cold calling.”
But these discussions don’t tell the risk part of the story. As I’ve learned the hard way, prospects hold very high expectations from social connections, and underperformance in the sales process causes backfires that can remain ugly. For example, one company I worked with believed its account executive was so well connected in a prospect’s organization that they didn’t apply customary rigor to navigating the steps to the sale. “No need for account qualification, value propositions, or financial justification because we know Joe through Steve,” they said. They were wrong. Not only was Joe disappointed, but he called Steve and asked “How did you ever get involved with these guys?” Beyond the introductory social connection chit-chat, somebody still needs to sell something. Complacency gets in the way.
Further, I was struck by a certain irony as I read Barry’s findings. Although we admonish our school-age children to be wary of social networking tools on the web, the high ratio of invitation acceptance he describes suggests that executives don’t exercise similar caution (albeit they need to do so for different reasons). Does the risk of a damaged reputation seem so remote that executives readily accept requests from cyber-strangers to endorse them? Will the current success ratio Barry discovered diminish as social networking becomes more mature, and executives learn how carefully-built reputations can become damaged? Will we see a similar wave of caution as we did with chat rooms, FaceBook, and MySpace?
Stay tuned.
(Apologies to Rob Cross for corrupting the title of his excellent book, The Hidden Power of Social Networks.)
Why? Because technology and the Internet propel unplanned situations and events at unprecedented speed. So it’s important to recognize that the same social forces that create significant value also have the power to annihilate it. How you manage the risks will determine whether history will judge you to be a New Media Ninja or another unprepared victim. While new media and social networking present boundless opportunities, no discussion is complete without asking what could go wrong, and what actions should be taken.
Risk Silos
Consider the catastrophic outcome that Bob Furniss shared in which a disgruntled 15-year-old started a FaceBook group called "ACME Tied to Kill Me."
As he described it, “She outlined her dissatisfaction. Suddenly, there were others who joined the group. Soon there were hundreds of links to personal and business blogs and complaint sites.” Twenty years ago, an unhappy teenager would have limited capacity to disseminate a product grievance, and would not have posed a measurable threat. That was then. This is now. The CRM breakdown likely led to a significant financial problem for the company. How many times do you think Acme’s Director of Customer Support said “Woulda . . . Coulda . .. . Shoulda” when he met with the company’s board?
How did ACME blow it? By failing to manage risks across the organization. CRM risks ARE financial risks. Unfortunately, many organizations like ACME silo risk management in the same way as they do business processes and information. Could this problem have happened if ACME’s VP of Customer Experience warned their CFO that through the Internet, an unhappy customer could singlehandedly undermine her best cash flow projections? Or, if the CFO had considered how events outside of market cycles and interest-rate fluctuations might put her imperil her financial planning? What preemptive actions could ACME have taken? In the absence of such strategic planning, the unprepared ACME managers must have appeared like deer in the headlights to this media-savvy kid.
For companies that value brand identity, social networks create unique risks as well. For example, a vexing trend is for consumers—not marketers—to use social networks to define product and brand attributes. While social media create the opportunity for products to better match required consumer outcomes, this shift in information power underscores the importance of asking the right risk-related questions:
• If we lose control of product designs and life cycles, what strategic risks would we face?
• What if the resulting product design or image is one we don’t want, can’t support, or both?
• What operational challenges could occur if we can’t manufacture the desired products in the right quantity at the right time?
While the operational questions highlight risks that companies have faced and managed for many years, social networks have rendered past mitigation strategies obsolete, so new strategies must be developed.
Strategy risk
In his article, Like On-Demand, the Social Web May Have Unintended Consequences for Businesses, Denis Pombriant highlighted another set of risks. He writes, “My bet is that social computing will provide us with an avalanche of new data from customers that must be analyzed, and that's where I think we can look for unintended consequences.”
Those unintended consequences are the associated risks of implementing the wrong strategy, or implementing the right strategy the wrong way. According to Denis, one risk is “that we take the new information we collect too seriously and that we fail to perform analysis and challenge the results. If that happens, look for companies running off in strange directions chasing what amounts to unicorns. The odds are that some companies will fall into this self-baited trap...”
Reputation Risk
If you’ve worked in sales for few years, you’ve probably heard a manager in your company say “If we can just get meetings with the right people, our product sells itself.” Clearly, the best products in the world can’t be widely sold if influential people don’t know about them.
Based on that imperative, it’s easy to understand why social networking tools are vital for reducing sales risk.
John Todor explained why in his CustomerThink article, Social Networks and Online Communities Create Elastic Ties and Surprisingly Powerful Pay-Offs: “The power of online social networks comes, not from whom you know directly, but from the people the people you know know. People who actively pursue weak-tie relationships stand to gain substantial benefits. They can quickly take advantage of emerging opportunities, find collaborators, find jobs, find employees and build a pool of advocates.”
Barry Trailer’s blog provides empirical proof:
“For a test, 30 sales executives were selected to interview. Using LinkedIn members of our network were asked to facilitate an introduction to these people we had never met. Surprisingly, 29 of these individuals accepted the request and passed it on to their contacts with a personal note of introduction. More surprising, 23 of those targeted executives (including people in Europe and the Far East) accepted our request, and offered to consider helping our research effort.
In follow up, 18 of the 23 participated – a 60% hit rate! A much more favorable result compared to cold calling.”
But these discussions don’t tell the risk part of the story. As I’ve learned the hard way, prospects hold very high expectations from social connections, and underperformance in the sales process causes backfires that can remain ugly. For example, one company I worked with believed its account executive was so well connected in a prospect’s organization that they didn’t apply customary rigor to navigating the steps to the sale. “No need for account qualification, value propositions, or financial justification because we know Joe through Steve,” they said. They were wrong. Not only was Joe disappointed, but he called Steve and asked “How did you ever get involved with these guys?” Beyond the introductory social connection chit-chat, somebody still needs to sell something. Complacency gets in the way.
Further, I was struck by a certain irony as I read Barry’s findings. Although we admonish our school-age children to be wary of social networking tools on the web, the high ratio of invitation acceptance he describes suggests that executives don’t exercise similar caution (albeit they need to do so for different reasons). Does the risk of a damaged reputation seem so remote that executives readily accept requests from cyber-strangers to endorse them? Will the current success ratio Barry discovered diminish as social networking becomes more mature, and executives learn how carefully-built reputations can become damaged? Will we see a similar wave of caution as we did with chat rooms, FaceBook, and MySpace?
Stay tuned.
(Apologies to Rob Cross for corrupting the title of his excellent book, The Hidden Power of Social Networks.)
Goofus and Gallant Make CRM Decisions
For those who may not be familiar with Goofus and Gallant, the Highlights Magazine feature contrasts how two children—Goofus, who is bad, and Gallant, who is good—make divergent ethical choices when faced with the same set of circumstances. The text is presented as captions below simple drawings that illustrate the action. (A quote from a 1960 Highlights: “Goofus turns on the television when there are guests; whenever guests arrive, Gallant turns off the television at once.”)
Reading Goofus and Gallant is a great dose of reality on days when I’m feeling totally ethical. I always ask myself “What would I do?” While I don’t think I’m as flagrantly selfish as Goofus, I’m clearly socially and ethically maladjusted next to Gallant’s consistent kindness, thoughtfulness, and sense of fair play.
What if Goofus and Gallant outgrew their permanently juvenile forms and became grown-up executives faced with contemporary ethical decisions? How might they decide when they aren’t guided by flowcharts, formulas, and sophisticated software, but rather when answering the question “what is the right thing to do?”
Here are some examples:
“Goofus believes that only frequent passengers on his airline have the right to expect good service. Gallant believes all passengers are entitled to a good flying experience.”
“Goofus markets his products as ‘green’ even though he buys many materials from unregulated offshore factories; Gallant only sells products that meet rigorous standards for responsible environmental stewardship.”
“Goofus licenses his company’s logo to other companies whose practices and motives are unknown so that he can make an extra profit; Gallant values the trust that his customers place in his company.”
“Goofus uses direct mail to circumvent regulations so he can get senior citizens to accept telemarketing pitches; Gallant complies with the FTC’s vendor guidelines for no-call lists.”
“Goofus saves IT costs by not updating infrastructure and information security software; Gallant believes the privacy of his customers’ transaction information is a strategic priority.”
"Goofus optimizes his personal exit strategy when making CRM decisions; Gallant thinks about what’s best for his employees and customers.”
As sales, marketing, and business development professionals, we have at our disposal unprecedented power to create positive outcomes for many people, or to turn that power toward tactics that exploit trust and erode value. The overwhelming majority of the decisions we make are not constrained by laws and regulations. Even if Gallant’s decisions represent an unattainable ethical purity, isn’t it worth asking “what is the right thing to do?”
Reading Goofus and Gallant is a great dose of reality on days when I’m feeling totally ethical. I always ask myself “What would I do?” While I don’t think I’m as flagrantly selfish as Goofus, I’m clearly socially and ethically maladjusted next to Gallant’s consistent kindness, thoughtfulness, and sense of fair play.
What if Goofus and Gallant outgrew their permanently juvenile forms and became grown-up executives faced with contemporary ethical decisions? How might they decide when they aren’t guided by flowcharts, formulas, and sophisticated software, but rather when answering the question “what is the right thing to do?”
