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Why Innovative CEOs Are Tearing Down Their Sales and Marketing Silos

In order to thrive (and sometimes just to survive) a company needs cash. In this current recession cash is hard to come by. Most bank lending windows are closed. Selling equity at today’s stock prices is definitely off the table. And cost cutting has gone about as far as it can constructively go.

So, what is a CEO to do to grow cash flow?

Back in the 20th Century, cash seeking CEOs frequently turned to their sales and marketing silos to get cash flow flowing. Those functional silos had thick walls that isolated the sales and marketing people, one from another . . . and all of those people from the other functions in the organization. But, with silos churning out tremendous amounts of cash, no one cared about the walls or functional isolation.

Here in the 21st Century sales and marketing silos still dominate the corporate landscape. The good news is that they are still chock full of cash flow potential. But, the bad news is that getting the cash flow potential out of sales and marketing silos requires tearing them down.

The problem, today, is that customers want what they want…when, where, how and at the price that they want it. And companies that do their work inside silos do a crumby job of giving customers what they want. Thick silo walls keep people inside the company isolated, one from another. And, they keep all of the people inside the company isolated from their customers (who are outside the company).

In order to get more cash from customers (which is where most cash needs to come from nowadays), a CEO simply has to get their silos torn down. And then they have to get the business process dots that give customers what they want…connected.

Working through connected dots (rather than sales and marketing silos) a company can give its customers more of what they want (and less of what they don’t want). As that happens customers bond with the brand. They pay more for products and services and purchase them more frequently. Best of all, they recommend the brands that they bond with to their friends. And that is where growing sales, profits and cash flow comes from.

So, innovative CEOs who need to grow cash flow are getting their sales and marketing silos torn down. The process is almost magical. And, utilizing the HalpinRoth Strategy, it works almost every time.

For more about growing sales, profits, cash flow by tearing down silos and connecting dots, visit www.HalpinRoth.com [http://www.HalpinRoth.com].

Big S, little m–What is the Right Mix of Sales and Marketing?

Don’t worry; this isn’t going to be an article about Sado-Masochism! Well, come to think of it, that term may apply to what some founders and senior managers in startups are doing to themselves and their companies. What I’m referring to is the VP who gets hired to manage both the Sales and Marketing functions. Oftentimes this turns out to be a job we call “VP-SALES & marketing”. Thus the phrase “Big S, little m”. The position is usually offered to a crack sales guy or gal, who also happens to have a marketing title somewhere in their job background.

JUST GO GET THE ORDERS

To high tech insiders the meaning is clear. The anointed candidate will be expected to go out and beat the bushes for customers, and bring in new orders quickly. Oh, and by the way, Mr. VP, you’ll also be in charge of producing data sheets and attending a few trade shows. You know, all that marketing stuff!

In most of these cases, I would recommend that anyone being approached for a job like this run in the other direction as fast as possible. These positions are usually classic “traps”. The attitude is “We’ve got a great new technology; all we need is someone to go knock on a few customer’s doors and bring the purchase orders back to headquarters”.

Hopefully, most of those reading will recognize that this is a recipe for a very unhappy outcome. The founders and senior management will be unhappy with revenue and profits, the VP will be unhappy because he’s likely to get fired in 9-12 months. The other employees will be depressed and talking about how “Sales & Marketing” is the weak link in the company. And the investors, of course, will be very, very cranky.

Why does this occur? It often occurs when the key senior decision makers (CEO, CFO, Founders, etc.) don’t have a background or appreciation for the difficulty of the sales function. And it’s even more likely to happen when there is no key decision maker with a background in Marketing. The decision maker’s attitude often includes an over-confidence in the role that superior technology plays in the overall success of a company.

IS TECHNOLOGY ENOUGH?

Certainly having a defensible technological advantage is a major factor in the success of a high tech company, especially when that company is in startup mode. The problem arises when management believes this is enough to “win”. How hard is cold calling and knocking on doors for a sales force with an unknown company name? Not to mention an unproven product, which may solve a problem the customer may not yet know exists? I’ll give you a hint–it’s really, really hard!

Likely there is a lack of understanding of the crucial role marketing plays in establishing a new product in the marketplace. There may be a view that marketing is some theoretical, squishy function that is a waste of money, or maybe something that has value but the company just can’t afford. Management thinks, we’ll introduce the product, sell a bunch and build the marketing function later. Unfortunately, that thinking is as backwards as can be, and will usually lead to the unhappy results discussed earlier in this article.

Why IS marketing so important, and why is it such a critical mistake if it isn’t a major part of the new product process? It’s because marketing is crucial in every phase of introducing and growing the revenue of new products, from conception until end-of-life. In the beginning, an engineer may come up with a great new technology that appears to allow someone to do an existing task better. Or maybe it allows someone to do something that wasn’t even possible before. But that’s really just the beginning of the product development process. Product engineers aren’t trained to closely match customer needs with the features of this whiz-bang new technology. Often they think it’s easy – you just go ask the customer what he wants! But customers often don’t tell you the truth; sometimes they lie, and sometimes they don’t even know what they really want (this is the topic of a future column). And even if they tell you the truth, it’s important to make sure that what these customers are telling you is representative of your entire target market segment. This is a task that looks intellectually easy on the surface, but for a lot of reasons, it’s very difficult to get right.

