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Improving Pricing Quality with Six Sigma Methods In a technical context, the word quality can have two

meanings, according to the American Society for


Quality: 1. The characteristics of a product or service that bear on its ability to satisfy stated or implied needs; 2. A product or service free of deficiencies. An important characteristic of a product or service is a price that satisfies the implied need for profitability, at least from top managements viewpoint. Just as quality in manufacturing became important in Detroit during the 1970s with the oil crisis and increased competition from Japan, so is quality in pricing becoming important in many industries as the costs of raw materials skyrocket, the U.S. dollar plunges against other currencies, and companies face stiff competition worldwide. The difference now is that, for many companies, the tool set for implementing and deploying quality initiatives in manufacturing is quite sophisticated. Whats lacking is a means for targeting and adapting this tool set for pricing. This article describes a situation faced by a real company--well call it Acme Industries Inc.--in which it was compelled to adapt its Six Sigma manufacturing expertise to improve its pricing processes. The result was Six Sigma pricing, previously described in a May 2005 article in the Harvard Business Review and more thoroughly in my book Six Sigma Pricing: Improving Pricing Operations to Increase Profits, (FT Press, 2008).

Red alert at Acme


Executives at Acme Industries Inc., an industrial manufacturer, called an emergency planning session. Unless they could improve profits within one or two quarters, the companys projections to Wall Street regarding profits would seem foolishly optimistic. To increase profits, the company had already cut costs as much as possible. Now it would have to increase prices without losing sales. The question was how to do that given the competition and the companys own erratic history. In the past, the company aggressively pursued market share by allowing sales representatives a lot of flexibility on price. However, Acmes dollar sales grew only marginally in a bullish market while profit plummeted. The following year, drastic inflation in critical raw materials motivated the company to push for higher prices, even if it meant losing some business. The companys dollar sales remained flat. Operating profit grew by more than 10 percent, but the stock price remained below expectations and precipitated changes in key management positions. The new leaders reverted to capturing market share through lower prices, even though the costs of raw materials were rising. Annual results were dismal-sales, operating profit, and stock price were down. Acme had its share of internal issues as well. These were due to the complexity of its manufacturing processes, as well as several pricing functions that contributed to price leaks. The functions included marketing, sales, finance, and pricing. Marketing owned pricing strategy, sales was responsible for fixing the customers price, and finance was responsible for all reporting. The different incentives in different functions led to variations on basic processes, shortcuts, double approvals, and a buddy system, even in the same product line and sales region. When someone tried to lead a discussion on price improvement, it degenerated quickly into a blamestorm rather than a brainstorm.

Six Sigma for pricing


During the emergency meeting, the vice presidents of marketing and sales emphasized the tough external environment and the importance of pricing. The pricing manager showed two slides (see figure 1, below) that reflected the wide variation in discounts--from 5 percent to 95 percent--offered to customers within a single stock-keeping unit (SKU), regardless of the customers size or even the transaction.

Senior managers began to understand that this variability was a problem and symptomatic of process issues. Acme had enjoyed considerable success in reducing manufacturing variability by applying Six Sigma. The managers felt that the transaction- pricing process was similar enough to a manufacturing process to warrant piloting a Six Sigma pricing project in one of the companys North American subsidiaries. They appointed the manager from pricing to carry out the five Six Sigma DMAIC steps: define, measure, analyze, improve, and control, with the help of a Master Black Belt recruited from manufacturing. The project sponsor was the senior executive responsible for pricing.

Define
The project sponsor limited the scope to one particular product line. Acmes project manager proposed that a defect be defined as a transaction invoiced at a price lower than the one that pricing had approved (or lower than the current blanket guidelines, when approval hadnt been sought). The project would have to deliver a better understanding of the existing pricing process and a modified process to improve and control final transaction prices or discounts. The project manager then enlisted people from pricing, finance, marketing, IT, and sales for the Six Sigma team. He also asked people in positions of influence at Acme to serve on a steering committee chaired by the project sponsor. These included the director of sales, vice president of IT, vice president of finance, and vice president of marketing. The committee confirmed the proposed problem definition and project charter, and set a project goal of increasing revenues by $500,000 during the first year following implementation--without incurring any losses in market share or unit sales volumes.

Measure
The project manager formally interviewed colleagues from IT, sales, pricing, finance, and marketing. He also sought informal feedback from other people in these functions to draw a high-level diagram of the entire process showing information flow from one step to the next. The map revealed a pricing process with six main steps. In practice, however, the sequence was replete with exceptions and shortcuts. Step 1: Perform initial price assessment with customer. The input for this are the list price, the blanketdiscount guidelines for sales in the particular market, and the customers product and pricing requirements. The output is a discount taken off the list price. Approval is needed from pricing if the discount is deeper than the maximum authorized for the particular market. Step 2: Request pricing approval. For pricing personnel receiving such a request, the input are the price the sales rep has requested and the guidelines for pricing analysts. In practice, sometimes a sales rep offered a final discounted price to the customer without prior approval. Step 3: Compile quotation information. The input are the information about the customer and the order provided by the sales rep to support his or her request. The output are the complete details of the transaction. In practice, the sales rep didnt or couldnt provide enough information about the quotation. Step 4: Review and analyze quote. Input are the completed quotation information generated in the previous steps, including the tentative price that the sales rep requested, reports summarizing the history of similar transactions in the particular market, and, when available, reports of similar

transactions with the same customer. In practice, with information scattered in different computer systems, the guidelines available to the pricing analyst could be quite poor, or the sales rep might request a quick turnaround, leaving little time for a pricing analyst to carry out this step effectively. Step 5: Communicate approval to sales office. The input are the tentative approved price from the analysis in the previous step and any additional information regarding the order and the customer. The output is the approved price. In practice, this could be the beginning of a prolonged negotiation between sales and pricing. A senior sales or marketing manager might weigh in at this point as well, and the final approved price could end up quite a bit lower. Step 6: Submit price to customer. The input is the approved price. The output is the tentative price for invoicing that the sales rep submits to the customer. In practice, the price that the sales rep actually offered to the customer could be quite a bit lower than the approved price. The team also assessed the quality of the input data that supported the pricing process and found the sales transaction data to be reliable.

Analyze
The team, with the help of the Master Black Belt, used a cause-and-effect matrix to guide discussion toward identifying and prioritizing problems. The main findings from this exercise suggested that the defects arose largely from problems in steps 1, 4, and 6, and from failures in reporting. Step 1. The team found that sales reps abilities to help customers select the right products and features was critical to managing customers price expectations. Unfortunately, salespeoples failures in assessing customer requirements couldnt be easily detected or controlled. Step 4. Sales reps sometimes wanted discount approval within hours of forwarding a request, which made it difficult for pricing analysts to determine whether the discount was reasonable. Step 6. Sales reps sometimes offered final prices to customers without prior approval, leaving pricing with little choice but to approve the price after the fact. At the reporting stage, information about transactions wasnt gathered or presented consistently. Discrepancies and redundancies in reports led to variability in the decisions the analysts made when deciding prices. The project manager statistically analyzed transaction- level data for all transactions that occurred during the two years before the project started. He found the actual discounts to be bell-shaped in distribution. Using analysis of variance, he was able to conclude that different pricing guidelines had to be set for different transaction sizes and for different territories within the same market, and possibly even for customer groups.

Improve
Response speed was critical for salespeople to act quickly and close deals, but this was a challenge for pricing personnel. The project team concluded that clear guidelines were needed when granting deeperthan-usual discounts. The team proposed giving graduated discount-approval authority to individuals in three levels of the organizations hierarchy: sales reps or managers, pricing analysts, and the pricing manager. Making the guidelines and the escalation process clear sped up the transaction process. In cases where sales reps had already offered a customer a price and needed after-the-fact authorization, a new process required that the rep involve her boss for approval. The price already offered would still be honored, but now representatives could be held more accountable for making unauthorized commitments. Exception codes enabled Acme to track the reasons for price variations and made it clear who had been involved in the decision to deviate from guidelines.

Control
Acme set up a monthly review during which executives--mainly the vice presidents of marketing, sales, and finance, along with their direct reports--looked at the companys overall performance as well as particular geographic markets and transaction sizes. They determined whether the new process resulted

in higher average transaction prices, fewer exceptions, and no loss in market share. If prices were under control but the company was still losing market share, then they needed to review pricing guidelines. The review team also checked exception codes to see who was deviating from the process.