Here are some examples:
“Goofus believes that only frequent passengers on his airline have the right to expect good service. Gallant believes all passengers are entitled to a good flying experience.”
“Goofus markets his products as ‘green’ even though he buys many materials from unregulated offshore factories; Gallant only sells products that meet rigorous standards for responsible environmental stewardship.”
“Goofus licenses his company’s logo to other companies whose practices and motives are unknown so that he can make an extra profit; Gallant values the trust that his customers place in his company.”
“Goofus uses direct mail to circumvent regulations so he can get senior citizens to accept telemarketing pitches; Gallant complies with the FTC’s vendor guidelines for no-call lists.”
“Goofus saves IT costs by not updating infrastructure and information security software; Gallant believes the privacy of his customers’ transaction information is a strategic priority.”
"Goofus optimizes his personal exit strategy when making CRM decisions; Gallant thinks about what’s best for his employees and customers.”
As sales, marketing, and business development professionals, we have at our disposal unprecedented power to create positive outcomes for many people, or to turn that power toward tactics that exploit trust and erode value. The overwhelming majority of the decisions we make are not constrained by laws and regulations. Even if Gallant’s decisions represent an unattainable ethical purity, isn’t it worth asking “what is the right thing to do?”
A Sales Team Needs More Than "High ROI" and "Low TCO" To Compete
“How will your IT solution help me sell more pizza?”
That’s how one COO recently confronted a team of salespeople from a software integrator when they showed up for their first sales call. The salespeople could not answer the question. They had prepared for a different discussion, and the PowerPoint they brought, but never showed, included lots of technical information, along with charts and graphs showing ROI (Return on Investment) and TCO (Total Cost of Ownership)—none of which offered insight about how to solve COO’s strategic challenge. The meeting was terminated and rescheduled for a later date. The final outcome? It’s described toward end of this blog.
The pain of that interaction underscores why one of my clients, a large software developer, initiated a worldwide program to help their resellers shift from selling mainly small $20,000 Information Technology (IT) projects—which are frequently vetted using ROI calculations—to selling larger enterprise projects that require sales teams to prove strategic value along with financial returns. As enterprises adopt governance policies and “balanced scorecards” designed to promote alignment between IT investments and corporate strategy, the need to adopt a sales process that proves value beyond the achievement of simple financial calculations or Key Performance Indicators (KPI’s) has never been stronger. The project I’m currently working on provides me the opportunity to facilitate this metamorphosis.
But what’s wrong with talking to prospects about ROI and TCO?
Nothing, other than the fact that many marketers and salespeople simply fail to put these metrics in any context. Case in point: This week, RFID Solutions Online sent me an e-newsletter with the subject “Find The ROI In Your Asset Tracking Initiatives”. But the accompanying article summary doesn’t connect the value of asset tracking to financial or operational strategy.
And it’s not that there isn’t a connection. There is, but I couldn’t find it anywhere in the email. So the over-worn statement “Find The ROI . . .” isn’t visceral to C-Level executives who live and breathe strategy. This example is the tactical equivalent of a quarterback leading an offense to the opponent’s 10-yard line, and on third down saying “I think we’ve gone far enough.”
Why does ROI/TCO alone fall short? Because the “heavy lifting” in sales is in enabling prospects first to believe the facts about an issue, then to care about the issue, then to act to solve it. ROI and TCO are reasonably helpful for the belief stage (“We used the numbers the client provided for our ROI calculations!”), but marginally effective for answering the question “Why should I care?” And, if no influential individuals in an organization care about a given issue, would anyone wager that they would act to solve it?
So, beyond ROI and TCO, how can a company gain a sales advantage?
To answer that question, let’s look at how the sales team managed its setback with the pizza company COO. After returning to their office, the group took the time to formulate a set of questions about the growth strategy for the pizza company, including questions about finance, supply chain logistics, CRM, and human resources. They reformulated a presentation and met with the COO about two weeks later. Their project was approved and they won the opportunity.
What did the team figure out?
First, the team realized that positioning their offering to enable growth was mission critical for both vendor and prospect. By making the shift from a purely financial appeal to a strategic appeal, the sales team minimized the risk of “no decision.” In addition, another important outcome occurred. Because strategic growth impacts every operating unit in an organization, the sales team opened relationships with a cross-functional team of senior executives. Prior to that change, the vendor’s sales team networked only in the IT department. Finally, the sales team was rewarded with an unintentional benefit: they faced fewer competitors. Before changing their approach, the sales team competed with every vendor touting high ROI—some of which were selling IT solutions. Now, only two vendors offered a path to the strategic growth the COO required.
How did the sales team realign to address the COO’s problem, and what steps did they follow from beginning to end?
The team leveraged the competencies they already had, but had never effectively combined. They used empathetic listening skills, systems analysis techniques, and business acumen to convert what could have been a certain loss. All of these competencies rarely exist in one individual, so collaborative processes and effective team leadership were also required. The specific steps the team used will be covered in next week’s blog, “How to Uncover Strategic Opportunities through Strategic Questions.”
That’s how one COO recently confronted a team of salespeople from a software integrator when they showed up for their first sales call. The salespeople could not answer the question. They had prepared for a different discussion, and the PowerPoint they brought, but never showed, included lots of technical information, along with charts and graphs showing ROI (Return on Investment) and TCO (Total Cost of Ownership)—none of which offered insight about how to solve COO’s strategic challenge. The meeting was terminated and rescheduled for a later date. The final outcome? It’s described toward end of this blog.
The pain of that interaction underscores why one of my clients, a large software developer, initiated a worldwide program to help their resellers shift from selling mainly small $20,000 Information Technology (IT) projects—which are frequently vetted using ROI calculations—to selling larger enterprise projects that require sales teams to prove strategic value along with financial returns. As enterprises adopt governance policies and “balanced scorecards” designed to promote alignment between IT investments and corporate strategy, the need to adopt a sales process that proves value beyond the achievement of simple financial calculations or Key Performance Indicators (KPI’s) has never been stronger. The project I’m currently working on provides me the opportunity to facilitate this metamorphosis.
But what’s wrong with talking to prospects about ROI and TCO?
Nothing, other than the fact that many marketers and salespeople simply fail to put these metrics in any context. Case in point: This week, RFID Solutions Online sent me an e-newsletter with the subject “Find The ROI In Your Asset Tracking Initiatives”. But the accompanying article summary doesn’t connect the value of asset tracking to financial or operational strategy.
And it’s not that there isn’t a connection. There is, but I couldn’t find it anywhere in the email. So the over-worn statement “Find The ROI . . .” isn’t visceral to C-Level executives who live and breathe strategy. This example is the tactical equivalent of a quarterback leading an offense to the opponent’s 10-yard line, and on third down saying “I think we’ve gone far enough.”
Why does ROI/TCO alone fall short? Because the “heavy lifting” in sales is in enabling prospects first to believe the facts about an issue, then to care about the issue, then to act to solve it. ROI and TCO are reasonably helpful for the belief stage (“We used the numbers the client provided for our ROI calculations!”), but marginally effective for answering the question “Why should I care?” And, if no influential individuals in an organization care about a given issue, would anyone wager that they would act to solve it?
So, beyond ROI and TCO, how can a company gain a sales advantage?
To answer that question, let’s look at how the sales team managed its setback with the pizza company COO. After returning to their office, the group took the time to formulate a set of questions about the growth strategy for the pizza company, including questions about finance, supply chain logistics, CRM, and human resources. They reformulated a presentation and met with the COO about two weeks later. Their project was approved and they won the opportunity.
What did the team figure out?
First, the team realized that positioning their offering to enable growth was mission critical for both vendor and prospect. By making the shift from a purely financial appeal to a strategic appeal, the sales team minimized the risk of “no decision.” In addition, another important outcome occurred. Because strategic growth impacts every operating unit in an organization, the sales team opened relationships with a cross-functional team of senior executives. Prior to that change, the vendor’s sales team networked only in the IT department. Finally, the sales team was rewarded with an unintentional benefit: they faced fewer competitors. Before changing their approach, the sales team competed with every vendor touting high ROI—some of which were selling IT solutions. Now, only two vendors offered a path to the strategic growth the COO required.
How did the sales team realign to address the COO’s problem, and what steps did they follow from beginning to end?
The team leveraged the competencies they already had, but had never effectively combined. They used empathetic listening skills, systems analysis techniques, and business acumen to convert what could have been a certain loss. All of these competencies rarely exist in one individual, so collaborative processes and effective team leadership were also required. The specific steps the team used will be covered in next week’s blog, “How to Uncover Strategic Opportunities through Strategic Questions.”
Is Sales Necessary? ... Or Necessarily Evil?
Salespeople fight a "guilty until proven innocent" reputation when working with customers. I know, because as a salesperson I’ve battled it for over 20 years. The customer reaction isn’t surprising. Sales people are on the customer-relationship front line, and they absorb the brunt of buyer vitriol. In fact, a survey that DDI International recently conducted with 2,705 corporate buyers worldwide, “2007-2008 Global Sales Perceptions Report,” documented the problem with painful clarity. The report reveals how salespeople are perceived, and over 47% of US survey respondents indicated that they “would not be proud to be called a salesperson.” According to the report, “the most common description across all countries was that Sales is ‘a necessary evil.”
