I am not so concerned about the method or methods you use but more importantly that you or someone is DOING an analysis.  In today’s age with all of the types of methods and tools available, I find it absolutely amazing how many companies are either not doing any analysis or do it once and think they are done.   Like death and taxes, one thing you can count on is that your competitors are doing an analysis on you!

Given that let’s first start with the SWOT analysis, some pros and cons regarding it and then a few alternatives methods.

First, SWOT analysis is the identification of Strengths, Weaknesses, Opportunities and Threats that are related to the strategic and tactical direction of a company.   The “scanning “or analysis of the internal factors that relate to your direction and strategy are the strengths and weaknesses.  Examples of strengths could be vertical integration or distinctive skills/ intellectual talent, while some weaknesses could be a poor sales channel or lacking of sufficient financial resources.   Scanning of external forces are opportunities such as new markets or new products, and threats are areas like governmental regulation or lack of market share.  While SWOT analysis is one of the most commonly used methods (2007 global survey of top executives by McKinsey stated that 82% used SWOT, second to competitive analysis)   it like other methods has its pros and cons.

The pros are:

- Easy to understand and the four categories can be acknowledge quite quickly.

-It really does not require a rigorous level of research

-The context is usually within the understanding of the corporation

The cons are:

                -Lists can become long

                – Lists can be poorly defined and ambiguous

                -Not a very detailed or well verified list

Some suggestion on how to improve your strategic analysis:

1-You can augment the SWOT analysis by adding a weight and rating factor to each entry on the SWOT analysis.   The weight is a factor (0 to 1)   that ranges from very important to not important for each internal and external entry.  Next have a rating factor (1 to 5) that indicates how well your company is doing regarding this entry.  Multiply the weight times the rating to get a weighted score. Next, rate each entry how it might impact your company in the short or medium or long term situation.   These enhancement greatly helps eliminating a lot of the guess work, ambiguity, long lists and improves the overall ranking of the to be developed tasks as related to each entry.

2-Another variation of the SWOT analysis is to form a matrix just like one does in the SWOT but have the Strengths, Weaknesses, Opportunities and Threats on the vertical and horizontal axis and is the four sectors produce Strategies for strengths for working on opportunities (SO), Strategies for avoiding threats (ST), Strategies for opportunities to overcome weaknesses (WO) and WT, strategies for a company to minimize weaknesses and avoid threats.

3-A different analysis method is the Balanced Scorecard Method; this tool is used to align business activities to the strategy of the organization.   It works off of four areas; 1-financial by using important financial “levers” or targets,2- customers, it  tracks and measures inputs about how customers view the company,3- business processes that measure where the business excels and 4-growth, measurements to see if the company is growing and improving.

4-A fourth method is the PEST analysis which stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental and scanning component of strategic management.   Here we introduce external factors that in the current environment have become critical to the success or failure of many companies.  One very current example is the price of oil and gas and its impact on companies that are very dependent on oil and gas in one form or another.

In summary, it is not so much which method or tool one uses but most importantly, you must do some form of analysis and do it on a continuous basis!  If you would like to know more about these analytical methods or other methods that might be well suited to your company, send me a note. 

RHL 03/14/12

Typically companies go from a very simple organizational structure to some form of corporate or divisional or strategical business units (SBUs).

Start –ups or small size companies are typically managed by one or two people (entrepreneurs) who have the vision and passion to get things started. The environment is usually flexible, dynamic, has little in the way of processes or procedures and is freewheeling. 

Unfortunately when the company hits a certain revenue size or development phases, the entrepreneurial skills become secondary or more bluntly, other skills are needed to move into the next growth stage.

Skills like marketing, sales, or financial become critical for the company to grow.  Again it is more often than not that the original founder does not have the required skills for the next phase.

Here are examples what some call “crisis of leadership” that happens every day:

A small software company was started by a very talented engineer and their initial revenues came from personal referrals, which helped the company grow to a certain point , then the stall point happened and no one seem to know what the problem was. After close to a year of stagnation, a consult concluded that this company was not doing any marketing what so ever, mainly because the founder believed “if we make it, they will come”.  Eventually the founder hired a marketing person and gave her ownership not only for creating some marketing programs but developing the next wave of market development documents.

Another example is about an extremely passionate person who started a charity organization and again grew it to a certain “donation level” and once again things came to a halt. In this case the founder tried to do everything from fund raising to printing the next newsletter. The problem was no one knew who was responsible for what and what their contribution was, so most just sat back and waited for the founder to take action.  Again, objectives and goals were personal and not for the overall benefit of the organization.