Results
The initial goal of generating $500,000 in incremental revenues during the first year was handily exceeded in only three months. More important, a subsequent across-the-board list-price increase was fully reflected in the top line for this product. By contrast, other product lines realized less than half the increase. That list-price increase, together with the tighter controls the Six Sigma team developed and implemented, resulted in $5.8 million in incremental sales in just the first six months following the projects implementation, all going straight to the bottom line. From an organizational perspective, the Six Sigma approach has considerably reduced the friction inherent in the pricing-sales relationship. Systematically collecting and analyzing price transaction data gave pricing analysts hard evidence to counter the more intuitively based claims that the sales staff had typically advanced in negotiating discounts. A frequent claim, for instance, was, My customers want just as high of a percentage discount for a $1,000 transaction as they would get for one of $100,000. Now that pricing knows that Acmes customers tend to accept lesser discounts on lower-priced transactions, and that some customers are willing to pay higher prices, analysts can more easily push back when negotiating price approvals with sales personnel. They can respond confidently and authoritatively when sales reps ask, Why is my authorized price higher than those in another market? or Why dont we authorize the same price for all customers? Salespeople, for their part, are less likely to feel that the negotiation with pricing is driven by political motives or by personal desires to assert control. Moreover, they can use the same data to press their own points. It became clear, for example, that some sales offices that had been under scrutiny for aggressive pricing practices had, in fact, been acting reasonably given their local market conditions. In light of the projects success and its low cost, Acme is rolling out Six Sigma pricing across the organization. Other companies operating in competitive environments can also benefit from Acmes experience as they look for ways to exercise price control without alienating customers. They can transform the tenor of the relationship between their pricing and sales staffs from adversity to relative harmony by giving them a process for making joint decisions that are aligned with company objectives and based on solid data and analysis.

Why Six Sigma pricing?


This success story doesnt fully reflect the challenges of applying Six Sigma to pricing. Pricing processes have many stakeholders, which means that youre treading on eggshells despite top management support. Not all of these stakeholders will perceive a Six Sigma pricing project as a win-win situation, even if it adds significantly to the companys bottom line. This makes such a project vulnerable to sabotage at the first possible opportunity. Moreover, some of the key customers for pricing are internal, and their requirements may not be clearly stated. Additionally, pricing processes, when they do exist formally, are notable mainly for the lack of discipline or the effort required to follow them. Therefore, Six Sigma tools, such as failure mode and effects analysis, are critical in a successful control plan. Still, relative to the effort that goes into the project, the increase in profits from applying Six Sigma or other quality-based approaches to pricing projects are huge in comparison to those brought by manufacturing or services projects.

How to Apply Six Sigma to Sales


Share on facebookShare on twitterShare on linkedinMore Sharing ServicesShare on emailShare on print If someone were to say the words, Six Sigma, what would come to mind? Beyond the inevitable quip that its just Greek to me, youd probably think of manufacturing process and quality improvement. Thats because Six Sigma has long been linked with reducing costs, improving product quality, and increasing productivity in factories around the world. But the same principles can be applied to sales and marketing organizations, asserts Michael Webb, founder of Sales Performance Consultants, Inc., and author of Sales and Marketing the Six Sigma Way (Kaplan, 2006). Sales, he points out, is a process a series of activities designed to produce specific results. And process thinking, which enables you to measure activities and results and to analyze them for causes and effects, is the foundation for Six Sigma. In his book, Webb outlines the five steps of Six Sigma (called DMAIC) and shows how they apply to sales: Step #1: Define the problem and the process precisely, whether you are examining the entire process (i.e., the complete sales process) or only one part of it (i.e., the cold calling process). By identifying and clearly defining the process that contains the problem, you ensure the problem is real, solvable, important to the right people (i.e., your customers and stakeholders want it solved), that the data needed to solve the problem exists or can be developed, and that the resources to do the job exist. Step #2: Measure the activities and the results to understand the process. For instance, say your sales process relies heavily on cold calling, but you arent getting the results you need. In this step, you would document everything relating to your reps calls the times theyre being made, the number of calls, the results of each call, the scripts being used, the type of contact being reached, and so on. Webb acknowledges that this step usually involves a significant data collection effort. But that data is essential because without it you dont really know whats happening. Step #3: Analyze the data for variations in the results and in the activities that produced them and search for cause-and-effect relationships. Youll often need to move back and forth between the measure and analyze steps. For instance, Webb tells the story of the private banking division of a major financial institution that wanted to bring in more business. It examined its sales process and discovered a bottleneck at the account-opening stage. So the division measured and analyzed the way it opened accounts the procedure, the number of employees involved, the number of touches a customer required, and the time involved. It also examined the results customer satisfaction, customer complaints, instances of troubleshooting by salespeople, and deals lost at this stage. The banks conclusion: the procedure for opening accounts caused customers to drop out at that point. Step #4: Improve the process by constructing an experiment or pilot project to test your hypothesis. If your hypothesis is correct, you should see a measurable change. For instance, when the bank redesigned its account-opening procedure, more customers completed the account-opening process and the division increased its revenue by 18 percent in one year with no increase in staff. Step #5: Control the process to make the change permanent. In the case of the bank, the change was relatively simple to make permanent a change in forms and the information

those forms required. In other cases, institutionalizing the change might involve new management reports or financial incentives as well as a control plan to ensure that the inputs and outputs remain within the targeted ranges, says Webb. In short, Six Sigma applies science to the art of sales to consistently improve results. For more information on how you can apply these principles to the problem areas in your sales process, visit www.salesperformance.com.
How Does

Lean Process Excellence Conserve Resources In Sales and Marketing?

By Michael Webb

The Lean philosophy enables companies to identify and eliminate waste in manufacturing environments, where the specificationwhat the customer will pay foris known. But how does this translate to sales and marketing environments, where figuring out what the customer will pay for is the goal? Properly applied, Lean enables companies to conserve sales and marketing resources by improving the ways in which managers allocate those resources and the ways in which salespeople use their time. This also improves sales productivity and performance. In sales and marketing, Lean process excellence can facilitate this by:

Defining the sales value stream Increasing visibility into the sales process Providing a specific method of improvement
Defining the Sales Value Stream

Sales and marketing is difficult to manage in most companies because they have copious data on sales results, but almost none on the activities that produce the results. There is also lack of agreement on which sales and marketing activities create value and which create waste. This dearth of data and knowledge would never be tolerated in a manufacturing environment. To apply Lean in sales, you must recognize that producing an order requires multiple steps, just like producing a product does. Manufacturers know what work is required at each stage of production. Similarly, sellers must understand the stages customers go through in becoming aware of a problem, gathering information, comparing solutions, making the purchase a priority, budgeting the funds, and implementing the purchase decision. Along the way, the seller must command prospects attention, provide information, earn their time, gain their trust, and motivate them to act if they are to win sales. These stages comprise a value stream known as the Customers Journey, though the specifics vary in different markets and change with market conditions. Aligning the work of the seller to the needs of the buyer at each stage eliminates huge amounts of waste from the sales process, because the seller avoids

wasting resources on poor quality prospects. Far more resources are expended on poor quality prospects and sales opportunities than are used to identify, measure, and qualify those prospects and opportunities. Identifying your Customers Journey so you can allocate sales and marketing resources effectively and efficiently is a necessary first step. This goes beyond simply understanding their purchasing process or believing you know how existing customers buy just because they are existing customers. It also goes beyond establishing sales stages based on best practices and arbitrary estimates of conversion at each stage. Rather, it means aligning every marketing, selling, and servicing activity to an element of the Customers Journey in order to actively propel customer actions (and generate data) by offering valuable assistance to the prospect at each stage of their journey. Increasing Visibility into the Sales Process Traditional approaches regard sales as something you do to prospects and customers. A Lean approach holds that selling is something you do with them. This more collaborative approach generates a more transparent sales process. For example, you use Voice of the Customer to learn the stages of the Customers Journey, and then identify signs or actions which indicate the stage a given prospect or sales opportunity is in. Rather than relying on salespeoples assessments of how likely their prospects are to buy, management can review observations of prospects and sales opportunities (data) that indicate their position in the value stream. The resulting visibility into the sales process enables managers (and salespeople) to reduce the amount of resources they expend producing:

Ads and collateral no one reads Tradeshows, promotions, and leads that dont pan out Prospects who dont appreciate your value Quotes and proposals that dont sell Products and services no one wants Customers who are not loyal Anyone who has attempted to reduce sales and marketing expenses in areas like these has heard the objections: You never know where a prospect will come from! You have to spend money to make money! You cant increase sales by cutting costs! Of course indiscriminant cost cutting is a blunt instrument. Tracking the movement of prospects in the value stream provides a more powerful approach to identifying costs, distinguishing value from waste, and allocating resources. It enables managers to identify bottlenecks, and to know which part of the value stream needs improving. Visual indications of the flow of prospects can be created and regularly communicated, providing more insightful and actionable information for management decisions. This enables the focus to be expanded from simply identifying the flow of prospects and sales opportunities to identifying their quality. Instead of being accountable only for results, salespeople can be held accountable for identifying the observable characteristics of their sales opportunities that make them more or less likely to buy. One client struggled due to one of the most common mistakes in sales: attempting to get prospects to do things they were not ready to do. When improvements were made to offer helpful information at each stage, salespeople found it much easier to implement the sales process. When they defined observable characteristics of prospects that were most likely to buy and used check sheets to track these

characteristics, amazing things happened. First, they were surprised to learn that the data more accurately predicted which prospects would buy than they could. Next, by allocating their sales efforts according to prospects quality scores, they immediately increased their close ratios. Once you make the quantity and quality of prospects and sales opportunities visible, salespeople and their managers can better understand and calibrate the sales process. Yet thats just the beginning, because this is where the most powerful characteristic of Lean process excellence in sales kicks in. Improving by a Specific Method An initial step in defining a process is to establish respectful agreement around the best means of doing the work (sometimes called standard work). When applied properly in a sales environment, standard work serves a crucial purpose: it defines the work at a level of detail that is useful for the sales team and provides the basis for improvement. Sales operations like economies, companies, cultures, and species either evolve or decline. Working methods which are not improved over time inevitably become ineffective, inefficient, and uncompetitive. When salespeople lack the means to improve their work, improvement stops, motivation is killed, customers move on. Problems crop up repeatedly, unidentified, unsolved, unabated. To counter this, management must create an environment that enables workers to improve the process. Edwards Demings PDCA (plan-do-check-adapt) management cycle is precisely that kind of approach. It is the key to sustaining and extending the gains in any process because it recognizes that the technical/process side and the social/people side of the business must be managed with equal priority. In addition to harnessing the creativity and motivation of the sales team, this approach provides management with a constant stream of data around common, high-impact issues which prevent sales from achieving its goals. This approach also gives salespeople the means to improve their work. In the client example cited above, the sales team handled prospects more consistently and improved their qualification criteria and selling tools. This generated a higher perception of value among prospects and customers and increased the average deal size as well as margins and close ratios. The financial impact of improving the process over time was roughly a 40% improvement in sales productivity, with potential for further significant gains. Conclusion Once you commit to following the data trail as described above, the traditional sales management approaches used in most companies seem antiquated, inadequate, and disorganized. Lean in sales and marketing enables managers and salespeople to conserve resources, cut costs, create value and increase sales by focusing on what the customer wants from the sales process and then delivering it. - See more at: http://salesperformance.com/how-does-lean-process-excellence-conserve-resources-in-salesand-marketing-2#sthash.p0mmpzqY.dpuf

Seven Ways to Permanently Improve Sales


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by Michael J. Webb (pdf of this article)

Leading a company is a difficult job in the best of times. Yet executives can take common sense steps to make things easier to generate customer revenue. Our work in a variety of industries has revealed seven ways to make the sales funnel flow faster. Taken independently, they are simply shifts in how the executive thinks about the situation. Taken together they comprise a powerful framework for winning in business.
1) Find a Starving Market

The famous direct response marketer Gary Halbert once said, A key to success is to find a starving market whose needs you can fill. No doubt your companys original success was due to this. Unfortunately, rather than continuing the search for starving markets, most companies start believing their product is what makes money for them. As a result, when the market changes from, say, electron tubes to integrated circuits (or from cell phones to wireless PDAs), they are left behind. Chances are some of your customers have been asking you for things you dont currently provide. Ask yourself, for example:

Often your salespeople say no to customers? What things your customers want, but dont think you can (or will) offer? What workarounds does your customer employ as they try to achieve their ultimate goal? Finding and filling these new needs mean changing and growing. Doing it consistently is the definition of a successful business.
2) Know Your Customers Journey

Once you are in the right market, chances are someone else is too. To win you must do a better job than they do. That starts with making yourself easier for customers to deal with. Your customer goes through stages (called the Customers Journey) as they attempt to solve their problems. At first they may not be aware of their problem. Then they have to prioritize it, attempt to understand the causes, determine a solution, and so forth. If you understand their journey you can decide where and when to interact with them. You can avoid aggravating them about your product when they havent yet realized they need it. You can build a process that helps them, builds their trust, and gives you an advantage over your competitors. Without understanding your Customers Journey, you can still succeed, at random intervals. With it, you have the potential to build a more consistent money machine.
3) Establish a Systems Perspective

Many senior executives try to achieve results by optimizing marketing and selling as independent functions. This is wrong. As evidence, consider the swarm of cancers it creates:

Marketers work hard to generate leads that are not what salespeople can sell.

Service departments see customers complain again and again about issues that product designers dont pay attention to. Salespeople dont have enough opportunities to make quota because they have to nurse existing customers or because prospecting is so time-consuming. Managers tire of the internal bickering and complaints. Unable to resolve the dilemmas, they resort to just do it because I say so policies. Worse, the functional view has no means of correcting its errors. Why would your definition of the functions be any better than mine or someone elses? Whether you know it or not, the part of your company that finds, wins, and keeps customers is a system of interdependent elements. How well it works depends on how well it generates actions on the part of the customer. You make an offer; if they like it, they respond. The goal is not to optimize the output of the marketing department or the sales department (as the functional view suggests). The goal is to optimize the movement of prospects through the stages of their journey. Ads and offers with high response and high conversion create value. Those with low response and conversion are wasteful. For example, an engineering company raffled a widescreen TV at an industrial conference. It generated many names, but few were prospects for their services. The effort was wasteful. Likewise, proposals that get ignored are a tragedy. Features customers chronically complain about are a crime. These feedback loops signal the need for improvements. The defining characteristic of the systems perspective is its ability to evaluate improvements according to their effect on the entire system.
4) Simplify the Steps and Write Them Down

Things get tricky when the thing you are trying to control (your customer) cant be controlled in the first place! Thats why many salespeople resist efforts to document the sales process. Dealing with this issue correctly separates meaningful selling from wasting your effort (or the paper it is printed on). Knowledge of the customers journey is pivotal for clarifying and simplifying this work. It allows you to lay out a game plan with defined roles for your players. It also provides a language for identifying variations in the quality of sales opportunities. For example, signals such as body language, tone of voice, or something that happened when they dealt with you last year can indicate how to handle a prospect. Yes, these are judgment calls, but they are judgments of facts, of observable characteristics of a sales opportunity. Identifying them can tell you crucial things, such as:

Whether an opportunity really exists The extent of the pain/value/urgency to the customer The extent of the potential value to your company The likelihood of your company winning the business Much of the sophistication of salespeople revolves around their ability to gain insight into these factors and to use them to advantage. In my experience, salespeople love to articulate and clarify this logic. Helping them do it puts your company light years ahead of others for three reasons: 1) it elevates the consistency of salespeoples decision making in the field, 2) it enables new salespeople to get up to speed more quickly, and 3) it serves as a surprisingly accurate forecast indicator.

Far from a boring, pointless exercise, documenting the sales process can and should be an essential goal of every sales organization, one grounded in street-savvy facts that everyone (especially customers) must face.
5) Measure the Process by Following the Money

Measuring live deals through the stages of the customers journey improves the performance of your production system. Unfortunately, instead of measuring these facts, most companies substitute someones arbitrary estimates or percent chance of close. The futility of this has always mystified me, but considering the difficulties of getting good data from field salespeople, some people may consider it an option. Why is it so hard to get data from salespeople? There are many reasons, many of which are actually true:

Recording data is extra work that creates no value for us (salespeople). Any information we provide can (and will) be used against us. What we do is art, not science, so this is a waste of time. This is another example of how management just doesnt get it. Rather than being designed in any systematic manner, most sales processes have grown helter-skelter over the years through personalities and chance. Somehow it generates the money the salespeople and the organization need (although few people understand exactly how). Fooling around with peoples money generates fear and mistrust. Sales process measurement is actually a leadership problem, and not an analytical one. Doing it requires adroit and persistent effort (often with the help of outside consultants). Even the most effective interventions generate some immune reactions in any organization. In sales, if you dont have something immediately credible, and there is nothing obvious in it for the sales department, you are going to get fried. This is obviously worth the effort. Salespeople are like an enormous array of sensors, each with partial knowledge of what is happening. Focusing this mosaic effectively enables you to do learn things like which million dollar deals will close next quarter, which packaging tweaks will increase market share by 15%, and which promotions will pre-empt the competition.
6) Provide the Supporting Infrastructure

Normally, behaviors can only change after the systems change, the training changes, and the performance evaluations change. Often the systems, training, and performance evaluations simply need different linkages and policies rather than a major redesign. One HVAC manufacturer saved hundreds of thousands of dollars when it realized that the infrastructure for managing coop-advertising funds was unnecessary. They freed up even more sales time, eliminating controls around price discounting, when they realized a change to the commission policy could help sales managers self-regulate. Another company developed a better sales process, only to discover most of the salespeople were still in the dark. They had been busy booking business while the process improvement team did its thing, and thus missed the chance to grapple with the issues and concepts themselves.