Given the billions of dollars that are spent annually on sales effectiveness training and CRM systems, this sentiment is an indictment on the sales profession, and it says we’re failing at our efforts to improve our face-to-face experiences with our customers. Not all is bad, however. Tremendous opportunities exist for enterprises that strategically change how their sales forces engage with customers.
Why do buyers have antipathy for sales people?
To answer this question, it’s necessary to look beyond salespeople themselves and to the culture and systems under which salespeople have worked for several generations. First, ever since sales became a distinct entity in commercial enterprises, the tactical objectives of the sales force have been dictated by corporate revenue goals. A closely-watched metric by investment analysts, revenue goals are developed in the board room, and trickle down to the individual sales representative through a sometimes-perverse and inherently flawed calculus, the end-point of which is called a quota. This all-important number represents the salesperson’s revenue commitment to the organization, and it carries ponderous weight. With revenue as the focal point of sales-performance discussions, quota over-achievement often means significant financial rewards; under-achievement compromises a salesperson’s ever-tenuous job stability.
As any quota-carrying salesperson or sales manager can attest, the assignment of sales quotas frequently involve rancorous negotiations. Some quotas are completely arbitrary, based on the direction fairy dust blows when it is thrown up in the air. Others are based on conditions that are outside of the salesperson’s control—market and economic forecasts, product and pricing forecasts, assumptions, and growth factors.
Quotas are half the story. The other half is how revenue is credited against sales quotas. This exercise often results in a smoke-and-mirrors game that is as much political as it is the application of accounting debits and credits. The result is an unwieldy multi-page document, sometimes called a Commission Plan, which can require a lawyer’s expertise to decipher for all the ambiguity. Such complexity prompted one Vice President of Sales at a company I worked for to envision a commission plan that could fit on one side of a business card—a noble goal he never implemented.
So every day under this basic system of illogical quota calculation and revenue accrual, legions of salespeople engage with millions of customers worldwide. Lost in all the shouting and confusion are the answers to these questions: “What is valuable to the people and organizations that use our products?” And the corollary question, “How will our salespeople behave given the financial “ecosystem” we have created?” No wonder so many buyers decry their sales experiences. Any moniker purporting “customer-centricity” only serves to put lipstick on this big, ugly pig.
Second, many organizations have not applied thought to the question, “what value must sales contribute to our organization in order for us to meet our strategic objectives?" Yet, companies invest in recruiting, hiring, managing, training, and compensating their sales forces in spite of such vagueness, and without a coherent way to measure efficacy.
When I ask my clients what value their sales force must provide to their organization, the immediate answer I often hear is “revenue.” “OK,” I say, “but if there are no profits associated with the revenue, is that valuable?” My clients respond “Of course not, we must make a profit.” Taking this idea further, I ask “If you make a profit, but your customers aren’t satisfied with your product and wouldn’t recommend your company—is that valuable?” And the inevitable answer: “No, of course not.” Finally, I ask “What if your organization achieved profitable revenue targets, and had satisfied clients, but didn’t gain any market insight for future strategy—would that be valuable?” The answer: “No, our planners and strategists depend on our sales force to provide valuable feedback from the field!” Then the light bulb turns on: the sales force must deliver value beyond top-line revenue! Unfortunately, we’re stuck in a cycle of value-chain discord until organizations stop demanding multiple outcomes from their sales force, but understand only one dimension—revenue.
Happily, some organizations have taken important steps to break free from the revenue-at-all-cost myopia. One company I work with penalizes a salesperson if a customer has purchased its software, but does not use the capabilities the software provides. Why has the vendor taken this position when nearly all of its competitors are focused on pushing new licenses and version upgrades? Because their senior management recognizes that nothing puts a company’s logo into a customer’s budget-cutting crosshairs faster than a known wasted IT investment. Other examples abound in which organizations have taken a progressive stance on rewarding salespeople for activities that are valuable to the organization beyond revenue generation. Such changes are important because they serve as steps to mitigate the discord described in the DDI survey.
But if we can’t change the economic system, how can we find a better way for sellers and buyers interact?
Probably the more fundamental question is “do we need to find a better way?” Are you content with the status quo? The DDI survey clearly says buyers are not. Your answer likely depends on whether you view sales as necessary—or necessarily evil.
Given the billions of dollars that are spent annually on sales effectiveness training and CRM systems, this sentiment is an indictment on the sales profession, and it says we’re failing at our efforts to improve our face-to-face experiences with our customers. Not all is bad, however. Tremendous opportunities exist for enterprises that strategically change how their sales forces engage with customers.
Why do buyers have antipathy for sales people?
To answer this question, it’s necessary to look beyond salespeople themselves and to the culture and systems under which salespeople have worked for several generations. First, ever since sales became a distinct entity in commercial enterprises, the tactical objectives of the sales force have been dictated by corporate revenue goals. A closely-watched metric by investment analysts, revenue goals are developed in the board room, and trickle down to the individual sales representative through a sometimes-perverse and inherently flawed calculus, the end-point of which is called a quota. This all-important number represents the salesperson’s revenue commitment to the organization, and it carries ponderous weight. With revenue as the focal point of sales-performance discussions, quota over-achievement often means significant financial rewards; under-achievement compromises a salesperson’s ever-tenuous job stability.
As any quota-carrying salesperson or sales manager can attest, the assignment of sales quotas frequently involve rancorous negotiations. Some quotas are completely arbitrary, based on the direction fairy dust blows when it is thrown up in the air. Others are based on conditions that are outside of the salesperson’s control—market and economic forecasts, product and pricing forecasts, assumptions, and growth factors.
Quotas are half the story. The other half is how revenue is credited against sales quotas. This exercise often results in a smoke-and-mirrors game that is as much political as it is the application of accounting debits and credits. The result is an unwieldy multi-page document, sometimes called a Commission Plan, which can require a lawyer’s expertise to decipher for all the ambiguity. Such complexity prompted one Vice President of Sales at a company I worked for to envision a commission plan that could fit on one side of a business card—a noble goal he never implemented.
So every day under this basic system of illogical quota calculation and revenue accrual, legions of salespeople engage with millions of customers worldwide. Lost in all the shouting and confusion are the answers to these questions: “What is valuable to the people and organizations that use our products?” And the corollary question, “How will our salespeople behave given the financial “ecosystem” we have created?” No wonder so many buyers decry their sales experiences. Any moniker purporting “customer-centricity” only serves to put lipstick on this big, ugly pig.
Second, many organizations have not applied thought to the question, “what value must sales contribute to our organization in order for us to meet our strategic objectives?" Yet, companies invest in recruiting, hiring, managing, training, and compensating their sales forces in spite of such vagueness, and without a coherent way to measure efficacy.
When I ask my clients what value their sales force must provide to their organization, the immediate answer I often hear is “revenue.” “OK,” I say, “but if there are no profits associated with the revenue, is that valuable?” My clients respond “Of course not, we must make a profit.” Taking this idea further, I ask “If you make a profit, but your customers aren’t satisfied with your product and wouldn’t recommend your company—is that valuable?” And the inevitable answer: “No, of course not.” Finally, I ask “What if your organization achieved profitable revenue targets, and had satisfied clients, but didn’t gain any market insight for future strategy—would that be valuable?” The answer: “No, our planners and strategists depend on our sales force to provide valuable feedback from the field!” Then the light bulb turns on: the sales force must deliver value beyond top-line revenue! Unfortunately, we’re stuck in a cycle of value-chain discord until organizations stop demanding multiple outcomes from their sales force, but understand only one dimension—revenue.
Happily, some organizations have taken important steps to break free from the revenue-at-all-cost myopia. One company I work with penalizes a salesperson if a customer has purchased its software, but does not use the capabilities the software provides. Why has the vendor taken this position when nearly all of its competitors are focused on pushing new licenses and version upgrades? Because their senior management recognizes that nothing puts a company’s logo into a customer’s budget-cutting crosshairs faster than a known wasted IT investment. Other examples abound in which organizations have taken a progressive stance on rewarding salespeople for activities that are valuable to the organization beyond revenue generation. Such changes are important because they serve as steps to mitigate the discord described in the DDI survey.
But if we can’t change the economic system, how can we find a better way for sellers and buyers interact?
Probably the more fundamental question is “do we need to find a better way?” Are you content with the status quo? The DDI survey clearly says buyers are not. Your answer likely depends on whether you view sales as necessary—or necessarily evil.
Strategic Questions Will Uncover Strategic Opportunities
The late Peter Drucker said “true marketing starts out with the customer, his demographics, his realities, his needs, his values. It does not ask ‘what do we want to sell?’ It asks ‘what does the customer want to buy?’ So, why have so few people figured out how to routinely and systematically uncover this fundamental insight? And why do few senior managers pay more than lip service to encouraging or requiring their sales forces to discover the answer?
One reason is that in the quest to create a “sales-driven culture,” companies push muscular sales tactics that often subordinate the importance of questions. “ABC—Always Be Closing,” or “Show the ROI!” or “Go for a trial close after showing our key features,” are part of sales-process DNA. Does anyone remember this recommendation--“When you get the customer to answer ‘yes’ to three consecutive questions, ask for the order.” ? One sales training tape I heard ignored asking questions altogether, offering this nugget: “If the customer voices an objection, give them a ‘yes . . .but.. . .” (I am not making this up—and I’m sure the phonic similarity to “headbutt” is not just a coincidence!) These superficial tactics fall short by not embedding strategic discovery into the sales process.
