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

Shown, early radar towers in the UK during WW II  The introduction of radar was a significant game changer, both offensively and defensively.

In prior posts, here, here and here, I reported about my random survey of “front-line” B2B Marketing troops in Eastern Massachusetts during the last two weeks of January 2010.  Their main concern is the lack of available monies, either internal funding or credit.  Perhaps recognizing the cost of customer acquisition, they are focusing on extracting more money from their existing customer base.  They are dabbling in or trying out social media/networks but are not yet convinced that these new tools can be monetized as effectively as the ones that they know.

In this last post about my survey, I will cover two related aspects, Software as a service (SaaS) and the rate of new product introduction.

For those companies in my survey that sell software or a combination of software and hardware, virtually all are looking at providing it as a service.  This does mean that they are doing it, or will do it in 2010.  Rather, it means that they are looking it as another way to capture revenue.

All I talked to recognize both the cultural and economic impact of moving from providing software, either installed or “shrink-wrapped” versus providing it as a service.  In the service model, Customer support looms large; this potentially requires adding heads, which translates into higher fixed costs.  In addition, questions regarding hosting, SLA’s etc. need to be resolved. At the same time, there is the potential for a revenue drop-off as what is being purchased is a fragment of what was being sold.

Bottom line, some companies will offer their software products as a service in 2010, perhaps more in 2011.  The bulk will continue to examine it as though it were a new channel of distribution, but put off implementation due to the cost implications.  There does not appear to a universal ground swell or consensus that this is now the way to go.

Equally interesting were the conversations around new product introductions.  As the economy tightened in 2008 and extended into 2009, many companies cut their Marketing departments, but did not make proportional cuts in their development organizations.  The result is that they have ready, or coming, new products and releases.  The question facing many of the Marketers is; “Is this the best time to launch new products/services?”

Not surprisingly, some companies are holding back.  The reasons are varied, “We are in the midst of up-selling the customer base, a new release will confuse this.”  “The new release is good, but not great, we won’t get back the expense of launching now, as it won’t generate that much incremental revenue.”

Those that are launching are doing so either because of competitive pressures (catch-up) or because they have new significant differentiators which they feel with drive additional market share.  Of course, not launching results in any added revenue from the product being lost, as well as related revenues…service, consulting, etc.

Bottom line, there will not be a wave of new product introductions in 2010.  Those that come to market will either be catch-up defensive plays or significant game changers.  The threat to a CMO is that one of his/her competitors launches a game changer, which is well received by the CMO’s installed base.

What would you do if this happened to you?  Is pricing your only recourse?

RHM  3/11/2010

 Five major direct marketing misconceptions:

 1-      Given today’s technologies, direct marketing is the only way to go and it is the least costly. Well, technology is changing the way we do things, but technology alone is not always the key driver for change. Remember that your potential customers are humans and thus they vary on how they “gather” information and interact with technology. Secondly, some products and services are not very well oriented towards today’s technology. As for cost,  the “web 2.0” process is far from free; take a complete look at the cost to do direct marketing. In some cases you may have to add resources to manage the multiple divergent activities.

 2-      Everyone has email, so I can send our emails and the orders will start coming in.  This plan of action may be in violation of the CANSPAM act, and may alienate potential customers.  Just like traditional telemarketing, one needs a compelling offer, an approved targeted list, a call to action, and supporting activities such as case studies, blogging for creditability, and must importantly a well thought out email program, because one mailing alone will not cause potential customers to react.

 3-      Social marketing has no proven results, so I do not need too use any of these new tools! Understand that the vendor to consumer model has changed. The consumer is in the driver seat and consumers can and are talking about enterprises and about enterprises’ products and services. So as a minimum, one should at a minimum, monitor what is being said so you can react. Secondly, many end users are using media tools like blogs, twitter postings and Facebook to become informed before they make a decision, so it stands to reason that if they don’t see anything about your services or products, you will not be considered.

