Reset the Revenue Funnel for Revenue Forecast Accuracy

by Chuck Besondy

In case you didn’t notice your customers are buying differently today than they did last year. The differences could be subtle or obvious, but if you observe closely you’ll see that the process they follow to make a buying decision–the buyers’ journey’–has changed.

If your selling process and sales funnel structure haven’t adapted to the buyers’ journey the efficiency of your sales and marketing efforts will be down and so will the accuracy of your revenue forecast. This is what I call the new “Funnel Economics”.

Here are the major variables in a sales funnel (which I am now going to refer to as the revenue funnel because it should be co-owned by marketing and sales).

1. Stages of the buyers’ journey
2. Lag time between stages
3. Leakage rate at each stage
4. Advancement rate at each stage
5. Number of meetings required in each stage
6. Number of meetings that each sales person can expertly handle in a week
7. Number of available sales people
8. Average revenue per order

Any change to any of these variables has an impact on how many deals get closed in a period of time. The marketing and sales effort required to generate a level of revenue last year is very different from what it takes this year.

If you’re still trying to plan and forecast based on last year’s funnel structure, you’re not just flying blind you’re flying with the wrong instruments.

Reset your revenue funnel by analyzing and observing the customer’s current buying process and behaviors. Dial in the new metrics into your revenue funnel and monitor carefully over the next several months. The accuracy of your revenue projections will improve. What’s more, you’ll have a more realistic preview of what type and level of activities are necessary to achieve a certain revenue outcome.

Chuck Besondy is a principal at One Accord Partners and is co-author of Leadership on Demand: How Smart CEO’s Tap Interim Management to Drive Revenue. You can read more about Interim Sales and Marketing Management by Chuck Besondy at his blog The Sales Funnel Fanatic.

Photo by Jake Rome

The Recession May Make CMOs More Numbers Driven

John Quelch wrote a thought provoking article (How CMOs Should Function in a Recession) which touches on how the recession can alter the role of the CMO in an organization. Not only do they have to come up with creative ways to stretch marketing spend further but they have to be more cognizant of the return on investment on marketing spend.

The recession will have two important, lasting results for CMOs: First, financial accountability of marketing is here to stay. Only in a few high-margin fashion-intensive categories will the shoot-from-the-hip right brain marketer survive. Second, improved accountability requires CMOs to be financially literate, to understand the balance sheet as well as the income statement impacts of marketing initiatives. The result will be a new generation of CMOs who command more respect in the C-suite and hold their jobs longer as a result.

If Quelch is right, successful CMOs in the future may require an analytical skillset that outweighs the creative skillset. In the classic debate of whether marketing is an art or science, this may give the science side the lead for now. The recent Stephen Baker book, The Numerati, describes how business is becoming more analytically driven as artificial computer intelligence is able to give marketers new insights into the behavior patterns of consumers, connecting the dots when human intuition comes up short. For example a computer sorting mountains of information from consumers online, found that Netflix users who rent romatic comedies are more likely to rent cars for the weekend. A data analysis also found that drinkers of hard liqour drinkers often buy Gatorade. These consumers likely wanted to prevent hang overs by drinking or mixing liqour with the electrolyte rich sports drink. This information could be valuable for Gatorade’s marketing department who could use this to target liqour buyers to increase sales.

Have you seen any examples of numbers becoming more important in the role of a CMO or marketing department?

Interim Marketing Executive Question: Why Do Companies Fail to Reach Revenue Goals?

What do you think are the major reasons companies fail to reach their revenue goals?

The famous McDonald’s restauranteur, Ray Croc, used to say “There is no competition”. What he meant was that we can’t blame others for our failure with customers (I would add children or spouses as well!)

Some years ago, Rockefeller Corporation did a study which asked, “Why do customers leave companies?” Their findings, in David Letterman bottom-up style:

• 1% – The customer dies.

• 3% – The customer moves away.

• 5% – The customer has a friend who provides the service.

• 9% – The customer is lost to a competitor.

• 14% – The customer is dissatisfied with the service.

• 68% – The customer believes you don’t care about them.