What is strategic discovery? It’s the process of learning how an organization plans to create, monetize, and deliver its value. Why is strategic discovery a vital competency for sales forces? Because compared to operational problem solving, strategic collaboration tightly connects enterprises in a value chain. Those tight connections increase a vendor’s value and reduce selling risks. Why? Because strategic initiatives are mission-critical and are often less ephemeral than operational initiatives. When a salesperson says “my solution enables your strategy,” she has a competitive advantage over the salesperson who says “my solution provides the highest ROI (and/or lowest Total Cost of Ownership).” I know from numerous sales engagements I’ve managed that “high ROI” alone provides a wobbly sales-value foundation. (See my recent blog, A Sales Team Needs More Than "High ROI" and "Low TCO" To Compete and related article The Right Sales Questions Will Get the Right Answers.)
Strategic discovery doesn’t have to be difficult, but the process makes many salespeople uncomfortable. Strategy questions must uncover business and financial challenges. They examine forces that are outside of anyone’s direct control. Part of the discussion includes blurry concepts like risks and trade-offs. Few strategic questions can be answered with a simple ‘yes’ or ‘no.” And strategic plans aren’t guided by ordained roadmaps or prescriptive methodologies.
So, what are the steps that a Sales-Discovery Black Belt should follow?
1. Begin with a foundation of mutual trust. As Jim Collins said in the bestseller Good to Great, “create an environment where the truth is heard.” Prospective customers don’t spontaneously open up and provide meaningful and honest answers to questions. And if you wait until the second meeting to start thinking about how to cultivate trust, it’s probably too late. Mutual transparency of goals and objectives must characterize the business relationship from the beginning. The best book I have read on this topic, Mahan Khalsa’s Let's Get Real or Let's Not Play, provides an approach that is as eloquent as it is sensible: “The decision to trust doesn’t start inside (your prospect)—it starts inside of you. Intent is a choice, and your choice will have consequences. You will communicate your intent whether you want to or not . . . Based on your intent, people will decide to trust you or not.”
2. Ask the right questions. Here are some of my favorite strategy questions, culled from a list of hundreds I’ve compiled over many years:
What are the key capabilities and resources required to execute strategy and achieve your goals?
In order to execute your business strategy, what are the key things you must do well?
What proprietary advantages must your company create for your strategy to be successful?
What are the most valuable outcomes your organization enables for your customers?
What are the major forces driving changes in your business?
What conditions have the most disruptive impact on your business now, and will have in the future?
What are the greatest opportunities for your company to change the basis of competition in your industry? How might these impact barriers to entry? Switching costs? Relationships in your value chain? Product differentiation?
How sustainable is your market position and the business model needed to achieve and support that position?
What are your options for growing your business in the future?
3. Identify capability gaps. Specific operational questions will uncover gaps between strategic imperatives and current capabilities. For example, the question “What are the major forces driving changes in your business?” might yield that global competition is a condition of growing importance. If the prospect company lacks operational capabilities to manage a worldwide supply chain, a strategically-significant impediment has been identified. From this finding, the essential work of sales takes place—enabling a client first to believe the facts about an issue—then to care, then to act. Operational questions are instrumental for crossing the belief threshold, so caring and acting are more likely because of the strategic ramifications of the capability gap.
4. Align the gaps with a recommended solution. This final step ensures that the recommended solution matches the client’s strategic imperative. A scenario from my sales past illustrates the importance of this step. Several years ago, one prospective client told me “Our goal is to get our organization 100% on bar coding by the end of next year.” Although I was pleased he believed in my product, I cringed at his remark, wondering how he would handle the Q&A from his management peers at his next planning meeting. The strategic goal was to improve cash flow by cutting order cycle time. Bar coding was one enabler. By establishing a foundation of trust described in Step 1, my commitment was to help my client achieve that outcome.
Achieving the right sales outcome--my client's success--required both my client and me to keep the strategic objective in focus.
One reason is that in the quest to create a “sales-driven culture,” companies push muscular sales tactics that often subordinate the importance of questions. “ABC—Always Be Closing,” or “Show the ROI!” or “Go for a trial close after showing our key features,” are part of sales-process DNA. Does anyone remember this recommendation--“When you get the customer to answer ‘yes’ to three consecutive questions, ask for the order.” ? One sales training tape I heard ignored asking questions altogether, offering this nugget: “If the customer voices an objection, give them a ‘yes . . .but.. . .” (I am not making this up—and I’m sure the phonic similarity to “headbutt” is not just a coincidence!) These superficial tactics fall short by not embedding strategic discovery into the sales process.
What is strategic discovery? It’s the process of learning how an organization plans to create, monetize, and deliver its value. Why is strategic discovery a vital competency for sales forces? Because compared to operational problem solving, strategic collaboration tightly connects enterprises in a value chain. Those tight connections increase a vendor’s value and reduce selling risks. Why? Because strategic initiatives are mission-critical and are often less ephemeral than operational initiatives. When a salesperson says “my solution enables your strategy,” she has a competitive advantage over the salesperson who says “my solution provides the highest ROI (and/or lowest Total Cost of Ownership).” I know from numerous sales engagements I’ve managed that “high ROI” alone provides a wobbly sales-value foundation. (See my recent blog, A Sales Team Needs More Than "High ROI" and "Low TCO" To Compete and related article The Right Sales Questions Will Get the Right Answers.)
Strategic discovery doesn’t have to be difficult, but the process makes many salespeople uncomfortable. Strategy questions must uncover business and financial challenges. They examine forces that are outside of anyone’s direct control. Part of the discussion includes blurry concepts like risks and trade-offs. Few strategic questions can be answered with a simple ‘yes’ or ‘no.” And strategic plans aren’t guided by ordained roadmaps or prescriptive methodologies.
So, what are the steps that a Sales-Discovery Black Belt should follow?
1. Begin with a foundation of mutual trust. As Jim Collins said in the bestseller Good to Great, “create an environment where the truth is heard.” Prospective customers don’t spontaneously open up and provide meaningful and honest answers to questions. And if you wait until the second meeting to start thinking about how to cultivate trust, it’s probably too late. Mutual transparency of goals and objectives must characterize the business relationship from the beginning. The best book I have read on this topic, Mahan Khalsa’s Let's Get Real or Let's Not Play, provides an approach that is as eloquent as it is sensible: “The decision to trust doesn’t start inside (your prospect)—it starts inside of you. Intent is a choice, and your choice will have consequences. You will communicate your intent whether you want to or not . . . Based on your intent, people will decide to trust you or not.”
2. Ask the right questions. Here are some of my favorite strategy questions, culled from a list of hundreds I’ve compiled over many years:
What are the key capabilities and resources required to execute strategy and achieve your goals?
In order to execute your business strategy, what are the key things you must do well?
What proprietary advantages must your company create for your strategy to be successful?
What are the most valuable outcomes your organization enables for your customers?
What are the major forces driving changes in your business?
What conditions have the most disruptive impact on your business now, and will have in the future?
What are the greatest opportunities for your company to change the basis of competition in your industry? How might these impact barriers to entry? Switching costs? Relationships in your value chain? Product differentiation?
How sustainable is your market position and the business model needed to achieve and support that position?
What are your options for growing your business in the future?
3. Identify capability gaps. Specific operational questions will uncover gaps between strategic imperatives and current capabilities. For example, the question “What are the major forces driving changes in your business?” might yield that global competition is a condition of growing importance. If the prospect company lacks operational capabilities to manage a worldwide supply chain, a strategically-significant impediment has been identified. From this finding, the essential work of sales takes place—enabling a client first to believe the facts about an issue—then to care, then to act. Operational questions are instrumental for crossing the belief threshold, so caring and acting are more likely because of the strategic ramifications of the capability gap.
4. Align the gaps with a recommended solution. This final step ensures that the recommended solution matches the client’s strategic imperative. A scenario from my sales past illustrates the importance of this step. Several years ago, one prospective client told me “Our goal is to get our organization 100% on bar coding by the end of next year.” Although I was pleased he believed in my product, I cringed at his remark, wondering how he would handle the Q&A from his management peers at his next planning meeting. The strategic goal was to improve cash flow by cutting order cycle time. Bar coding was one enabler. By establishing a foundation of trust described in Step 1, my commitment was to help my client achieve that outcome.
Achieving the right sales outcome--my client's success--required both my client and me to keep the strategic objective in focus.
Honor Thy Customer Before He Leaves—Not After
In three years, I’ve never felt as loved as I do now by the cable service I just dropped, Cox Communications. Why? Because at the end of March, Verizon Fios will be the new communications provider at my home. And I feel heartsick for Cox—I’m not leaving Cox because I love Verizon more, but only because the Verizon package costs much, much less than my unbundled services.
Now the jilted Cox is communicating—with a vengeance. They have called me several times in the last two weeks to tell me how much they will miss my business. Today’s call was from Vivian “calling on behalf of Cox.” Picking up on her semantic hint, I asked her what company she was with. “Timberline,” she reported, and without pausing, she continued, “We understand you want to go with another provider, and we’re calling to offer you a discount on your cable service if you continue with Cox.”