 4-      Hard copy (print) mailings are no longer used because they are not effective. Again, it is not a question of what to use, but your mix.  Hard mailings are and can be very effective.  A good example is a mailing to “new” customers, those who may not know about you. Hard mailings add personalization and get around potential filtering by the corporate IT email structure.  Hard mailings can also precede or follow up as part of planned social media programs.

 5-      The web site is nice to have but once I get it launched I can focus on other marketing programs. As I noted in item number three, the consumer is in control. Their major source of information is the internet, starting with your web site. If your web site is not user friendly, up to-date, contains real information and provides “give a ways” such as papers, case studies, white papers; and then you have just lost another potential customer.

 In summary, as I have always stated, look at your strategy and goals and see how direct marketing as a sales channel will support them.  In reality, your sales model will probably be a mix.  So the real question is how much direct marketing and what percentages of its components will be used. Also like other marketing programs, know your audience and know what they are thinking and saying about you.

 Do you know how your web site compares to your competition?

 RHL 01/19/10

 Five major indirect channel misconceptions:

 1-      Partners, resellers, etc. are all alike. Nothing could be further from the truth! The major impression is that most indirect channels carry vendor’s products, do some form of telemarketing and just take orders. In reality resellers come in thousands of kinds and types.  From pure distributors, to value added resellers, to system integrators.  Many resellers not only know the products and/or services better then the vendor; they usually have very knowledgeable sales people with solid long-lasting relationships with their customers.

 2-      The indirect channel is only interested in pricing for products and /or services. While everyone is in business to make a profit; the indirect channel is equally interested in areas such as marketing programs, territory alignment, training, technical support and LEADS!  And like all good businessmen, they recognize the positive nature of continuing relationships with key customers.

 3-      Your channel programs can be applied to all resellers/partners equally.  If you believe this then you are in for some very rough times with your resellers. Again resellers come in different forms. Some are product oriented, others specialize in services, while others focus on certain type of industry applications.  Therefore one needs to tune each program   for each different type of partner (reseller, distributor, etc.).

 4-      Indirect channel partners only know how to sell. Just like myth number 2, channel partners can and do have many capabilities. Again usually each has one or two major strength capabilities, so make sure you know what they are when selecting a indirect channel partner such that their strengths matches with your distribution strategy.

 5-      Indirect channels do not need much care and feeding after the initial start up. This is like the myth of the direct sales force that “loves them and then leaves them” but coming from the other direction.  Probably the worst thing you can do is to ignore your indirect channel. Take this approach and see how long your partners last with you. Make sure you have sales people who know how to manage and support your indirect channel.  The most successful companies have channel partners who have been with them for years.

 In summary, noting that the indirect channels are actually more complicated then the direct channel, one should make absolutely certain that the partners/resellers you select match your strategy. Next, depending on why you selected the appropriate partner, make sure that your partner programs meet your and your partner’s needs. Lastly make it a partnership relationship not just a business relationship!

  Have you thanked your channel partners today?

RHL 01/12/10

Five major direct sales force misconceptions:

1-      That the sales force is only “coin operated”, meaning they are motivated by money, money and more money.   Granted direct sales people are compensated by a combination of a salary and commission, which is usually organized around an increasing sales volume, incenting them to sell more. However, other equally or more important drivers are that most sales people are driven by being singled out at the annual sales meeting as the top performing person in his/her region, or the overall top performer, or being selected to go that exclusive “retreat” for outstanding individuals within the corporation. Another major driver is what I called the thrill of the “kill”; i.e. getting that big order! In other words, competition and recognition are just as important as is the compensation.

2-      That sales people are just “gun slingers”; they see a potential opportunity and drop what they are doing and go after this potential record breaking situation. The true top performing person spends hours in understanding potential customers needs, who is who, generating a strategy, knowing the competition’s strengths and weaknesses and providing the best solution that meets the customer’s real needs.

3-      That sales people only know how to sell.  Again your top sales people not only know how to sell, but often they know the products and/or services usually better than some of the product managers! Sales people also know technology, and more importantly they know the appropriate situations for specific technologies. Probably the best attribute is they know how to propose the best solution for the customer’s problem.

