Jun 24, 2022 | Customers, Leadership, Management, Marketing, Sales
In the past, for the orderly management and convenience of organisations, Sales and Marketing have been kept by management in separate functional silos.
In a time of flattened organisation structures and the ease of communication and data sharing, this no longer makes any sense at all.
The evolution of the silos to one functional area of responsibility will remove substantial opportunity for the transaction costs incurred by turf wars, miscommunication, and unaligned objectives, to be eliminated.
From a customer’s perspective, how you are organised internally is irrelevant, they are looking for the products and services that solve their problems or address their opportunities in the most cost-effective way.
The vast majority of interactions a customer will have with a supplier will be cross functional. Over the course of a transaction, they will interact with sales, technical service, after sales service, and logistics, probably sequentially.
The power in the sales relationship has moved from the seller, who had control of the information necessary for a customer to make a purchase decision, to the buyer. In past days, the sellers only delivered the information that benefitted them, but those days are almost gone. This process has been gathering speed since the mid-nineties, and now dominates every transaction beyond small scale consumer purchases like groceries, and even there, the need to be clear about the ingredients, their sources and provenance is pervasive.
Both sales and marketing silos have the same ultimate objective: to generate a sale, and preferably a relationship that leads to a continuing flow of orders. The combination of the silos into one, Revenue Generation, makes logical organisational sense in this new environment, as well as better reflecting the way customers interact.
Sources of revenue.
Isolating the sources of revenue is a crucial component in effectively managing the revenue generation function. Luckily, the sources can be summarised into three areas.
- Customers. Which customers buy what products, in what volumes, how often?,
- Markets. There are many ways you can dissect a market. Geographically, customer type, customer purchase model, product type, depth of competitive activity, lifecycle stage, and others.
- Product. Product type, mix, price points, lifecycle stage, margin, potential, and others.
Together these three axes form a three dimensional matrix from which your revenue is derived. The task of the RevGen personnel is to maximise the revenue today, and into the future, while minimising or at least optimising the cost of generating that revenue.
Type of Revenue.
Considering not only the source of the revenue, but also the type is a crucial part of the equation that will lead to long term profitability. Again, there are three broad categories into which all revenue can fall.
- Transactional. One off sales that require little else at the point of the transaction beyond a mechanism to execute the exchange of goods for money.
- Packaged. This category is by far the biggest, as it contains all sales that come with a ‘ticket’ of some sort. That ticket may be a guarantee of service, warranty period, assurance of quality via a brand, bundled pricing, promotional support, and many others.
- Subscription. With the emergence of the internet, subscription sales are growing rapidly at the expense of the packaged sales. This exchanges the upfront revenue of a sale for an ongoing revenue stream based on use, time, or both product and service. The emergence of the ‘cloud’ has spawned a host of new business models that use subscription as their base, but it is not new. Xerox used subscription for decades by leasing their equipment, then charging for usage on top. Similarly, Goodyear moved their sales of tyres to the airline industry from a sale to a usage model in the 80’s to sidestep the simple fact that their tyres were more expensive, but lasted longer. This encapsulated the price sensitive nature of airline purchases, with the savings over time because their tyres lasted for more landings than did the opposition.
Thought about these variations all have resulted in an exploding range of business models over the last 20 years, making the task of managing the generation of revenue way more complex, and therefore also opening opportunities for those who can think creatively about the task.
When you need some creative outside experience in this complex menagerie, give me a call.
Jun 13, 2022 | Customers, Marketing
Manufacturing Week was last week in Sydney. I spent Wednesday there, snooping for solutions to problems most of my SME manufacturing clients may not yet recognise they have, and just looking for ideas.
Found one that might be useful, but it was hard going, very hard going.
There were 170 exhibitors in one of the ICC halls, ranging from the small 9 square foot booths to enormous installations that must have cost tens of thousands just for the floor space. On top of that there was the cost of the installation of the gear, manning the stands, and all the associated costs.
Every stand had the name of the company emblazoned somewhere.
Not one stand, not one, had any reference to the problems they solved.
Why?
It is useful to have the names up there. Many visitors would find their existing suppliers to have a yarn, complain about service, look at the new versions, or do a deal. However, those like me, with a problem to solve, the name of the company is of little use.
How much better would it be for them to have up in lights the problems their products are uniquely designed to solve?
I had a look at several participants websites, and they make the same mistake.
