Complex-Product Marketing 2.0

Unfortunately, maintaining a face-to-face sales force is expensive.  If you sell products that require face-to-face sales calls, the only way you can reduce this expense is by making the efforts of your sales force as effective and efficient as possible.  

Traditionally, field sales people have been handed 'leads' or given 'accounts' and then left pretty much alone to sell.  In today's difficult business environment With decreased product margins, increased cost of sales, accelerating product commoditization, and easy product research and comparison via the web, that strategy is not as cost-effective as it used to be. 

Do you ever watch the show "How it's made" on the Discover channel? http://science.discovery.com/fansites/howitsmade/howitsmade.html
In a half hour, the manufacturing processes of at least four common products are shown - loaves of bread, caterpillar tractors, kitchen sinks, etc..  Everytime I watch, What strikes me most is the amount of automation in most of these manufacturing processes.  (Comparing marketing/sales with manufacturing is a favorite theme of mine.  See http://pavement-level.com/WYPWL-S+M%20are%20processes.htm )

With manufacturing automation in mind, think about what we've been doing in sales (or haven't been doing).  Should a highly skilled and expensive sales person with a multi-million dollar quota be spending any time on a low value-add activity such as making cold calls?  Should she be spending time as a walking and talking sales brochure when a customer can get all the detailed product info they could ever want via the web?  Should she be doing introductory prospect visits to hunt for potential sales?  (Should she be wasting time on forecasts? Don't get me started.)  From a customer's point of view, how do any of those things add value to the buyer/seller relationship?

Add to this the fact that recent studies have shown the majority of buyers of complex and high-tech products today research their potential purchases online LONG before they ever meet with a salesperson.  Do we really think an uninvited phone call from a salesman will influence their purchase decision?  Do we really think a face-to-face sales call a year before a scheduled purchase will accelerate the purchase? 

Sure, occasionally a cold call will get lucky and bring in an unexpected sale.  But believing it's so common that cold-calling is a cost-effective use of expensive and talented sales people is like believing you'll win the Lotto. 

Sales people should be doing what they (SHOULD) do best - providing the kind of value only a human can provide - helping buyer's reach that "aha" moment when they realize the problem they're having can only be solved with the solution you're offering.  All the other 'traditional' sales tasks should be automated. Period. 

This is where the line between marketing and sales blurs.  In fact for the types of products you sell, sales and marketing are a single process.  (Another favorite theme of mine.) But just as the weldor doesn't do the job of the machinist when building bulldozers, the salesman and the marketeer each have their specialties. 

The bottom line for your type of products - salespeople meet face-to-face with prospects who've indicated they're ready to buy.  Everything else is handled by someone/something else - most likely an automated marketing engine.

As you may suspect, the key to making this work is to have enough ready-to-buy prospects to feed to the salespeople.  That means the traditional sales funnel has both lengthened and broadened to pull in more visitors and automatically help them on their journey from visitor to suspect to prospect before a live sales-call is ever made.  

The end result is better utilization of each salesperson's time, better quality of prospects when they meet with the sales people, and fewer sales calls required before a purchase is made.  Overall, both sales efficiency and sales hit-rates increase, sales revenue goes up, cost of sales goes down, and fewer sales people can close more business.  Not to mention the improvements from the customer's point of view. 

That's the big picture.  Getting from where you are today to that perfect world is the subject of a future blog post.

Improving sales hit-rates, alternatively called "close-rates", is the single most cost-effective thing you can do to improve revenue and profits.  Especially if your products are expensive, complex and/or high-tech and require face-to-face sales calls.

For products like that, the cost of sales can soon devour whatever margin the product has.

It's a no-brainer to make each sales call as efficient as possible in order to reduce the total number of sales calls required.  What isn't so obvious is the effect of considering sales over time and including both wins and loses in that measure of efficiency.  

It then becomes clear that while closing every sale as quickly as possible is important, considering how many sales are won out of all the sales started, is REALLY important. 

Again, measuring and utilizing the metrics of sales hit-rates and sales efficiency are most important for organizations selling big-ticket items that require face-to-face sales calls.  It's those customer visits that chew up the dollars.  Wining and dining and schmoozing isn't terribly expensive per individual prospect, but add up a dozen prospects and pretty soon we're talking real dollars.  Your product better have really good margins.  Unfortunately, with the acceleration of the commoditization of almost all products, margins aren't what they used to be. 

Devil's Advocate: Good sales people increase their own sales efficiency and hit-rates so the organization doesn't have to be concerned about it.  Sales compensation plans apply the invisible hand of the market to these issues.  Good sales people are rewarded handsomely.  Poor sales people fall out of the system.  Overall, our cost of sales stays low if we cull the poor salespeople quickly.  

