Marketing

Sales keys for the “Operationally Excellent” companies

Sales keys for the “Operationally Excellent” companies

This is the third installment in my series of blogs about the implications on sales of Tracey and Weirsma’s great book “The Wisdom of Market Leaders”.   Last week we talked about companies who compete based upon “Product Leadership” (see below) and today we’re going to discuss those who compete on Organizational/Operational Excellence… from the sales perspective!

If you remember, your target market is smaller than you think because certain customers will want different things from their vendor.  So, even though you may target “small to medium sized businesses with more than fifty knowledge workers in New England”, certain customers will want certain things from their vendor and other companies will want other things.  You, as a vendor must decide upon which of these definitions of value you will compete, and thus organize yourself and run your business.  As the authors so beautifully put it:

“If a company is going to achieve and sustain dominance, it must first decide where it will stake its claim in the marketplace and what kind of value it will offer its customers.”

The three types are:

  1. Companies who compete on “Customer Intimacy.”  These companies appeal to those customers who look for “the whole product” and want a vendor who will understand their business and their needs.  IBM and Nordstrom are such companies.
  2. Companies who compete on “Operational Excellence.”  These companies appeal to those who look for the lowest total cost.  Staples and Acer are such companies.
  3. Companies who compete on “Product Excellence.”  These companies appeal to those who look for the latest and best products.  Apple and Lexus are such companies.

So, what are the characteristics of companies who compete on operational excellence?  Operational excellent companies focus on offering the lowest total cost.  Sometimes that means the lowest product cost, but not always.  For Wal-Mart it does mean lowest product cost, but for FedEx it means lowest total cost.

Customers and prospects sometimes differentiate between the tangible product cost and the intangible costs.

  • Does your local 7-Eleven provide the lowest product cost?  Hardly.  But, when convenience is considered it many times can be the lowest total cost.
  • Why does Toyota run ads touting the fact that their 98% of their cars sold in the last twenty years are still on the road?
  • Why does Maytag advertise about the fact that their repairmen are lonely?

So, how does a company who competes on operational effectiveness operate?  Well, for starters they are highly regimented and follow strict formulas.  Everything that deviates from the norm adds friction to their operation and adds cost; and when cost is added they can no longer compete on total cost.

A few years ago I worked with the corporate division of Staples.  Staples is a company that competes on operational efficiency.  Their product costs are just a few percent more than the absolute lowest cost you can find anywhere, but, when you add in the ease of doing business with them they are certainly the lowest total cost provider.

I remember interviewing a bunch of their best corporate sales reps trying to determine their best practices.  The best always said the same thing: "we are not sales people as much as we are logistics people.  For our customers we make sure that they are never out of toner in their Wichita office.  Although we are not the lowest absolute cost on that toner, the value we add to their operations is significant."

So, from a sales perspective, here are some thoughts if you compete on operational excellence.

  • Sales people must be very disciplined and trained to not deviate from standard practices.
  • Qualifying is critical.  You need to find the customers who want the lowest total cost and not the ones who want "one-off" stuff or who need hand-holding.
  • Working in teams is essential.  Sales people need to be interchangeable.  Sometimes combination of inside and outside sales teams work well.
  • Customer service behind the sales team needs to be flawless.  Friction in the system in terms of dealing with returns and customer complaints is deadly.
  • Never have sales!  Variety in price is bad for business.  You will train your customers to wait for price.  Think Wal-Mart's "Everyday Low Prices".
  • Sales people need to always be thinking about how to drive cost out of the system.  Remember the Staples sales people who think of themselves as logistics experts as much as product experts.

As usual, I would appreciate hearing from you on your thoughts on this topic.

Good Selling

Bob

Read More

Sales leaders, here are keys for the “customer intimate” sales force

Last week I wrote about Tracey and Weirsma’s great book “The Wisdom of Market Leaders”.  Over the next few blog articles I want to dive in a bit deeper and analyze each of those types from a sales perspective.  This is, afterall, a sales blog!

If you remember, your target market is smaller than you think because certain customers will want different things from their vendor.  So, even though you may target “small to medium sized businesses with more than fifty knowledge workers in New England”, certain customers will want certain things from their vendor and other companies will want other things.  You, as a vendor must decide upon which of these definitions of value you will compete, and thus organize yourself and run your business.  As the authors so beautifully put it:

“If a company is going to achieve and sustain dominance, it must first decide where it will stake its claim in the marketplace and what kind of value it will offer its customers.”

The three types are:

  1. Companies who compete on “Customer Intimacy.”  These companies appeal to those customers who look for “the whole product” and want a vendor who will understand their business and their needs.  IBM and Nordstrom are such companies.
  2. Companies who compete on “Operational Excellence.”  These companies appeal to those who look for the best price.  McDonalds and Acer are such companies.
  3. Companies who compete on “Product Excellence.”  These companies appeal to those who look for the latest and best products.  Apple and Lexus are such companies.

