Building Market Share With Market Research

Do you really know what your customers are thinking?  Do you know what they value?  Do you know which ones are complaining?  About what?

David Line, President of InfoSearch International discusses how market research combined with intelligent statistical analysis can be used to build market share.

David Line, President of InfoSearch International

Metrics – Lots & Lots of Metrics

Readers of this blog have seen a lot about the indispensable value of metrics.  First, ya’ gotta’ have a defined process.  Then ya’ gotta’ measure it.  That’s the only way to know if improvement has occurred or not, and at what rate.  It’s the only way you can prove your dedication to continuous improvement.  Show me the data!  If you don’t have data, you’re just blowing smoke.

OK, hard to debate, but…  It’s also crucial to have a lot of different metrics.  Without a variety of statistical perspectives, it’s easy to misinterpret what a given metric really means.  You might put some action plans in place that are incomplete, a bit off target or downright wrong-headed.

Here’s an example from the social/political world to illustrate the danger of using only one metric.  Consider income/wealth  inequality.  The chart on the left shows that the richest 1% of Americans have 1/3 of the money, and the poorest 50% have only 1/2 of it.  In other words, for every $1 someone in the poor group has, someone in the rich group has $676.  Or you could say $100 vs. $67,600; or $10,000 vs. $6,760,000.  One might conclude that such a big difference is just wrong, and that something should be done about it.  Like maybe taxing the rich group & subsidizing the poor one???

Let’s take a look at a different metric regarding this income disparity thing.  The poorest 5% of Americans are richer than 68% of the world’s inhabitants.  Compare the US numbers to India’s.  America’s poorest are, as a group, about as rich as India’s richest!  Is that also just plain wrong?  Should somebody do something about that too?  Like maybe taxing all Americans & shipping gigantic barrels of cash to everyone in India???

My point is not to debate what should or should not be done by whom regarding income and wealth disparity.  My point is that the way the question is framed and supported by data can have a really, REALLY big impact on the resulting action plan.  Different sets of numbers about the same thing can tell a radically different story, and lead to radically different decisions.  We need to think, discuss, debate, discover and learn just exactly what the numbers are telling us.

How do you objectively judge – using data, of course – the performance of a sales rep?  Total sales?  Sell cycle time?  Profitability?  Sales of old products to new accounts?  Sales of new products to old accounts?  Average sales size?  Number of sales to new accounts?  Number of sales to existing accounts?  (I could add the other 700 or so possible sales metrics I’ve collected over the years, but I’ll spare you!)

Is it one or two or three or fifty key indicators?  For every rep in every territory?  Regardless of rep experience or if it’s a newly penetrated geography or segment?  Is it some way cool index the MBA-toting, outside expert consultant cooked up?  Is it whatever the company president chewed out the sales VP for yesterday?

This may be a shock…  I don’t think the answer to that last set of questions matters all that much from a “continuous improvment of my sales process” standpoint.  The truly powerful value of lots of metrics is the discussion about them.

It’s the series of deep, intelligent, challenging, painful, heated, gloriously rewarding coaching conversations that matters.

Collect the data.  Analyze the data. Debate the daylights out of what the data really means.  Then go sell more.  Go sell it faster!

Think About It – Week of 11/14/10

“A man with one watch knows what time it is; a man with two watches is never quite sure.” – Mark Twain

Yes, metrics are essential.  BUT, make sure you’re sure what they’re telling you!

Give Me More Discipline & Accountability!

A comment on one of my recent posts about forecasting really got me thinking.  Here’s the comment, “Managers, grow a backbone.  Hold your people accountable and stop accepting excuses.”  My knee-jerk reaction was violent agreement.

Then I started thinking…  How effective is Atilla The Hun style management?  How did I and would I react to a “no-excuses, do what I say” attitude on the part of my boss?  How can accountability become an integral part of the sales culture without being heavy-handedly imposed from above?

The answer lies in the competitive nature of the sales beast.  It’s also embodied in W. Edwards Deming’s famous line, “What gets measured gets done.”  And it’s ridiculously simple to implement.