A third example is about Larry Ellison and Oracle.  Larry Ellison has great vision and a passion for his company, but Oracle also hit a stall point, but in this case Larry saw he was part of the problem and hired some financial experts and he focused on the next innovations.

For those at the top, here are some things to avoid according to J. Hamm “Why Entrepreneurs don’t scale” Harvard Business Review.

1-Don’t be to loyal to your comrades

2-Don’t become too task and detailed oriented

3-Be careful of single – mindedness,   because this can develop into tunnel vision

4-Don’t work in isolation, leaders lead, do not hide

If you see any or all of the above situations within your company, I would suggest seeking some outside advice in order to get a third party’s point of view.

Remember, a management strategy is just as critical as having a product or service strategy.  Not having a strategy is like sailing a ship without a rudder.

RHL  10/13/11

 I stated that customer satisfaction is the responsibility of EVERYONE!

Everyone “touches “  the customer and how everyone performs their job relates to the customer being satisfied.  I also listed several steps for starting a customer satisfaction program within any company. Lastly, Marketing should always look at their activities from the customer’s “glasses.”

Several people asked about research on customer satisfaction and activities that a company can perform and linking it to either starting a customer satisfaction program or improving their current customer satisfaction program.   Well the answer is a definite YES!

There are a number of approaches, companies and experts on this subject, but they basically boil down to a relatively small number of activities that help improve customer satisfaction.

Fundamentally, customers (both B2B and B2C) are looking for value (see my posting on good value propositions) and value is benefit minus cost.    Given this basic premise, one can link activities that focus on benefits and cost, and if one improves on these activities it will result in an improvement in customer satisfaction and in most cases have a positive impact on the company’s revenue stream.

Two examples of this relationship are:  One, developing a quality product that addresses a customer’s critical issues, resulting in a perceived benefit and subsequent purchases of that product or service. (e.g. disposable diapers)  Secondly, by developing a great relationship with the customer base or creating a wonderful image of your company that will be viewed as a benefit to the customer and again resulting in a purchase of the product or service. (e.g., Apple, Disney)

Bradley T. Gale’s book titled “Managing Customer Value” talks about developing a matrix of attributes related to customer satisfaction consisting of “levers” that when improved will result in an increase to the benefit attribute or when levers addressing costs are improved will also increase the overall value and thus the potential for increased revenues.   The key point is incremental or small improvements in some or all of these attributes have a multiplying impact on the revenue improvement factor.    So just a 1-5% improvement in several areas can result in increased revenues.  

So, as I stated before, everyone can impact customer satisfaction and there are metrics that can be put in place that do not require a major undertaking to measure overall customer satisfaction AND increased revenues. 

Have you stated your customer satisfaction program; if not why not?

RHL 8/16/11

If you are facing this situation, here are three suggestions:

1.  Increase marketing expenditures and step up advertising and promotion.  In 2008, I researched which companies succeeded during the Great Depression.  I found that those that advertised were much more successful than those that cut back on their marketing expenditures.  Moreover, if your competitors know this, and step up their marketing expenditures and you do not you may get overwhelmed. 
2. Stress value.  Increase the perceived value of your offerings by adding something; be it free shipping, an extended warranty, additional support, etc.  Make the buyer feel that they are getting more “bang for their buck.”  By doing so you not only differentiate your product/service from the competition, you also make it easier for your inside advocates to speak for you.
3. Focus on solutions, not features.  Today’s buyer wants help in solving problems.  Identify the customer’s problem and point out to them how your product/service solves that problem, better than any competition.  For example, if a buyer is concerned about ease of installation and security regarding a software package, show him/her how easy yours is to install and secure.  Do not talk about the customer’s ability to design a custom user interface and report writer.
4. Keep it simple.  Decision makers at all levels will be facing increasingly difficult choices as the year unfolds.  They do not want to wrestle through complicated pricing plans, confusing rebate programs or long-term obligations.  Your message should be, “Our product (which is the best) solves this problem and will cost you this much.”
5. Use social media, when and where appropriate.  The different social media tools are effective when tailored to fit your individual company’s customers.  There is no universal application that works.  Understand how your customer base likes to talk, and then engage them at that level, which can range from a monthly newsletter to daily interaction on twitter and Facebook.  One suggestion, if your product is the least bit complex, explore the use of video as an adjunct to your pre and post sales customer support. 

Will following these 5 steps ensure that you make the year.  No.  However, focusing on them will help you remain competitive and help maintain your slice of the pie. 