4-      That sales people “loves them (the customer) and then leaves them”.  Good sales people not only get the initial order, but stay with the customer and work to understand other related needs or other emerging needs within the corporation. This accomplishes two major tactics, one, getting embedded with the customer for future business and two keeping the competition out.

5-      That anyone can sell so if I lose a good sales person, so what!  People who say this probably have never sold, just like people say anyone can do marketing. It take a unique combination of drive, motivation, knowing people, understanding needs and fulfilling those needs, negotiating, knowing how to close, and in many cases taking rejection, in order to be a good salesperson.

In summary, while the direct model requires many factors for success, the most important component is the sales force itself. You can create great programs, products/services but if you have mediocre sales people you will not last long. On the other hand you can have mediocre products and programs, and top performing sales people can make up the difference. So do your due diligence on selecting sales people just like you would do on selecting a strategy.

Have you thanked your sales force today?

RHL 01/05/10

When the best doesn’t come, everyone wonders why goals are not being met, why the sales force is confused and why the partners are underperforming?

I call this approach the “ready, fire, aim” method. The answer to the confusion above is that there is no well thought out, formal partner reseller program.

The following are the major activities that best-in-class partner programs have in common:

1-Strategy- If you have read any of my other blogs regarding sales or sales channels, you know the first consideration already. Any good program must have a strategy. What is the company’s strategy and how will the partners contribute to the strategy? Some of the questions you must answer are: are you developing a partner program to get new customers, new territories, or to augment your direct sales force? Whatever the reason, the program must support these strategies, if not the path will be filled with potholes!

2-A Partner Program: This may seem obvious, but you would be amazed how many companies see an opportunity, but do not plan a program and thus cause a false start and, in some cases, bad will in the reseller community.

Fundamentally a program outlines the why, the who’s and how’s of doing partner business. A partner program is like a business case, it contains items such as goals, objectives, forecasts, roles and responsibilities, partner programs, partner manuals, partner collateral, leads program, training, promotional activities, support guidelines, benefits, procedures/processes, measurements/metrics, engagement procedures, customer service an escalation policy, and much more.

3- What type of partners will you be recruiting? Will they augment your sales force, or a technology, or a skill set, or a region, or help you expand into a new market(s)? Will there be synergy with your sales force or will there be a huge overlap (and potential conflict)? Note that this decision ties back to your strategy.

4- Partner selection: Your program must have documented information on the selection criteria for partners. The criteria should cover among other things: business requirements, certification, capabilities, partner’s responsibilities, partner’s benefits from the program, and sales coverage requirements.

5-Financials: How will the partners be compensated, is there a special discount rate for the selected partners? Will the partners be measured on volume, revenues, or just new business?

6-Targeted Markets- Assuming you have targeted markets for your direct sales force, what will be the targeted market(s) for the reseller(s)? Will they be the same as for the direct sales but with different products, or different markets with the same products or different products and pricing?

7-Measurements- How will you measure success of the partnerships? This will depend on the “stage” that your company is in and the overall goals of the company. As an example if you are in a start-up mode, the measurement for the reseller might just be new business (profitability is secondary), but if you are seeking product revenue expansion, the measurement might be net new revenues.

Well these are some of the major activities that one must consider is developing partnerships. Again, like my blogs that discuss channel selection, things are never black and white and unfortunately they tend to be very gray and complex. Don’t let this scare you away; start with a very well thought out and tested strategy. If you do this step well and involve potential partners, you will be amazed how the well the other activities move ahead.

Till then happy partnering!

RHL 11/23/09

Last time we discussed the scenario of a direct sales channel and switching or adding an indirect channel. The key issues were: a complete strategy, reseller selection and a reseller program(s). This posting is about adding a Direct Marketing function. Again, like the last discussion, make sure you have a sales strategy or that your sales strategy is updated. We will also assume the strategy is valid.

Here are five key considerations for a direct sales channel planning on switching to or adding a direct marketing channel.

