Laws of Marketing: Do They Exist?

The Answer is Yes.

A number of years ago, I was introduced to a short, pithy book The 22 Immutable Laws of Marketing by Ries and Trout, which is possibly the best marketing book of all time.

Why go into this on a blog dedicated to C-Level Priorities? Simply put, effective marketing should be a C-Level Priority in every company. Companies that don’t follow sound basic marketing rules spend a lot of money, waste a lot of time and fail to realize their full potential.

strategy-streetI want to touch on just the first two of the laws- The Law of Leadership and The Law of Category. In combination, these two laws position a company, a line of business or a brand to win and to remain a winner over the long term.

In late 2008, I took over a business that described itself as a “Marketing Services Provider”, and in fact they were the largest independent company in the Northeast in this line of business. I am going to call this company MSP. Unfortunately, in their largest division, MSP was making the mistake many other companies do- they had an executive with a VP of Sales and Marketing title, who really was the head of Sales. In truth, marketing in this company was sales support, and that was not being done well either. Coincidentally, MSP owned and operated two Direct Marketing Agencies, so they knew marketing. They just weren’t applying it to themselves (shoemaker’s son?).

There was a very talented marketing executive in one of the Agencies and we asked her to head marketing for the entire company. We knew we had to re-position the business and this marketing executive knew how to do that. We also knew the Marketing Services Provider “category” was too broad and we could never “own” it. Let’s take a break from this story and go back to the 22 Laws. We will return to the story after that.

22-lawsHere is a synopsis of the first two of the 22 Laws:

Law #1
The Law of Leadership- It’s better to be first than it is to be better.

Law #2
The Law of the Category- If you can’t be first in a category, set up a new category you can be first in.

It’s important for a company to be first in their chosen area of business. If they’re not first, then the stronger competitor sets the pace and others follow. It’s also difficult under these circumstances to differentiate yourself competitively. We recognized this right away, and took a deep dive into a positioning exercise. After a thorough external search and an internal self-assessment, we settled on a new category we termed Personalized Communication. It was a segment of the services provided by a marketing services provider, and MSP was particularly good at it.

Now we had to implement. It was first necessary to get everyone in the company aligned around this concept- we began with the senior management team. From there we addressed the sales force, client services group, and on into all customer-facing units in the company. Then the tactical marketing began- website, direct marketing/lead generation campaigns, webinars, thought-leadership communications… all centered around Personalized Communications.

No need to get into more details, suffice it to say it worked- and here are two proof points. First, a Google organic search for Personalized Communications placed this regional provider consistently above the fold. Second, business performance improved dramatically, enough that the company received an unsolicited offer to be acquired.

Back to the main point- yes, there are laws of marketing. It’s a C-Level responsibility to make sure they are being applied effectively and not violated. In the words of Ries and Trout “Violate them at your own risk”.

Bell the Cat: Good Plan, But We Need a Playbook

There’s a well known fable that goes by a number of names- “Bell the Cat” is one of them.

“The fable concerns a group of mice who debate plans to nullify the threat of a marauding cat. One of them proposes placing a bell around its neck, so that they are warned of its approach. The plan is applauded by the others, until one mouse asks who will volunteer to place the bell on the cat.” (Wikipedia)

The origins of this fable are in question (Aesop is the going favorite), however the meaning or the lesson often refers to great plans that cannot be executed (so how does the bell get around the cat’s neck). The plan and the execution must obviously be in synch and achievable for a great idea to have any value.

Of course this concept is not new. In The Art of War, Sun Tzu said, “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”

There’s also a classic article by Jim Womack, founder and chairman of the Lean Enterprise Institute, that does a great job of discussing this issue in the development of LEI. In it, Womack identifies “Planning” as the easy part- it’s “Execution” that will get you. The article describes a four-part process for planning and execution- Plan, Do, Check, Act (PDCA), originated by W. Edwards Deming.

Nowhere is execution more critical than in Sales. In our Sustainable Business Growth blog post we discussed how we hired, prepared and then managed a newly recruited sales force and got Results. What we did not mention is the concept of the Playbook.

The Sales Playbook for us was literally a book that contained all the elements of planning and execution for the sales organization. Every sales and support team member had a Playbook that included the strategies and tactics, management processes, reporting, collateral materials… everything needed to be successful in their role.