Do you have any additional suggestions that your can pass along?  Comment below.

RHM  6/23/2011

For the rest of you please read on.

In one of my postings titled Why Marketing Products and Services Are The Same, I discussed why, from a marketing point of view, products and services are the same.  I contend that the same is true about for profit and non-profit organizations.   As I always like to say, the recipe is the same but the ingredients are different. 

First of all, there are definitely some differences between for profit and non-profit. The major differences are:

1. From a legal/tax basis they are viewed and handled differently.
2. There are differences on how certain parts or groups within the organizations must behave and/or how they are governed. One example is how board members are organized and their compensation.
3. Probably the biggest difference is the money side.   How “revenues” are generated and what one can do with the “profits”.

Now why are for profit and non-profit the same from a marketing point of view?  Let’s look at the major marketing functions and see why.

Product or service research:  One must do a Marco/ micro segmentation for both for profit and non-profit to truly understand one’s targeted customers.  For a non-profit that has a single cause the audience will be very specific.  And, one must know the targeted customer’s”pain points” so you can develop the appropriate product /service/message to address the correct segment with your existing product/service/message.

Product or service introduction/offer:   What is the compelling offer today that would make your customer buy or donate?   You must provide all the necessary marketing support and collateral to address this.  Again, there is no real difference between for profit and non-profit.  The difference urging people to contribute to the Jimmy Fund today is not at all different from urging people to buy my software package.

Value:  In a guide that we offer titled, “How to Create a Value Proposition” the key point is do you have a value (Value= benefit- costs) that first, addresses a need, second is unique, third is compelling and fourth, is there value in the eyes of the potential customer?  I should stress even in non-profits, if you don’t articulate a value, why someone would donate to or join your organization.   What is that “ROI” from a customer’s perspective…understanding that it may be emotional and intangible vs. tangible?

Off/online Marketing:   Another point I always make is, it is not a question of which marketing tool to use BUT what is the appropriate mix!   If for example, a nonprofit is focused on the homeless, then there is a high probably that the homeless themselves will not have Internet access and thus blogging is not the answer, but it might be for the corporate sponsors that you have or are seeking.  To address the homeless, the marketing strategy might be to have posters at shelters, parks or other public places. Point is different media/methods for each audience.

Generating revenues:  Again, each type of organization needs revenue, be it from the sale of a product or service or a donation for a nonprofit.  These revenues come from some form of leads, which again must be generated using marketing tools that fit the firm/organization, aimed at keeping a funnel or pipeline full of prospects.

So, keep in mind whether it is for profit or non-profit, one still needs a strategy goals and a marketing plan to be successful.  The only difference is, the recipe is the same but the ingredients are different. 

RHL 5/27/11

Value propositions are very important to business because if they are done correctly they uniquely define something that a company offers to their customer that addresses their need(s).  Unfortunately many marketing people and some senior management people are so close to their products or services that they actually feel their value propositions are compelling and that their customers feel the same way too.  In reality, value propositions are usually vague, do not address the customer’s issues and if you close your eyes you cannot tell one vendors values from another.

So what are great value propositions?  Well first let’s define a value proposition and what its components.

Wikipedia’s “defines a value proposition is part of business strategy. A value proposition is based on a review and analysis of the benefits, costs and value that an organization can deliver to its customers, prospective customers, and other constituent groups within and outside the organization. It is also a positioning of value, where value= benefits- cost.”

Neil Rackham believes that a value proposition statement should consist of four main parts: capability, impact, proof, and cost.  I would add to this definition that it should have a differentiator

Investopedia states “a business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.”

Value propositions should address issues that are concerned with:

• Increasing revenues or market share
• Time to market
• Decreased costs
• Operational efficiency improvements
• Customer relationship improvements

Some examples of weak value propositions are the following:

            **We have experience

            **We improve your marketing

            **We offer training

            **My favorite, we are number one provider of XXXX (provider of what???)

Some examples of strong value propositions are:

**Our Automobiles will save you 20% on gas over all other cars

**Customer can save 65% with our home insurance versus any other insurance company

**Wal-Mart   “everyday low prices”

**BMW   “the ultimate driving machine”

Why are these good value propositions; because they address a customer segment needs, are compelling, and they definitely have value.

So ask yourself this, does your value proposition address what I call the customer’s pain points, are you resonating with them in the sense that you and your potential customers are talking about the same thing? 

Second, does the value proposition provide uniqueness/differentiation as compared to the competition?

