7 Quick Tips for Sales Cost Reduction

There is considerable pressure to reduce cost in sales and marketing. But how to cut sales costs without shooting oneself into the foot?

Usually, the budgets for sales and marketing are derived not top-down strategically, i.e. the planned revenue drives the amount of resources to invest into sales. But, more often the budget is derived by top-down "That´s all the money we have for sales." (see percentage-of-sales)

Therefore, many sales departments are chronically underfunded and will not deliver the amount of leads, contracts, orders and revenue that would be possible and profitable. CEOs and CFOs need to be also aware that the higher the achieved revenue, the lower the relative cost of sales & marketing. Therefore, the task is not to minimize cost but to maximize sales productivity: more sales at lower cost.

In reality, reasons for less than optimal productivity in sales & marketing are manifold. However, in my experience there are a few actions that drive higher sales at lower cost quickly:

1. Work Intensity: Ensure that sales people are actually visiting clients selling to them, instead of sitting in the office doing administration, powerpoint, brochures, calculations or a myriad other things that holds them away from the prospects.
Result: Increased selling time from (average) 11% to 30% of sales rep working time

2. Outsource Lead Generation: Salespeople hunting for leads is often very inefficient and yield low results. Better to use outsourced lead generation marketing, e.g. mailings, e-mail, phone, events, etc. that delivers more and better opportunities for sales; the key here is testing and accountability for delivering high quality leads.
Result: More and higher-quality leads for less cost

3. Split Defense & Offense: Like in football, make a division between routine & new/special sales work. Focus all in-bound, routine selling & customer service work in an internal sales team working on the phone. On the offensive side build and train a strong field sales team that is out and about, winning new accounts and negotiating tough problems and contracts.
Result: Routine work done faster at lower cost and more high value conversations with prospects for new business

4. Speed Up the Sales Cycle: Many default visits are not needed and even not wished by the client. Ensure every call and presentation delivers on the closing of the contract. Cut the "nice to meet" events and deliver real value each time your client is talking with your people.
Result: Faster sales with fewer work hours

5. Set Customer Priorities: An intuitive, gut-driven segmentation of customers often lies at the core of waste in sales and marketing; seemingly attractive segments, "heavy users", "volume buyers," "18-35 year olds," "high-margin targets," "loyal customers," etc. turn out to destroy profit. In some cases, 30% of customers sap 50% off the profit. In order to seriously save cost, sales & marketing need to look at the data for real profitability of segments and set their priorities accordingly.
Result: Cut the profit-eating targets and build business on truly profitable customers

6. Specific Sales Training: Often sales persons are not trained to really master their job tasks. Yes, they can do much of it at some level of proficiency, but not well enough for breakthrough success. Here specific training and coaching can effectively double or triple the sales person´s effectiveness. Although this requires individual analysis and hard work on part of the sales rep and his coach and manager, it does pay off. For a list of skills, see here.
Result: Doing the right sales work consistently delivers the right sales results: leads, orders, revenue.

7. Get Started Today: Often I observe managers agree on all the cost cutting measures, and then do ... nothing. People wait for the holidays to be over, Jack to be back, or for Godot.... It is like starting with a fitness work-out, if we wait to long, we´ll gain a few more pounds again. The best is to start right away and to improve the results a bit every day.
Result: Small wins every day motivate the team to deliver ever better results. Because, there is no end to improvement.

For comments contact me at asattlberger@fortee.com or write below.

Banking 101 and Leadership 101

Yesterday evening the Financial Marketing Association in Vienna, Austria, invited the CEO of BAWAG/PSK, Mr. David Roberts, to present the status of his turnaround of the bank. It was staged in the great Otto Wagner Haus, see foto.

Having experienced catastrophic failure before the global banking crisis, the BAWAG was taken over by the US private equity fund Cerberus. Interviewed by Dr. Frey from the "Der Standard", Roberts explained to the audience what his strategies for the turnaround were, what worked and also, where he wants to lead the bank.

His general assertion was: Let us focus on the fundamentals. It sounded to me a lot like Banking 101, but more it was Leadership 101.

Mr. Roberts wants to focus on stability, confidence and trust as the foundation for building a long-term business. Also, he stressed the importance of teaming up with the bank´s employees and to support them to increase their productivity, while at the same time building profitable relationships with customers. And, he ensures the implementation of innovative process improvement (kaizen) methods, like six sigma, CRM tools, risk management, and customer management.

These insights are of course not new, even in banking. However, these truths do not bancrupt the bank, but build a profitable business. And that means a lot nowadays.