So what is the opportunity here? Just ask:

1. When was the last time you “touched” your best customers with a special VIP offer?

2. How about your “medium” customers with an up sell or a product line extension?

3. And rather than kick your worst customers to the curb, how can you monetize that relationship (and recoup your investment) by finding a strategic partner for whom those customers could be bright new sources of revenue?

As P.T. Barnum said, “There’s a customer born every minute”!

Paul Travis is an interim marketing executive at OneAccord. Mr. Travis is based out of Seattle with 25 years of experience in high technology, marketing, and consulting. He can be reached at Paul.Travis(at)oneaccordpartners.com and at 206-910-2222.

Finding Profitable Clients

When working with company‘s that have sales revenue and profit challenges one of the first places to look and diagnose the root cause is within their sales numbers, specifically the sales pipeline. The sales pipeline typically reveals the symptoms associated with the revenue and profit challenges a company is currently experiencing or will experience. One key metric to examine is the win rate, which is the total revenue sold divided by the total revenue sold, lost and disengaged. The win rate percentage provides a factored view and insight into predicting a company‘s future sales performance. Conversely, it also reveals areas of deficiency that are impacting or will impact sales performance. Another key area is looking at how opportunities enter the pipeline. Do they enter from demand creation (the proactive pursuit of sales revenue) or demand management (reactive pursuit or sales revenue from leads, referrals and bluebirds).

Experience has shown that revenue challenged companies rely much more on demand management than on demand creation to generate sales revenue typically resulting in an unbalanced 80/20 split.

Companies with an unbalanced and unpredictable revenue stream need to ask themselves the following question: Where do we want our sales revenue to come from? When applying conventional wisdom, the answer to the question can be found by identifying your company‘s —ideal client profile“ or those clients most likely to receive significant value purchasing your product and/or service based on the alignment of qualifying characteristics and attributes between your company and the prospective client. However, going a step beyond conventional wisdom and applying biblical wisdom can help you identify not only your most profitable clients but also your most sustainable clients. The biblical wisdom referenced is found in the book —Beyond Babel“ by Gerald R. Chester, Ph.D. regarding the biblical principle of equal yoking specifically related to C4 to identify your —ideal C4 client.“

Since most companies typically do not select their clients, it is even more difficult to find C4 clients. The components of C4 include a company‘s:
1. Calling
2. Character
3. Capabilities
4.Commissioning

Calling Speaks to the heart of the company.
Will your value proposition bring lasting value to the prospective client?

Character Is the accepted worldview of a company.
Does the prospective client‘s company values and operating principles align with your company?

Capabilities A company‘s ability to assess the value proposition.
Do your services and/or products facilitate the successful completion of tasks or business challenges that can‘t be effectively addressed by your prospective client?

Commissioning The external invitation and permission to speak into a client.
Do you have the affirmation and confidence to fulfill your client‘s needs?

In conclusion, the alignment of C4 between your company and your prospective client(s) will not only help establish your most profitable C4 relationships but will also build a sustainable and predictable revenue stream

Need help growing revenues? Contact an interim marketing executive today at info@oneaccordpartners.com or visit www.oneaccordpartners.com.

Photo via flickr

A 5 Step Process for Achieving Rapid Revenue Acceleration

by Arnie Valenzuela

It was a familiar feeling that I was all too used to. That feeling of getting ready to attempt to perform a death defying feat in front of a crowd when I had little or no confidence in accomplishing the feat. To make things worse the crowd was my peers, my fellow sales executives and my clients. What I was facing was that formidable act of teeing off with a driver to start the company golf tournament. To make matters worse we were playing this tournament at one of the most prestigious golf courses in the country and I had no business attempting to execute a descent tee shot with a driver. I was conflicted with the knowledge that I knew I shouldn’t be attempting this shot with the driver because my ability to execute a good golf shot had been proven to dismal over my many years of golf the length of the hole was so long that the only way to get to the green was to use the club that provided the longest shot available. The result was the same as most of my other attempts at using a driver on the tee, I duffed it.

Now what does this pitiful golf story have to do with the title of this article? It is because all successfully selling engagements result with a specific problem being solved in such a way that provides such as unique set of value that the client is willing to pay what the product or service is worth. If the problem is solved through a unique or one of a kind selling/buying experience the client may pay list price.