But that was back in 1990. Today, our tools are much improved and communication is far more efficient. Presentations, proposal templates, collateral and all other materials can be stored in shared disk drives for easy access anywhere; CRM’s for pipeline management and reporting… The physical form of the Playbook may be different but the need to equip and manage the sales force using a complete and comprehensive Playbook remains the same. It is through the Playbook that “Execution” in the sales process is assured.

We talk a lot about Sales as a C-Level Priority- because it is.

Tone at the Top: More Than an Accounting Term

“Tone at the top” is a term that originated in the field of accounting and is used to describe an organization’s general ethical climate, as established by its board of directors, audit committee, and senior management. Having a strong tone at the top is believed by business ethics experts to help prevent fraud and other unethical practices. (Wikipedia)

While the term may have originated in the field of accounting, setting a strong “Tone at the Top” is a leadership fundamental, and therefore a high C-Level Priority.

C-Level executives should be thinking of the tone within their organization as a key part of the company’s culture- well beyond the “general ethical climate”. What C-Level exec’s communicate in word and in action, how they deal with issues in practice, and what gets prioritized and rewarded all dictates an organization’s tone.

Often times you can walk into a company’s offices and immediately get a sense for the company’s energy level, relationship with its customers, its management style, … all the things that give a company its personality. Companies have a “feel”, a “style” that carries through and characterizes the organization. This all reflects the tone.

In an earlier blog post we discussed Market Focus and used the example of how one troubled technology company did not seem to have the word “customer” in its vocabulary. Shifting to a Market Focus had to start at the top, just as do other key principles. Sometimes creating the tone takes a lot of time and repetition- as it did in shifting to a Market Focus. Other times, it can happen in a flash.

There is a classic example of how one reputable company handled a major issue that set a lasting tone, while at the same time taught us all a lot about them and their culture. This excerpt is taken from my book- The Loyalty Payoff:

Remember the Tylenol scare which occurred in the fall of 1982 when seven people in the Chicago, Illinois, area died after ingesting Extra Strength Tylenol medicine capsules which had been laced with cyanide poison? Immediately upon learning about this horrible situation, Johnson & Johnson Corporation, the manufacturer of Tylenol, distributed warnings to hospitals and distributors and halted Tylenol production and advertising. It issued a nationwide recall of Tylenol products; an estimated 31 million bottles were in circulation, with a retail value of over US$100 million. The company also advertised in the national media for individuals not to consume any products that contained Tylenol. When it was determined that only capsules were tampered with, Johnson & Johnson offered to exchange all Tylenol capsules already purchased by the public for solid tablets.

While the Tylenol example was an extreme case, contrast that to the manner in which Merck handled the 2004 “Vioxx scare” (the product was alleged to increase the risk of heart attack and stroke in its patients). While Merck ultimately pulled Vioxx from the market, it was only done after a long and involved series of denials. The Merck response did not set the aggressive, patient-welfare tone that J&J’s did 2-decades before. Vioxx was returned to the market after further FDA investigation, but the damage done to Merck’s reputation in the way it handled the issue lingered.

Senior executives are responsible and accountable for setting the tone within their organization that often determines a company behavior, especially when the chips are down.

Our thanks to the accounting profession for introducing us to the concept, but the tone at the top needs to be thought of well beyond the accounting world and in the everyday running of the business. How the C-Level staff set that tone has a major bearing on a company’s welfare in so many ways.

The best employees look for it, customers look for it, and boards of directors should demand it- clearly a C-Level Priority.

The Sales Audit: Measuring and Improving Sales Effectiveness

Financial audit? Standard operating procedure.

Quality audit? Standard operating procedure.

But what about sales? After all, it’s what drives the top-line… a very high C-Level priority. The reality is that not enough companies audit their sales operation in the way they do other major processes driving the company.

Sales is a process, and as a process it has to be set up for high performance. Unfortunately, even if it has been set up well, it can drift and inefficiencies can result.

The purpose of the audit is two-fold. It provides the information to determine sales operation performance. The audit is also the mechanism to drive improvements in sales performance. Sales audits are critical to any company’s overall operation and should be embraced at all levels, especially the C-Level.

The process of conducting a sales audit certainly depends on the particular sales model a company employs- direct sales, sales through distributors, online sales, etc. But there are a lot of common steps in the process regardless of the sales model.