Choose an important metric and publish a top to bottom ranking every month.

Let’s say it’s forecast accuracy.  Somebody will be best, somebody will be worst.  Somebody #1 will feel good and strive for a repeat performance.  Somebody #2 will immediately conclude that bottom-of-the-pile notoriety is no fun and strive to move up at least into the middle of the pack.

Here’s what’s really cool.  Nobody wants to be last, but somebody will be last each month.  That means a whole lot of self-imposed, proactive action to improve performance will be going on.  Self-imposed and proactive; not pressure applied from above.  The absolute level of last place performance will slowly, relentless get better and better and better.

Sounds like a culture of continuous improvement doesn’t it?  Sounds like a culture where reps actually do demand more accountability.  Sounds like a culture where the reps will be intensely focused on identifying the “right” metrics, the really critical ones that produce sales growth.  Hmmm…  Maybe 3 or 4 or 5 important metrics should be published each month.

(A final note:  It isn’t necessary to publically post actual names next to the scores.  It IS necessary, however, to publically post the scores and let each individual know where he or she ranks.)

How many metrics does a sales manager need?

As a group, sales managers are not big on “managing by the numbers.” Only a very few use more than a half-dozen or so measurements to monitor the quality and effectiveness of sales performance. Most rely on two, revenue and profit. They are the ultimate indicators of success, right? Why would anyone need to know any more?

Consider this… Assume that you just “volunteered” to manage a little league baseball team. One of the first things you need to do is come up with a batting order. Lacking any information, your only choice is to list the names in random sequence. In other words, the success of your first management decision will be based purely on luck.

Now assume that you find a list of each kid’s batting average from last year. You now have a metric and can make a better batting order decision. For example, put the kid with the highest average first, second highest second, etc.

Next assume you also find each kid’s on-base percentage from last year. (This is different than batting average. In addition to actually getting a hit, a batter can get on base by drawing a walk, getting hit by a pitch, or due to error made by a fielder on the other team.) You can now make an even better batting order decision.

For example, put the kids with the three highest on-base percentages up to the plate first, second and third. Put the kid with the highest batting average up fourth. Doing so increases the odds that your best hitter will go to bat with three runners on base, thus increasing your odds of scoring more runs. One metric yields a better decision than no metrics. Two metrics yield a better decision than one.

The scenario can continue to change. What if you also knew each player’s stolen base percentage, runs-batted-in, extra-base-hit percentage, etc., etc., etc… Each additional metric enhances the manager’s ability to make a better decision.

Shift gears and look at the big leagues.  Since the Oakland Athletics pioneered the use of metrics and statistical analysis back in 1999, their use has skyrocketed.  Over a 7 year period from ’99 through’05, Oakland won 658 games.  That’s 22 fewer than New York Yankees over the same period – essentially equivalent results.  In the same time frame, Oakland paid out a total of $295 million in player salaries.  The Yanks?  $965 million!!! Each win cost Oakland $448K.  Each win cost New York $1.4 million.  For the math challenged, a win for the Athletics cost 1/3 of what win cost the Yankees.  No wonder every Major League Baseball team now has a statistician on board.

Maybe there really is something to this managing by the numbers stuff… Maybe it even applies to sales… Maybe my competitors will continue to mange like little leaguers…  Sadly, maybe you will continue to manage like a little leaguer.

Think about it…

Forget One & You Fall Down

It’s quite instructive to examine the nature of offerings from the hordes of sales consulting and training firms.  The overwhelming majority of them are focused on developing sales skills.  Clearly, what sales managers are demanding is precisely that.

All well and good.  I’m the first to violently agree that selling skills are fundamentally and critically important.  Ya’ gotta’ have ‘em.  Without ‘em, you’re dead meat.

What concerns me is the near total lack of training regarding sales process and metrics.

Every business school known to mankind and virtually every consulting/training firm for other business functions  teaches with a three-legged stool philosophy.  It’s skills, it’s process and it’s metrics.  Tools supplement and help with the coordination of the three essential legs.