Working with a skilled facilitator gave them the opportunity to grapple with the question of what does great selling look like in their environment. They applied the new process on some of their live sales opportunities. They devised improvements to the sales tools and proposal templates. They came out with an appreciation and enthusiasm for the new approach. Their permanent behavior changes produced more than enough ROI for the process improvement project. Improvements to the CRMs report formats and the ability to forecast deal closures with 90% accuracy reinforced the new sales mentality.
7) Manage Based on Facts

Getting things done through other people bedevils managers everywhere:


Are our salespeople prioritizing their time and their choices in the best way? Are our sales managers effectively coaching and guiding them for the best results? What do our executives need to know to take appropriate corrective actions? How can our senior managers gain the facts they need to determine whether problems are in the market, in the sales force, or in the product? A properly designed process enables managers to focus on achieving results rather than activities. It aligns everyones interests with the customers, so facts and data can actually flow throughout the organization. Most important, it enables managers to learn which of the seemingly little problems they are seeing are actually big problems, representing system-wide opportunities to increase margins and decrease costs. Conclusion Far from taking the human element out of sales and marketing, the right approach to the sales process engages peoples talents to observe what is real, consider the perspectives of the customer, the salespeople, and the company, and create new opportunities to make more money. - See more at: http://salesperformance.com/seven-ways-to-permanently-improvesales#sthash.xL2Bsr10.dpuf

Need to Fix Low Sales Productivity?


Filed under: Articles, General Manager Articles, Lean Process Leader Articles, Sales and Marketing Manager Articles Comments (1)

Here are Three Root Causes Every Senior Executive Needs to Know
by Michael J. Webb

Improvement in sales productivity doesnt grow on trees. Once you understand what is really involved, the causes of statements like these jumps out at you:

Company President: I really like the new sales process you helped us design. Now, I expect my Sales VP to implement it. After all, I pay him enough. Director of Marketing: I understand how the Voice of the Customer (VOC) could help us improve product development, customer satisfaction, and retention. However, what does VOC have to do with sales conversion? CRM company executive: The sales process in most B2B companies is quite rudimentary. Yet, when we show the Sales VP what our system can enable them to do, their eyes glaze over. Why is it like pulling teeth to get them to see the value of this?

Sales training executive: B2B companies pay to train salespeople, and yet they resist buying reinforcement training for sales managers. Why cant they see this is the reason training doesnt stick?

Functional Silos = Wrong Standards


It is a good thing that companies organize themselves around separate functions. After all, the talents of marketers, sellers, and servicers really are different. The problem occurs when those functions become and end in themselves, rather than something the customer values. A healthy company is a system whose purpose is to help customers solve their problems. The functional mindset gives middle managers the wrong standards for what is good and what is bad. It focuses on the parts, irrespective of the whole. Thats why companies cant help turning out products no one wants, brochures no one reads, proposals no one buys, and customers whose problems are not solved. Years ago, Japanese companies began beating American ones at the manufacturing game. The Japanese approach (sometimes called Lean Kaizen) provided a better framework for deciding what is good, and what is bad in a production system. Good means:

The customer will pay for it (i.e., it creates value for the customer) We can make money doing it (i.e., it creates value for us) Lean means everything in the system is judged against these standards. Kaizen means everyone in the company works to continuously improve their performance. Under this system, functional silos are replaced with production systems. Those production systems are continually revised to increase quality, and reduce inventory, lead time, and cost. In Lean Kaizen, functional excellence is placed in service of a process that creates what a customer will pay for.

What Does Lean Kaizen Have to do With Sales and Marketing?


Everything. You cannot improve sales productivity until you learn to see marketing, selling, and servicing (find-win-keep) as a production system. Manufacturing executives know their managers need leadership and training to travel along the Lean Kaizen Journey. They know that until managers learn to see waste (i.e., what is bad vs what is good), problems remain unseen and unchallenged. What we see is filtered by our assumptions, especially as you get farther away from the action (called gemba in Japan, the place where truth is found). Wrong assumptions are an occupational hazard of senior managers, who live far from the daily work, whether it is on the factory floor or in the customers office. Most people in sales and marketing organizations can sense that their business is not designed very well. Many have good ideas about how to improve. Unfortunately, with no recognized standard for what creates value and what is waste, it is difficult to collectively see the waste. Whos opinion counts the most? Salespeople make their own decisions and move on. They are not empowered to make big changes.

Three Root Causes of Low Sales Productivity


Getting to the bottom of this problem requires beginning at the beginning: What are the undesirable results? What data and evidence exists? What are the potential causes of these undesirable results?

Working out cause-and-effect diagrams with sales and marketing organizations typically produces root causes such as.

We have no production measurement system to tell us what needs to be improved in sales and marketing (because management didnt know we needed one). Almost no standard work is defined across the find-win-keep system (because management didnt understand the value of it). We dont really understand what the customer wants (because management hasnt prioritized VOC, and doesnt know what to do with the information). To some degree, these roots causes are common to most companies, especially in North America. They are great places to start improving, because they dont cost anything. They are primarily educational and cultural, which means they wont change overnight. However, they provide valuable insight for executives who want to overcome barriers to improving sales productivity. For example, consider the the statements at the beginning of this article:

Company President: I really like the new sales process you helped us design. Now, I expect my Sales VP to implement it. After all, I pay him enough.Should the sales department alone be accountable for its results? Could there be marketing or servicing factors that get in the way? Director of Marketing: I understand how the Voice of the Customer (VOC) could help us improve product development, customer satisfaction, and retention. However, what does VOC have to do with sales conversion?If the marketing department doesnt know what qualified prospects want (VOC), or where to find them, how can they help the sales department lift results? CRM company executive: The sales process in most B2B companies is quite rudimentary. Yet, when we show the Sales VP what our system can enable them to do, their eyes glaze over. Why is it like pulling teeth to get them to see the value of this?If people dont understand the value of standard work, and have no measurement system, how can they possibly benefit from a CRM system? Sales training executive: B2B companies pay to train salespeople, and yet they resist buying reinforcement training for sales managers. Why cant they see this is the reason training doesnt stick?If the company does not have data indicating what systemic issues are causing current sales performance and productivity, how can any initiative, such as sales training (or anything else) be any better than a shot in the dark?

How to Improve Sales and Marketing Productivity


Once, early in an engagement, an intelligent sales VP said to me The rest of this company thinks making the sales numbers is the sales departments problem. If we cant get them to recognize that they have to change as well, this isnt going to work, and were going to get the blame again. Sales VPs (or Marketing VP, or even the Servicing VPs) who attempt to improve their processes on their own cant help but threaten the functional status quo. Without senior executive leadership their functional peers will eat them alive. (It is the same in manufacturing organizations, by the way!) Your team must begin at the beginning: they must be lead to identify the undesirable results, find evidence and root causes, and begin fixing them one by one. What do you think about this? Have you seen these things in your organization? Michael Webb Dec 15, 2009 Rate this article:

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Nurturing The Secret to Doubling Your Sales Conversion Rate


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by Michael J. Webb (pdf of this article) The root cause of most sales process problems is the failure to understand the customers point of view. It is every sellers dream to stumble on a market tornado where virtually everyone in the market is qualified and ready to buy today, and there is no need to try to understand anything about them. Unfortunately, as the economy becomes more complex, those conditions are increasingly rare. In most markets (especially B2B), the Customers Journey can be complex and nuanced. Understanding it is essential for finding the right prospects, helping them recognize their problem, evaluating alternatives, and so forth. The failure to understand the customers perspective leads to two basic selling problems. The first is attempting to get prospects to do things they are not ready to do. The second is the lack of a nurturing cycle for prospects that are not ready to buy now. Helping Prospects Get Ready to Buy If someone has not recognized a need for what you sell, telling them about your product wont usually help you (duh!). The sales process must begin on the prospects terms: when they recognize a need. Here are three examples of people who are about to become prospects for some salesperson: 1. Electronics design engineer You need a microwave component for a small electronic system you are designing. The system needs to withstand a wide range of temperatures. You are not an expert in microwave devices, but you can read industry sources and follow the design parameters easily enough, so you order some components and have the prototype developed. You think everything is going along fine, until failures on the prototype are traced to mysterious cracking on the mounting joints for the microwave component. At this point, you have a problem: you have to figure out the cause of the cracks and fix it while staying on budget for the project overall. You have become a prospect for electronic design engineering services to troubleshoot the application and select the right components and surface-mounting technology. 1. Respiratory therapy department manager Increasing amounts of your budget are being spent renting respirators (for patients unable to breathe on their own) from a medical supply house because your hospitals aging machines are becoming unreliable. You resolve to put a proposal together for new machines. You think you are doing well until the hospital administration selects the MRI labs proposal for new equipment instead of yours (MRIs generate new patient revenue, respirators dont). Your problem now is how to endure another year of suboptimal equipment while figuring out how to persuade the administration to approve your proposal.

