One definition of a sales channel is that “it is the pipe through which a producer’s product flows to the user.”  Like all pipes it can be straight, crooked or have many branches.  And reflecting today’s new technologies the pipe can have a flow of information in two directions.

Which channel is best for your business?  As with all such broad questions the immediate answer is “It depends.”  It depends on how your customer wants to buy, the price and complexity of your product, the length of the buying cycle and a myriad of other intertwined elements.

The most common channels today are:

·         Direct, where a company’s sales people interact directly with the buyers

·         Indirect, where a company sells to distributers, who in turn sell to either other distributors or buyers

·         On-line, where the buyer contacts the company directly over the Internet

And, once a company decides on its main distribution channel, secondary or alternative channels often spring up.  Managing the relationships that arise due to multiple channels of distribution is a difficult and time consuming process. The failure to pick the right channel can result in business failure, as key buyers are missed and competitors swoop in and win sales.

Sales channels or Distribution is one of the classic “4 P’s” (Product, Place, Promotion, Price) of Marketing.  On May 3rd, Dick Lush and I will be discussing Sales Channels at 2:30 in Platform A at the Rhode Island Business Exchange (RIBX), and look forward to answering any questions you may have.

You can find out more information about RIBX, other speakers, directions, etc. here:  http://http.ribx.wordpress.com/.

RHM 

4/24/2012

A recent conversation with a potential client (PC) went something like this:

(PC)  “I need someone to develop a white paper on our new product that can be used to fulfill the offer in our upcoming email program.  The content will also be used in a brochure that we plan to hand out at the annual trade show, and can be used in a direct mail campaign.”

(FAM)  “That’s great.  It sounds as though you have thought this through.  One question, why are you doing this?”

(PC) “Huh?  This is the way we generate leads.”

(FAM)  OK, let me ask some questions before we get started, relating to your desire to generate leads:

·         Who is your target market?

·         What have been your results in the past 12 months in reaching them?

·         How is your product significantly different from the competition in solving the problems in your target market?

·         What is the “normal” open and conversion rate for your emails?

·         What has been your return for trade show activities?

·         What have been the results of your direct mail programs in the past?

·         Etc.

(PC)  Gee, you don’t understand me do you?  We just want somebody to deliver a white paper, not ask questions about us.  We know what we are doing, and want you to deliver the documents requested.

(FAM)  Thank you for considering us.

This exchange represents a mindset that is common today, i.e., people who are employed on a contract or temporary basis are expected to deliver a specific item which is then to be used by the contracting firm as they see fit.  The “contractors” are not expected to understand the broad picture or strategic plan of how and where their effort fits.

The result is that the worker provides what he/she thinks is needed, based on conversations, reading and observation of the product/service/company.  The buyer gets the work product and is often dissatisfied, complaining that when they had their own marcom, copywriter, designer, etc. the work product was better.

Experience has shown that the longer a “contractor” works with a company, the better the work product.  Generally this is because the “contractor” learns and understands over time, the strategy, plans and objectives of the company.

Companies seeking help on a short-term basis should follow two simple rules:

1.      Over communicate with contract workers.  Share with them what you are doing, planning and where you want to go.  The probability of them running across the street to your competitor with your intellectual property is low.  In short, make them part of your team.

2.      If you have even partial success with a contractor, keep him/her, train him/her about your company and culture and give them more to do.  Until a requisition is open for a full time position, keeping a person for an extended time is your best bet.

Our experience is that the more companies share with us, the more and better work we deliver; that while we market ourselves as “consultants” we do provide deliverables, and the more we know about our clients the better we can meet their needs.

If you have personal experiences in this area, chime in.

RHM 

4/17/201  

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

I have written about deflation before, here, and here.  Recent anecdotes lead me to believe that the rate of deflation is picking up.  Specifically:

1. Direction, from one of my Doctors, to either Target or Walmart to fill a generic description for $4.00, as opposed to my regular pharmacy and higher prices.
2. The rise and use of social networking coupon sites, and extreme couponing.
3. The reported lack of full time dentist hygienist positions…the work being done by part-timers…saving the dentists the costs of a full time employee.
4. The increase of “2 for $20.00” meals at some restaurants, where essentially an appetizer or desert is thrown in for free.
5. The promotion of “X years free service” when you buy/lease a new car.  Unless car prices have gone up to cover providing free oil changes, tire rotations, etc. this is a cost coming out of some profit center.

And I am sure that you have your own examples.  The point is, as the economy slowly moves out of the Great Recession, the 99%’ers are taking advantage of every-day cost savings which, when aggregated together more than offset the inflationary effects of increases in gas and health care.  These cost saving actions and the cost saving mind set easily translates to business decisions, where the buyer or buying committee becomes receptive to "added value" when making a purchase.