Dimitri's Response: Talk about inefficiency.  While that system has worked well enough in the past, too many things (to cover in this post) have changed in the last few years making that strategy non-sustainable. To give an example - suppose the 80/20 rule to sales is true for your organization - 80% of the revenue comes from 20% of the sales force because 'good' sales people are more efficient and have higher hit-rates.  Why not examine what those good sales people are doing and apply what is learned to the ENTIRE sales force?  I call this the sales evolution process.   http://pavement-level.com/WYPWL-the%20Sales%20Evolution%20process.htm  With close monitoring of the sales evolution process, it may be possible that the second tier of a sales force could become as efficient as that top 20%.  Next year, 40% of your sales force could be bringing in 160% of last year's revenue.   

So how can you increase your sales efficiency and hit-rates?  That's my next blog subject.

Watching the emotions on the faces of the winning players of the SuperBowl tonight I was reminded of the few times I've felt something close to that.  Only once was it in relation to a product I was marketing. 

It was after four days at the industry's most important trade show where we'd just introduced the product we'd been building for the previous three years.  At the end of the show we'd gathered hundreds of highly qualified leads, our product had become the buzz of the show, and we'd taken enough orders to hold us over for most of the coming year. 

I know exactly what Eli Manning was feeling tonight and it felt so good back in '88 that I spent the next two decades trying to duplicate it with every organization I was part of.

Unfortunately I've learned in the ensuing years that complex product success is rarely measurable by SuperBowl type of wins.  Our product development times are measured in years.  Our customer's complicated purchase cycles are often longer than a year.  Our competitors always seem nimble and crafty.  And many times our product's base technology advances before we even cross the chasm. 

Even when we start getting into the early majority of customers, identifiable milestones to celebrate are hard to spot.  Big sales never seem big enough to make special notice of.  Important feature and function additions never seem quite so important once they're out there. 

Depressing really.  If I think about it too long, I start to understand why mailmen sometimes go 'postal'. 

So here are two items that have kept me sane, interested and motivated about marketing complex products. 

1. Remember that everything we do is part of a large process of continual product marketing and sales improvement. 

Unlike winning the SuperBowl, our jobs are more like climbing Mount Everest - when you get to the top, you're only half done - getting back down the mountain is just as hard as getting up. 

After we'd had a nearly perfect product introduction back in '88, the next year we nearly killed the product through our own quality errors in manufacturing.  The following year one of our competitor's new products became the buzz of the show and we had to fight hard to hold our position.

With complex products, at least one aspect or another of the product and sales improvement process always needs improvement - pricing, sales channel, marketing, sales strategy, packaging, or features/functions. 

Expect it.  Stay on top of it.

As a marketeer of complex products, that is our lot in life - managing the process to gain continual improvements if possible, or at least ensure we hold our ground against everything being thrown at us.

2. Celebrate the little victories as they come.  The little ones may be all you ever get.  But more importantly, you'll be well practiced to put on one hell of party when the big ones do appear.  

Many years ago I participated in an Emergency Medical Technician (EMT) training program.  I was spending a large portion of my free time out in the wilderness of the American west and didn't want any of my fellow adventurers to die from injuries we might sustain in our journeys just because I didn't know how to keep them alive. 

The most important thing I learned in that program was the priority of care - attend first to the things that are most life-threatening. This EMT training was so effective that even twenty five years later I can rattle them off from memory;

1.Airway
2.Breathing
3.Circulation
4.Bleeding
5.Spinal Fracture
6.Shock

The idea is, these are the six things that cause death most quickly in a physical trauma situation.  But the ones closer to the top of the list are what will do it faster.  So the order of care should start at the top and work down the list.

While watching a cop show late one night, I realized the success components of product sales and marketing are very similar in that a priority of care is also important to the product's survival. 

1.Pricing
2.Sales Channel
3.Marketing
4.Sales Strategy
5.Packaging
6.Features/Functions

1. Pricing - If your pricing is out of line, no matter how good all the other components are, no one will buy.  Fortunately, pricing is usually the most flexible of all these components.

2. Sales Channel - it won't matter how perfect your pricing is unless you're reaching the most appropriate buyers via the proper sales channel.

3. Marketing - it won't matter how good your sales channel is unless they have leads/suspects/prospects to follow-up on and effective marketing materials to give or point their prospects to.

4. Sales Strategy - without understanding the ideal customers, their businesses, the motivations of their buyers, and the problems our product solves for them, marketing materials are a complete waste.

5. Packaging - Without consideration of the most appropriate packaging with other hardware or software products and/or services, you may well have a nice little niche component that will never sell by itself.

6. Features/Functions - Every product has features and functions.  Some products have better sets of features and functions, some have worse, but nearly every product is suitable for some subset of customers if enough of the previous components are in place.