Now back to golf for a moment. My problem was my inability to successfully hit a driver from the tee and was so acute that it had destroyed my confidence as well as took to joy out of playing golf. Notice that I said it was, not is my problem any more. How did I solve this problem? You are going to laugh but it was just this simple, I got a new driver. The new driver solved my problem due to the much larger club head and higher degree of loft and the combination of these two components solved a 20 plus year problem, it was that simple.

Once again what does this have to do with Rapid Revenue Acceleration in your business? After 23 years in your industry I have concluded that more is not better. What I mean is that more is not better when it comes to more features, multifunctional capability, finishing or software programs. What this proliferation of features has created is a focus on the bells and whistle of such features instead of solving business process problems that exist within ever business you encounter on daily basis. Your customers want solutions to their problems. They don’t want your bells and whistles. The fastest method of achieving Rapid Revenue Acceleration is to become very simple minded in your daily selling efforts. Become an expert at discovering the problem; look for the obvious and you may find that the solution to their business problem (not their copying, printing for faxing problem) be as simple as buying a new driver.

Now how to do that in an industry that demands your mind share and constantly pushes the requirement to sell features instead of becoming intimate with specific business problems. Instead of becoming an expert at the bells and whistle of your wizbang document delivery device, become an expert at discovering the most significant problems in your clients document delivery processes. This is not to say that you can go about selling your products or services without any product knowledge but don’t spend your time trying to sell features from the start. I know your industry well enough to know that you have an over abundance of product expertise available to you through your vendors as well as your professional or technical services staff. What you need to do is invest your time discovering the business process problems and quantifying them in terms of the negative impact they have on the organization whether that impact is a slowed down production process, a delay in billing, delivery of documents to the wrong client or a document production process that is riddled with error.

Here are 5 quick steps to get you on the right track in every sales engagement.

1. Locate 3 to 4 departments inside the organization where the money is handled or revenue is the core focus.

The most common departments where this is a priority are finance (accounts payable, receivable, credits, buyer financing) executive (reporting on the production and retention of revenue), production (producing what they sell), delivery (proof of delivery to start the billing process), warranty (credits and debits), and sales/ecommerce (the speed and accuracy of processing sales orders). Submit a request to your main contact to set up a brief interview with the department manager regarding his/her satisfaction with the current document delivery process that exists in his/her department.

2. Ask them to rate their satisfaction of their current document delivery system on a scale of 1-10 with 10 being perfect.

The answer to this question will determine if you should invest additional time with them or not. If they answer a 7 or above, go find another manager to interview. If they give a rating of less than 7 ask them what would have to be different for them to give a 10. Record their answers and then request a 45 minute meeting to further discover the impact of those missing pieces to the puzzle that makes up a perfect 10. The statements they make about what would have to change to make a 10 are from hereon referred to as EIOP indicators or “Economic Impact of Processes” indicators. In most cases you will find 1-3 EIOP indicators with how documents are delivered that could be solved by one of your solutions. Ask them to rank the priority of the EIOPs based on the amount of money it would take to fix the problem as well as the amount of company resources they would have to invest to fix it. Assure them that you will need only 45 minutes and then hold yourself to it.

3. At the meeting start with the number one EIOP he is concerned with and ask them to describe how the deliveries of documents are involved in the business process that needs fixing.

Make sure that you quantify the impact in terms of the problem’s context such as lost income, lost revenue, delayed production etc. The problems must be specific and measurable like dollar amounts; hours of lost production time and lost orders and they must mean enough to the decision maker for them to sponsor your solution up the line of command. He will stake his own reputation on your negative findings and your solution so make sure it is accurate and meaningful to the company.

4. Ask them if they could have access to a solution, would they be willing to pay the same or more than they are already paying for the insufficient services they are receiving now.

Their answer is the first indication whether they believe they are receiving unique value or not and if it is yes then you are on your way to a highly profitable sale. If the answer is no then go back and find out why they won’t and the answers will provide the roadmap to the sale. Another possibility is that you are at the wrong level of decision making and need to find another contact to present your findings and solution.

5. Once you have a commitment that they want to solve the problem and will spend the money to solve it, assembly your support team (product specialist, manufacturers, professional and technical services) and review the findings of your EIOP meetings.