You have become a prospect for assistance in justifying, selecting, and acquiring new respiratory ventilators. 1. IT project manager your department develops systems for an international banking firm. Your funding comes from intracompany billings that require documentation for the time your personnel have spent. Although timesheets are part of their job, your people dont like them and it does not get the attention it needs. Making sense of inconsistent timesheets axed or e-mailed from multiple geographies and time zones is taking up too much of your time. You realize you have a serious problem when a cranky division vice president alleges over-billing and refuses to approve a payment for the services he received. You have become a prospect for specially configured timesheet data collection software and training for your staff. There are several things to notice about each of these cases. For one, you are probably not aware that you have become a prospect. It might surprise (and even delight you) to learn that there is a salesperson somewhere who knows how to help. For another, in each case a product wont solve your problem. The problem requires the application of some kind of services to the product in order to fit your context. In addition, you wont be ready to recommend that your company spend any money until you have found someone you can trust who knows how to solve your problem. The seller who wins your business will have focused on understanding your problem and earning your trust. Finally, the need and decision to act come from the customer, and not from the seller. Once you have decided whom to deal with and what to purchase, you might be somewhat interested in a discount or package deal, but not until then. Sellers who focus on these limit themselves to transactional marketplaces where discounts and deals are the only differentiation. The Need for Nurturing There are usually many reasons prospects are not ready to move from one stage of their Customers Journey to the next. For one thing, they have many problems to deal with at any given time. It can be difficult for them to decide which problems to focus on first. For another, their problems are often complex and interrelated. They may require time to study their situation and decide what is causing the problems they are experiencing. In addition, their situation changes over time. New priorities can distract them. From their perspective, the solutions to their problems may not be apparent or believable. Even if they have figured out their problems and potential solutions, they may face the challenge of having to persuade others within their organization. Or, they may face the challenge of convincing a decision maker who does not see the problem their way. Overcoming obstacles like these is a challenge under the best of circumstances. People need repeated encouragement to help them overcome these types of inertia. When you look at it this way, it seems obvious that the sellers job is largely nurturing such relationships. The seller must continuously educate prospects on the value of their offers, make it easy for them to take baby steps in the right direction, reduce the prospects risk (by increasing their trust), and help them overcome organizational inertia.

The question for the seller becomes how to provide the relationship nurturing so it is most effective. Clearly, leaving the task up to salespeople alone might make it a hit-or- miss affair. While salespeople can play an important role, the nurturing process is important enough to warrant the attention of the team to make sure it gets done as efficiently and effectively as possible. Types of Nurturing Programs Nurturing programs can serve several important purposes. In the cases above, nurturing communications could help prospects move through the stages of their problem-solving journeys (in other words, moving the sale along). The marketing department could produce articles, whitepapers, case examples, and other materials of interest to prospects in various stages of their journey. These could be delivered to prospects via e-mail or direct mail nurturing programs (as part of the regular sales process) or be used by salespeople as sales aids as they saw fit. In addition, there are cases where nurturing should be used to create obstacles for your customers. Here is an example: The western regional sales manager in a small but growing company had too many prospects asking for his time. A new prospect in Anchorage, Alaska, had asked him to visit. He had demonstrations to conduct in Phoenix and Los Angeles. Proposals were due in Sacramento and Denver. He physically couldnt be in that many places in the time available. We designed an initial information package for his new prospects, which included a brochure set, company background, a DVD demonstration of the product, and several case history examples. It also included a series of e-mails sent automatically over a 3-week period informing the prospect about how their offers had helped other companies. The last e-mail in the series asked them to complete a simple application questionnaire on a website in exchange for the opportunity to meet with one of the companys sales consultants. The idea was if they were really interested, they would spend the time to complete that questionnaire. If they did so, and if the answers were the right ones, it was evidence that they were a qualified prospect. They would be worth prioritizing over other demands on the regional managers time. This became the standard way to respond to initial inquiries, and it accounted for a substantial increase in sales productivity. Some companies use permission-based newsletters as nurturing vehicles. Others use call center agents or account managers to keep in touch with their prospects over time. Information products and membership subscriptions are valuable vehicles to nurture relationships with potential prospects. Campaign or lead management software are often used to help manage the mechanics of keeping track of opt-ins, fulfilling the offers, forwarding leads to salespeople, and reporting on results. Whatever the vehicles you use, there are several things to keep in mind when designing these communications. Principles of Designing Nurturing Process The principles of designing a nurturing program are essentially the same as those for designing a sales process:

Focus on the prospects problem and how to solve it, not on your product.

Make their problem/situation easier by providing helpful information, examples, and problem-solving guidelines. Be clear on what stage of their journey they are in and what your goal is for the communication. Always, always offer a call to action, to move them to the next stage of their journey. If you are not sure what kind of help they need or want, the best thing you can do is to ask them! Find ways to talk to prospects so you can learn what they need. Communications that nurture relationships with prospects are definitely among the most important ones in the entire sales process. The return on investment for developing and implementing these types of programs can be extremely high. In addition to helping customers solve real problems, you are also making the process more consistent, which heightens the value of their experience with your company. Rate this article: (2 votes, average: 1.50 out of 5)

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Can Your Marketing and Selling Process Be Improved?

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By Michael J. Webb, Sales Performance Consultants, Inc. Originally published in Marketing Times Spring 2005 (pdf of this article) Process improvement has revolutionized manufacturing over the past two decades, but is only now coming to sales and marketing. Yet it is coming, and it s something every marketing and sales executive should know about and consider employing. Process improvement, also know as quality improvement, encompasses scientific approaches to management such as Six Sigma, Lean, and Total Quality Management. In general, these methods measure and analyze the parts of a business process, eliminate unneeded parts, fix broken ones, add new ones, and monitor improvement. It is the measurement, analysis, and systematic approaches that make these methods scientific. For example, Six Sigma rests upon a five-step process called DMAIC (de-may-ik): Define, Measure, Analyze, Improve and Control. Lean systematically eliminates activities that don t add value for customers and strengthens those that do. This article introduces and illustrates basic process improvement concepts as they apply to marketing and sales.

See Sales as a Process


A company s sales process comprises everything it does to find (market), win (sell) and keep (service) customers. Every activity in this end-to-end process can be identified and, if necessary, improved. This differs from the usual fixes for marketing and selling problems, such as branding, sales training, CRM systems, personnel changes or bigger bonuses. In fact, fixating on those fixes can blind managers to actual process problems. A global bank thought the only way to increase revenue in a unit selling investment accounts to wealthy individuals was to add salespeople. But DMAIC revealed that the problem was not in selling new accounts, but in the procedures for opening them. The bank streamlined these procedures, at a fraction of the cost of expanding the salesforce, while boosting revenue and customer satisfaction. The idea wouldn t have surfaced without a process approach, which always pinpoints bottlenecks.

Create Value for Customers


The concept of creating value for customers roots process improvement in reality. What value do marketing and sales create for customers? Solutions to problems. Marketing locates and attracts people who have problems the company can solve. Sales helps those people apply those products to their problems. People in business continually ask themselves which problems need attention, who should be involved, and how to find and implement a solution. The company whose salespeople best answer those questions

will win the most sales. Marketing and sales must locate people who are asking questions relevant to their product and learn what they value. Yet marketing will often generate leads without first defining with sales what a lead really is. When marketing and sales do define leads, it is usually in terms of prospects characteristics. A lead might be a commercial bank with at least $50 billion in assets or a service company under 300 employees. But that doesn t set things in the context of what prospects value. A software firm s website produced 200,000 leads annually. Unfortunately, Mickey Mouse was a frequent visitor. In fact, to avoid sales calls, 28 percent of visitors supplied bogus contact data. The company didn t know who visited specific pages, or why. The website had been built around the company s products rather than visitors needs. Thus, a lead was not a specific person who needs a product like ours, but rather unidentified people downloading something. A redesigned site dramatically increased lead quality by helping visitors get something they wanted (e.g., help with certain problems), requesting contact data in return. When a lead is defined and generated in the context of customer value, you have an actual lead, which goes beyond the name of someone in some job at some company.