The irony of all this was too much to bear, so I asked Vivian why Cox would wait until I’ve decided to terminate my service to have an outsourced salesperson call to tell me how much I’m appreciated by offering me a discount when they were perfectly happy to bill me at the premium rate up to this time. The unflappable Vivian didn’t have an answer for me, but she told me she noted my concern and she wished me a good day.
I was disappointed that Vivian couldn’t shed light on my question. I realize that logic often gets in my way. Is there anyone who can help me understand why Cox might wait until a customer has decided to leave to apply significant resources toward customer retention, rather than loving a customer while he or she is a customer? Is there a compelling conversion factor or KPI that I’m unaware of that makes Cox’s late plea economically astute?
In the end, it seems sad that Cox has such poor Customer Relationship Management execution that it could only muster a price-play on this “hail Mary” telemarketing call. Cox’s customers deserve better—and so does Vivian.
Now the jilted Cox is communicating—with a vengeance. They have called me several times in the last two weeks to tell me how much they will miss my business. Today’s call was from Vivian “calling on behalf of Cox.” Picking up on her semantic hint, I asked her what company she was with. “Timberline,” she reported, and without pausing, she continued, “We understand you want to go with another provider, and we’re calling to offer you a discount on your cable service if you continue with Cox.”
The irony of all this was too much to bear, so I asked Vivian why Cox would wait until I’ve decided to terminate my service to have an outsourced salesperson call to tell me how much I’m appreciated by offering me a discount when they were perfectly happy to bill me at the premium rate up to this time. The unflappable Vivian didn’t have an answer for me, but she told me she noted my concern and she wished me a good day.
I was disappointed that Vivian couldn’t shed light on my question. I realize that logic often gets in my way. Is there anyone who can help me understand why Cox might wait until a customer has decided to leave to apply significant resources toward customer retention, rather than loving a customer while he or she is a customer? Is there a compelling conversion factor or KPI that I’m unaware of that makes Cox’s late plea economically astute?
In the end, it seems sad that Cox has such poor Customer Relationship Management execution that it could only muster a price-play on this “hail Mary” telemarketing call. Cox’s customers deserve better—and so does Vivian.
Strategies—Not Products—Create Lasting Market Disruption
"I just saw our software demo," I said to my company's VP of sales. "I can see how its features will be valuable for our customers." "It's disruptive!" he replied proudly, without enlightening me about what that meant or why it mattered. But his ebullience seemed so promising at the time.
Within two years, the company churned its senior management team, the sales VP and the majority of its sales force. What went wrong? I'll get to that in a moment.
The sales VP probably knows now that products and processes by themselves have little capacity for creating meaningful change because they are not disruptive. Strategies enable market disruption, and those strategies include product innovation. Skills play a role as well, and successful managers know that working with potentially disruptive innovations requires the economic insight of Adam Smith, the inspirational leadership skills of Martin Luther King, the communication skills of Ronald Reagan, the perseverance of Thomas A. Edison, and the entrepreneurial vision of Steve Jobs. If that sounds like a daunting combination, take solace in the fact that these individuals took risks and failed repeatedly before achieving success.
‘Try describing to a teenager today what you did in 1980 to obtain music that you liked to listen to.’
What makes an innovation disruptive, anyway? An innovation is disruptive when it affects the hegemony of the market-leading company, companies or prevailing technologies for a specific market. Among the many examples of disruptive products are digital photography technologies, which replaced photographic film. And Netflix upended complacent market leader Blockbuster through an innovative business and logistics model, which forced Blockbuster to relinquish a significant source of profits from late fee charges.
Many variables
The term, disruptive innovation, was introduced by Clayton Christensen in an article written with Joseph Bower, Disruptive Technologies: Catching the Wave. The magnitude of the disruptive impact resulting from innovation can take many years to develop because the influence of many of the variables involved is unknown at the time the innovation is introduced. Today, the amount of disruption caused by such nascent innovations as iPhone, Linux and digital media file sharing is still unknown.
What conditions must be present to create disruption?
The market for the product or service is experiencing, or is likely to experience, an increased rate of demand. This demand might be created by social, business or regulatory change.
The economic outcomes in providing, acquiring or adopting the new product or service must be significantly better than the prevailing offerings.
The business model or core technology used for the innovation must be both fundamentally different from the prevailing offerings and sustainable.
Because there are many variables over long timeframes that influence whether a product or service will be disruptive, is it accurate or even useful to proclaim disruption as the sales VP did? What relationship do product innovation, market demand and marketing strategy have with market disruption? Do products that have potential to create market disruption have unique characteristics that require specialized strategies and tactics? See Elements of a Successful Disruptive Strategy below for the answers."
So what did go wrong for the sales VP and the rest of the company? Simply put, the company couldn't generate enough sales to cover expenses. It had scant market presence or brand recognition. The partner strategy was formulated as an afterthought to the sales program. The product's value to its prospective customers was poorly understood, so it could not be communicated. Compound those problems with high adoption costs and unproven financial and operational outcomes for customers, and the result was a sure failure by any sales measure.
Most egregious was the company's miscalculation that the strategic benefits its customers achieved in one successful market—electronics—would extend to other market verticals. The reason that assumption was proven wrong can be summed up with one word: Dell. No other market vertical had the adapt-or-die economics that Dell imposed in electronics. The company's managers completely misunderstood that reality, and they made poor assumptions as a result.
What can you take away from my erstwhile sales VP? First, market disruption does create value for customers. Try describing to a teenager today what you did in 1980 to obtain music that you liked to listen to. He wouldn't believe that before disruption in the music industry, consumers had to accept music in the form of complete sets (back in the day, they were called record albums) from artists that companies wanted to record, in the order they recorded them, on the media they provided, from retail channels they controlled, at the prices they wanted to charge.
But here's the second lesson: Customers are not interested in disruptive products per se; they're interested in the outcomes those products provide. Chasing the objective of creating a disruptive technology will almost surely divert management's attention from achievement of more worthwhile goals. Market disruption is a byproduct of other strategies that are inherently more meaningful to define, measure and control. Those goals could be achievement of a targeted return on investment, revenue milestones or a specific customer adoption rate.
Any one of those, managed well, will garner more success for your company than chasing the elusive disruptive technology.
Elements of a successful disruptive strategy
An understanding of the economics of the product innovation in the context of the prevailing competitive economics. Companies that have created market disruption have exhibited a keen understanding of the laws of supply and demand. Their executives understand the connections among costs, pricing, adoption rates, and market growth.
Leadership for facilitating change. Displacement of entrenched competitors—whether they are loved, reviled or something in between—requires the displacing organization to lead change. Leading change requires appeals at multiple levels: emotional, factual and symbolic. In the book, Changing Minds (Harvard Business School Press, 2006), Howard Gardner outlines seven levers of change: reason, research, resonance, representational re-descriptions, resources and rewards, real world events and resistances. These seven levers relate to different ways visions and ideas can be communicated, so people are inspired, motivated and moved to action.
Business processes that are empathetic to the customer's perspective. Effective disruptive strategies are based on an outside-in view of the innovator's organization, which means that sales processes are created from the perspective of how customers buy—not how sellers sell.
Providing purchase motivators. Those motivators are based on managing two product attributes: reduced price compared to current offerings and an expectation of increased benefits—or a combination of the two.
Reducing adoption barriers. Similar to purchase motivators, reducing adoption barriers has two components: minimizing switching costs and ensuring availability (synchronizing supply with demand, for those who like buzzwords)—or a combination of the two. Many companies formulate compelling purchase motivators but fail to consider the huge impact that adoption costs have on purchase decisions. Many great products have failed in markets because adoption economics have favored the status quo or because the new product simply wasn't available when needed.
Demonstrable thought leadership. Thought leadership involves being a champion for the change you wish to see in the world, however that might be defined. It's easier to be known as the market leader because you've said so from the beginning, rather than reminding customers of that fact when the market is saturated. Innovators who seize an early opportunity to become thought leaders can dominate the industry buzz for their product or service; elevate the value their prospects perceive for their product or service; and solidify their role as the innovation pioneer.
—Andrew Rudin
Within two years, the company churned its senior management team, the sales VP and the majority of its sales force. What went wrong? I'll get to that in a moment.
The sales VP probably knows now that products and processes by themselves have little capacity for creating meaningful change because they are not disruptive. Strategies enable market disruption, and those strategies include product innovation. Skills play a role as well, and successful managers know that working with potentially disruptive innovations requires the economic insight of Adam Smith, the inspirational leadership skills of Martin Luther King, the communication skills of Ronald Reagan, the perseverance of Thomas A. Edison, and the entrepreneurial vision of Steve Jobs. If that sounds like a daunting combination, take solace in the fact that these individuals took risks and failed repeatedly before achieving success.
‘Try describing to a teenager today what you did in 1980 to obtain music that you liked to listen to.’
What makes an innovation disruptive, anyway? An innovation is disruptive when it affects the hegemony of the market-leading company, companies or prevailing technologies for a specific market. Among the many examples of disruptive products are digital photography technologies, which replaced photographic film. And Netflix upended complacent market leader Blockbuster through an innovative business and logistics model, which forced Blockbuster to relinquish a significant source of profits from late fee charges.