For the CMO, this means making sure that each product offering now includes something “extra” that wasn’t there last year.  This could be free added service, lower cost financing, no cost installation, etc.  It is important to note that the value added is not adding another feature (higher speed, more I/O ports etc.); rather it is adding a new additional value to the original product package.

In short, in today’s environment even though a product/service’s value proposition separates it from the competition, the total offering has to be enhanced with an additional value in order to close the deal.  This is especially true in highly competitive oligopolistic markets where the differentiation between the key competitors is very small.

For management worried about how to pay for this change, the answer comes from the company's buyers/administrators.  For every 2-3% that is added to the value of the product, management must demand that the buyers get at least 2-3% added value from suppliers.

On a personal level, are you taking advantage of added value in the products/services that you are buying?  Has this added value swayed your purchase decision making?  Do you see how this process can translate to your firm’s product and services?  Are you prepared for deflationary times?

Or, do you feel that we are in a time of inflation and are acting accordingly?  Let me know how you see the future unfolding, and how your competitors are acting.

RHM 3/6/2012

Pawngo, a startup on-line pawn broker (who shares investors with Groupon) thought it could attract attention and gain customers by dumping 8.000 Butterfinger candy bars on Copley Square in Boston, with a sign that said, “Thank You, Wes Welker,”  and promoting the event on twitter.

FAIL!!!!

No marketing campaign should ever be built on or contain derogatory comments or references to your competitors, people or things.  Full Stop.

Boston sports fans are among the most loyal in the country.  They have suffered through heart-breaking losses and enjoyed championships.  Their relationships range from religious to fanatical.

But they are fans.  They know that they are rooting for teams, and that teams win, individuals don’t.  The Patriots as a team lost the Super Bowl.  They would have won as a team.

Highlighting a person, thing or place and making fun of it tends to alienate fans and followers.  Pawngo has about as much chance of gaining market share in New England as Bucky Dent has of being elected Mayor of Boston. (To reference another heart breaking loss.)  What Pawngo, Chevy (who belittled Ford in one of their ads) and others don't realize is that people follow teams (or brands) and an insult to a team/brand is an insult to them.  This negative impact lasts a long time.

While the CEO of Pawngo has offered an apology, it is full of marketing BS, and you can almost hear him chuckling, “gee, I am sorry” …but look at all the free press we got!  While some say that no publicity is bad, I say what Pawngo did is bad and will have a long term negative impact on them.

To young and old marketers, this is a valuable learning moment. 

To Wes Welker and the Patriots, I say thank you for doing as well as you did, we know that you tried hard and gave it your all…job well done.

RHM

2/9/2012

That the “Occupy” movement has gained visibility and traction over the past few weeks is an interesting commentary on our times.  The demographic studies done a few days ago as to who is part of the group seems to dispel the myth that they are white suburban hippy want-a-be’s.  What is clear at this point is that the group is dissatisfied with any one of the following:

• Lack of jobs and/or unemployment
• Student loans
• Mortgage rates/foreclosures/loss of housing
• Wall Street players making inordinate amounts of money
• The demise of the American dream that if you work hard, you will be rewarded
• The inability of elected officials to act positively

My interpretation of this social upheaval and dissatisfaction is less nuanced.   I believe that the average American is born with a fundamental sense of Fair Play.  We intuitively know when something is right and when something is wrong.  The “Occupy” people are expressing this feeling that something is not fair and is wrong, and they want it to be made right.  This does not mean that they want hand-outs, or a more socialistic society, or stronger government intervention.  They want things to be more in balance and more equitable.  (An example of the inequality can be found in this NY Times chart: http://www.nytimes.com/interactive/2011/10/26/nyregion/the-new-gilded-age.html?ref=politics)

What does this mean to Marketers?  Dick and I have written before about “under-promising and over-delivering” and the need to exceed expectations.  If my assumption about Fair Play is correct, the practice of exceeding expectations is now a requirement for every company. 

This does not mean lowering prices, or giving things away.  It means being responsive to customers, whether B2B or B2C.  For example:

• Making it a practice to solve a customer complaint on the first call, or within a designated period of time.
• Beating or meeting all communicated delivery dates, whether it is a product or services.
• Including all elements of a purchase at the time of purchase, not “nickel and diming” the purchase experience.
• Deciding not to charge for something that has been free or bundled in…the Bank of America debit card charge and Netflix streaming video change are two current classic examples of creating customer dissatisfaction.

I am sure that you can implement other actions that are specific to your business or service.  The point is that in America today there is a growing desire for Fair Play in all things.  Recognizing this, good marketers will ensure that their products and services do not run against this current, or if they do, make the appropriate changes.

Do you even know how your products are perceived in the market or do you act with the hubris of BofA and Netflix?  If this movement gains more steam will you win or lose?

RHM ­- 10/27/2011

Q4 is the usual time for pulling together plans and budgets for the following year.  In the past, I have written about the problems and issues that this process generates, but decided this year that a checklist might be of better use.