Make sure that you don’t let quotas or personal agendas of your team influence the recommendation because if you do you will likely lose the engagement to a competitor (traditional or non-traditional) whose sales model is solution driven versus product or quota driven like your business. Be especially careful of software providers (VARs or business process integrators) as their sales model is grounded in business process problem discovering and creating a solution instead of selling a product.

If you use these 5 steps as a guideline you will create a competitive advantage, improve your focus, deliver what customers want by discovering real business problems and create solutions that speed up the buying cycle. Implementing these steps can improve your conversion ratio of leads to sales much like the purchase of a new driver did for my golf game. In addition to providing a much larger sweet spot and greater loft what my driver has done for me has allowed me he the confidence to swing naturally and the result is that I feel more relaxed and confident at the tee so much that my last tournament included a drive nearly 300 yards long, straight down the middle. My hope is that you will achieve similar results in your daily selling efforts, good selling!

Photo via flickr

The Japanese Way of Marketing

The marketing approach of Japanese companies contrasts starkly with the common practices in the US. We can learn a lot of valuable lessons from studying how the Japanese market their products, especially since companies like Toyota are crushing the competition. The last time I checked, the market cap of Toyota was around $600 billion while GM is losing billions each quarter. The book Relentless describes some of the major differences in marketing strategy in Japan and how this approach can be extremely effective.

Intuition versus Market Research
Many companies in Japan rely on common sense and intuition when developing products for launch rather than lengthy and expensive market research. They will often follow their intuition and launch a new product on a small scale and then incrementally scale and improve it based on the feedback they get from actual customers. This makes a lot of sense when you consider the high percentage of new products that flop despite extensive market testing and research. It is extremely difficult to accurately predict consumer behavior as even the best executed research can be dead wrong. Many internet companies take this approach by releasing a beta version of their site and continuously improving upon it.

Imitation and Churning
The authors of Relentless observe that Japanese companies are very adept at quickly imitating innovations. When one company launches a unique product, the competition is quick to go to market with similar versions. Churning refers to the fast cycle of innovation and imitation. Churning makes it difficult for anyone to maintain a first mover advantage but the positive is that consumers are less afraid to be early adapters since several companies have created a similar product. This helps the whole category to grow and this inherently helps the leader although there is less of a first mover advantage. This also creates an environment that encourages fast adoption of new technology.

The Buyer is the Master
There are obviously many differences in the culture in Japan, and one that can be striking is the relationship between buyer and seller. Too often in the US, the buyer is at the mercy of the seller, take auto mechanics or cell phone carriers for instance. Also, buyers in the US often have a confrontational approach with sellers who may try to push things they don’t need or charge the highest price possible. In Japan the buyer is the master and the seller is like a servant. This changes the whole dynamic of how products are sold and marketed. The seller is concerned with what the buyer wants, rather than what they want to sell. When the customer’s interest is put before the profit of the company, this can lead to strong and lasting relationships between the buyer and seller.

Many Japanese Companies do not have “Marketers”
In Japan, often marketing is part of everyone’s job in the company rather than a specialized department with specialized professionals in marketing. As a result many companies do not have marketing managers. While I don’t necessarily think US companies should get rid of their marketing departments, a lot of successful companies do little or no formal marketing. In Japan, the quality of their products speak louder than any commercial.

Image source luckygun

Republished with permission from Cool Marketing Stuff

Do You Know How Big Your Funnel Is?

Interim Marketing Executive Question: How to Grow Sales If You Can’t Afford Marketing

Question: What if your company is struggling and you need to grow sales but can’t afford to spend cash on marketing?

First thing I’d do is look very closely at the sales funnel. Are the stages of the sales funnel aligned with the buyer’s journey? Are the right tactics being used at different stages of the funnel to advance buyers? Are my conversion rates at certain points in the funnel higher than they should be? Can the lag time between stages be reduced in anyway? Do I know how many orders or deals I need within the financial period to reach my revenue target? What is the leakage rate at each stage and what tactics are being used to nurture those buyers so at some point they will re-enter the funnel?

In most cases a close examination and analysis of the sales funnel will uncover multiple opportunties for improvement that will result in higher rate of wins and more efficient use of sales and marketing resources.