Many variables
The term, disruptive innovation, was introduced by Clayton Christensen in an article written with Joseph Bower, Disruptive Technologies: Catching the Wave. The magnitude of the disruptive impact resulting from innovation can take many years to develop because the influence of many of the variables involved is unknown at the time the innovation is introduced. Today, the amount of disruption caused by such nascent innovations as iPhone, Linux and digital media file sharing is still unknown.
What conditions must be present to create disruption?
The market for the product or service is experiencing, or is likely to experience, an increased rate of demand. This demand might be created by social, business or regulatory change.
The economic outcomes in providing, acquiring or adopting the new product or service must be significantly better than the prevailing offerings.
The business model or core technology used for the innovation must be both fundamentally different from the prevailing offerings and sustainable.
Because there are many variables over long timeframes that influence whether a product or service will be disruptive, is it accurate or even useful to proclaim disruption as the sales VP did? What relationship do product innovation, market demand and marketing strategy have with market disruption? Do products that have potential to create market disruption have unique characteristics that require specialized strategies and tactics? See Elements of a Successful Disruptive Strategy below for the answers."
So what did go wrong for the sales VP and the rest of the company? Simply put, the company couldn't generate enough sales to cover expenses. It had scant market presence or brand recognition. The partner strategy was formulated as an afterthought to the sales program. The product's value to its prospective customers was poorly understood, so it could not be communicated. Compound those problems with high adoption costs and unproven financial and operational outcomes for customers, and the result was a sure failure by any sales measure.
Most egregious was the company's miscalculation that the strategic benefits its customers achieved in one successful market—electronics—would extend to other market verticals. The reason that assumption was proven wrong can be summed up with one word: Dell. No other market vertical had the adapt-or-die economics that Dell imposed in electronics. The company's managers completely misunderstood that reality, and they made poor assumptions as a result.
What can you take away from my erstwhile sales VP? First, market disruption does create value for customers. Try describing to a teenager today what you did in 1980 to obtain music that you liked to listen to. He wouldn't believe that before disruption in the music industry, consumers had to accept music in the form of complete sets (back in the day, they were called record albums) from artists that companies wanted to record, in the order they recorded them, on the media they provided, from retail channels they controlled, at the prices they wanted to charge.
But here's the second lesson: Customers are not interested in disruptive products per se; they're interested in the outcomes those products provide. Chasing the objective of creating a disruptive technology will almost surely divert management's attention from achievement of more worthwhile goals. Market disruption is a byproduct of other strategies that are inherently more meaningful to define, measure and control. Those goals could be achievement of a targeted return on investment, revenue milestones or a specific customer adoption rate.
Any one of those, managed well, will garner more success for your company than chasing the elusive disruptive technology.
Elements of a successful disruptive strategy
An understanding of the economics of the product innovation in the context of the prevailing competitive economics. Companies that have created market disruption have exhibited a keen understanding of the laws of supply and demand. Their executives understand the connections among costs, pricing, adoption rates, and market growth.
Leadership for facilitating change. Displacement of entrenched competitors—whether they are loved, reviled or something in between—requires the displacing organization to lead change. Leading change requires appeals at multiple levels: emotional, factual and symbolic. In the book, Changing Minds (Harvard Business School Press, 2006), Howard Gardner outlines seven levers of change: reason, research, resonance, representational re-descriptions, resources and rewards, real world events and resistances. These seven levers relate to different ways visions and ideas can be communicated, so people are inspired, motivated and moved to action.
Business processes that are empathetic to the customer's perspective. Effective disruptive strategies are based on an outside-in view of the innovator's organization, which means that sales processes are created from the perspective of how customers buy—not how sellers sell.
Providing purchase motivators. Those motivators are based on managing two product attributes: reduced price compared to current offerings and an expectation of increased benefits—or a combination of the two.
Reducing adoption barriers. Similar to purchase motivators, reducing adoption barriers has two components: minimizing switching costs and ensuring availability (synchronizing supply with demand, for those who like buzzwords)—or a combination of the two. Many companies formulate compelling purchase motivators but fail to consider the huge impact that adoption costs have on purchase decisions. Many great products have failed in markets because adoption economics have favored the status quo or because the new product simply wasn't available when needed.
Demonstrable thought leadership. Thought leadership involves being a champion for the change you wish to see in the world, however that might be defined. It's easier to be known as the market leader because you've said so from the beginning, rather than reminding customers of that fact when the market is saturated. Innovators who seize an early opportunity to become thought leaders can dominate the industry buzz for their product or service; elevate the value their prospects perceive for their product or service; and solidify their role as the innovation pioneer.
—Andrew Rudin
Do You Know What Your Customers Are Really Buying From You?
How does an enterprise create sustainable value? Through listening to customers and innovating products and services they want to buy? Or by creating a product and hoping the world beats a path to its door (or website) to buy it?
The better answer—listening to customers and innovating products and services accordingly—plays well in PowerPoint presentations under the Why We’re Customer-centric banner, but many truly smart people still don’t get it.
An article, The Innovation Illusion, by Sergio Zyman, contains a compelling real-world example. “While Sony was busy making colorful new versions of personal, portable CD players, Apple was out there redefining portable entertainment. Sony should have introduced iPods, not Apple. So what was the domain of Sony is now Apple’s forever.”
If Sony can find solace about squandering an opportunity it created almost 30 years ago, it’s in the fact they have plenty of company. In February, Polaroid Corporation announced it would cease manufacturing virtually all of its instant film, closing three plants in the process. Polaroid’s explanation: “marketplace conditions,” which is business-speak for “so few people want to buy our products that we can’t afford to produce them.”
If you were born before 1980, you’ll recognize these other not-seen-lately products to add to the dustbin: water beds, dustbusters, cigarette vending machines, mimeograph machines, and multi-media all-in-one stereo systems. The list goes on. The all-important wall-mounted pencil sharpeners that used to adorn almost every school and workplace? Made obsolete by computers and mechanical pencils. Many of the companies that were dominant suppliers are no longer in business. Marketplace conditions also likely claimed the financial stability of the ecosystems of people and companies that produced these products—parts suppliers, retailers, resellers and distributors, and sales forces.
So why do some companies closely tied to blockbuster successes like Polaroid Film and the Sony Walkman lose momentum while other companies perpetuate through other offerings? A new book, Think Two Products Ahead, by Ben Mack, explains why, making a case for understanding customer need and building brand equity to support it. Mr. Mack supports his point by describing how in the late 1800’s, Wells Fargo transitioned from a delivery company to a financial services company by understanding that trust was what their customers were really buying. “Trust is the essence of the Wells Fargo brand, more than its physical banks, checks, or even its name. The name became a symbol of this trust, but without this trust, the company would have evaporated when the government took over Wells Fargo’s express business. It was the customers’ willingness to do business with Wells Fargo that allowed it to continue when the business suddenly had to switch product offerings. It was the business managers leveraging Wells Fargo’s common thread that facilitated the company finding new business opportunities.”
What creates the success-failure chasm between companies like Wells Fargo and Sony and Polaroid? Could it be in the questions they ask—or not? Did Wells Fargo survive through astute introspection? Were senior managers from Sony and Polaroid so enamored with their own revolutionary technologies that they failed to later ask the same questions that ironically might have helped create their own breakthroughs? These questions include:
What does our next customer want to buy?
What emerging forces will impact our business?
Are there new business models or technologies that should be adapted to deliver radical improvements in the value we provide?
What proprietary advantages must we exploit to sustain or improve our market position?
Are there shifts in market power or industry fragmentation that create new sales opportunities?
A historical comparison will prove that asking questions such as these—and taking action on the answers—have played an important role in every successful product or business venture. Curiosity has great innovative power.
The next time I nostalgically remember a product or company made newly-extinct by marketplace conditions, I’ll just say “We bought one of those! It worked so great at the time.” But I won’t need to guess about what happened.
The better answer—listening to customers and innovating products and services accordingly—plays well in PowerPoint presentations under the Why We’re Customer-centric banner, but many truly smart people still don’t get it.
An article, The Innovation Illusion, by Sergio Zyman, contains a compelling real-world example. “While Sony was busy making colorful new versions of personal, portable CD players, Apple was out there redefining portable entertainment. Sony should have introduced iPods, not Apple. So what was the domain of Sony is now Apple’s forever.”
If Sony can find solace about squandering an opportunity it created almost 30 years ago, it’s in the fact they have plenty of company. In February, Polaroid Corporation announced it would cease manufacturing virtually all of its instant film, closing three plants in the process. Polaroid’s explanation: “marketplace conditions,” which is business-speak for “so few people want to buy our products that we can’t afford to produce them.”
If you were born before 1980, you’ll recognize these other not-seen-lately products to add to the dustbin: water beds, dustbusters, cigarette vending machines, mimeograph machines, and multi-media all-in-one stereo systems. The list goes on. The all-important wall-mounted pencil sharpeners that used to adorn almost every school and workplace? Made obsolete by computers and mechanical pencils. Many of the companies that were dominant suppliers are no longer in business. Marketplace conditions also likely claimed the financial stability of the ecosystems of people and companies that produced these products—parts suppliers, retailers, resellers and distributors, and sales forces.
