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This old sales model is no longer valid, the selling company is no longer in control, and the potential end user/buyer is NOW in control.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

In talking with clients and potential clients, Dick and I see  companies that are making “mistakes.”  These are common regardless of size, maturity level, or industry.  The most frequent that we see are: (not in any order)

• Not cultivating the installed base.   Too many companies remain in the “kiss and sell” era.  They forget that their customers are a valuable resource. Key opportunities come from:
  • Up selling to the newest and latest release.
  • Mining the installed customer base for case studies, testimonials and referrals.
  • Establishing relations with new hires in the customer base, who may become decision makers.
  • Using social media (like LinkedIn) to see where ex-employees have landed and following up with them.

• Using the wrong mix of new and old tools.  Some B2B companies are reluctant to adopt social media tools.  Others have gone too far in that direction.  The key is to understand which of the new tools best suits reaching and interacting with your customers and then implementing it.  We advise:
  • Poll your customers to see what resonates with them.  (The assumption here is that future customers will mirror existing customers.)
  • Measure the effectiveness of your current tools, i.e., which tool generates the greatest number of leads, which one reaches your customers, which ones don’t work.  Cut back on the ones that don’t work, increase the investment in those that do.
  • If your customer base is migrating toward some of the new tools, go with them, don’t fight it.

• Not training everyone in the company on the corporate message.  Today almost everyone is using some form of social media.  Inevitably they will tweet, blog or comment about where they work, the products/service, the management, etc.  It is important that everyone be on the same page.  We advise:
  • Make sure that there is a written policy about the use of social media.  It shouldn’t be long or complicated, but should outline the “dos & don’ts” of employee use.  This should be read and signed by each employee annually.
  • Train the customer service personnel, who are often a primary contact point with customers, about the corporate message.
  • Train those involved with Public and Analyst relations on the same message.
  • Train all “C” level executives on the message – No one is exempt.
  • Implement listening of social media for comments about your company, and have a documented, well understood, and tested reaction plan in the event of a crisis.  Remember, you won’t have much time to think how to react, and you must react quickly.  How the NFL is handling the screw-up of sold, but no seats available, Super Bowl tickets is an example.

• Rushing to introduce a product before it is ready.  While Google pioneered the concept of introducing “Beta” versions, on the whole these were well tested, functional products.  Those that have been pulled (Buzz et al) have been the result of market demand, not technical limitations.  We see some companies that are trying to beat their competition by releasing products with limited features or incomplete testing.  In most cases these products fail.  We advise:
  • Unless you are the size of Goggle, forget about the “Beta” concept.  Develop, test and release the product in its normal course.  Don’t force an incomplete product to market early.
  • When launching a product, make sure that the whole system, i.e., sales, marketing, customer service, finance, etc. is ready for the launch.  Having a new customer call customer service and hearing that they don’t know about a product (or problem) is a no-no.
  • Don’t anticipate a hockey stick revenue increase.  99% of products grow slowly.  Very few things rocket up.  Setting unreachable expectations, even when you have great market research results, is a dangerous path.
  • If you choose to go the “Freemium” route, make sure that you fully tested the appeal of the Premium product, and can extrapolate from the “Freemiums” that you ship to a profitable position.  Additional, if this is offer is part of a product line, make sure you fully understand its impact on the whole product line, not just the Premium offer.

• Not resolving the definition of a qualified lead with Sales.  Both Marketing and Sales are under pressure to produce.  It is too easy for the functions to get into a finger pointing contest about who and what. (Ever watch brothers or sisters fight?)  The point is that an agreed upon definition isn’t that hard, what is hard is to stick to it over the course of a year when revenue goals aren’t being met.  Note that the definition of a qualified lead is seldom an issue when sales are growing month over month.  We advise:
  • Establish an agreed upon definition, and mutually present this to the CEO/COO.
  • Establish goals for marketing to provide qualified leads.
  • Establish procedures and feedback mechanisms on how Sales is going to handle the leads, including lost sales reports.
  • Set a 6 month milestone meeting where each function reports on how they met their goals and what needs to be done to improve the process.

• Waiting too long to make a change.  Of all the mistakes that we see, this is perhaps the most common and most troublesome. It expresses itself as Marketing management being wedded to a philosophy or approach that is detrimental, if not fatal to the company.  This could be a failure to push for a new product to replace the “cash cow,” the continuation of a campaign that is old and getting decreasing responses, or not reacting as the product and market matures by changing the distribution model mix (indirect vs. direct for example), etc.  We advise:
  • As CMO, if you haven’t made a significant change in the past 24 months, (re-doing the website doesn’t count) do so, or your successor will have that privilege.
  • Choose only one thing to change at a time, so choose wisely.

What problems have we missed?

Comment below or send me a note at Contact US.

