8 Procedures to Take Control of Sales and Marketing

The Cash to Cash Cycle

Part Three of Series

We’re sprinting toward that million dollar mark…and we’re only a couple strides away…

Decreasing inventory carried us over the first hurdle, and last week reducing Accounts Receivable sped us through the half-way mark. We’re making great time, so let’s bring on the next mile marker – marketing and sales.

Increasing Overall Sales and Marketing Effectiveness

If you are an organization spending $500,000 or more on marketing expenses (e.g. advertising, trade shows, print materials, direct mail, etc.) then STOP! We found it again. Why you ask…? Because marketing has the greatest potential of being very unproductive. In fact, many marketing programs struggle to break even, and actually frequently lose money. So if we increase the overall effectiveness, then we can eliminate 50% or more of your wasted marketing efforts, which translates into $250,000 in cash.

So now, let’s see how this actually works in a real-life scenario.

Sales and Marketing Company Policy Case Study

An organization with $500,000 in marketing expenses needed assistance. We examined their sales and marketing process to understand and quantify the lead flow, follow-up, and demand forecasting issues. Then we designed and implemented a process to improve their sales cycle efficiency and tie it closer to their customer’s buying cycles. After the marketing reductions, we then reinvested $100,000 back into new processes for public relations and Customer Relationship Management (CRM), both of which were suffering badly.

The metrics we developed reduced their marketing expenses by 60% overall and increased their sales cycle efficiency from 40% to 60% within 6 months of implementing the new procedures. With these new processes and reports, the company now tracks sales cycle efficiency and life-time value rather than just sales quota achievement, as the measure of their sales & marketing effectiveness. The result: an extra $300,000 in cash plus a 50% increase in process capability (capacity).

As we have seen time and time again, time can be our best friend, if only we let it.

Methods to Design the New Sales & Marketing Process

o Improve Follow-up. Only about two percent (2%) of sales occur on the first contact. Eighty percent (80%) of sales will require five to eight contacts before the sale closes. This means that if you are contacting the prospect less than five times or more than eight times, then you could have a problem with follow-up.

o Sales Cycle Efficiency. Time kills deals. The speed at which a prospect is converted into a customer and the number of prospects required to make that conversion determines your sales cycle efficiency. So ask yourself, are you taking the right steps to measure and reduce lost sales?

o Life-Time Value. How profitable a given customer is over time defines your LTV or Life-Time Value. Companies spend ten times more to acquire a customer than to keep a customer. However, existing customers are more likely to purchase again, spend more money, and therefore become more profitable. If you don’t know your LTV, then how do you know how much money to spend and on which customer segment?

o Demand Forecasting. Every customer buys on a cycle. So this means that you should track cycle times and variance to increase the accuracy of your forecasting and the loyalty of the customer. Do you know when your customers need to reorder?

o Improve Lead Quality. Do you have methods in place to measure the conversion potential of each lead? Lead generation activities (i.e. forms) should pre-qualify every new lead so that you can take the right follow-up actions for the marketing offer. Strong leads produce strong sales.

o Increase Awareness. To keep the sales pipeline full of good quality leads you must continuously increase the awareness of your company and the solutions that it provides. Public relations is more efficient at building awareness than advertising, yet many companies spend wildly on advertising and trade shows while neglecting to fund public relations efforts much at all. Increase your name recognition, not your budget.

o Reduce Discounting. Discounts represent deficiencies in the sales & marketing processes, which means that you should use them sparingly. Instead, determine the root cause and then fix the process that’s causing the need to discount. Show customers the added value, and they won’t focus on price.

o Train Personnel. Provide your sales & marketing personnel with regular formal training. This will arm them with better product knowledge, as well as presentation, negotiating and selling skills that will improve effectiveness. This will boost both employee morale and the bottom line – a win-win.

Control of Sales and Marketing Policy and Procedures

Improve your sales cycle efficiency. Reduce your marketing expenses. Tie it closer to your customer’s buying cycles. And take control of your sales and marketing program to let it work for you.

Improvement with Well-defined Policies and Procedures

With well-defined processes and procedures in place, you will increase efficiency by reducing ineffective sales and marketing programs. And, again, we make such improvements to create more cash on hand – all toward that million dollar goal and to cross the finish line.

Next week, we will hurdle the final $250,000 mark with the Accounting Payables function – so close you can see it.

Big S, little m–What is the Right Mix of Sales and Marketing?