Lastly, is there a real value (benefit minus cost) to the customer?

IF you cannot answer yes to all these questions, I would strongly suggest reconsidering both your messaging and value proposition statements

RHL
5/3/11

So if you are living in the old world where sales people knew everything about their accounts, where they provided the customer with all the “necessary information” and helped guide them down the path that eventually led to an order, you are in for an extremely rude awakening!

This old sales model is no longer valid, the selling company is no longer in control, and the potential end user/buyer is NOW in control.

There are many reasons why the sales model has changed and why you, as a vendor, should understand all the issues in order to reorganize your sales and marketing organizations to make them current with the today’s buyers.

One reason for this dramatic change is the Internet.   The world of information has been opened to the consumer (both B2C and B2B).  End users can research everything about a company, about particular products or services, about existing customer’s reactions, about any issues related to the company, the product or service and price.   The bottom line is that the end user is getting data and information about product and services how and when they want it, versus the vendor “spoon feeding” it to them.

So you have two choices, one you can keep doing things the way you have been and wonder why sales are not only not growing but actually declining.  Or, you can analyze the customer “domain” and modify your sales and marketing to be in sync with your existing and potential customers.

I will post some other issues that have caused the sales model to change, but in the mean time if you have any specific questions just ask them via Contact Us.

RHL 3/22/11

In my last posting, I talked about a number of critical considerations/ activities that one must review when selecting to use an indirect channel. As I have said in other postings regarding channels  make sure you have an overall strategy and ask; will this channel selection support this strategy?  I then talked in more detail about the financial considerations and how this will have a great impact on the type of indirect method one chooses.

Personally, I believe the most critical consideration in implementing and maintaining an indirect channel of distribution is the partner programs.   The partner programs can be broken down into three major components. One, the strategy on why an indirect channel or partnership, two, the partnership selection process and three, the actual partnership programs.

Let’s look at these in more detail

Partnership Strategy:   What is the corporate strategy and will going indirect support this strategy?  Are you selecting indirect for added sales coverage, augmenting your product or service lines, augmenting a technology you do not have, or seeking to add specific skill sets from the distributor and or reseller? Whatever the case, make sure you understand the overall objective because in the long run if you do everything else and it doesn’t match your strategy, it will be nothing more than a waste of time and money.

Partnership selection: Assuming that everyone understands the strategy and how indirect will support this strategy, then the selection process is the next critical step. Selecting partners should be like conducting an interview for key positions within your company.  Some major areas to investigate are the following:

1-      What is the potential partner’s strategy and does it align with yours?

2-      Will this partner augment your product or service line or will he compete with you?

3-      Does this partner have the skill sets to sell your product or service?

4-      Does this partner have the support functions to provide best-in-class services?

5-      Does the partner’s territory/ coverage add or conflict with your territories?

6-      Will the compensation plan fit within you current sales force’s plans or if there is no direct sales force will the financials make it a win- win for each party?

7-      How well will the partners’ marketing function fit with your company’s marketing?

8-      Will the partner’s brand add or detract from your branding activities?

Partnership Programs:  Some of the programs that a best-in-class should contain are the following:

1-      Rules of engagement for your company and the distributors and resellers

2-      Well defined territory coverage for your company and the indirect partners

3-       Policies on demo units/loaners

4-      Policy on escalation and returns

5-      Warranty coverage, who, when and how long

6-      Volume, discount structure and are there any incentives

7-      Well defined joint marketing activities

9-      Promotional programs  (Push and Pull)

10-   Funding,  who funds what and when

11-   Schedule regarding investments in major activities  and mutual related  metrics

12-   Executive liaison for both parties

13-   Collateral for products and services that are tailored for the distributor and resellers

14-   Tradeshows/events/venues

As one can see going indirect requires a lot of planning and joint activities.   Indirect channels should be a true partnership not a vendor- reseller agreement.

If you would like more detail on areas of consideration for indirect or any other channels; give me a call (508-838-1073) or visit our Contact US.

RHL 02/22/11

If you are considering selling your product or service via an indirect channel (when you sell your product or service to an intermediary or middleman, who then sells it to the end user) there are numerous considerations that you must examine. As I have said in other postings make sure you have an overall strategy and ask; will this channel selection support this strategy?    Most people think that companies select indirect channels because they are less expensive to use and support than having your own direct sales force (your product or service is sold by your sales people directly to other enterprises or end users). Again, depending on your strategy, you might use indirect for sales coverage, augmenting your product line, or augmenting a technology you don’t have or to improve your brand awareness. In any case understand the main objectives first.