2/9/2011  -  RHM

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

Today’s environment has created challenges for all marketing organizations.  First, the economy is probably having a negative impact on your business, which is being reflected in your marketing budget, personnel and flexibility. All of this with increasing requests to generate additional leads (sales). The other challenge is keeping up with and utilizing appropriate new technologies that are emerging daily.

So the real question is not what do I do with fewer marketing dollars (no-one wants to hear this), BUT how to optimize your current resources (dollars and people) to generate additional revenues, all while staying within budget.

There are several ways to attack this challenge. 

• One method is to run a marketing campaign with a specific mix for a period of time (several months or more) and then analyze your results at the end of the specific time frame.  The good news is that you did run a marketing campaign, but the potentially bad news is that if the mix was incorrect, you not only wasted precious time but you have also spent or wasted a portion of your marketing budget.

• Another method is to run two campaigns with different marketing mixes simultaneously and analyze the results as in method number one. The good news here is that you might have gotten some positive results because the two campaigns probably covered a larger “audience”. Unfortunately if neither campaign met their objectives the time lost is huge AND the marketing dollars lost could cripple your remaining activities.

• A third method is to just do the same as you have been doing before.  Given the current economic environment, this approach will definitely be the worst choice as the economy has changed buying habits drastically and the new ways in which your potential clients are gathering information to make decisions.

• A fourth choice is to model your current marketing activities  along with  your goals and objectives, research all the best practices in your similar industries for marketing, create different business modules for the numerous distribution  methods and then integrate all this together and run it against your desired results.   The upside potential is that your might optimize your marketing mix.  More than likely you will have various “errors” in your model and thus end up with less than desirable results. Plus this takes considerable time and resources during which nothing is “happening”.

An alternative approach is to utilize Fire Alarm Marketing’s Marketing Resource Optimizer™ (MRO).  The benefits of our model are; (1) the best practices have been already researched, (2) the various marketing activities have been tested over many years and (3), the newer marketing technologies have been incorporated into the model.

The choice is yours on how to optimize your marketing mix.  Whatever method you pursue, start “optimizing “now before it is too late!

If you would like more details about our model, give us a call (508-643-0411) or contact US

RHL 10/12/10

Before I answer the question, let’s look at what functions each perform and then draw a conclusion.

Assuming your enterprise has a direct sales force, it performs many functions such as; relationships, promoting your company, finding customers, closing orders, etc. An additional function that is performed by sales people is creating a personalized awareness with their customers.  Two major issues a sales team cannot do effectively is create wide-spread awareness and be the most cost effective.

Advertising can be used for different objectives. The primary objectives of advertising are creating awareness, branding, and providing information about your company and /or products.  It has been proven that advertising increases sales efficiency by providing awareness or helping turn a cold call into a warm sales call.  On the other side of the equation, advertising is not a substitute for personal selling or creating product preference.  These require a sales person to be “real time” and demonstrate or explain the value propositions to a potential customer.

So which is best?  The answer is not which channel is the best but that advertising and personal selling support each other and thus, picking the correct mix and integrating from a marketing communication strategy is really the key.  Of course the mix will contain more than just personal selling and advertising but other marketing tools as well.  The real challenge is developing a complete marketing plan that maximizes the  communication tools, supports the overall goals and falls within the marketing budget.

So the keys are: 

-Develop an overall marketing strategy and implementation plan

-Structure the mix to include your sales team

-Make sure things like messaging and value propositions are in sync between advertising and the sales force.

-Establish the budget that supports the overall game plan

RHL 7/27/10

 1-     Understand the goals and go to market (GTM) strategy for the enterprise and /or the SBU (Strategic Business Unit).  Example: is it “price skimming” – entering the market with a high price with the intent to capture a piece of the market and drive revenues, or penetration, initially pricing low to gain volume/market share or attack the competition?

2-     What is the financial pricing philosophy?  Is it cost plus (internal costs plus some factor to get to a selling price) or is the objective to have a certain margin (price minus cost).  While I am not a fan of “cost plus” because it does not consider what I call the “surrounds” (buyers value, market advantages, competition, economic factors, etc.), it is critical to know ALL the costs that go into a product/service.  There are the fixed product costs (material, labor), possession costs (storage, transportation) and user costs (installation, training), as well as the variable costs (marketing, distribution, corporate overhead, etc.)

3-     What is the competitive situation?  Do your competitors have the equivalent product and equivalent features? While this is important, I feel what is more important is a view of the competitor.  What is the competitors’ goals and strategy, what is their GTM strategy, what do their financials look like? What market segments is the competitor focusing on?  How will the competition react to your product introduction? All of this can have a major impact on pricing your product.  An example would be, if the competitor has little margin, then pricing your product just below his could lead to capturing his market share. One last comment, whatever you do, do NOT get into a pricing war. These usually lead to both parties losing.