Let’s take a look at a direct selling organization and examine what the audit process might be like…

The audit itself involves pulling together and quantifying a lot of material about the sales operation. It can be done methodically using the best information available. Where detailed information is not readily available, educated assumptions can be made and confirmed over the course of the audit process. Once information is collected and quantified, then management can go to work on making improvements.

Below is a list laying out the steps for a direct sales organization audit process. The order in which this information is assimilated may not follow the sequence below. What’s important is that the information is gathered and quantified to the greatest extent possible. Again, many of these steps will apply to a number of different sales models.

  1. Lead Generation Process
    Identify all inbound and outbound lead generating activity, as well as event-based marketing activity like trade shows. Determine the number of leads from each activity and how the leads were transferred to the sales activity.
  2. Map Out The Sales Cycle
    This step involves building a flow chart that identifies each step of the sales cycle. For example: qualification, needs analysis, product demonstration, proposal, etc.
  3. Dimension The Sales Cycle
    Every step in the sales cycle is dimensioned in relation to closing a deal. For example, on average how many companies do you have to submit proposals to until you get one deal? The sales cycle is also dimensioned in terms of the time it takes to pass from one stage to another (e.g. from demonstration to proposal). Finally, resources are dimensioned (how many man-hours are needed to prepare and conduct the demonstration?).
  4. Materials And Tools
    At each step of the sales cycle, identify the materials and/or tools needed to most effectively move the prospect through the various steps in the sales cycle. For example, tools might be demonstration software, technical support, webex conferences, white papers, proposal templates, presentation materials…
  5. Build The Sales Pipeline
    Now that the steps of the sales cycle are defined and dimensioned, quantify how many prospects are in each stage of the sales cycle. How many in the qualification stage, how many in the proposal stage, how many in the needs analysis stage.
  6. Determine Best Practices
    The effort of determining best practices may come directly out of the work in steps 1 to 5, or it may require looking outside the sales operation for answers. For example, if one sales unit is significantly outperforming others, then what are their best practices?

With this information collected, we’re now in a position to make improvements. To illustrate, let me just point out one area that I often find is an issue- prospect qualification. If our hit rate (or the number of prospects that we take from the proposal stage in the sales cycle to a successful close) is low it can be because the prospect was not qualified.

Armed with the information from the chart above, you can look back to see what criteria were being used to qualify an account and rectify the process. The issue here is that a lot of time and resources (money) are being wasted if unqualified accounts are being pushed through the sales cycle. A best practice is to determine the criteria for qualifying an account and make sure it’s being applied. It’s far better to know upfront if you have a truly qualified prospect than it is consume a lot of resources only to lose the deal in the end.

We’re really just scratching the surface on the sales audit process, but hopefully the point is clear. A high performing sales operation is a high C-Level priority and the sales audit is an effective first step towards both measuring and improving the sales operation.

Sustainable Business Growth: The Sales-Engine-Model

Businesses certainly all strive for reliable, sustainable growth- and it is usually well within the reach of most of them. Simply put, it requires developing a process driven, quantitative, highly measurable sales process (emphasis on process) no matter what the industry or market situation. A number of organizations today are using the term Sales Engine to describe this tried and true model. It’s not new, it does work, and the tools for implementation are much improved and getting better every day.

The first introduction for me to the sales engine model was in 1990. I had just taken a position as the VP of Sales & Marketing for a subsidiary of Eastman Kodak. We were introducing what was at the time a revolutionary new system for digitally composing pages for publication. It was the first “open system” platform of it kind. We had very high expectations for market penetration and our business plan called for us to place more systems in our first two years than the current market leader. We had to hire, train and equip a new sales force in less than 12 months, and beat the competition in system placements in year one. Dock Square Consultants had been hired to help us build a sales engine that turned out to be the critical success factor for us in achieving the lofty goals. More on this later…

sales engine

The classic “database centered” sales engine has 3-parts.

  • Activity Generator where inbound and outbound marketing activities generate leads through marketing communications programs, or even through “cold-calling” using all available channels
  • Prospect Database that contains the target market database for the product or services
  • Sales Funnel that is used to manage the sales process once a “lead” is generated.

Regardless of the tools employed (websites, CRM, e-blasts, blogs, etc.) in the sales engine, the basic model remains the same. It is the rigor, quantitative measurement and process-management of the sales engine that creates sustainable growth.