It still requires a self-confident, down-to-earth banker to dare to speak out such much needed truths. Like Warren Buffett, who explains his formula for success with "It is simple, but not easy", so Mr. Roberts reminds us that good banking business requires them to excel at a few simple but essential competencies.

And, it is refreshing to observe that a sound thinker, attentive listener and straight talker like Mr. Roberts can provide the leadership needed in turbulent times like ours. We would all like to see more of such leadership.

Yes, we can

Last night I took part in a TV talkshow (Club 2, ORF, Austria) on the topic of President Obama´s economic policy and its effect on the world economy. The discussion made it clear to me, how little the new US administration is prepared to really solve the economic crisis; this, despite the massive $825 billion stimulus package.

The start of Obama´s administration seems to be driven by three types of factors:

1. Strong leadership and optimism: Yes, we can!
Obama´s leadership and strong performance as communicator created massive expectations and high hopes for the renewal of American values at home and abroad. Although the expectaions are extremely over-hyped, strong belief in his leadership is an absolute plus.

2. Hard, cold interests
Obama is not an island by himself. There are real pressures to deliver on the expectations and to answer these interests. Call them pork barrel, special interests or any other name. He needs to work with these groups that demand their share for support; nationally (unions, states, military, energy, Wall Street, Big 3, etc.) as well as internationally.
Even in case he would have the best laid plans, to implement these in the real world is an entirely different challenge. It seems he is building a team that balances competence with affiliation in order to deliver on this "realpolitik".

3. Wrong-headed economic policy
The economic issue is the most important and the "make-or-break" topic for Obama´s performance as a president now. But, as far as we can read the administrations´economic plans and intentions, these by far do not measure up to the challenge lying in front of the US, and the whole world, in fact.

The key problem of the current economic crisis is the credit crunch. The articulated measures so far are based on Keynesian-inspired demand stimulation, which is the wrong strategy. It will lead to hyperinflation, but will not accelerate the urgently needed build-down of toxic waste credit in the financial system.

What does it mean for managers and entrepreneurs? How to address the economic crisis?
We need not despair, however, not yet. Obama seems to be a smart individual who is capable of working with the best and to change his approach in order to learn what works. Also, we as managers and entrepreneurs can and should pro-actively address the economic crisis:

Individually, managers can implement three measures:
First, we can take a leaf out of Obama´s book and provide leadership in difficult times, believing in better solutions and communicating clearly to generate rational optimism.

Second, managers should go back to a proven success formula and focus on customer value in everything the organization does. Everyone should think from the point of view of the customer and ask oneselves: "Would I really buy that now?"

Clearly, necessity is the mother of invention. Managers´ task consists of supporting the never ending pursuit to providing ever higher value and additional benefits at lower cost to customers - now. Then, customers will keep buying even in recession and bad times.

Third, managers need to prove their mettle - especially in these trying times . There will be difficult situations where a shortcut seems the easier way out. It can concern downsizing, cutting salaries or asking individuals to work better, smarter and harder.

Because, to lead an organization requires to stand up for one´s values and to give the respect to every employee, customer and other stakeholder. The human values are the foundation of every success and need to be preserved right now, when they count most.

asattlberger@fortee.com

Marketing in Times of Recession

What does it mean to market in times of recession and low demand?

This is a new question to many managers, having been spoiled by success. Same - same and business as usual are definitely out.

Nevertheless, some managers are clinging to the old habit of sitting still, waiting for the storm to abate. Hey, it worked in the past.

This time, though, is different and here are some of the reasons for urgent change:

1. The recessionary business climate will take longer, at the minimum 18 months or - god forbid - even years, so sitting still will lead to insolvency
   
2. Global competitors will start to enter new markets, maybe already next month in search of new customers (most probably yours)
3. The internet and international exchange help to spread innovations much faster, therefore, innovations will be obsolete earlier and will not last until the next up-turn
   
4. Lower demand and smaller budgets require lean and more frugal offers, products and solution to be marketed fast
5. Cost reduction while keeping talents and brain power demands creative approaches in order to develop profitable business in a time of change
6. Thrifty customers will force everyone, from CEO to engineer to sales rep, to figure out what exactly customer really value so much that they will spend their scarce budget
   

These reasons - among others - will force CEOs, CMOs, and other managers to think hard and to come up with better market solutions. But not to wait, because time can run out on the ones who come late.

Between the option of cutting costs and the option of pushing for better customer solutions, managers are well advised to overcome the seeming paradox and to do both: developing and delivering better solutions at lower costs.