  __  Strategy, goals and objectives – Are the goals and objectives for 2012 articulated?  Is the strategy to reach these goals and objectives clearly spelled out, with priorities specified?

__  Budget and staffing – Is the budget for 2012, even at an approximation level, available?  Is the headcount forecasted to go up, down or remain the same?

__  Support groups – Are all the support functions (customer support, field services, product services, etc.) in line and capable of supporting the plans.

__  Events – Are all the major events/milestones known, i.e., new product introduction in Q1, major trade show in Q3, major partnership agreement in Q1?

__  Cost and profitability – For multi-product companies, are the costs, by product, going up, down, or remaining the same?  Will pricing remain the same or change?

__  Policies – Is there any need to change or modify customer facing policies or social media policies?  For example, has the current “Response” policy and procedure been effective?  Is the policy about employees discussing the company on Facebook and twitter clear and being followed?

__  Target market – Have you identified the target market?  Is it (audience) the same as it was in 2011?  Does it have the same segmentation?

__  Campaigns – Are there developed campaigns (strategies) to support all the marketing activities?

__  Marketing mix – Is the 2011 allocation of Marketing spend applicable to 2012?  For example, should more resources be devoted to social media, or to trade shows?

__  Tactical product pans – Will the 2011 tactical plan be effective in 2012?  Specifically is the “volume” product still competitive and profitable, is the “loss-leader” able to generate sales, and are there contingency plans in place in the event of competitive inroads?

__  Sales relations – Is there agreement on what constitutes a qualified lead?  Is Sales looking for additional support in the form of Product Managers?  Are Sales’ lost sales reports meaningful in helping to define the Marketing mix?

__  Social media – Which 2011 metrics have been the most useful to Management?   How can these be improved or expanded in 2012, and at what cost?  Additionally:

• Is this the year to redo your website?
• When is the last time you updated your SEO activity/measure?
• Do you have a content calendar with confirmed inputs for Q1, the year?
• Can you improve your utilization of content?
• Are you up-to-date on the latest Facebook, LinkedIn, and twitter changes?

This checklist is meant to be a memory jogger, as each company and situation is different.  The point is that in approaching the 2012 budgeting process without a checklist, key things can be overlooked or forgotten.  The importance of a checklist has been proven by pilots and doctors, and should be used by all good Marketers.  (See: The Checklist Manifesto: How to Get Things Right by Atul Gawande)

Have you constructed your checklist for 2012 yet?  How many items are checked off?  What other items would you add to this checklist?

PS.  If all this is confusing, you can find help in our Marketing Resource Optimizer (MRO) product.  Click here to obtain a copy of Part 1.

RHM  10/20/2011  

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

One way NOT to raise prices is to follow Bank of America’s example…increasing prices for a regularly used item with little or no concern for the impact.  The fallout for B of A has been catastrophic, ranging from members of Congress telling people to get out of that bank, to being denounced on the Jay Leno show as “screwing one American at a time.”  Masspirg has even put up a page on How To Close Your Bank of America Account: https://secure3.convio.net/engage/site/Advocacy?cmd=display&page=UserAction&id=3316

In today’s environment, buyers want and are demanding more.  You can raise prices if you offer more.  For example, what if Bank of America had done one of the following 3 things:

1. Offered to pay the fee at any ATM machine for a monthly fee of $5.00, on an opt-in basis.  I think the majority of B of A customers would have gone for this, as the convenience of being able to use any ATM at any time for a minimum cost is significant.  The cost to B of A in today’s electronic world…extremely small.  Plus the concept of offering something new and better would have differentiated them from their major competitors.

2. Borrowed from the phone companies, and instituted a volume plan, i.e., your first 10 ATM transactions a month are free, over 10 we charge your account $3.00, over 20 we charge $5.00.  Customers are used to rate plans and work with them.  While this may not have raised as much revenue, it would be acceptable by all, preserving the bank’s image.

3. Tied the $5.00 charge to a bundle of other services, i.e., your account now costs $5.00 a month and includes no charge overdraft protection, 3 credit reports a year, 50 free checks and your ATM card.  Here the impression is that there is a bundle of goods and services that differentiate the bank’s offerings from others, and have a perceived value to the customer.

The lesson learned from the Bank of America debacle is that you must know your customer, and fill their needs.  Today’s customers are value conscious.  They do not appreciate the arrogance of banks (who they feel were bailed out while the bulk of Americans are suffering) who arbitrarily raise prices with no value add.

In all likelihood your customers reflect the mood of the general population.  At the same time, as CMO you are probably being asked, along with your engineering and manufacturing counterparts, to increase profitability.  In pricing your products consider the buyer and give them more real or perceived value than they expect.  In doing so, you will be able to raise your prices without the severe backlash that has engulfed B of A.

RHM  10/6/2011  

 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