So why do some companies closely tied to blockbuster successes like Polaroid Film and the Sony Walkman lose momentum while other companies perpetuate through other offerings? A new book, Think Two Products Ahead, by Ben Mack, explains why, making a case for understanding customer need and building brand equity to support it. Mr. Mack supports his point by describing how in the late 1800’s, Wells Fargo transitioned from a delivery company to a financial services company by understanding that trust was what their customers were really buying. “Trust is the essence of the Wells Fargo brand, more than its physical banks, checks, or even its name. The name became a symbol of this trust, but without this trust, the company would have evaporated when the government took over Wells Fargo’s express business. It was the customers’ willingness to do business with Wells Fargo that allowed it to continue when the business suddenly had to switch product offerings. It was the business managers leveraging Wells Fargo’s common thread that facilitated the company finding new business opportunities.”
What creates the success-failure chasm between companies like Wells Fargo and Sony and Polaroid? Could it be in the questions they ask—or not? Did Wells Fargo survive through astute introspection? Were senior managers from Sony and Polaroid so enamored with their own revolutionary technologies that they failed to later ask the same questions that ironically might have helped create their own breakthroughs? These questions include:
What does our next customer want to buy?
What emerging forces will impact our business?
Are there new business models or technologies that should be adapted to deliver radical improvements in the value we provide?
What proprietary advantages must we exploit to sustain or improve our market position?
Are there shifts in market power or industry fragmentation that create new sales opportunities?
A historical comparison will prove that asking questions such as these—and taking action on the answers—have played an important role in every successful product or business venture. Curiosity has great innovative power.
The next time I nostalgically remember a product or company made newly-extinct by marketplace conditions, I’ll just say “We bought one of those! It worked so great at the time.” But I won’t need to guess about what happened.
"Our Computers Don't Talk to Each other." No Kidding!
In May, my client told me they have a project for me in Tel Aviv. The bad news is I had to fly to get there.
About thirty days before my trip, Expedia sends my itinerary by email. The travel document shows a Delta flight number, and the carrier as "Delta, operated by: Air France.” (The airlines refer to this arrangement as “code sharing,” but a more accurate term is “code unsharing.” I will explain why in a moment.) It contains an Expedia Itinerary Number, an Airline ticket number, a Delta confirmation code, and an Air France confirmation code—all conveniently grouped in the upper left hand corner of the email.
Which company is responsible for delivering an excellent customer experience? I’m not sure, but the memorable scene in The Wizard of Oz in which the Scarecrow at once points to the left and to the right as the best way to reach Oz seems as good a way as any to describe the confusion.
“Code Unshared” Experience #1: My Expedia reservation doesn’t have seat assignments, meal requests, or my Delta SkyMiles number. Easy enough to fix, I think. I go online to make the needed changes. First to Delta’s website, where I enter my SkyMiles number. I use SeatGuru (www.seatguru.com) to help me find the best seats, but Delta’s website stubbornly won’t accept my seat request for the Paris to Tel Aviv leg. Security reasons maybe? The website offers no information.
So I try Air France’s website using their conformation code, and still no luck. Thinking the transaction might be best done by voice, I click around to find the Air France reservation phone number and reach a human after several minutes. “We can’t reserve a seat for you. You’ll have to do that when you check in at Washington Dulles in June,” I’m informed. When I realize that this seemingly-simple transaction has consumed over ninety minutes, involving the resources of (count them) four companies, I settle for a partial win.
“Code Unshared” Experience #2: June 12. My taxi drops me off at the Delta door at Washington Dulles Airport. I stride up to Delta’s self-service check in kiosk and slide my credit card into the reader. The system finds my reservation, but the display indicates that for a boarding pass, I must check in at Air France (recall that I have a Delta flight number). I look down the uncharacteristically empty terminal at Dulles and see about 100 people queued in front of one counter. That’s Air France.
“Code unshared” Experience #3: The check in procedure at Air France goes smoothly, and I make the long walk to Terminal B. As I’m heading up a long escalator, I glance at my seat assignment: 33E. Forging ahead toward the gate, I count on my fingers to “E.” Five! To my horror, I figure out this is not the aisle seat I painstakingly acquired online. It’s in the middle of the middle! I rush to the counter at the gate to get another seat, and to ask what happened. The agent can’t explain, but she kindly accommodates my request and immediately reissues my boarding pass with a better seat.
“Code Unshared” Experience #4: About an hour into the flight, the attendants push the meal carts through the aisles in coach and distribute trays of food to the passengers. As one is about to be dropped onto my tray table, I ask if it’s the vegetarian meal I requested. As if by rote, the flight attendant responds “Sir, you must request those at least twenty-four hours . . .” Cutting him off, I say “I requested the meal last month.” “What is your last name?” he asks. “Rudin,” I say, spelling it, just to make sure. He looks at his computer-generated list and shakes his head. “I’m sorry. We don’t have any record of your request,” he says with finality. With my patience waning, I say “This looks really stupid. Not you—but this whole situation. You can’t get anything right.” I show him the printout of my Expedia email with the four confirmation numbers. “Sometimes our computers don’t talk to each other,” he offers. It's an unnecessary attempt to explain what is already painfully obvious to a frustrated passenger.
I often hear road warriors share bad airline stories over drinks at the bar the same way cowboys used to tell yarns about the cattle drives around the campfire. But this story isn’t really about airlines. It’s about what happens when businesses “team” for marketing and sales purposes, but don’t put the right operations in place to execute on their promises—both stated and implicit. In the process, high customer expectations slam into voids created by disconnected services and systems. In information technology, website facades and user screens that have no infrastructure behind them are derisively termed “Hollywood Sets,” a metaphor which needs no explanation in terms of the customer experience.
In contrast, a great customer experience can be found in a transaction nobody wants—auto collision repair. A single call to an insurance company or agent creates a claim record that seamlessly flows between the insurance company, body shop, and rental car company. A single version of the information is available to all, and billing and funds transfers occur quickly and easily. Even more remarkable, compared to Delta and Air France, you couldn’t find three business operations more different than insurance, auto repair, and car rental—yet the process integration between the three, along with convenience for the customer, is astounding.
Whether you believe the excellent customer experience is intended—or simply a byproduct of a larger need for insurance companies to control payouts is the subject of another blog. But using that logic, in the name of Tight Security is it unreasonable to expect that even basic passenger information be shared between two carriers? Unfortunately, just the opposite is true.
Part of my work in Tel Aviv on Monday involves analysis of a telecomm business case as a way to help salespeople identify strategic business opportunities and operational gaps. One fact the participants will uncover is that the telecomm firm can’t meet its objectives because it lacks integrated IT systems. I think I’ll invite Expedia, Delta, and Air France to sit in.
About thirty days before my trip, Expedia sends my itinerary by email. The travel document shows a Delta flight number, and the carrier as "Delta, operated by: Air France.” (The airlines refer to this arrangement as “code sharing,” but a more accurate term is “code unsharing.” I will explain why in a moment.) It contains an Expedia Itinerary Number, an Airline ticket number, a Delta confirmation code, and an Air France confirmation code—all conveniently grouped in the upper left hand corner of the email.
Which company is responsible for delivering an excellent customer experience? I’m not sure, but the memorable scene in The Wizard of Oz in which the Scarecrow at once points to the left and to the right as the best way to reach Oz seems as good a way as any to describe the confusion.
“Code Unshared” Experience #1: My Expedia reservation doesn’t have seat assignments, meal requests, or my Delta SkyMiles number. Easy enough to fix, I think. I go online to make the needed changes. First to Delta’s website, where I enter my SkyMiles number. I use SeatGuru (www.seatguru.com) to help me find the best seats, but Delta’s website stubbornly won’t accept my seat request for the Paris to Tel Aviv leg. Security reasons maybe? The website offers no information.
So I try Air France’s website using their conformation code, and still no luck. Thinking the transaction might be best done by voice, I click around to find the Air France reservation phone number and reach a human after several minutes. “We can’t reserve a seat for you. You’ll have to do that when you check in at Washington Dulles in June,” I’m informed. When I realize that this seemingly-simple transaction has consumed over ninety minutes, involving the resources of (count them) four companies, I settle for a partial win.
“Code Unshared” Experience #2: June 12. My taxi drops me off at the Delta door at Washington Dulles Airport. I stride up to Delta’s self-service check in kiosk and slide my credit card into the reader. The system finds my reservation, but the display indicates that for a boarding pass, I must check in at Air France (recall that I have a Delta flight number). I look down the uncharacteristically empty terminal at Dulles and see about 100 people queued in front of one counter. That’s Air France.
“Code unshared” Experience #3: The check in procedure at Air France goes smoothly, and I make the long walk to Terminal B. As I’m heading up a long escalator, I glance at my seat assignment: 33E. Forging ahead toward the gate, I count on my fingers to “E.” Five! To my horror, I figure out this is not the aisle seat I painstakingly acquired online. It’s in the middle of the middle! I rush to the counter at the gate to get another seat, and to ask what happened. The agent can’t explain, but she kindly accommodates my request and immediately reissues my boarding pass with a better seat.