Help Salespeople Sell


The test of any marketing or selling improvement effort is: Does it sell, or help salespeople sell (now or in the future)? Sales process improvement should result in questions, value statements, new kinds of interactions, product characteristics, and internal improvements that help solve customers problems, and thus help move more products and services. A scientific company had a better, but more expensive, product that eliminated many hours of lab testing in food production. The salespeople could handle calls with lab and quality managers, but not plant managers, who had to approve the higher expense. Business Value Mapping, a tool for detecting customer needs, revealed that in order to sell the value of that time (since no one would be laid off), salespeople had to know what else the researchers could be working on. In mapping business value, the company learned how to discover and express the impact of this freed-up lab time and soon saw major account wins.

Its a Process
Sales process improvement ranges from Six Sigma initiatives for global salesforces to limited projects improving lead-generation or selling techniques. Yet they always include defining, measuring, analyzing and improving specific activities on the basis of data and facts, usually from customers as well as from salespeople. Those are core methods of process improvement, and they work.

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What is Six Sigma and Why Should Marketing and Sales Managers Care?
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Michael J. Webb, Sales Performance Consultants, Inc. Originally published in Marketing Times Summer 2005 Subsequently published in Marketing Watchdog Journal, August 2005 (pdf of this article) Six Sigma is a funny name for a serious way of boosting marketing and sales performance. Its already transformed manufacturing in hundreds of companies, and it is now doing the same in marketing and sales in companies such as Bank of America, Dell, General Electric, HSBC, Service Master, Johnson & Johnson, Standard Register, Sun Microsystems, Xerox, and many more. To apply Six Sigma to marketing and sales in your company, youll probably need to think in new ways. With Six Sigma, you base decisions on measurement and analysis of activities and results, then improve the activities to improve the results. Believe it or not, thats generally not how marketing and sales are now managed (with one exception, which Ill discuss). This article explains the basics of applying Six Sigma to marketing and sales. As it turns out, Six Sigma practitioners have the same goal as marketers and sellers: to find more profitable ways of giving customers what they want. Creating Value We all know that good marketing and selling gets other people to take the actions we want them to take. The challenge is in figuring out how to do it better. The way to get other people to take actions is to show them the value to themselves or their company. Whether you do it in person, over the phone, in a letter, in a newspaper, on the radio, or with a webpage makes no difference. Prospects and customers need communications in all those ways and more. Unfortunately, innumerable variables make marketing and selling challenging. For example, some direct mail campaigns generate a 1% return, others generate 1.5%; some salespeople close 20% of their deals, others close 30%. Wouldnt you like to know why some mailings get a 50% greater response rate and why some salespeople have a 50% higher close ratio? Six Sigma helps to identify the causes of variations like these so you can make better decisions on what needs to be changed. Is This Greek to You? In statistics, the Greek letter S (sigma) is a measure of variation. In business, Six Sigma is a measure of quality: 3.4 defects per one million events, with a defect defined as a variation from the desired outcome. In any language, 3.4 defects per million is an astonishingly low rate of error. (One sigma would be variations in 70% of the outcomes!)

The focus on measurement distinguishes Six Sigma from other kinds of process improvement. Six Sigma gives you a method for analyzing sales activities and characteristics (the input variables) to learn whats causing variation in your marketing and sales results. Direct marketers (the one exception I mentioned) have been doing this for decades. Split testing shows them which variable-the headline, sales copy, color of the envelope, day of the week, or use of a stamp versus metered postage-caused variations in response rates. Then they employ the variables that produce the best results. Six Sigma enables you to apply that kind of thinking to your marketing and sales process, what ever it may be. Of course, sales processes never approach 3.4 defects per million, which is near perfection. But marketing and sales can be managed far more scientifically than it usually is. The Science of Six Sigma The science of Six Sigma resides in its reliance on two things: measurement of activities and results, and a rigorous approach. Measurement of activities and results is rare marketing and sales. Yes, managers usually have reams of data on monthly and quarterly sales, period-over-period sales, and sales against quota. But those are only measures of final results, not interim results and the activities and other variables that produced the results. The variables determining sales results include the quality of leads (a real biggie), the presence or absence of gatekeepers and coaches, and the quality of presentations and proposals, to name a few. Without data on these variables, you really dont know what needs improving. That leaves sales managers with the usual uncertain fixes of sales training, hiring or firing people, tweaking the incentive plan, installing CRM software, and so on. Six Sigma enables you instead to learn what, exactly, needs improvement. Six Sigmas rigorous approach comprises fives steps, known as DMAIC (de may ik):

Define the problem (defect) and the process in a precise way (whether youre examining the entire sales process or one part of it, such as generating leads) Measure the activities and the results (being careful to clarify exactly what you are measuring) Analyze data (from the measurement step) for variations in the results and the activities that produced them, looking for cause-and-effect relationships Improve the process by forming a theory of how to change the activities to improve the results, then make that change to test your theory Control the process to achieve future gains (if your theory proves correct) by making the change permanent. While the basic steps are straightforward, it takes experience to execute them successfully. Individuals who have achieved basic competency in the technique are designated as Green Belts. Those with higher competency are Black Belts or Master Black belts. A Case in Point Six Sigma projects can range from a complete redesign of an end-to-end sales process to SWAT-style interventions for specific problems. However, good Six Sigma practitioners never aim to implement a predetermined solution. Instead, they start with a problem, gather and analyze data, and then develop and implement a solution.

A Web-based lead generation process provides a good example: Visitors to a software companys website downloaded whitepapers and demonstration copies over 200,000 times per year. Each time a lead was sent to the companys call center. The CEO was frustrated with the low conversion of those leads to orders (well under 1%). It took some work to define the problem correctly. Like most companies, they had simply launched an informative Website and left the rest up to the visitors. One clue was that 28% of the leads had bogus contact information (Mickey Mouse and Richard Nixon were frequent visitors). In order to measure more effectively, they needed to map their process. This involved analyzing why people would take an action. Immediately, they saw a problem. They didnt know why all those people were visiting the site because the site had been designed around their product instead the prospects or customers purpose. They researched the Voice of the Customer by conducting surveys and interviews. (In Six Sigma parlance, they were learning what was Critical to Quality, called CTQs). This enabled them to improve the site so various types of visitors could gain what they wanted more easily. People seeking product information were channeled to the sales call center. Those seeking free training and technical information were channeled away from it. Thus the company gained control of the variations. The quality of leads skyrocketed. The close ratio increased. The cost of sales declined. Get Sales Down to a Science Whether you are managing market research, advertising, product development, brand positioning, or million dollar salespeople, Six Sigma and other process improvement tools provide new ways to address perennial sales problems. Of course, Six Sigma projects often get more complicated than this, but the logic is unassailable: If you improve the marketing and sales process, you will improve the results that people working in that process produce. Best of all, companies are proving that this works. Rate this article: - See more at: http://salesperformance.com/what-is-six-sigma-and-why-should-marketing-and-salesmanagers-care#sthash.73onADTQ.dpuf

What Is Operational Excellence in Sales and Marketing?


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by Michael J. Webb (with Robert Ferguson) (pdf of this article) A reader from Microsoft recently asked me an interesting question: What are the key parameters which define Operational Excellence in a sales and marketing organization?

I like the question, because Operational Excellence isnt just a slogan or a matter of opinion. It is a fact that businesses that achieve Operational Excellence produce the most consistent growth and profit performance in the long run. Operational Excellence is the result of applying the scientific method to achieve the goal of a business (which, as Goldratt said, is to make money now and in the future). The scientific method gave rise to the seven quality tools and the Lean and Six Sigma tool sets (among others), which enable people to measure facts so they can understand causes and effects. Armed with these insights, people can cause their companies to steadily improve quality and yields while reducing waste and cycle time. Ask production managers how their business is going, and theyll be able to provide projections based on carefully defined measurements of facts. Theyll be able to translate their figures from operational into financial terms in the blink of an eye. And their answers will turn out to be mostly correct in the end. Ask sales and marketing managers how things are going, and theyll typically say Great! If theyre lucky, theyll be able to point to a big customer order that recently landed and to say Were ahead of plan! However, their projections usually dont turn out to be correct in the end. Does the Emperor Have Any Clothes? Sorry, but I have to be in your face about this. Most corporations have a pretty poor idea about what is really going on in sales and marketing. Of course, marketers and sellers (and company presidents) desperately need to know what is going on. They track their results like a pride of lions track straggling cattle on the African Sahara. Often these are some of the smartest people in the company, but they really dont know what is going on. Thats because they havent built the means necessary for them to know. Want proof? See how well your people can answer any of these four questions:

Do you really know what a lead is? This one is so easy, youve probably tried it before: Ask a couple of people in the sales department how they define the term lead. Now go ask a couple of people in the marketing department the same question. Chances are, their answers wont even be close. Youve just identified a gigantic hole in your companys bucket. This is a fixable problem, dont you think? Until it is fixed, marketing will continue to generate more of what sales doesnt want while leaking profits uncontrollably. Do you know which deals on the sales forecast will close? The accuracy of most field sales forecasts is miserable. The cost of this problem ripples like a tidal wave throughout the company. Yet, this is quite a fixable problem. With help, your sales team can build and validate a short-medium term sales forecast instrument that is accurate 90% of the time. Forecast accuracy can be gotten under control and systematically improved. Otherwise, its another big leak in the bucket. Do you know which process improvements are working? Get the data for the number of orders or the revenue by time period over the past two years. Does the data demonstrate a shift in the mean of the process yield as a result of attacking a root cause? You do have a program in place for knocking out the most important reasons for lost deals, dont you? Fail this one, and, well how many holes are in your bucket now? Do many of your corporate initiatives fail to achieve their goals? How many of your product launches, promotional campaigns, lead generation efforts, and other initiatives have failed to achieve their goals? Most companies live with this chronic problem. Yet it is hard evidence that someone doesnt know what they need to know about what works out in the field with real customers. How did you do? On any of these questions? I didnt think so.