They almost all have an ‘About us’ page. It might make them feel good, but I am not interested in the family history, or the great awards they have won, I only care about the problem they solve for me.
They all fail my 3 second Vegemite test, and as a result have wasted at least part of the investment made in being there.
Where are their marketing people hiding?
Having thrown a brickbat, it is also fair to acknowledge that there was some pretty impressive stuff on show.
Header photo courtesy university of Woolongong.
May 16, 2022 | Customers, Governance
When a rule is made by some institution, seemingly in the best interests of the community, most citizens accept the rule and do their best to adhere.
This applies from the rules introduced by local councils to moderate litter, to the larger tax and commercial governance rules applies by federal governments.
Some rules are just ‘semi-rules’. The intent is to substitute for common sense, rather than attracting enforcement in the breaking of them.
Problem is that once you have a rule which dictates behaviour, any behaviour that is not explicitly outlawed becomes OK. That has led to armies of lawyers and accountants using unintentional loopholes in tax laws to slide through.
The wider impact is that the community ceases to consider what is ‘right and wrong’, substituting the question ‘is it legal: Yes/No’. If one of the accountants can make it seem legal, no matter how morally corrupt it may be, we now have the licence to go ahead anyway.
This is stupid, it has led to the erosion of the ‘moral compass,’ the sense of right and wrong that we used to impose on ourselves.
In addition, these rules become so complex that only experts can understand them, and mistaken misunderstanding is not seen as a defence.
Just consider for a moment our taxation regime.
Hugely complex, a great big pile of band-aids that applies only to those without the resources to exploit the gaps.
Even at the ‘semi-rules’ level this applies.
Last week coming up to some roadworks in my street, I slowed to accommodate the obvious cement truck coming out of a side street. There was a bloke with a sign that said ‘slow’ which I took to mean slow but careful, assuming the truck driver would respond accordingly. He apparently did not see the sign, slammed on his brakes, as I did as it became obvious that if I followed the clear instruction, I would not come out of it well. In addition, I copped a mouthful of extremely fruity language from the driver. Understandable, but in the circumstances, unwarranted.
Had the whole thing been left to common sense with no dozy sign carrier removing the need for common sense to apply, none of this would have happened.
In most situations where people are in a position to make a decision, let them. There will be errors, and mis-steps which will lead to learning, and attendant improvement. Providing a framework for decision making empowers people to do the right thing, offering a sense of responsibility and accountability they will not have in a highly regulated environment.
Substituting common sense, courtesy, and respect for others with formalised rules applied by institutions is part of what has led us to this state of perpetual anxiety and selfishness.
May 6, 2022 | Customers, Governance
The Financial service industry is the last bastion of the defence of the 20th century business model where the seller had control over the vital product information.
In those old days, you went to your bank branch where the manager knew you, your kids, your financial position, and was someone to be trusted.
When did that change?
Now you cannot get to see anyone in a bank who either knows your situation, cares, or can make any sort of decision.
This personal relationship has proven time and again to be one of the most important in the lives of most people.
After the Royal Commission into ‘Misconduct in the banking, Superannuation and Financial Services Industry’ which reported in February 2019, most thought that the shenanigans of banks would be cleaned up.
Not as such, as Monty Python would say.
Banks are not required by regulation to take steps that are in the best interests of their clients.
This means that they can, and do, sell you products when they know absolutely that there is a better deal, or one that better fits your circumstances readily available elsewhere.
By contrast, when you deal with a broker, they have a legally enforceable fiduciary duty to ensure they are always acting in their clients best interests. This means they are prohibited by law from behaving the way banks routinely behave.
If there was ever a good reason to go to a broker to find finance rather than directly to a bank, this is it!
You know that a good broker has found the best deal possible, having scoured the landscape for the best deals, because they will be prosecuted when it is found they have not.
Pity the banks cannot follow the same rules, although if they did, and they still had their clients best interests at heart, there would be no need for a broker.
The information, or at least the understanding of the information is skewed away from the consumer of financial services.
Finance is one of the last markets where it is difficult for the average consumer to do a realistic assessment of their best option. In every market I can think of, except financial services, the net has democratised information. No longer do the sellers of a product have all the information needed to make informed decisions, and dole it out as it suits them, to best serve their own ends. The web changed all that, forever.
The regulations applying to financial services have become so complex, the options so wide, and the nuances of options so difficult to understand, that most still need a specialist to navigate the potholes.