Now, that is a task worth of managers of our times. What else would they need us for otherwise?

Globalization - Rules of Global Business

Globalization has brought to us the world-wide exchange of goods and services together with broad international connections in cultural, political and financial terms. Many managers have welcome this as an opportunity for increased growth.

New markets with millions or even billions of potential customers make every marketer´s heart jump with joy. The idea is to source from the global market cheaply and then export it with high value and profitable prices to countries with needs.

However, globalization has profound consequences in the way of Schumpeter´s "creative destruction". Whereas this is an ongoing process for all, especially the European countries are lagging dangerously, hiding behind obsolete protectionist and unsustainable barriers to competition.

Not only does the current financial and economic crisis put up a strong mandate for excellent management of global business. This serious recession makes the mandate to change more urgent and pressing for top managers, leaders and statesmen.

How to master the global business challenge? Here are some proven rules:

1. Extend your personal and organizational perspective to global matters; open up your world to what is out there, take it in and learn from new realities - if you like it or not. Start here at the lonely planet guide .
   
   
2. Secure the facts and knowledge about global markets, the trends, risks and opportunities; replace hear-say, half-truths and pseudo-knowledge with systematic understanding. Start here: global edge, university washington library, CIA world factbook, stat usa, or internet world stats .
   
   
3. Develop clear international business goals and strategies; these need to be realistic and worked out in required detail, while keeping room for adaptation to accomodate local or temporal changes. Start learning here: OpenCourseWare MIT or here Kellogg Insight .
   
   
4. For market leadership, the right positioning is key to success; research and establish the right position in the respective markets and back it up with branding resources. For branding and positioning see MarketingProfs Branding, Copernicus Marketing or B2B Branding .
   
   
5. Accept, respect and integrate local culture and quirks; leave local decision makers to adapt the goals for optimal implementation. Execution is always local, not only in marketing, but in all functions. For details, look at cross culture communication, WorldBusinessCulture, or
   
   
6. Leverage existing market infrastructure, channels and providers and build alliances and cooperations; to build everything from scratch is seldom necessary or profitable. Select high-quality partners and tie them to you. See US Commercial Service, German Chambers of Trade or Austrian Trade.
   
   
7. Get started now with this one page marketing plan template. For details on starting, just look into yourself! Good luck!

Marketing Needs to Deliver Cash Flow

As my teacher, Prof. Philip Kotler, once remarked, “There are two types of CEOs—those who know that they don’t understand marketing and those who don’t know that they don’t understand marketing.”

As he would have known quite a many CEOs, this tells me that marketing needs to explain itself better to CEOs.

One consequence of this lack of understanding results in the across-the-board cut of marketing budgets. In an effort to secure survival, CEOs cut expenses, quite correctly.


However, to cut marketing investments is like unscrewing the engine from the car, because it "weighs so much", in order to gain speed. This works until the downhill momentum stops, then the car really stops in its tracks. We do not want that to happen to our companies, do we?


Because marketing is the driving motor of the company we must not "unscrew it". Done right, marketing has two tasks, nicely defined in "Marketing Champions":

1. identifying new sources of cash flow
   
2. realizing this cash flow.
   

This quite common sensical understanding of marketing gets often lost in the everyday hassle. Marketing then is reduced to communication, advertising or sales support.

In order to be a serious driver of company success, Marketing - as a function and a team - must not get lost in the creative, "soft" advertising stuff. Quite the contrary: the role of marketing is to safeguard the one and only reason for the existence of the company: to profitably win and keep customers.

It is to hope that even CEOs will understand that. And, that they will ask their marketing managers to deliver the cash flow or to find such marketers that do.

Thus, marketing is the engine of the company.

Web 2.0 and Other Hypes

Web 2.0 slowly made it´s way to the executive suite. The definition you find in Wikipedia.

Then I get asked, what the impact of Web 2.0 is having on the practice of marketing. My first answer is: practically very little, with exceptions. In my experience only a few industries have had any real exposure to the Web 2.0 trend of net collaboration, interactivity and free online sharing.

That does not mean that it had not had a serious impact for selected industries with easy online sharing, like

• music industry (file sharing, even if illegal)
  
• the electronics and travel retailers (exchange of price data)
  
• internet advertising (millions of little ads)
• social platforms, like youtube.com (don´t know what business, if any, that is...)
  

However, in practice, for most industries, the topic of Web 2.0 is so far out of their world that many do not even know what it means. Practically oriented marketers and leaders are more concerned with established metrics and issues that keep them more than busy right now.

