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

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

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

Blame it on the repetitive snow storms, the cold, or the blahs of January.  I feel compelled to spout off about a number of subjects:

• Self proclaimed experts.  In the Social Media/Digital 2.0 world a self proclaimed expert pops up every 15 minutes.  Malcolm Gladwell had it right in this book The Outliers where he said that it takes 10,000 hours to become an expert.  One more blog or article about the need to listen, act and integrate social media by some 20+ year old blogger will convince me that the millennials never learned about plagiarism.  I would settle for one good report that tightly links repeatable social media actions to sales by a B2B company whose products sell for over $50K each.  (By tightly I mean, I did this digitally and as a result this specific sale occurred, not that we listened, responded and our overall revenue went up 10 %.)

• The assumption by the social media “experts” that the same tactics used in B2C apply to B2B. Listen up!  B2B is different than B2C.  Any time a company is going to put out 6 or 7 figures for something, and that something is tied to a person or committee in the company, they want to see, hear, and talk to a person…directly.  Yes the significant influencer will do research on the Web.  Yes, they will appreciate “nurturing” emails as they progress through the buying cycle, but at the end of the day the person/committee making the decision wants to sit across the table from a person, have him/her look them in the eye, and talk about the product.  A corollary to this action is that many buying companies want “one throat to choke” and they cannot choke a plug in the wall.

• Providing a value add.  It appears that fewer and fewer companies are providing a true, differentiated value add.  Most companies seem to feel that they can or should offer something that is similar to what is already in the market, and then gain revenue and profit by exploiting a distribution, service or promotion flaw in the market leader.  I recognize that many “first movers” fail, and that being second in a market is a valid strategy, but being 4^th, 5^th or 6^th speaks to either unbelievable hubris or stupidity.  How some of these companies get funding or resources remains a mystery.  If you have a fully differentiated product, go for it.  If you are planning to be a “me too” go back to the drawing board.

• Most buyers are smarter than sellers think. It took less than 2 years for B2B buyers of software to realize that the later in the month/ quarter that they negotiate their purchase, the bigger discount they get.  Buyers quickly learn about, and subsequently reject, ploys to get them to part with their money.  Three things count for a B2B buyer:

• • Does the product do what I want it to do?  (References are key here.)
  • Do I respect the seller and do they respect me? (Personal contact required here.)
  • How long have they been in business and what is their reputation? (Due diligence required.)

The buying company will use the Internet to get some of the information to answer these questions, but in order to               achieve the emotional comfort that is part of the purchase, a person has to be part of the equation.  Note that often price is number 6 or 7 on a list of key criteria.

• Being polite.  People made fun of the way IBM used to enforce a dress and behavior code.  But their salespeople always showed up “presentable” and conveyed an image of respect, helping propel IBM into profitable leader.  It is  not clear that today’s sellers of $100K+ software packages or hardware project the same image or give the same impression, either by their dress or the way they act, with the resulting negative impression reflecting back on their companies.  For some it seems acceptable to show up in jeans and a black T-shirt and say, “Dudes, glad to see you guys here.  Sorry I am late, can you wait a few moments while I get my x%#**g presentation hooked up and by the way do you have any Diet Coke?”  Sure, I am going to give this guy’s company $250K over the next three years.

As someone has said, the only constant is change.  However, underneath the change remain certain bedrock principles of trust, respect, responsibility and doing what is right.  It goes without saying that the higher the value of the transaction, the more important these principles are.  Personally, I don’t know of any way these can be accurately conveyed over the Internet…a knowledgeable, articulate presentable person is required.

I have to go snow-blow my driveway for the 12^th time this month and put another log on the fire.  Your thoughts?

RHM  1/27/2011

Much is being written today about aligning Marketing and Sales, a divide which is being exacerbated by social media tools, lead nurturing and new Marketing metrics.

Over the years I have had the privilege of working with some outstanding Sales people and Sales management.  They all have many things in common, but one trait that sticks out is skepticism.  Whether this is inbred or arises out of constant rejection is unclear, but if you scratch the surface of a good salesman you will find a skeptic.

This skepticism comes to the fore in discussions where Marketing trumpets its social media successes: increasing hits on the web site, a new CRM system that allows them to track inquires and downloads, Email open and click-thru rates, etc.  Since many of the charts start at a low level and increase over time, Marketing is looking good, and why shouldn’t Sales be impressed?

The Sales skepticism about the Marketing results can best expressed by the phrase uttered by Rod Tidwell in the movie Jerry McGuire, “Show me the money.”   Sales people aren’t interested in hits, click-thrus, downloads or other Marketing metrics.  What they want are solid qualified leads.  An added plus would be the customer’s potential pain points, as well as multiple contacts within the customer.