Many of the broker groups are owned or at least controlled by banks. Where is the responsibility for doing the best deal possible for the client lie in that situation?
Not with the bank controlled ‘pretendy’ brokers.
No, the best deal is to find an independent broker you trust, one who takes the time to understand your situation, then allocates the time and resources to scour the landscape for the best deal possible for you.
Not the best deal easily available, but the best possible.
It seems the obvious scepticism of Royal Commissioner Hayne, obvious to all when refusing to shake the Treasurers hand when formally handing the Commission report to the government in February 2019 has been confirmed.
May 2, 2022 | Communication, Customers
The BATNA (Best Alternative to a Negotiated Agreement) has become an essential tool in the negotiation toolbox, yet many leave it in the box.
It is, in effect, your ‘walk-away’ point.
However, before you walk away, there are always alternatives that can be considered. Identifying these alternatives that make the ‘pie bigger’ is often a challenge only overcome after considerable work, but having done this preparation before entering the negotiation starts will always be useful.
Understanding your own BATNA is essential, but it is just as important to understand as best you can, the BATNA of the other party, or parties.
What do they value that you can deliver?
What are their ‘non-negotiables?
Will the decision maker be at the table?
How can you make the pie bigger for them at little cost to you?
There is a myriad of questions you can ask yourself that will give you a better feel for your relative position, simply by thinking about them, and assembling some information that may otherwise have been overlooked.
In a negotiation, we tend to automatically set ourselves for some sort of compromise. We assume that the net effect of the balance of wins and losses for both parties in the compromise will be the most satisfactory outcome for all.
Often it is not.
Prospect theory, first articulated by Daniel Kahneman points out that the pain we feel for a loss is much greater than the joy we feel for a gain. If we are given $50, we just say thanks, and are happy. If we are given $100, then $50 is immediately taken back, we feel pain. The outcome of both is the same, we are $50 ahead, but the balance of pain and joy is completely different.
This applies in a negotiation when trying to balance gains and losses for an acceptable outcome. At a rational level we can reach an agreement on the net outcome, but at an emotional level, a compromise generally does not allow for the impact of prospect theory on the perception of an individual of the net value delivered.
It will pay you to consider deeply how the impact of this disparity between gains and losses will be felt.
Negotiation is all about the recognition, articulation, and exchange of value.
The challenge is we all see value differently. Being able to recognise the value as the other parties in a negotiation see it will deliver hugely valuable insights to be leveraged.
In other words, understand the psychological BATNA of the other party as well as you can.
Header cartoon credit. Scott Adams and Dogbert perfect negotiation tactics.
Mar 16, 2022 | Customers, Marketing
We are confronted every day with hundreds, thousands of messages, all competing for our attention. The volume has ramped up exponentially since the net delivered access to anyone with a connection.
The vast majority are tactical thought bubbles, cat photos and brain farts by people vying for attention, but then not knowing what to do with it when they are the winners of the lucky dip.
‘Yesterday’, access was not so available, you needed lots of money, which ensured there was a barrier to entry not hurdled by the figurative cat photo.
The generation of revenue, the process that encompasses both ‘Marketing’ and ‘Sales’ is a continuum. Sales comes in right at the end, at the point of, or near to the transaction. Marketing is the longer-term stuff that provides the opportunity to open and lead the process culminating in a transaction.
Think of it like a race.
Are you running a sprint next month, or a marathon?
If it is the sprint, training can be short sharp explosive sessions. You focus on the detail, short sharp sprints, and many of them.
By contrast, if it is the marathon, training for a sprint will not get you far. You need to have longer sessions, building slowly to the marathon distance.
Building a relationship that leads to making a sale is a marathon, not a sprint.
Most of the marketing I see is designed as if the race was a sprint. Usually this is the wrong training, as in most instances beyond small value commodity items, you need to get set for the marathon.
As a result, you have all this crappy tactical sales stuff thrown at you daily, which is rarely of any interest, so you turn off. Turning off just encourages the tactical digital set to chuck more crap at you in the hope that something sticks.
When you have to churn out new messages daily, weekly, it removes the opportunity for creativity, the building of the relationships that may lead to something meaningful at the end.
Most so called ‘marketers’ brought up on a diet of digital are unfamiliar, and as a result do not deeply understand this more strategic approach. They set out to sprint in a marathon, and end up coming in at the tail, assuming they actually finish.
Header photo: Marathon startline 1904 Olympics