4-     As I have repeatedly stated before, know the customer (enterprise in this case). Is there a demand in the segment(s), and if so, the value(s) might be different for each segment.  Is there a major void with no current solution?  What value-added benefits might the enterprise see from this product introduction? The benefit can be a unique or new feature, it can come from an operational feature such as reliability or quality; it can be from a financial factor like total cost, or even from a buyer department guideline, i.e., providing minimum risks or outstanding support.  If an enterprise sees benefits and value (value is quality relative to some price), then your price can have a premium over the competition.

5-     Does the product or service have a unique feature that the competition does not have or the market does not know about yet? If so you have a price advantage!

6-     Is there a service that must be attached to the product?   A strategy might be to lower the product price and recoup profits from the service.  This is especially a good approach if you “control” the service and the enterprise sees value in the service.

 7-     What impact will this product introduction and its price have on your other products?  Will this new product’s price and features replace another one or negatively impact your current revenue stream?

8-     Channel considerations: who will sell the product?  If it is your own sales force, then you may have some margin movement.  If it is a reseller, they will usually want some form of discount from list, and thus the margin (therefore the price) has to be such that you and the reseller both make a profit.

9-     Legal consideration:  there are laws regarding price setting and discounting. For example the Robinson – Patman Act addresses unlawful price discrimination, requiring the seller to take into pricing into account when there will be multiple channels re-selling the product.

10- Lastly, once you have launched the product, monitor the situation in the field to see if adjustments need to be made.

 Like any guide there are risks in general statements, but the recipe is usually the same, it is the ingredients that vary. So adjust each step relative to your product. Start with a well thought out strategy, decide on a pricing strategy that supports your enterprise’s goals and objectives. Know your competition, and know the channel(s) and their characteristics.  Truly understand the benefits of the product/service and their related values for both the buying enterprise and their end users.  Most importantly, understand that pricing is NOT a standalone task, but a multi dimensional – interrelated function.

 In today’s tough economic times are your prices being forced down by cut-throat competition?  Do you know how to escape from a price war?

 RHL    4/6/10

One tool to help you in the process is market segmentation (A market segment is a group of people or organizations sharing one or more characteristics that cause them to have similar product and/or service, from Wikipedia).

The following is a guide for the segmentation process

For the purpose of this guide we will assume we are marketing in the B2B environment (there are differences versus B2C but it is more in the ingredients versus the formula).

First here are some key initial steps in helping make the selection process.

1-     Is there information about the customers to be obtained?  

2-     Will these markets be accessible, i.e. can we reach them?

3-     Is the segment large enough to spend effort on them (this will lead to estimating profitability, but that is a different exercise).

4-     Does this segment “match” your enterprise goals and objectives?

Second, completely understand the Strategic Business Units (SBUs) strategies and product/service portfolios so that you have a firm reference point(s) on what segments best match up to their goals and objectives.

Third, know your competition and what are their strategy, products/services and their value proposition in these segments… it may be different for different segments.

Fourth, consider what I call the “surrounds” those aspects that can relate and impact a segment.   Two examples are: the mobile phone and how it impacted land lines vendors and suppliers. The internet and how the convergence of data and voice impacted traditional PBX vendors, tariffs and business applications.

Fifth, start with macro segmentation, which has organizational characteristics such as size, geography, and organizational structure. A helping structure is North American Industry Classification System (NAICS). For the NAICS codes 541511, a high level breakdown  looks like this; 54 is for technical services sector and 1511 is for Computer software analysis and design services.

Sixth, assuming you have the resources, dig deeper. A micro segmentation addresses areas like decision making, buying attributes, and user attitudes of the players in the segment.

In many cases of B2B it is important to know the buying habits of the end user or the buying procedures of the enterprise.  A marketer might be required to have messaging or value propositions that appeal to the purchasing organizations. An example is the buying cycle, if one can improve this cycle for its customers this could be an overall key factor.

Seventh, test your assumptions and segmentations before making any major investments.

Eighth, Now if you have done the above you are half way there. The next major step is the implementation of your strategies. Keep in mind that the strategy for B2B is NOT a short time or quick fix issue; it needs to be thought out such that it will last, at least long enough to have time for implementation and a buying cycle so you can analyze actual realistic results. An example of implementation is what type of service will be needed to support the business and marketing goals. Another example is how is the sales force organized relative to the market segmentations?

Here is just one example of an enterprise that utilizes segmentation with great success. Dell has at the macro level the Home segment (B2C) and the Business segment (B2B). Then within the B2B they have small businesses.  Within the small businesses they have solutions that range from laptops to high end servers. For each sub segment, Dell offers various packages.

Key point:  if you do not know your customer, and your competitor does, you won’t make a sale!

                        To see some examples of the implementation process, Click Here

RHL 3/30/10