Chuck Besondy, Principal, OneAccord.
512.692.9642
chuck.besondy(at)oneaccordpartners.com

Upcoming Growth Conference in Salt Lake City, Utah

OneAccord will be leading a revenue related panel discussion on March 10 as part of the Association for Corporate Growth Utah Growth Conference and Capital Connection at the Grand America Hotel in Salt Lake City, Utah.

OneAccord principal Rich Hennessey is on tap to be a featured presenter, and Regional Managing Principal, Peter Klinge Jr. will be the panel moderator.

You can also attend a ski weekend sponsorsed by the NY and Utah chapters March 7, 8, and 9. You can register for the conference here. The cost to attend is $199 for ACG Utah members and $250 for guests if you register before Feb 27, 2009.

Interim Marketing Executive Question: What Direction is the Best to Build Sales?

Question from client:
$3mm confection company wants to go national; capacity to rapidly grow. Need high end retail customers for this premium brand.

What direction is best to build sales? Direct sales force calling on targeted accounts, or indirect via distribution or food brokers? Is there a way to assess situation before choosing one or more directions?

Great Question!

In short, an interesting strategy would be to blend both approaches. Specifically (1) in a market with a strong retail presence (high end…e.g. Norstrom) go with a direct sales model…the business volume will more than pay for the resources required; (2) in other “attractive markets” (…would need more info on your products and company to define) use a distribution channel model where you can be cost efficient by “piggy-backing” on an existing sales network….

Craig Lewis, Regional Managing Principal, Phoenix.
408.394.4514
craig.lewis@oneaccordpartners.com

Numerous scenarios are possible from this high level view and vary dramatically based on the type of confection. Here are a couple possible scenarios.

1. Both Direct and In-Direct via brokers have merit but require much more depth of information to recommend direction in this case. The primary issue will be the current cash position (or capital access) of the company. Direct sales organizations (especially when you have access to the talent) are my personal preference but require an up front capital investment. The key to success in such a venue is to hire people that have previous success and relationships with the target prospects. In-Direct is less expensive short term and can provide the instant relationship. The down side is you lose control of your brand and message.

2. Depending on geographic distribution, it is plausible that an in tandem Direct and In-Direct strategy are viable depending on distribution patterns and product make-up.

3. The key is relationships and finding a connection into the first, targeted account. The first one is gateway into the others.

4. Direct Response TV is an unconventional option if the product supports such an initiative. Building the brand first via alternative outlets is a prescribed plan by some buyers. They may desire customer demand before viewing the product seriously.

5. Overall an assessment would be the most prudent move and the depth would vary again based on organizational complexity, current distribution, competitive make-up, and product to name a few.

Darin Leonard, Regional Managing Principal, Seattle.
206.229.1187
seattle@oneaccordpartners.com

What’s the competition doing today? As noted above, there are numerous scenarios possible for this company. Without assuming too much, and depending on “what going national” really means to this $3M company, it all depends. It depends on how much capital the company is willing to invest and/or, how strategic they want to be with the right partners and/or distribution channels.

Regardless of the distribution channel(s), whether its high end retail direct or partnering with established high end distributors, consideration of how the product will be promoted to/through these channels will be key. Technology solutions also apply, along with an effective web strategy also.

Dave Swartzendruber, Principal, Chicago.
312.265.5843
chicago@oneaccordpartners.com

You are right to ask the question as the answers will be pivotal to both your short term and long term growth. The right answer will, of course, come from asking yourself not only the right questions but also asking them frequently.

A lot of your answers will stem from “How is the item positioned?” Upscale? Downscale? Superior quality? Great value? The reason your next steps might determine your short and long term growth potential is because how you position yourself now will carry you forward — or hinder your longer term success. In other words, how do you see your brand’s key benefits and exactly who will be your toughest competitors?
Also, try to understand what your “brand” is all about. What is the emotional connection your customers have with the product? What competitive attributes or factors are driving it? Where’s the real customer perceived value?