As for other considerations, be prepared to have thoroughly thought-out the following items (not a complete list but a good start):

• What are your partner programs (things like engagement rules, incentives, joint marketing, financials, etc)?
• What are your criterions for selecting partners (territory, skills, products, and name, just to list a few)?
• What products or services will the partners carry for you; do they already carry your competitor’s products or services?
• How will the partners and your direct sales force interact (will they compete or augment each other)?
• Is your product or service too complex for certain types of partners to handle?
• Financially, will you and your partners make any profit (Do you have sufficient margin built into your product to support this channel)?

Let’s explore the last item (financial considerations) in more detail, because at the end of the day, most companies are in the game to make money and if this can’t happen then the rest is academic (there are cases, particularly in a start-up mode, where getting your name out there is initially more important than making a profit, but let’s look at the other situations).

To go indirect, which can be two or three tier (you and a reseller or you, a distributor and a reseller) each company wants to make a profit.   So a key question for you is, is there enough margin to “share” it with your partners.  Example, let’s say you have a product that cost you $20 to manufacture and the average sell price (ASP) is $50, thus a profit of $30 and 60% margin ( in reality there are other costs ,but for discussion purposes we will keep it simple). In the direct model you will enjoy the $30 and show a profit. 

In the indirect model, each intermediary will want to have some profit also. Depending on the overall situation the intermediaries will ask for a percentage off the ASP so they can sell the product at a profit. The range varies greatly, but it is not uncommon for it to be anywhere from 20% to 60% off of ASP or list.

So with you are two tiered, can you afford to give, let’s say 40% off of the ASP in this example? Is a $10 profit okay for your company?   Now about the three tier situation.

Usually one assumes that the intermediaries have to sell the product for less than the manufacturer (unless they have some unique value propositions).  So given this assumption, let’s see what the margins look like now.              

                                Reseller sells for                               $45.00

                                Reseller buys for                              $40.00                   Reseller Margin                12%

                                Distributor sells for                          $40.00

                                Distributor buys for                         $30.00                   Distributor Margin           25%

                                 Manufacturer sells for                     $30.00

                                 Manufacturer cost                          $20.00                   Manufacturer Margin    34%

 Critical point is does one have enough margins for everyone to go indirect.  As you can see going with the indirect model poses some unique considerations and if they are not explored in detail not only will you lose money, but your creditability and customers.

If you would like more detail on areas of consideration for indirect or any other channels; give me a call (508-838-1073) or visit our Contact US.

RHL 02/08/11

Product:   the “thing” manufactured by a company and sold to the buyer.  Note: service and software are now products and secondly, differentiation and value propositions (not the only criteria) are required to keep your specific product or service selling.  Suggested modification here is to incorporate for B2B solutions not just products, because buyers are looking for solutions that address their “pain points” or applications and this requires a combination of products and services.

Price:   the amount proposed for the product or service, not necessarily the actual sold price.   I would suggest that value might be a better criterion here than price but that is for another discussion.

Place:  where the buyer can actually purchase the product or service.  Historically this was a store or a distribution channel but mainly someplace that one went to pick up or the process by which the product was delivered.   With the introduction of the Internet, today buyers do not even have to leave their home to buy almost anything!

Promotion:  the methods used by marketing to promote their product or services.  Like anything else there are numerous methods to pick from in promoting a product, the real challenge is defining the appropriate mix.  And again with the introduction of the Internet, there are more possible selections and thus more considerations.

Wikipedia suggests that there are three (3) additional P’s to consider.  People - those who consume the product, and thus the topics like market segmentation and data gathering should be added to the marketing activities.  Process- the flow of activities by marketing, or as I like to think about it,  the overall campaign and how to make it a completely integrated process in order to obtain maximum impact. Physical evidence- part of the marketing strategy that addresses some form of customer satisfaction.

I would suggest adding the fifth category called Public and here is why.   First of all, Bob and I have stated that the selling process has changed, the buyer is now in control and the potential buyer is doing research long before the selected vendor even knows about it.   Again the Internet and now social media are providing massive amounts of information (granted not all of it is factually correct) about companies and their product and services.   Therefore Marketing must, as a minimum, monitor what is being said about their company and its products and services.  Even though the comments may not be from potential buyers, they will have an impact on the image and opinions of others, thus companies need to be aware of the public and their perceptions (perceptions are real) and integrate this into their overall marketing activities.

Are you adequately monitoring everything that is being said about your company and your products and services?

RHL 12/14/10