So, today let’s look at companies who compete on customer intimacy…

If that’s you,

  • You sell the total solution.  You appeal to customers who realize that getting the best product or the best price is not nearly as good as getting the best total experience.  These are customers who think “total cost of ownership, not cost of product”.
  • You know that simply acquiring a product at a good price doesn’t mean much if the customer lacks the skill to achieve optimal results.
  • You know that the keys to your success are your ability to craft custom solutions that are perfectly fitted for that customer.
  • You realize that a sale is not good enough, rather, you are after long term highly profitable relationships.
  • As part of your operating model you strongly believe that losing money is not nearly as bad as losing a good customer.

So, what does this mean for your sales force and how you operate your sales team?  It means:

  • You are ruthless at qualifying.
    • You want fewer customers with deeper relationships, rather than lots of them with shallow relationships.
    • Your sales people will tell the prospect in no uncertain terms the type of customers they seek – those that see them as problem solvers who add value to their business, not product pushers or low-cost providers.
  • You hire people with deep knowledge of a certain industry, who excel at understanding the customer’s underlying problem, people steeped in building customer relationships and people who can and will customize solutions to meet the specific needs of their customer.
  • Your sales people excel at having business discussions with business people; not endless discussions and debates on product features and functions with technical people.
  • You focus on the lifetime value of the customer and long term customer satisfaction, not what this year’s revenue will be, and you pay accordingly.
  • You probably have both hunters and farmers.The hunter is good at finding the customer, selling the vision, having detailed knowledge of the customer’s business and industry, and being able to configure the solution to that customer. The farmer is expert at customer relations, at listening and responding to customer needs, to having detailed conversations on the customer’s future needs (in business terms, not in product terms) and at conveying the continued value to the customer is the customized relationship between them and the vendor.
  • Your people routinely have quarterly business reviews with their clients, not to talk about how the product installation and training is going, but what impact the solution is having on the business.
  • Your sales team will never perceived as a people trying to sell to the customer, rather they will foster the kind of relationship where customers will want to buy from them because they know they will get the best solution for their business — and they are willing to pay for it.

If you’d like to discuss how you and your company can be one that focuses on customer intimacy give me a call.

Good selling,

Bob

Read More

Your target market is smaller than you think!

Choosing target markets and market segmentation have always intrigued me.  Although there are many ways to think of it, I had an epiphany as I reread one of the classic strategy books over the weekend, the book is “The Discipline of Market Leaders” and is available at Amazon through this link.

In the book the authors claim that to be a market leader you need to focus and organize around one of three distinct principles that customers value.

  • Operational Excellence, BEST TOTAL PRICE.  You are middle of the market (or lower) at the best price with the least inconvenience. Low price, hassle free service, think Wal-Mart
  • Product Leadership – BEST PRODUCTS. Offer products that push performance boundaries. Value Proposition is “we offer the best products, period!”  Continuous innovation, they will obsolete their own products.  Think Apple and Nike
  • Customer Intimacy BEST TOTAL SOLUTION.  Delivering NOT what the market wants, but what individual customers want.  They do NOT pursue one time deals; they pursue long term, mutually profitable relationships.

Selecting a Value Discipline in which to operate is a strategic goal, it is a central act that shapes every subsequent plan, in short it is strategy.  The authors argue that “If a company is going to achieve and sustain dominance, it must first decide where it will stake its claim in the marketplace and what kind of value it will offer its customers.”  The choice of a value discipline shapes the company’s subsequent plans and decisions, coloring the whole organization, from its culture to its public stance. To choose a value discipline is to define the very nature of a company.

Examples:

  • If your customers love your consistency and speed of your products, you’d better be stellar at the core processes of product supply, expedient customer service and demand management.  You will fine tune your structure to empower the people who can make a difference in producing value. You’ll design your management systems around measuring and rewarding what’s most important; and you’ll make sure your people are indoctrinated with your specific definition of success.
  • If you are a product leader, such as Apple or Sony, the critical processes include invention, intimately understanding your customers, product development and market exploitation.  You’ll have management systems that are results-driven, that measure and reward new product success, and you won’t punish failure.
  • For customer intimate organizations you will have a business structure that delegates decision-making to employees who are close to the customer; you will reward the sales force for how long customers remain with the company.

Okay, so we’ve established the three types.  But, the real crux of the matter from a sales and marketing perspective is how do you attract the right type of customers?

  1. Don’t try to fit a round peg in a square hole.  What do I mean by that?  Well, if you are organized in one discipline, say customer intimacy, you should train your sales reps to ask questions to the prospect to determine just what type of relationship they want to have with you!
  2. Just because you want customers who value customer intimacy it does not mean that every prospect you get will actually want that kind of relationship.  So, establish a process to qualify them out!
  3. Understand that attracting a customer who desires one type of relationship when you offer another is a disaster waiting to happen!  You’ve all heard about the “customer from hell”, well there is a good chance this one might be it since you simply will only disappoint them!
  4. Train your sales people that there is such thing as bad business.  Many sales people don’t know how to differentiate between a good customer and a bad.  Train them and reward them for successfully selling to the right kind of customer.  This will be difficult in the beginning, but I can tell you from experience that in the long run your reps will be much more successful and much happier when they bring in the right business.

I am curious what people have to say about this topic.  It certainly provides us much to think about.

Good selling,

Bob

 

Read More