Lets’ say you make your living managing a baseball team.  Let’s also say you have the world’s greatest living all-around athlete signed to a 10-year, no-way-out contract.  Now let’s say that athlete takes the field and does all the things required to win a basketball game.  In other words executes a basketball process.  Let’s measure the athlete’s performance in the context of what wins basketball games; by counting rebounds, percentage of shots made and defensive steals.  Goofy to even consider, right?  That awesome set of skills is so badly misapplied, that it’s totally useless.

Let’s say you make your living building cars.  Let’s also say you have the world’s greatest living plant manager signed to a 10-year, no-way-out contract.  Now let’s say that plant manager goes into the factory and does all the things required to build laptop computers.  In other words executes a laptop manufacturing process.  Let’s measure the plant manager’s performance in the context of profitably building laptops; by counting percentage of hard drives correctly installed, number of copies of Windows sold and number of machines built with more than 2 USB ports.  Goofy to even consider, right?  That awesome set of skills is so badly misapplied, that it’s totally useless.

Let’s say you make your living selling stuff.  Let’s also say you have the world’s greatest living all-around sales rep signed to a 10-year, no-way-out contract.  You want that rep selling your stuff right?  Not doing the things that make a great baseball player or get a bunch of high quality cars built.  You want that rep executing a sales process; your sales process.  Not a basketball process or a laptop production process.  And you want to measure performance in the context of revenue generation; things like sell cycle, close rate and average deal size.

Time to state the obvious.  A sales rep – even the greatest in the world – cannot execute a sales process that doesn’t exist.  And, by the way, if the process is not written down, agreed to and executed by the entire sales team it does not exist.  And if the process does not exist it cannot be measured.

Please do me a favor.  Promise yourself to be totally objective, hard-nosed and honest, and re-read the previous paragraph.  Are you solidly based on a three-legged stool?  Or are you more like The Great Wallenda, balancing precariously on the skill leg only?

Think About It…

“However beautiful the strategy, you should occasionally look at the results.”  Winston Churchill

Don’t ever forget how easy it is to get lost in our own brilliance and lose site of the real objective.

Selling With A “Net Cash Flow” Approach

This isn’t the first time you’ve read about The Universal Language of Business on this blog.  Doesn’t matter what they sell or what their SIC code is, ALL of your customers are in the money-making business.  All sales reps must therefore learn how to communicate effectively using Finance, the universal language.

And don’t tell me it’s too hard!  Part two of the Finance series, dealing with Net Cash Flow, involves nothing more than addition and subtraction.  Oh… along with a thorough understanding of the customer’s business operations.  Anyone care to debate the necessity of that?

Sell using a net cash flow analysis by laying out the value and costs of the “Before” and “After” scenarios and highlighting the differences between the two.  In this example, my opening value proposition would be something like:

The suggested changes to the project plan can return almost $500,000 to your budget over five years.

The story continues…  According the numbers you provided me, Mr. Customer, the cash flow for Department X is as shown by following chart.  It shows:

  • The value projected to be generated by Items 1, 2 and 3 for each of the next five years. (Cash Inflows)
  • The projected amounts to be spent to create that value (Cash Outflows)
  • And the net difference (Cash Flow Summary)

The return with your current plan is about $2.2 million.  Wow!  Pretty impressive.

Mary, Bill, Frank and I really dug through the current plan and concluded it was pretty darn bullet proof.  We did, however dig up a few items that could be done just a tad better.  You’ll need to invest a bit over $6 million as opposed to the planned $5.5 million, but I think you’ll agree it’s worth it.  First though, here’s what the revised budget value and costs would look like:

OK, now lets take a look at the 3rd chart, the net difference between the two scenarios.  As you can see, the total additional cash in pocket after five years is $486,000.

What customer wouldn’t get really, really interested in whatever the heck it is you’re selling when you dangle a half a million bucks out there?  Wouldn’t that be awful if you got stuck in long conversation with a decision making executive about business issues?