Don’t worry; this isn’t going to be an article about Sado-Masochism! Well, come to think of it, that term may apply to what some founders and senior managers in startups are doing to themselves and their companies. What I’m referring to is the VP who gets hired to manage both the Sales and Marketing functions. Oftentimes this turns out to be a job we call “VP-SALES & marketing”. Thus the phrase “Big S, little m”. The position is usually offered to a crack sales guy or gal, who also happens to have a marketing title somewhere in their job background.

JUST GO GET THE ORDERS

To high tech insiders the meaning is clear. The anointed candidate will be expected to go out and beat the bushes for customers, and bring in new orders quickly. Oh, and by the way, Mr. VP, you’ll also be in charge of producing data sheets and attending a few trade shows. You know, all that marketing stuff!

In most of these cases, I would recommend that anyone being approached for a job like this run in the other direction as fast as possible. These positions are usually classic “traps”. The attitude is “We’ve got a great new technology; all we need is someone to go knock on a few customer’s doors and bring the purchase orders back to headquarters”.

Hopefully, most of those reading will recognize that this is a recipe for a very unhappy outcome. The founders and senior management will be unhappy with revenue and profits, the VP will be unhappy because he’s likely to get fired in 9-12 months. The other employees will be depressed and talking about how “Sales & Marketing” is the weak link in the company. And the investors, of course, will be very, very cranky.

Why does this occur? It often occurs when the key senior decision makers (CEO, CFO, Founders, etc.) don’t have a background or appreciation for the difficulty of the sales function. And it’s even more likely to happen when there is no key decision maker with a background in Marketing. The decision maker’s attitude often includes an over-confidence in the role that superior technology plays in the overall success of a company.

IS TECHNOLOGY ENOUGH?

Certainly having a defensible technological advantage is a major factor in the success of a high tech company, especially when that company is in startup mode. The problem arises when management believes this is enough to “win”. How hard is cold calling and knocking on doors for a sales force with an unknown company name? Not to mention an unproven product, which may solve a problem the customer may not yet know exists? I’ll give you a hint–it’s really, really hard!

Likely there is a lack of understanding of the crucial role marketing plays in establishing a new product in the marketplace. There may be a view that marketing is some theoretical, squishy function that is a waste of money, or maybe something that has value but the company just can’t afford. Management thinks, we’ll introduce the product, sell a bunch and build the marketing function later. Unfortunately, that thinking is as backwards as can be, and will usually lead to the unhappy results discussed earlier in this article.

Why IS marketing so important, and why is it such a critical mistake if it isn’t a major part of the new product process? It’s because marketing is crucial in every phase of introducing and growing the revenue of new products, from conception until end-of-life. In the beginning, an engineer may come up with a great new technology that appears to allow someone to do an existing task better. Or maybe it allows someone to do something that wasn’t even possible before. But that’s really just the beginning of the product development process. Product engineers aren’t trained to closely match customer needs with the features of this whiz-bang new technology. Often they think it’s easy – you just go ask the customer what he wants! But customers often don’t tell you the truth; sometimes they lie, and sometimes they don’t even know what they really want (this is the topic of a future column). And even if they tell you the truth, it’s important to make sure that what these customers are telling you is representative of your entire target market segment. This is a task that looks intellectually easy on the surface, but for a lot of reasons, it’s very difficult to get right.

Sometimes companies do get it right even without an experienced, professional marketing function in place. Let’s assume for a moment that they do. There’s still a very long way to go before those purchase orders start pouring in. The product must be positioned properly, relative to the direct and indirect competition in the market. It needs to be priced so that the market is willing to take a close look, but not so high or low that it retards the product’s long-term profit potential. Will it be distributed only through the company’s direct sales force, or should we court VARs, distributors, retailers or OEMs? What kind of pricing can we offer those partners without creating gray markets or channel conflicts? And please, let’s not forget about creating a bit of demand for those poor guys and gals in the sales force. Cold calling really does suck! It’s not good for anyone, the sales reps or the company’s profitability. It will “burn out” your sales force in no time.

Marketing programs that generate hot leads, or even complete sales, are much more cost-effective than relying on highly paid (but beleaguered) sales reps to do their own inefficient “door to door” marketing. And how should we generate those leads? Via PR, Advertising, Direct Marketing, Partnering, Search Engine Optimization, Paid Search Engine Ads, Trade Shows? The Marketing folks are the strategic quarterbacks of the organization who should be driving the answers to these questions–as well as executing the strategy within the required parameters.