In 1990, we did not have websites; and CRM’s were very large, expensive and cumbersome systems. We used the tools available to us at the time. They were rough but adequate- it was our company-wide commitment to using the sales engine process that made the difference, not the tools. Everyone on the customer facing side of our operation was involved, especially the sales team. We made it a condition of employment for the sales organization, and we also made it profitable for them in the commissions and bonuses as they achieved results.

There was predictability in the model. We could pace lead generation, we knew when we needed to hire more sales or more support staff, we learned the profile of the best prospect and used that to update the database, we could effectively forecast sales, schedule installations… all because we measured and managed each step of the process. We knew where the bottlenecks were before they became bottlenecks. Dock Square set up the engine, but our sales leaders managed it- everyone owned it.

We started with a database of prospect names that were then pre-qualified by a telemarketing team equipped with a qualification questionnaire. Before we placed a sales rep in a territory, we generated 50 highly qualified leads in the territory to help the rep get started, and then continued to drive lead generation. We measured every step in the sales cycle at weekly sales reviews, and posted results of each of the sales rep’s activity and results. We set up a “war-room” and measured all activity not just wins and losses , because the right activity leads to sales. Of the 12 very-senior-sales exec’s hired only one fell out due to lack of performance in that first year.

In case you are wondering, we met our sales goals in both the first and second years of operation. We were so successful that many of our team were promoted and moved onto larger areas of responsibility- myself included. We carried the model with us into our new assignments because we believed in it and because it worked.

While there are always many variations on the sales-engine theme to accommodate the uniqueness of different businesses, the model remains the same. As I said earlier, the tools are certainly much better today which makes implementation more cost effective and faster. Sustainable business growth creates value. At the heart of growth, is a strong functioning sales engine.

Market Focus: Get It and Keep It

Market Focus is about knowing, listening and responding to the customer. It’s about understanding the trends shaping the market. Without it, companies can easily drift into a more internal focus over time.

The good news is that Market Focus can be learned or relearned within an organization that has the right C-Level leadership.

Why is this important? Because Market Focus can make or break a company. Here’s one story about how focusing on the customer helped re-make a business:

Simplex_Time_Recorder-4In the early 1980s, the Simplex Time Recorder Company (STR) recruited a “turn-around” management team. The goal was to restore profitability and growth to this iconic company that invented the time clock almost 100 years earlier. One of the challenges this team faced was resurrecting STR’s fire alarm and building control systems. It was the largest segment of STR’s business, but it was under heavy attack by competition.

The General Manager leading the turnaround sent a team on the road to talk face-to-face with customers to find out what the company had to do to restore its competitive advantage. He told the team to stay out there until they had the answer. He promised that after the 5th or 6th in-depth visit discussing issues with customers, they would have the answer and be allowed back in the office. He was right.

The team found that the fire alarm and building control systems functioned extremely well when properly installed. But the problem was that contractors felt the systems were “impossible” to install. The wiring schemes were far too complicated. The first graph shows the ratio between installation cost and equipment cost for a typical installation. Far too much money, and far too much time, was spent in the installation process because of the wiring complexity. The electrical contractors were going crazy trying to conform to the wiring specifications and very often the Occupancy Certificate for the entire building was held-up while the complex fire alarm wiring was debugged. As a manufacturer of these systems, STR concentrated on making what they thought was the best equipment, and not on the total cost of installation. They weren’t looking at things through the customer’s eyes.

After listening to several electrical contractors tell this story, the answer was clear. STR had to look not just at its product but to the entire process of installation and support to determine how they could make systems easier to install and maintain.

Here’s the interesting part- STR went back to the contractors and asked if they would pay more money for a system that was easier to install. The contractors said: “Where do I sign?”

So let’s see how this works- STR can regain its competitive advantage, increase the share of the Total Installed Cost (or put differently increase the price of its equipment), and dramatically increase customer satisfaction if it could solve the installation problem. All of this was learned by listening to the customer- not bad.

STR did in fact find a way to reduce installation cost. They did this by embedding small microprocessors into the detectors positioned throughout the building. Doing so allowed for virtually random wiring because the detectors could identify themselves to the control panel instead of being wired in a specific order. The devices were called “smart detectors”, and they took advantage of the technology trend in integrated circuitry.

But the real story is the part about knowing the customer and their problems, listening to the customer to truly understand the problem, and then responding to the customer with a solution. Revenue per unit and market share for the company both increased dramatically- mission accomplished.