Now, go over to your VP of manufacturings office and ask him/her some similar questions (tell him/her to be patient and that laughing at you isnt fair):

How do you get people in the purchasing department and the production department to have the same definition of the term raw material? How do you manage to continuously improve the accuracy of your production forecast? Could you tell me about some process changes that have caused at least seven points above the mean in your production yields over the past two years? How many of your production initiatives or projects actually fail to achieve their goals? See the difference? Its Not Your Fault, but It Is Time to Grow Up As I said previously, marketers and sellers (and company presidents) are often among the smartest and hardest working people in the company. The fact that they dont understand what Operational Excellence means in sales and marketing is not their fault. At one time, manufacturing executives didnt understand those things either. Thanks to the efforts of geniuses like Shewhart, Deming, Taguchi, Ohno, and others, they realized they needed to make their work more visible so it could be measured and analyzedand improved. By trying to see inside their manufacturing processes, diligent manufacturing executives and engineers created a market for improved sensors and control systems and production management systems. Now the inside workings of molds, extruders, and production equipment of all types are taken for granted. So is measuring the conversion of raw material to work in-process and finished goods, making it possible to translate operational measures into financial ones. What does Operational Excellence look like in sales and marketing? Here are some prerequisites for being able to achieve it:

Value = actions by the customer. Recognize that marketing, selling, and servicing exist to serve the customer. The value created (for the customer and for your own company) is measured by the customers responses to your actions (headlines, offers, requests, proposals, etc.). Actions without customer response = waste. Banish the functional mindset. Replace it with systems thinking. Your customer wants to get the results you promised. Their relationship is with your company as a whole, not the marketing department, salesperson, or service representative. Those functions are interdependent; they must be managed as a system. Optimizing one function at the expense of another causes your company to fail its promise to the customer. Period. Make actions and results visible. Language is a tool for dealing with the facts of reality. Every word, concept, and generalization should be traceable to the specific facts and characteristics that give rise to them. Creating operational definitions is a critical step, especially for the stages of production (such terms as leads and qualified opportunities). Dont allow floating abstractions. All words should mean something measurable in reality. Everyone should be able to trace those meanings. Have the discipline to close the loop on your process. Executives are prone to defining the sales process and leaving the details up to everyone else. Employees are prone to lip service to keep the boss happy and avoid the uncomfortable. Dont fall into either of these black holes, because youll never come out. The sales process must be home grown. Break it into its smallest components and learn how salespeople solve those problems. See how their solutions vary and why. That is where your real sales process is. Always remember that.

Why Pursue Operational Excellence? Companies whose sales and marketing departments choose the path toward Operational Excellence will have a variety of competitive advantages:

Their knowledge of what their customers respond to will be clearer and more timely. The ideas that flow from customer and salespeoples insights will drive a variety of experiments, each of which increases the companys knowledge of how to make deals flow faster and how to make more money in their markets. These businesses will understand where their bottlenecks are and the financial impact of potential improvements in their processes. They inherently take less risk, because they have established a range of simultaneous experiments, the results of which provide the evidence needed by product managers, marketing managers, and sales VPs for decision making. Initiatives that dont meet expectations are the exception, not the rule. The predictability and stability of their financial results will make them more attractive to investors, who will be willing to invest more money in them than their competitors. And those are just a few of the reasons. Can you think of others? Rate this article: (2 votes, average: 4.00 out of 5) - See more at: http://salesperformance.com/what-is-operational-excellence-in-sales-andmarketing#sthash.0djICc7Y.dpuf

Three Proven Tactics to Get Salespeoples Cooperation in Launching New Initiatives


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by Michael J. Webb (pdf of this article) One of the most common questions from executives trying to improve sales and marketing results is this: How can we get our salespeoples cooperation in our new (blank) initiative? Whether you are trying to implement process improvement, CRM, a product launch, or a lead generation campaign, getting salespeoples attention, support, and active cooperation is critical, yet is often painful and frustrating. Salespeople can often seem to be the most resistant, uncooperative group in the company. Why is this and what can you do about it? Why Are Salespeople Resistant to Managements Attempts to Improve? Of course, not all salespeople are resistant to a companys attempts to improve things. Like any other group, some salespeople are early adopters and some are slow to change. New products, systems, and marketing campaigns that are on the money and fill a market void are usually embraced by sales

organizations. Other types of changes can be viewed as risky and unfruitful by salespeople. Why? Here is what I have observed:

Salespeople face conflicts (of the type companies dont like to deal with). Salespeople are at the point of conflict between what customers and suppliers want. If a competitors offer seems cheaper, faster, or less risky to the customer, the salespersons job chances for success go down, often for reasons they might never know. Any improvement that might affect this balance is threatening to salespeople. There can be conflicts in responsibility vs. control. Peoples resistance to change is normal. For sales organizations, there is this added dimension: Salespeople instinctively know when the problems are outside their control, such as the nature of the offers, the customers, or the competition. They will respond well to initiatives that clarify and respect the things they can and cannot control. They will resist (one way or another), initiatives that continue to hold them responsible for what they cannot control. The default solution is (much too often) to work harder. Salespeople are highly paid, and they should be expected to elevate their personal performance and maximize their time, skills, and effectiveness. Right? Well, yes, up to a point. In many organizations I have seen, salespeople are asked to work harder, and they do for a while. But when no one tries to change the basic conditions and conflicts they face in their environment, they get tired and frustrated. Who wouldnt? Salespeople may not be able to articulate the root causes of their problems (after all, that is not their job; it is managements job instead). So, they point out what seems obvious: Our prices are too high. We need to match the competition. Their management also points out what seems obvious: We need more orders at higher margins. Youve got to find a way. Obviously, this approach has diminishing returns. There is a limit to how hard people can work. This is especially true in mature companies. Because of their natural inward focus, they gradually lose their ability to hear or even respect the voice of the customer. The salespeople then by default usually are tasked with this job as well, by working harder, of course. How Can We Gain Salespeoples Cooperation and Support? The answer to this question is easy to say, not so easy to do: Make selling easier! It CAN be done, and IS increasingly being done in companies throughout North America. As I say in my book, Sales and Marketing the Six Sigma Way, Marketing is anything that makes selling easier. Although there are many possibilities for improving things, here are three tactics that tend to engage salespeoples whole-hearted support and cooperation: 1. Improve Lead Quality Once and For All Lead generation remains the single biggest bottleneck in most sales organizations. Unfortunately, since marketing is a separate department, most sales executives (not to mention presidents and CEOs) expect salespeople to somehow find a way to succeed, regardless of their marketing departments inability to generate qualified leads. Just Work Harder. In some markets there may be validity to this perspective. However, it is a serious blind spot because it ignores a fundamental problem: If marketing departments dont learn how to produce qualified leads, the salesperson will always be the bottleneck, the sales process will always be a hand-crafted cottage effort, and improvements in productivity will not happen. Further, your company will be vulnerable to a competitor who figures it out first. Salespeople cannot be in every place they need to be to find all the business there is. Of course, salespeople can always do things better and more efficiently and should be on the lookout for sales

opportunities wherever they are. Yet marketers have an incredible variety of communication channels at their disposal that can be in far more places at a fraction of the cost of the manual labor of salespeople if they know how to craft the right value propositions. Although the many tactics for generating qualified leads are beyond the scope of this article, please be aware that enormous strides are being made every day in companies that: a) understand their customers journey and b) know how to leverage direct-response marketing techniques. These techniques deliver offers crafted to make it easier for customers to move through their problemsolving/buying process. When marketers can supply the sales force with a predictable supply of qualified opportunities, the dynamics of the organization (and the market) change dramatically, and for the better. 2. Help Them Sell The work of selling is vast and complex because what you have to do depends on the specific nature of the customer and their problem at a particular point in time. Still, many repetitive tasks can (and should) be automated. Salespeople generally welcome systems and processes that reduce the possibilities of errors and mistakes, and that make their jobs easier. Here are a few examples:

Nurturing Prospects Who Are Not Yet Ready to Buy Chances are your company has a position on the six or seven things customers should consider in shaping their thinking about a buying decision. Why not formulate those in a catchy, appealing series of e-mails or direct mailing pieces? A salesperson could offer the educational, non-threatening series of messages as a way of staying in touch and helping the customer toward their objective until the time is right. The messages would be automatically sent each week or month until the prospect or salesperson unsubscribes them. They can include an offer to talk to the sales person (or other interaction) when they are ready, of course. Would your salespeople be willing to try a tool like this? Most will, and most will find it helps their cause! (Further, the initiation of such an automated sequence is exactly what the CRM needs to identify the existence of an opportunity so it can be counted and tracked.)