Grunt through the above numbers.  Understand them.  Try a Net Cash Flow Analysis with one with one of your customers.  Stay tuned for:

  • Part 3:  Cumulative Cash Flow & Payback (aka Break Even Point)
  • Part 4:  ROI
  • Part 5:  Net Present Value
  • Part 6:  IRR (Internal Rate of Return – The King of the numbers!)

Hey, Mom!!! I’m In The Top Million!

Part of me feels really dumb doing this post.  But another part of me is kind of proud.  Yet another part reminds me that it’s bad form to self-promote in your own blog.

So I hope you’ll cut me some slack…

The dumb part is actually feeling great about and broadcasting the fact that The YPS Group web site finally cracked Alexa’s top million barrier.  Feel good about being the 989,401-st most popular web site in the world?  Well, yeah.  Back in October ’09, our site sat at number 10.2 million and we set a goal of 1 million by the time I spoke at the Control System Integrators Association annual conference on 4/30/10.  The topic was “Every H-Rep Needs An E-Rep,” and I wanted some hard data to show how an Electronic Sales Rep, an E-Rep, could serve as a powerful assistant to a Human Rep, an H-Rep.  We missed, but only by 5 days.

So, yes.  I am proud of passing over 9 million other sites.  It’s proof that it can be done.  It’s also proof that focusing on and sharing as much information, knowledge and insight as possible with a target market is all that’s needed.  As an unexpected side benefit, I find that all the writing has made me a faster learner and better speaker.  Both good things for a sales process consultant.

So what’s in it for you?  Ummmm…  Maybe some inspiration to create and develop your own E-Rep?  An example of one method for measuring your web presence effectiveness?  A reason to believe that YPS is a great company?  :) Just kidding…  You promised to cut me some slack with this post, right?

Thanks to Stone Payton and Todd Schnick for providing the inspiration and a bunch of know-how!

Dunbar’s Number. Should A Sales Rep Care?

According to British anthropologist Robin Dunbar, 150 is the “cognitive limit to the number of individuals with whom any one person can maintain stable relationships.”  Simply put, you can’t have more than 150 friends and business associates.  Establishing that 151st contact causes a weakening of some other relationship.

Obviously, it’s not quite that cut and dried.  Some of us can handle more contacts, others of us fewer, but on average Professor Dunbar’s number holds up under scientific scrutiny.  Hunter-gatherer societies tended to grow to about 150 members, and then split into two groups.  Neolithic farming villages typically had 150 residents.  150 was the basic unit size for armies in the Roman Empire and still holds true for military units today.  British counties in the 18th century, apparently with only one exception, had populations of around 150.  Listen to Professor Dunbar himself.  The examples go on and on.

So, Mr. or Ms. Sales Rep, how many stable business relationships do you have?  How many should you have?  How many can you effectively handle?  We all know how vital they are to our success.

My company, The YPS Group has north of 3,200 subscribers to our Ideas! e-newsletter.  I personally have 2,737 contacts in Outlook.  I have 248 direct LinkedIn connections, 32,400 2nd degree and 2,534,700 3rd degree connections.

Frankly, I have no earthly idea how many strong business relationships I actually have or can effectively manage.

Does my sales rep DNA enable me to far exceed the average 150?  Yes.  Does my career-long habit of maintaining contact information help me far exceed 150?  Yes.  (In retrospect, I wish I had kept my box of 3X5 cards after transferring it to my IBM PC with 16K of memory back in ’84.)  Does my regular use of LinkedIn’s capabilities help me far exceed 150?  Yes.  Does my blog – especially the video posts – help me far exceed 150?  Yes.  YES.  YES!!!

That last one’s different.  And the difference is, in my humble opinion HUGE.  My blog makes it easier for other people to maintain a relationship with me. “They” do the work, I get the relationship-building benefit.  Watch this for an example.

Well look, I already admitted I don’t know how many business relationships I’m capable of effectively maintaining.  I can guarantee you though, that I’ll be pounding hard on my blog, on LinkedIn and on Twitter to get as far above 150 as I can.  What are you doing?