1-Product selection for direct marketing

Do the products within your portfolio meet the following criteria?
- Are the products straight forward and well understood by the market place?
- Are the products fairly standalone (no real services required)
- Do you have a timely distribution system (infrastructure) in place (turn around will be critical)?
- Does your infrastructure support multiple SKDs, as well as tracking and ordering online?

If your answers are yes to at least 2 or 3 of the four then continue. If you answer NO to most of the above, going direct marketing is not out of the question but you need to address the action items below.

Action items
-You will need to augment the product with very compelling features and benefits.
-Create or partner for a rapid/ quick turn around product distribution system.
-Develop your web site so that it handles the complete cycle for transaction activities.
-Begins staffing for customer calls, for those who don’t want to order over the web, those that have difficulty and those who have product problems upon receipt or under warranty.

2- Marketing methods and tool selection

Perform an analysis on which media you will use and what mix:
-Analyze how integrated and automated your marketing programs are, procedures and rules are (considering cycle times to be competitive, automation and responsiveness is critical)
-Telemarketing methods need multiple scripts and an installed follow-up system.
-Investigate what tracking tools you will use.
-Do you have compelling value propositions that will catch your potential customer’s attention?
-What is the best mix of traditional marketing (ads, telemarketing, etc.) versus email, blogging, face book, and twittering is appropriate for your targeted audience?
-Is your data base set up for all of the selected activities?
-Is your web site geared for transactions, and interactions?

Action Items
-Start monitoring what is being said about your company and your products.
-Do an ROI on the media mix and potential revenue per media.
-Do you have the budget and appropriate resources for social media methods (blogging, twitter, tracking, etc?) and skill sets?
-Develop or modify your customer database so it is integrated, complete, and flexible so that you have a closed loop marketing (customer- sales- marketing- back to customers) capability.
-Develop a metric/measurement system for the direct marketing (example, all programs must have an ROI target).

3- Marketing programs

You should have a series of marketing campaign well thought out ahead of time (multiple touches and offers will be required in order to develop a reasonable funnel).
-What will be the offers?
-How will the campaigns be linked (themes, or offers or audiences as examples)
-Do you have marketing “packages” oriented for each targeted audience or and campaigns?
-
Action Items
-Perform market testing for the campaigns and packages
-Develop some give-away within your web site such as white papers, free ipod, webinars, etc.
-Financials- prepare a complete forecast analysis to understand realistic revenue targets, realistic costs and thus true margins and ROI per campaigns.

4- Financials

Direct marketing will have a startup operating costs just like a product introduction, but the difference will be in the media methods, tools and the skills required in performing this closed loop marketing. So, just like the indirect model case build a complete business model with attention on the following areas:
-Data base organization and analysis
-CRM/SAP type applications
-Web information analytics
-Creative offers
-Web 2.0 type dynamics
-Skills sets required

Action Items
-Related to action item in 3- develop a complete business case.
-Have measurements and timelines with key milestones to determine progress.

5- Cultural Environment

Since direct marketing is under going some dynamic changes, new functions/ procedures need to be introduced into your enterprise. Management also needs to understand that some of these tools/methods are new and thus more of an art than pure science, so be flexible, and prepare for changes along the way. What will be your policy regarding twitting and face book both internally and externally (see our blogs regarding social networking (www.firealarmmarketing.com/blog/))? You also need to consider the value of marketing of brands versus your own internal content marketing.

Action Items

-Educate management and key people involved on the nuances of direct marketing.
-Develop policies and procedures for the various tools and methods of direct marketing

Well, as you can see, Direct Marketing, like other forms of distribution must have a strategy, but differ in that you will probably need new tools and skills to be successful. Overall, you probably will end up with a mix of media marketing with the biggest issue what percentage of each will result in the best return on your investment.

We have looked at different channels of distribution, some guidelines for switching or adding other channels. The keys overall are having a strategy, knowing what the selected channel can actually do for you and having the appropriate programs and tools to be successful.

So, what are you waiting for, get busy and start that channel(s) and start selling!!!!

RHL 10/20/09