I do not judge either side, the progressives nor the laggards, as each industry very much follows it´s own logic and development for a reason. However, more interesting would be those twilight places where an outsider enters the fray with a new business model based on Web 2.0 principles. I have not seen to many of such, for suggestions I am open.

In fact, most of the Web 2.0 players "play" in their own little world, while the rest of the "real" world only very slowly adopts these scary new concepts of UGC (user generated content), blogs, wikis and semantic web .... Marketing inertia is here to stay and especially now in uncertain times, many will be loath to experiment with unproven marketing tools.

It will be interesting to observe over the next years how such innovations are either integrated in existing marketing practices or overturn the existing order. The latter would have happened already or would it not?

So let us look out for the Web 2.0 impact, before we end up at Web 11.0 or so. In the meantime there are many quite profitable applications for early adopters to capture with Web 2.0. This blog is just one.

Marketing for Retail Banking in CEE countries

Having been invited to present in front of about two dozen CRM & Marketing Managers of a leading CEE retail bank, this taught me valuable lessons from the trenches. As there are many CEE banks headquarterted in Austria, like Raiffeisen International, Bank Austria UniCredit, Erste Bank, Volksbank, Hypo Alpe Adria, there is a vibrant demand for our specialized knowledge in marketing strategy and implementation.

My presentation was specifically tailored to case studies in direct marketing in CEE (Central and Eastern European) countries. The group of managers - from 14 countries - was quite young, highly professional, and very much interested in the practical aspects of how to make such direct response marketing work in the field.

They had already covered different areas of their CRM (Customer Relationship Management) work: data quality & architecture, analytical CRM solutions, marketing communication, principles of direct marketing, campaign execution & measurement.

In our preparation, presentation and discussion of the direct marketing topic for CEE I emphasized and found some valuable aspects that turn out to be keys for success in retail banking marketing in CEE:

1. Disciplined campaign planning & preparation are even more important in order to get all the elements together (list, offer, creative/phone script, budget, provider), as timing is always critical

2. Different languages need not be a barrier to exchange and learning, however team leaders must make an effort to bring the teams together regularly (like my client did) and to have an ongoing tool for communication in between meetings

3. Database availability and quality (even internal data) vary widely across countries and require substantial effort to clean and to maintain, where modern tools help but still require "brain" and personal effort

4. Training and coaching of the local CRM and marketing professionals in learning and using modern direct marketing tools and technology are absolutely necessary; as a result the team has demonstrated, how these efforts deliver high impact for their motivation and ensure profitable campaign outcomes

5. Marketing campaign execution requires strong leadership in order to get all the local and central resources to align for higher results as so much can go wrong - and much will go wrong! All plans are in vain, if there is a lack of follow-up and detailed attention. This seems to be the most important success factor to me.

6. As direct marketing delivers measurable results in retail sales, i.e. number of new loans, number of credit cards, usage of credit cards, up-selling of insurances, cross-promotion of savings products, acquisition of high net-worth clients, etc., these campaigns do have a real impact on the earnings of the bank.

7. The team showed a high amount of creativity in designing and developing campaigns; this shows that motivation arises not only from the final outcome, but also from the thinking and testing of fun and interesting promotions that eventually deliver the intended results.


All together, I learned a lot about dealing with practical problems in the field, fighting with data, technology, processes, quota, and a lot more every day - and still delivering bottom-line results. With their drive and determination for success these up & coming marketers have impressed me very much. I am sure, we will hear from them again.

Markets Leaders - How to Achieve and Keep Market Leadership

This blog is focused on market leadership. CEOs, Marketing and Sales Managers are looking for effective and innovative ways to win in the marketplace. That means, they want to become and remain leaders in their respective markets. But, how to establish and retain market leadership?

If there is proven know-how and knowledge about creating market leadership, managers need reliable and practical answers. It is of little use to mention highly sientific but unaccessible papers, many of which have little practical relevance. On the other hand, there are plenty of simple but useless rules of thumb, because they often lack basic reliability.

Also, there is plenty of information, but information is not knowledge. However, managers are inundated with data and information, while at the same time missing relevant knowledge about consumers, market preference, competition or economic and technical developments. The issue here is relevance.

In addition, between the time pressures on the one side and general management folklore on the other side, managers must make decisions, today. This blog´s purpose consists of using common sense to assess innovative market leadership ideas, to discuss relevant marketing and sales questions, and to create a dialogue with interested practitioners in marketing, sales and customer management.