Sometimes companies do get it right even without an experienced, professional marketing function in place. Let’s assume for a moment that they do. There’s still a very long way to go before those purchase orders start pouring in. The product must be positioned properly, relative to the direct and indirect competition in the market. It needs to be priced so that the market is willing to take a close look, but not so high or low that it retards the product’s long-term profit potential. Will it be distributed only through the company’s direct sales force, or should we court VARs, distributors, retailers or OEMs? What kind of pricing can we offer those partners without creating gray markets or channel conflicts? And please, let’s not forget about creating a bit of demand for those poor guys and gals in the sales force. Cold calling really does suck! It’s not good for anyone, the sales reps or the company’s profitability. It will “burn out” your sales force in no time.

Marketing programs that generate hot leads, or even complete sales, are much more cost-effective than relying on highly paid (but beleaguered) sales reps to do their own inefficient “door to door” marketing. And how should we generate those leads? Via PR, Advertising, Direct Marketing, Partnering, Search Engine Optimization, Paid Search Engine Ads, Trade Shows? The Marketing folks are the strategic quarterbacks of the organization who should be driving the answers to these questions–as well as executing the strategy within the required parameters.

IT MIGHT WORK–BUT DON’T BET ON IT

So does “BIG S, little m” NEVER work? Well, in some cases it not only works, it is even appropriate. Take the example of a semiconductor company selling a very niche chip to a vertical segment. They might have only 50 potential customers. In this case you REALLY CAN go ask the customer what he wants, and easily ask enough of them that you will end up building products that will apply to your entire target segment. With respect to lead generation, the target market is so small that traditional outbound marketing programs don’t make sense anyway, and that “door to door” marketing by your sales force might work just fine.

But I propose to you that this example scenario is the classic “exception that proves the rule”. In many, if not most cases, “BIG S, little m” will lead to failure – or at the very least, suboptimal performance. That’s my view–as always I’m very interested in hearing yours.

Why You Must Increase Sales and Marketing in a Recession

I have often read, and have heard many a pundit declaring that in a recession you must reduce your marketing spend. Based on my experience with previous recessions I have strongly opposed these views. I do have to say, that it is often very difficult for businesses to maintain their sales and marketing spend when times get tough. However, as you will see, the impact of a downturn in the economy plays havoc with established sales and marketing metrics. The effect of this should be to demonstrate clearly that in fact a company needs to increase its sales and marketing activity if it wants to survive a recession.    Philosophically this has always made sense, as for at least as long as we are going on a downward curve, there are more sellers than buyers. Those buyers, because they are short of money, will spend less on purchases to help them balance their reduced income. What I have tried to do is to quantify the effects of a recession on sales activity.

I have made some simple assumptions which are as follows:

1. To continue trading the company needs to achieve three sales in a month.

2. Its success rate from prospects to sales is 33%.

3. To get a meeting with a prospect requires ten cold calls.

So in a normal sales environment our simple model would deliver this: 100 Calls @10% Success Delivers 10 Prospects @33% Gives 3 Sales Essentially what we are saying is that you need to make 100 calls to get 3 sales. Now let’s assume we get some softening of the economy and things get more difficult so instead of getting 3 sales for ten prospects we only get 2. So to keep up our 3 sales per month we now need 15 meeting. Because the conditions are a bit tougher it gets a bit harder to get meetings and we now need to make around 16 calls to get an appointment. Suddenly our model looks like this: 250 Calls @6% Success Delivers 15 Prospects @20% Gives 3 Sales The result is that we now need to make 250 calls for our 3 sales.

Lets now go one step further and accept we’re in a full blown recession rather like we have now. Our success rate is half what it is in normal times (These new metrics based on the evidence from some of my clients and further anecdotal information). You end up with figures that look like this: 400 Calls @5% Success Delivers 20 Prospects @15% Gives 3 Sales You can see that the implication in this simple model is quite devastating. It’s clearly impossible to go from 100 calls per month to 400 overnight if at all or in the longer term find a regular 20 prospects per month. Typically sales will go down; just how far down depends on how well the sales team is managed and the local market (sector) conditions.

Many companies would soon exhaust they’re prospect list at that level of calling, which partly explains why it doesn’t happen. So how do we protect ourselves in these difficult times? Well first of all, don’t panic! Secondly, before you go rushing off to contact people, you need to understand where you are. What I mean by that is you have to have some of information about the current performance of your sales and marketing activities. Your baseline should be to understand what your current sales of metrics are. If you don’t have that information one simple way of creating some is to take the total number of bids, quotes, proposals you have made divided by the number you have won.

Next, make your marketing accountable, critically analyse the return on investment you get from your various marketing activities. In some cases this will be easy, for example if you use yellow pages or Yell.com you have their invoice which tells you the cost and you should be able to work out how much business you got from that investment. In simple terms than if your return is less than your investment, stop it. Stop it now if you can. If you can’t, stop it as soon as you can. With those more fuzzy situations where you spend time and effort rather than cash you must still assess where you get the best or least reward for your effort.

Only now that you have this information in your possession should you go out and up your marketing and sales. Using your new metrics as a guide you’ll need to adjust your activities accordingly. This simple exercise will have done two things; firstly it will have told you what your baseline is which will enable you to understand your effort to sales ratio. Secondly, it will have identified your most productive marketing channels. You now need to go out using those channels and communicate with your best customers, your good customers, and then the rest of your customers to identify sales opportunities. From here you need to move it into new business development.

Choose your best channels first as they are most likely to deliver the quickest results. And set yourself targets for activity to see what your new sales metrics are, and if you can, pursue them relentlessly. It will be tough in the early days, but if you stick at it while others fall by the wayside you will have created a stronger sales and marketing base to take you into the next upswing.