If the Sales force has to weed through patches of leads to find one that is worthwhile, then they feel that the work that Marketing is doing is not meaningful.  Sales people are generally paid on a commission, which to them means that time equals money.  The more time that Sales has to spend prospecting, the less time they have to sell and close.

David Merriman Scott recently released a white paper through Hubspot entitled 11 Examples of Online Marketing Success. Each example is indeed a Marketing success, but my skeptical Sales friends would say “show me the money.”  Only one of the examples deals with lead generation, and it relates to how John Deere gave away a tractor.  It does not report on how many of the people who registered to win the tractor were qualified leads for a sale.

I understand that part of Marketing’s role is to build and sustain a brand.  And I also understand that Product Managers are responsible for delivering the right product, at the right time and through the right channels.

But a key part of Marketing is delivering qualified leads.  In 2011 I think it is important that Marketing people don’t get caught up in digital metrics and overlook this important role.  When Marketing delivers qualified leads the conversation about a divide between Marketing and Sales disappears and the skepticism of Sales regarding Marketing goes down, however it never really goes away.

How well are you delivering qualified leads to your Sales forces?  How does this compare to how often are you telling Sales and management what a great job Marketing is doing on building the brand, recording hits, and downloads?

Are you focusing on the right thing?

RHM  1/13/2011

Many of the discussions that Dick, Tom and I have with clients and potential clients center on the lead generation processes and the conversion of  leads to sales.  Most companies have a combination of “older” programs (trade shows, direct mail, advertising, etc.) and  “new” programs (email, blogging, webinars, SEO, etc.) that generate leads.  Whether old or new the recurring question is some form of “how do I do a better job of converting a lead to a sale?”

Under the “older” programs, all leads are turned over to sales, or “qualified” leads that went through some screening process, are turned over to sales.  Once in the salesperson’s hands, it was up to him or her to follow up, understand the potential customer’s pain points and close the sale.

The emergence of the “new” programs and the rise of Customer Relations Management tools and programs add complexity to this process.  Now leads are followed and nurtured until a certain criteria is met, i.e., 3 visits to the web site, 4 downloads of white papers, 2 or more people from the same company looking at pricing, etc.  Then the lead is turned over to sales, who files reports on his contacts, both with the lead and other people in the company, ranking the probability of a sale.  The highest probability are recorded, ranked and followed, with additional resources, i.e., sales management, executive management, being called in at the appropriate time to close the sale.

The CRM tool makers will tell you that their following and nurturing process is more successful than the older process.  Yet we see many companies who employ the older process who are doing well.

Stepping back and looking at the conversion process from a high level, several aspects are clear:

• Today’s buyer has much more information about the vendor, his products and competitors than he has had in the past.
• While price is always important, other elements have significant influence in the buying decision, i.e. pre and post sale service, reference accounts, specific features that match the buyer’s needs, etc.  Conveying these differences to the buyer is difficult.
• Most B2B buying decisions are made by multiple people or a committee.  Frequently a lead that is generated is by a heavy influencer, not a decision maker.
• Reaching all members of the decision making team through digital marketing is problematic.
• Finer customer segmentation is required today to achieve continuing growth.

Our 2011 recommendations for lead conversions mix the old and new processes.

1. Make sure that your web site is current and that you are close to the top via SEO.
2. Understand that the buying cycle will be shorter, and therefore transfer leads to the sales force as soon as it appears to be qualified.
3. Make sure the sales force is trained and/or that there are sufficient SE resources to augment the selling process.
4. Use multiple channels to reach your customers.
5. Use contact information developed by the sales forces to expand the digital process, but don’t depend upon it to impact the sale.
6. Obtain sales and customer feedback via social media.
7. Focus on all high probability sales that fall within a 90 day window.

In short, use the new tools to improve processes that are already in place.

What are your experiences?  Do you think that digital marketing and in-house telesales can take the place of field sales people?

RHM   1/7/2011

Driving through a neighboring town the other day a small sign near a gas station exit caught my eye… “Check Out Our Low Price On Full Serve.”

This station is located at the intersection of two state routes, with a competing station diagonally across the street. On the other two corners are a supermarket and a drug store. The station is an Independent and small (two pumps) while the competing station is much larger and has an Exxon franchise. 1 ½ miles up the road, next to the Interstate, are two even larger stations directly across from each other. One is a Cumberland Farms store with gas; the other is Mobil with a store and a Dunkin’ Donuts

The two stations next to the Interstate compete on gas prices as well their convenience stores. Their current price for regular is $2.80. The Exxon diagonally across is $2.85. The Independent’s is $2.79…but with full service.