IT MIGHT WORK–BUT DON’T BET ON IT

So does “BIG S, little m” NEVER work? Well, in some cases it not only works, it is even appropriate. Take the example of a semiconductor company selling a very niche chip to a vertical segment. They might have only 50 potential customers. In this case you REALLY CAN go ask the customer what he wants, and easily ask enough of them that you will end up building products that will apply to your entire target segment. With respect to lead generation, the target market is so small that traditional outbound marketing programs don’t make sense anyway, and that “door to door” marketing by your sales force might work just fine.

But I propose to you that this example scenario is the classic “exception that proves the rule”. In many, if not most cases, “BIG S, little m” will lead to failure – or at the very least, suboptimal performance. That’s my view–as always I’m very interested in hearing yours.

Sales and Marketing – Align, Define and Make Money

The word misalign is defined as, “positioning or arranging something improperly in relation to something else.” Sounds like too many sales and marketing departments in corporate America. Even though the two departments share the same corporate office, the approach to engaging potential clients and existing customers is often disjointed. Here are six key areas of misalignment that cost companies lots of money each year:

1. The marketing message doesn’t match the customer’s need.

Sales managers need to ask the marketing department to join their sales teams on daily calls and meetings. Marketing surveys and focus groups are good for research, but meeting with prospects and customers at their place of business is better. “Ride-a-longs,” as we call them in sales, is the best place for identifying needs and gaps in the company’s product/service offering. It’s the day-to-day interaction with prospects and customers that provide real-world data for identifying opportunities, challenges, and trends in the industry.

2. There is a call to action and but no training for the sales team.

The marketing program is working; leads are being generated, the right prospects are calling, and the new product launch looks like a success…until the phone is picked up by the untrained salesperson. The salesperson has received no education in building rapport on the telephone and has no well-crafted value proposition about the new product. The result is a beautiful marketing campaign with less than desirable sales results. Lots of money has been invested on the front-end of the marketing campaign to create opportunities, and zero money has been invested on the back-end to insure that sales can close the opportunity.

3. The marketing message doesn’t reach the real decision maker.

Business changed after 9/11 and the Dot Com Bust. Changes included more people, different people, and a shift in the power of each buying influence. Companies continue to market to old buying influences because the sales team is too busy selling to sit down with marketing to discuss:

- Who is buying.

- Why they are buying.

- New pain points.

- Decision criteria.

The company is aggressively marketing…to the wrong people. Imagine going duck hunting in New York City…

4. The marketing message doesn’t match the follow-up by the salesperson.

How many of you have received literature on an exclusive resort or high-end product? The marketing program worked until you called to place your order. The salesperson on the telephone line doesn’t sound exclusive, can’t answer basic questions, and frankly, isn’t that enthused about their own product/service. Enthusiasm and confidence is contagious and in this case, the salesperson has driven you to, “I better keep looking.”

Ever experienced this one? Your marketing message promises that your consultants are “professional and knowledgeable,” but marketing and sales have not met to determine what “professional and knowledgeable” looks like on a sales call. For example:

- Professional: If the sales meeting requires a leave behind, does the marketing piece coincide with the prices you are charging? If your salesperson is a professional, are they showing up for the appointment five minutes early and in a suit that fits? Yes, I am tired of seeing too short, too tight or too big in the conference room.

- Knowledgeable: Has the organization figured out the FAQ’s in your industry? Does the sales team know the answers? What about competitive analysis? Does the salesperson know the gaps in the competition’s service offering so he/she can better position the call?

5. Using email marketing and follow-up by sales.

Email is an inexpensive way to drip market to prospects. Prospects responding to email versus other types of marketing require a different type of follow-up. Traditionally, salespeople immediately pick up the phone to follow up on the lead. The email prospect doesn’t want a phone call and is often turned off by this type of follow-up. The marketing is generating a response; however, the effectiveness of the campaign is diminished because of an ineffective follow-up plan.

6. Good repeat customers are ignored and the focus is on new business development only.

Everyone in business knows it’s more profitable to grow an existing account than to prospect for new business. When working with sales teams on strategic account management, I often hear, “I’m not sure if my customers know about our full service offerings.” That is a sales problem and a marketing problem. Marketing can assist sales by making sure customers are aware of the depth and breadth offered by the organization through articles, special events, newsletters, direct mail, emails, etc. Sales can follow up by setting up business review meetings to discuss other products and services offered by the organization.

Align your sales and marketing organization. Togetherness is not just for romance – it’s a very good way to make money.