“Code Unshared” Experience #4: About an hour into the flight, the attendants push the meal carts through the aisles in coach and distribute trays of food to the passengers. As one is about to be dropped onto my tray table, I ask if it’s the vegetarian meal I requested. As if by rote, the flight attendant responds “Sir, you must request those at least twenty-four hours . . .” Cutting him off, I say “I requested the meal last month.” “What is your last name?” he asks. “Rudin,” I say, spelling it, just to make sure. He looks at his computer-generated list and shakes his head. “I’m sorry. We don’t have any record of your request,” he says with finality. With my patience waning, I say “This looks really stupid. Not you—but this whole situation. You can’t get anything right.” I show him the printout of my Expedia email with the four confirmation numbers. “Sometimes our computers don’t talk to each other,” he offers. It's an unnecessary attempt to explain what is already painfully obvious to a frustrated passenger.
I often hear road warriors share bad airline stories over drinks at the bar the same way cowboys used to tell yarns about the cattle drives around the campfire. But this story isn’t really about airlines. It’s about what happens when businesses “team” for marketing and sales purposes, but don’t put the right operations in place to execute on their promises—both stated and implicit. In the process, high customer expectations slam into voids created by disconnected services and systems. In information technology, website facades and user screens that have no infrastructure behind them are derisively termed “Hollywood Sets,” a metaphor which needs no explanation in terms of the customer experience.
In contrast, a great customer experience can be found in a transaction nobody wants—auto collision repair. A single call to an insurance company or agent creates a claim record that seamlessly flows between the insurance company, body shop, and rental car company. A single version of the information is available to all, and billing and funds transfers occur quickly and easily. Even more remarkable, compared to Delta and Air France, you couldn’t find three business operations more different than insurance, auto repair, and car rental—yet the process integration between the three, along with convenience for the customer, is astounding.
Whether you believe the excellent customer experience is intended—or simply a byproduct of a larger need for insurance companies to control payouts is the subject of another blog. But using that logic, in the name of Tight Security is it unreasonable to expect that even basic passenger information be shared between two carriers? Unfortunately, just the opposite is true.
Part of my work in Tel Aviv on Monday involves analysis of a telecomm business case as a way to help salespeople identify strategic business opportunities and operational gaps. One fact the participants will uncover is that the telecomm firm can’t meet its objectives because it lacks integrated IT systems. I think I’ll invite Expedia, Delta, and Air France to sit in.
How Do You Stop a Great Product from Drying Up?
What do community swimming pools and pencil sharpeners have in common?
In twenty years, both might be remembered as once-valuable products that are now in the scrap heap.
Pencil sharpeners, I understand. But Swimming pools? That rock-solid institution of suburban summer fun? What’s next? Fireworks?
In Swim Clubs Struggle to Stay Afloat (The Washington Post , June 24, 2008), the paper reported that “beneath the sparkling-blue surface of scores of the region’s neighborhood swim clubs is a troubling new reality: many of them are crumbling physically and financially. . . The choice is simple, many pool officials say: If the clubs don’t change, those icons of Washington’s once-thriving middle-class suburbs won’t survive.” The claims are supported with declining membership statistics over the past ten years. With plant and equipment built half a century ago, many clubs can’t adjust to changing customer preferences.
How many industries and companies can you name that are experiencing these same gut-wrenching changes? Even if you market a product or service that doesn’t involve wearing a swimsuit, it’s worth taking a moment to understand what’s happening. The cultural and social forces exerting pressure on pool clubs are a microcosm of the world.
Lack of leisure time. Because an increasing number of households are supported by two working parents or a single working parent, it’s harder to spend hours at the local pool.
Increased availability of alternative activities. (It’s sad to see the swimming at the local pool replaced by more sedentary, digitally-enabled pursuits, particularly for a person who grew up swimming in pools and lakes. For an excellent discussion on this topic, read Richard Louv’s book The Last Child in the Woods).
Changing demographics in established neighborhoods brought about by new immigrant populations. Not every culture values the recreational experiences developers envisioned when pool complexes were originally built.
Escalating membership fees to cover high fixed costs. Membership fees are out of reach to consumers in the local communities.
Collision of local tax rates and current market conditions. Local tax rates create financial burdens because they reflect operational conditions over thirty years ago, when pool clubs were more financially stable.
How to stem the declining membership trajectory for public pools isn’t just a public policy problem, a land-use problem, or a recreation problem. It’s a sales problem. It’s about how seemingly rock-solid institutions succumb to forces when they are either unable to see them coming, unable to change, or both. It’s about substitute products cannibalizing markets. It’s about assumptions—valid up until few years ago—which are now incorrect because of changing preferences. And it’s about using those now invalid assumptions to create new strategies and tactics that are inherently flawed.
But there is hope. Could local pools be one beneficiary of high gas prices, as consumers modify their recreational activities to favor local pursuits?
Fundamentally, swim clubs need to rethink what they are selling. Could it be that it’s no longer splashing in the water, swimming laps, and playing “Marco Polo?” Instead, what about the community pool as a resort escape that you can walk to?
Here’s what I recommend for several of the local clubs profiled in The Washington Post article:
Install large poolside plasma TV screens. They’re on the beach in Tel Aviv. (After all, what’s sunset over the Mediterranean without World Cup Soccer?)
Co-locate Starbucks. Have “Free Latte Wednesday nights.”
Offer free wireless access and a “business center” in the clubhouse for those who just want to feel tethered to the office.
Provide alcoholic beverages (in plastic cups) Served weekdays from 9 pm to 11 pm, and all day on the weekend!
Offer Massage and spa treatments as concessions.
Offer live meringue for Hispanic residents and other ethnic music for other immigrant groups.
Hold inner-tube races for kids and adults instead of just swim team for kids.
Partner with property managers who need amenities such as pools to make their products more appealing. Provide direct transportation services from underserved communities.
Given the consequences of inaction, no idea is too preposterous. On paper, Minnesota’s Mall of the Americas, or the TV series Hogan’s Heroes, probably appeared equally foolish. Thanks to the resolve of their creators and financial backers, their commercial success proved otherwise.
In twenty years, both might be remembered as once-valuable products that are now in the scrap heap.
Pencil sharpeners, I understand. But Swimming pools? That rock-solid institution of suburban summer fun? What’s next? Fireworks?
In Swim Clubs Struggle to Stay Afloat (The Washington Post , June 24, 2008), the paper reported that “beneath the sparkling-blue surface of scores of the region’s neighborhood swim clubs is a troubling new reality: many of them are crumbling physically and financially. . . The choice is simple, many pool officials say: If the clubs don’t change, those icons of Washington’s once-thriving middle-class suburbs won’t survive.” The claims are supported with declining membership statistics over the past ten years. With plant and equipment built half a century ago, many clubs can’t adjust to changing customer preferences.
How many industries and companies can you name that are experiencing these same gut-wrenching changes? Even if you market a product or service that doesn’t involve wearing a swimsuit, it’s worth taking a moment to understand what’s happening. The cultural and social forces exerting pressure on pool clubs are a microcosm of the world.
Lack of leisure time. Because an increasing number of households are supported by two working parents or a single working parent, it’s harder to spend hours at the local pool.
Increased availability of alternative activities. (It’s sad to see the swimming at the local pool replaced by more sedentary, digitally-enabled pursuits, particularly for a person who grew up swimming in pools and lakes. For an excellent discussion on this topic, read Richard Louv’s book The Last Child in the Woods).
Changing demographics in established neighborhoods brought about by new immigrant populations. Not every culture values the recreational experiences developers envisioned when pool complexes were originally built.
Escalating membership fees to cover high fixed costs. Membership fees are out of reach to consumers in the local communities.
Collision of local tax rates and current market conditions. Local tax rates create financial burdens because they reflect operational conditions over thirty years ago, when pool clubs were more financially stable.
How to stem the declining membership trajectory for public pools isn’t just a public policy problem, a land-use problem, or a recreation problem. It’s a sales problem. It’s about how seemingly rock-solid institutions succumb to forces when they are either unable to see them coming, unable to change, or both. It’s about substitute products cannibalizing markets. It’s about assumptions—valid up until few years ago—which are now incorrect because of changing preferences. And it’s about using those now invalid assumptions to create new strategies and tactics that are inherently flawed.
But there is hope. Could local pools be one beneficiary of high gas prices, as consumers modify their recreational activities to favor local pursuits?
Fundamentally, swim clubs need to rethink what they are selling. Could it be that it’s no longer splashing in the water, swimming laps, and playing “Marco Polo?” Instead, what about the community pool as a resort escape that you can walk to?
Here’s what I recommend for several of the local clubs profiled in The Washington Post article:
Install large poolside plasma TV screens. They’re on the beach in Tel Aviv. (After all, what’s sunset over the Mediterranean without World Cup Soccer?)
Co-locate Starbucks. Have “Free Latte Wednesday nights.”
Offer free wireless access and a “business center” in the clubhouse for those who just want to feel tethered to the office.
Provide alcoholic beverages (in plastic cups) Served weekdays from 9 pm to 11 pm, and all day on the weekend!
Offer Massage and spa treatments as concessions.
Offer live meringue for Hispanic residents and other ethnic music for other immigrant groups.
Hold inner-tube races for kids and adults instead of just swim team for kids.
Partner with property managers who need amenities such as pools to make their products more appealing. Provide direct transportation services from underserved communities.
Given the consequences of inaction, no idea is too preposterous. On paper, Minnesota’s Mall of the Americas, or the TV series Hogan’s Heroes, probably appeared equally foolish. Thanks to the resolve of their creators and financial backers, their commercial success proved otherwise.
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