To me this is a prefect example of niche marketing. The owner/operator of this Independent station has recognized the market and has decided to go after two specific niches. The first is the price buyer, regardless of seller or brand. The second is the group that does not want to pump gas but is not disabled; generally elderly, some men who don’t like the smell of gas, and some women.

It will be interesting to see how this Independent operator does. I suspect that it recently changed hands, as the station was closed for a while and is operating under a new “logo.” The risks are; that the 1 cent difference may not make up for the lack of a brand, that there is not a large enough market of people who want their gas pumped, and that the lack of food/coffee while stopping for gas is a bigger negative than a lower price. Whatever the long term outcome, I am impressed with his/her Marketing acumen and their willingness to differentiate themselves in a competitive market.

Have you examined your market and competitors as well as this Independent operator? Can you turn a perceived disadvantage (only two pumps, no food store/coffee shop) into an advantage? Can you articulate the different segments or niches among your buyers?

Here is a link to an excellent article that Dick wrote earlier this year about Market Segmentation – A Market Segmentation Guide. I doubt if the new gas station owner read and then followed all of Dick’s steps or suggestions, but it does seem that he has covered all the bases.

Call (517) 306-6147 or contact us if you need help in segmenting your market.

RHM 11/04/2010
P.S. I didn’t buy gas this time as my tank was full, but will the next time.

ACME Software sells its product to other businesses.  ACME’s products allow a business to save time in their processes, resulting in a more efficient and effective operation.  Their software is licensed on a per seat basis and with service (updates) and training sells in the high 5 figure to low 6 figure range.  They sell directly to enterprises and have 8 regional sales people in the US and 3 distributors in Europe.  These are supported by 3 telesales people in HQ who process leads generated by Marketing.  To date, they have not penetrated the Asian market.

Sales have been relatively flat for the past two years as a result of the economy.  ACME has not lost any market share, but also has not gained it against its two major competitors.  In constructing the 2011 budget, ACME’s management has proposed to cut both Marketing’s and Sales’ budgets by 20%.  The rationale put forward by management is as follows:

• For the past two years they have invested in Marketing by purchasing CRM and other automation tools
• They have decreased out-of-pocket Marketing expenses in print advertising and trade shows, but these savings have been offset by added Marketing head count to manage the new social networking activities
• Because of the changes in Marketing, during the first eight months of 2010, leads at the top of the pipeline have increased by 20% and “sales ready” leads have increased by 10%
• With this positive trend the sales force will be more effective; since having potential sales closer to closing will enable the sales force to close more deals in a shorter period of time.

Neither Mary Smith, the CMO nor Brian Knowles the VP of Sales can accept this logic and fear the impending cuts will destroy their positive work over the past two years.  Mary feels that she needs a flat budget to maintain the positive trend; although the new tools have automated the process and the social networking people she brought in have “learned on the job” and are looking for other things to do.  Brian strongly believes that ACME products succeed because of a “relationship” sale and that despite getting mores sales ready leads, the number of sales per sales person is proportional to the amount of time he/she spends with the prospect.  Getting more sales ready leads doesn’t mean that the salesperson will necessarily close more leads in a shorter period of time.  That said, his newest sales person is currently ranked number 2 and has only been selling to his prospects in his region for a year and a half.

Mary and Brian have worked on a response to Management’s proposal.  Their points are:

• A 20% cut will not allow Marketing to aggressively go after related verticals for new leads, which will help grow market share.
• The 10% increase through August may be the result of a slight rebound in the economy.  If the economy turns down again Marketing will need all of today’s available resources just to generate enough leads to stay flat relative to market share.
• The selling cycle of a software package costing $150K (median value) is a relationship sale, taking time and requires touching numerous decision makers and influencers.  This cannot be sped up by “nurturing” emails and blogs.  It requires face-to-face time.
• The buying decision is being stretched out.  If ACME doesn’t have a physical presence then ACME may lose to our competitors that do.

If you had to decide for ACME, what would you say?  Can Marketing automation and social networking ease the burden/cost of face-to-face selling?  Have there been enough improvements in Marketing automation and social networking that Marketers are down the learning curve and can do more?  Has social media and networking shorten the sales cycle?

Remember, ACME management needs the saved dollars to invest in a new product to leap-frog rumored competitive inroads, so keeping funding constant will have long term implications.

Send me your thoughts.

RHM  10/28/2010