Qualifying and Assessing Their Opportunities and Account Relationships Sales managers and salespeople are tremendously interested in qualification criteria, yet they are unaware of the powerful potential inherent in it. You can work them through an exercise that helps them remove most of the subjectivity from the equation by articulating concrete observable characteristics about their sales opportunities. Then, they can implement a simple project where these observable characteristics are measured for a statistically significant number of their sales opportunities (via a simple electronic survey form). Analyzing the data from this kind of project always reveals surprising insights that advance peoples thinking about their sales process. It reveals which of the characteristics are statistically significant to winning or losing their deals. It also reveals a tipping-point, a narrow range of scores above which the probability of closing is nearly 100%, and below which the probability of closing is almost zero. The data can be used to refine and streamline the qualification criteria and the sales tools and provide much needed clarity for salespeople in prioritizing how they spend their time on their sales opportunities. I have seen this approach result in dramatic improvements in close ratios within a matter of a few months.

3. Save Them Time When internal departments assume getting orders is the sales departments problem, and executives have functional assumptions around marketing and selling, no one has a reason to look at how your company finds, wins, and keeps customers as a production system. As a result, no one really sees the bottlenecks (except the customers and the sales force). As a result, your sales force probably has time-wasting internal problems that keep them from productive time in the field. These problems may be administrative (expenses, activity reports, distribution issues, or ordering issues) or functional (generating proposals, quotations, demonstrations, or managing service problems). Whatever they are, you can earn the respect and appreciation of your sales team if you can figure out the biggest time wasters and solve them. The main tools to get at waste are daily activity logging and time analysis; and customer value mapping with sales process mapping, best done in concert with one another. Then, determine whether the activity can be eliminated, simplified, or automated. Rate this article: (1 votes, average: 4.00 out of 5) - See more at: http://salesperformance.com/three-proven-tactics-to-get-salespeoples-cooperation-inlaunching-new-initiatives#sthash.s31bvZvp.dpuf

Five Ways to Minimize Sales and Marketing Frustration, Waste, and Cost
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by Michael J. Webb (pdf of this article) What steps of your sales and marketing process produce the most cost, waste, and frustration? Here are five important mistakes you can work on to make your sales and marketing more productive. Fixing any of these five areas will produce big returns for your organization. 1) Observe the Use of Your Product in the Field Developing the right products and services is hugely important, yet most companies still produce too much of what customers dont really want. Avoid this frustration by basing your product development, your marketing, and your sales process on solid Voice of Customer evidence. You can even integrate your salespeople into this effort. For example, on a trip to Japan, one executive I know observed a sales report open on a worktable in a robotics manufacturing plant. It caught his eye because rather than having words and numbers, it contained sketches of the product in use by a customer, with detailed illustrations of how the customer had modified the grippers for their application. The result, ultimately, was that the robotics company began offering new types of grippers, and the salesperson had something new to talk to his customers about. 2) What Your People Already Know Is Better Than Market Research For a product launch years ago, my salespeople were to receive extensive (and expensive) data telling them who each of the prospects were. Our jaws dropped when we realized that 50% to 60% of that so-called data on companies in our territories were trash. Ive since learned that this is not atypical: just last week a

client confided that the $260k they had spent to get the results of a government-sponsored study of their customers was almost a complete waste of their lead generation money. How much cheaper would it be to have the mindset for documenting what distributors and salespeople already know about their customers businesses? 3) The Quality of Your Leads Is Everything Whats the telltale sign that your marketing and selling are wasteful? Its when salespeople wont follow up on leads provided to them. It happens for one of three reasons: 1. they dont believe the leads are worth their time (they may have evidence for this) 2. they dont have a good way to identify the high-quality leads and thus are overworked 3. they have too many high-quality leads, so some are falling through the cracks Any one of these situations means lots of time and energy is going down the drain. For example, most marketers are not rewarded for the quality of their leads and dont know how to do it in any case. Unfortunately, many executives (who should know better) mistake high activity for the likelihood of results. Nothing could be further from the truth! Only high quality implies likelihood of results. Giving your team a (statistically) valid way of qualifying their leads and opportunities is fundamental to improving them. 4) Try Getting Prospects to Do What They Are Ready to Do Once you find someone who is likely to buy, marketers and sellers who believe its a numbers game tend to make big mistakes. In an effort to maximize their results, they maximize their activities the number of products, promotions, leads, demonstrations, and proposals they produce. Instead of learning what is important to the customer, they tend to do what theyre supposed to do: 1. Talk about their product or service before prospects want to know (boring!) 2. Assume their product is best without proper evidence (arrogant!) 3. Waste time and money on demonstrations, samples, and proposals the prospect really didnt ask for (wishful thinking) 4. Make offers and deals when their prospects dont buy their proposals on the assumption that price is a motivator (it often it isnt unless you make it one) 5. Fool themselves into thinking customers should buy and business will get better (head in the sand) Getting higher output while requiring lower input comes from doing different things, not more of the same things. Companies need to design interactions which tell them what the customer is ready to do and encourage them to take the next baby step. It is much easier to help the customer do what they want to do instead of what they dont. 5) Its the Relationship, Stupid! The cost of keeping a loyal customer is much cheaper than finding a new one, but apparently not to accountants and lawyers who never have to sell anything. Consider these examples of companies that manage their relationships with customers poorly. They deserve the publicity:

The Firemans Fund Insurance Company happily took my premiums for 21 years, during which time I had one claim for less than the amount of the annual premium. Then, in year 22 of my relationship with them, winter ice tore down my gutters, and my garage and cars were vandalized, for a total of about $5k in damage. Owing to the relationship we had, they canceled my policy. (No lie.) Im not loyal to Firemans Fund any more. Weve all had longstanding relationships with the telephone companies, the cable TV companies, and credit card companies too. Yet they still dont recognize our phone number when we call them, wonder if

we speak Spanish, require us to enter long account numbers on the phone, and cant remember them during the long hold times they give us, so the agents we talk to have to ask for them again. Thats not to mention the poor service you often get once you do get through on the phone.

Bob, an engineer friend of mine, had his 4-year-old Maytag dishwasher go down. Since it was right before the Christmas holiday, Sears repair service would not answer his call. Facing a gaggle of relatives and a holiday party, he took the machine apart himself and found that a circuit board had burned through. He was able to replace the $100 part the next day through an Internet parts store. Then he called Maytag to return the defective part and to recover at least some of his money. Their response? A cheerful, empathetic e-mail pointing out he had made an unauthorized repair and they would therefore pay zero. These problems occur before the sale too. Have you ever felt like salespeople were jumping out from behind every rock when it came time for you to buy something? Customers get irritated if the only reason you come around is to get their money. On the other hand, if someone seems to always come up with something useful and helpful, you will listen, and if you trust them you are likely to buy. Companies that can devise ways of interacting with customers throughout their life cycle have a tremendous advantage. One client I worked with discovered that their prospects needed a template for proposing and cost justifying their systems to management, a process which took place when budgets were set at least a year before any transaction was even possible, long before they usually began talking with salespeople. Another client realized they could profitably sell training on the advanced modes of their product, typically about 18 months after its initial installation. Whats more, learning advanced modes made customers less comfortable with competitive products down the road. These discoveries created great ways for these companies to interact with customers and make more money from them at times when the customer was not ready to buy their main product offer. Rate this article: (1 votes, average: 3.00 out of 5) - See more at: http://salesperformance.com/five-ways-to-minimize-sales-and-marketing-frustration-wasteand-cost#sthash.sOeivY16.dpuf

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