You are right to asses the situation before moving forward forcefully. Your direction hinges on the factors mentioned above, and you have ample time to test your alternatives now — much more so than you will later. Without knowing the details of your situation, I suggest you see if there are ways to test alternative distribution methods. Think of your current market and distribution as the center of the bulls eye and your expansion efforts will test each concentric ring as you grow from the center. It’s better to test a few smaller steps before you shoot for the national goal. Your core customer base may change as you expand.
Finally, the right development of your web site and effective “search engine optimization” and “search engine marketing” efforts will give you public visibility at a very low cost — at least until you ready for even bigger efforts.

At the end of the day, remember to look at the factors involved, analyze your options, create a profitable direction, and execute.

Effective execution and ineffective branding leads to many business failures.

Feel confident that you seem to be asking the right questions.

Jim Fisher, Principal, Boston
781.449.4333
boston@oneaccordpartners.com

Believe it’s essential for a small company to understand its mission & purpose in laying the foundation for how it wishes to approach accelerated revenue growth that will sustain over time. This informs the essence of the product and the organization to define the brand and how that brand will be perceived in the marketplace and with myriad stakeholders.

The sales development organization strategy will be guided by how the brand and company’s value proposition is to be presented to direct customer and channel partners. Whether through direct, indirect or multichannel strategies there are a lot of options today. But a strategic focus to sales execution will further organize the pathways to how the company wants to be merchandised and who the right retail customers and channel (indirect or food brokers) players/partners are to promote the premium value associated with the product.

Peter Klinge, Jr.
Regional Managing Principal, Salt Lake City
peter.klinge@oneaccordpartners.com

The key is the last statement “Is there a way to assess situation before choosing 1 or more directions?” The answer is “yes” and independent assessment must be your first step. An Interim Sales Executive solution, provides the experience to fully assess the situation, has the expertise to develop a comprehensive strategy and understands what skills are needed to best implement the designed tactics.

The “interim” position efficiently provides the executive level performance needed at this critical time, but does not lock the company into a long-term high fixed cost solution. The flexibility of the “interim” solution facilitates quick improvements to take advantage of market dynamics and insights that are learned sales call by sales call. Before you choose a direct sales or indirect sales path use an Interim Sales Executive to further clarify and assess all the factors involved in your opportunity.

Dale Hintz, Principal, Dallas
972.824.6923
dallas@oneaccordpartners.com

My experience in the food industry, especially given an organization that is trying to establish itself, is that you’ll both need and want a solid well recognized food broker. A smaller firm will rarely be in a position to grow fast enough nor even have the funding to grow organically at a pace that the market will require. This is a well established industry, and the historically successful food broker’s have the necessary existing relationships that will dramatically reduce the sales cycle, while additionally offering your firm a variable cost model, both critical to early growth.

Michael Pearce, Principal, Los Angeles
425.830.4156
michael.pearce@oneaccordpartners.com

Choosing the right channel for your product will make a significant impact on your revenues and success, so you are right to think it through. Start by looking at the universe of channels.

There are three channel categories and here is the purpose of each: 1. Direct (Field Sales Force) – Good for complex sales, when control over the sale is required, or high-touch service is needed. 2. Indirect (Partners) – Good for lower cost sales, complete solutions, when local customer care is required, or you want to increase your reach in a given market. 3. Direct-to-customer (i.e. telephone, mail and Internet) – Lowest cost channels, maximum reach, efficient for simple items.

Create a coverage model by thinking of a grid with customers’ needs on the left and channel options across the top. Rank the channel options based on customer needs and you have your first stab at a coverage model.

Remember to keep testing and refining. That’s how successful marketers stay successful. Good luck.

George Reinhart, Principal
george.reinhart@oneaccordpartners.com

For me knowing the target channel or account base desired to penetrate will help formulate the correct strategy. Typically higher end retail customers like dealing directly with the company they are buying from to establish a closer partnership and relationship. If this is the case then going direct might make the most sense. Assessing the situation first is dependent on a number of variables, i.e., company cash position and ability to invest into sales before results, short and long term goals, etc. Again depending on the short and long term goals it might make sense to look at a hybrid approach whereby direct sales is targeted to the channels that need the relationship, i.e., Nordstrom for direct sales. Use in-direct sales (brokers) to establish distribution to larger mass retailers such as Kroger or Safeway.

Richard Brune, Principal
Richard.brune@oneaccordpartners.com

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