The road-to-success is paved with these stories of Market Focus. Unfortunately, the road-to-disaster is paved by those who lack it.

Turn It Up… Not Just Around- Part 2

“So what did you do?” was the question from last week’s post on the turn-around of the Technology Company. There were 3 Phases to the plan, all of which followed the Analysis, Actions and Results model portrayed in the “pyramid diagram”. Here is what we did…

Phase 1: Triage- 90 Days. The triage effort involved taking the steps necessary to get the business on firmer financial footing. There were 3 primary actions taken in this phase.

prioritiesChanges to the management team were needed that largely involved reassignment of senior staff, although there were a couple key new hires and terminations as well. The second action was to right-size the organization and consolidate facilities- always a painful step, but necessary. The third action was a very important one, and that was to impose financial discipline and financial decision-making. Previously, major decisions were made without financial analysis or justification. The newly appointed CFO took this one on successfully.

Phase 2: Market Focus- 18 Months. MBWA (management by walking around) is a technique I have used for years. I rarely heard the word “customer” in my MBWA analysis in the early days. So it was not difficult to see that the company was too inwardly focused and not market-focused.

dart boardPhase 2 then became the Market Focus phase. We took two significant actions in this phase- the first was to align our business in the way customers saw us and not how we saw things internally. We aligned as many of our resources as possible around our customer segments. In doing so, we improved our sales dramatically, but we also learned what was missing in our products and services. We immediately launched product development programs to strengthen our offerings- this took more than a year to accomplish. But, once we did, sales improved further yet.

Phase 3: Channel Focus- 12 Months. As we analyzed our situation in Phase 2, it became clear that the channels we were using to go to market, primarily OEM channels, were not delivering the kind of results we expected and were never going to. The channel partners lacked our goal-oriented sense of urgency and passion.

goalsWhat had to be done was obvious on the one hand, but very difficult to do on the other- we had to better control our channels to market. The action we decided upon was to acquire a significant channel player with global sales and service capability, and a strong market presence.

What allowed us to pull this off was our financial strength. By imposing financial disciplines in Phase 1, and with strong management and focus in Phase 2, we built a war-chest of cash that we could deploy for strategic acquisitions.

Certainly there is a lot more to this story. But, the 3-phase approach, coupled with the recurring use of the Analysis, Actions, Results methodology is the story. Within 3 years the company had its management processes, products, channels and focus clearly set.

Turn It Up… Not Just Around

In early 2002, I took over as CEO of a technology business that was in trouble. The company was losing money, running low on cash and performing way out of covenant with the banking group. There was no time to waste. We had a triage situation on our hands and had to stop the bleeding…

Within 3 months, we had the business rationalized and on sufficiently firm financial footing. This is what many of us in the business would term the classic start on a business turnaround. But the charge from the Board of Directors going into this venture was not to just turn this business around. It was about taking it to a very different place, one where the company’s potential was fully realized. They wanted to Turn It Up, not just turn it around.

Turn-Around-Management is a term to describe reversing a downward trend. And turning around or reversing a trend is certainly a critical part of the job when engaging with a business on a downward trajectory. As we know, it often requires a lot of heavy lifting, tough decision-making, and galvanizing a team around the effort.

Most business situations are not just about reversing a trend- they are about advancing the company’s business performance; in other words, Turning It Up. Advancing business performance like many things is a process- a process that has worked successfully in many company situations. It involves 3-steps- Analysis, Actions and Results- just as the chart below indicates:

While much of the process for advancing business performance may seem perfectly logical, it is often not followed. But when it is, and when there is solid execution behind it, the results will be there.

So let’s return to our troubled technology company, and how we turned it up. We followed the process of Analysis, Actions and Results, and executed well. Within 2-years, the company had developed a market focus that resulted in new and improved products to grow organically. We developed measurements for success driven by strong financial management. We built up a cash war-chest that allowed the company to grow strategically. In 4 years, through a combination of strategic and tactical moves, the company grew more than 4x to over $270 million in annual sales.

How we thought about the challenge was the key to success- we were Turning It Up, and not just turning it around.

My colleague at Dock Square, Rich Lettieri, suggested a fuller discussion on “what exactly did we do” to affect the results. Good question… for those of you wanting to know the same thing, I’ll answer the question in my next blog post.