Good morning

And welcome to edition 11 of AdVerb.

This edition's feature takes you on a tour of a hypothetical manufacturing facility.  It illustrates that you can learn more about sales process design and management on a modern factory floor than you can reading marketing literature.

Our second story explains why your promotional communications should be designed not to appeal to those potential customers who are currently in the process of making a purchasing decision!

The last edition of AdVerb generated a flood of mail with our offer of a bottle of Glenfiddich.  We congratulate Michael Axe of Economic Water for his correct answer.

Please enjoy ...

Justin Roff-Marsh
Editor

Everything you need to know about your sales process … you can learn on a factory floor!

If you’re struggling to multiply the effectiveness of your sales process, I challenge you to take a wide-eyed stroll around a modern manufacturing facility.

I’m betting that, among the noisy machines, the intimidating technology and the strange sights and smells of production, you’ll find plenty of inspiration for optimising the design and management of your sales process.

A walk through a factory will help you to define exactly what constitutes an organisational process — and illustrate why most sales processes hardly qualify to be called processes at all!

It will enable you to identify flaws in the design of your sales process — and to arrive at (often counter-intuitive) solutions to these fundamental problems.

And it will introduce you to a new way of thinking about sales process management — and expose why your current management initiatives may actually be sub-optimising the performance of your sales process.

In this article, we’re going to explore a hypothetical factory — I’ll be your tour guide!

I’ll refer to this factory as if it’s yours. If you’re not a manufacturer, that’s not a problem. I’ll be sure to explain the relevance of everything we see.

The factory floor as a classroom

There’s a good reason the factory floor makes an ideal classroom for this lesson on sales process design and management.

I want to focus your attention on the process in sales process. And it just so happens that manufacturing people know an awful lot about processes.

In fact, I think it would be fair to say that manufacturing process improvement has driven most of the increases we’ve seen in organisational productivity over the last century (from the assembly line to the quality movement).

What is a process?

We’ll start our tour by climbing the stairs to your executive suite. (We’re making the climb because this mezzanine level provides a bird’s-eye view of your factory.)

From up here, it’s easier to spot the method in the apparent madness below.

As you look from workstation to workstation, you can see raw materials being gradually transformed into finished products.

This view provides a practical definition of the word process — a logical starting point for our study:

A process is a sequence of value-adding steps that transforms a set of inputs into an output.

Makes sense, doesn’t it?

But try applying that definition to your sales process.

You know the desired output of your sales process is sales. But what are the inputs? And what specifically are the value-adding steps that transform these inputs into sales?

When pressed, most executives claim that the input into their sales process is leads (or sales opportunities).

But this answer exposes a fundamental (and common) flaw in sales process design.

If your sales process begins with a pre-existing sales opportunity, your ability to scale this process is constrained by the availability of such opportunities. Now, unless your organisation is in the fortunate position where demand for your product exceeds supply, it’s likely that this source of pre-existing sales opportunities is limited.

It's inappropriate, therefore, to regard sales opportunities as the input into your sales process.

Our article on Relationship-centric Marketing explains that sales opportunities emerge from the relationships that your organisation has under its custodianship.

The key to generating sales opportunities is to carefully manage these relationships.

If a relationship precedes a sales opportunity, from where then do relationships come?

Well, generally speaking, relationships come from two sources, existing clients and potential clients.

If you’re doing a good job of managing your existing client relationships, you should be more interested in the latter source of relationships than the former. This is because there is a limit to how many sales opportunities you can extract from clients (without damaging the valuable client relationships).

Where you have a finite number of client relationships, the potential to acquire relationships with potential clients is limited only by the size of your market.

To acquire relationships with potential clients, you need to invest money in a special kind of promotional campaign (we call this a relationship-acquisition campaign).

This promotional expenditure is the true input into your sales process.

Accordingly, your sales process should probably look something like this:

The lesson here is that your sales process should have the same key attributes as your manufacturing process.

It should have inputs, outputs and a sequence of value-adding steps. There should be a measurable cause and effect relationship between inputs and output. And it should be designed so that it can be scaled in line with the capacity of your organisation as a whole.

It’s an organisational process

We’ve descended from the mezzanine level, and we’re now strolling through your factory. We stopped and chatted to Terry, a forklift operator who receives raw materials and transports them to the appropriate workstations. We met Sue who operates a sheet metal press. And we even bumped into her husband Bob, who operates a powder-coating booth on the other side of the factory.

In chatting to Terry, Sue and Bob, we noticed that each is a specialist. Each focuses on one step in your manufacturing process — each has a trade qualification relevant to the particular tasks that make up that step. While all exhibited a healthy interest in your manufacturing process as a whole, their focus was obviously on their particular areas of expertise. (When I asked Bob if he ever drove Terry’s forklift, he laughed, as if the idea were preposterous.)

It’s easy to see that responsibility for managing your manufacturing process as a whole vests with Elliott, your production manager. In contrast to Terry, Sue and Bob, Elliott has only a passing interest in the individual tasks that comprise your manufacturing process. But when we ask him a question about the productivity of this process, he can’t wait to share his control charts with us!

If we contrast the division of tasks and resources (in this case people) with a typical sales process, the differences are obvious.

Your manufacturing process is an organisational process. However, most sales processes are personal processes. In most organisations, the salesperson is the sales process.

If you think of a typical sales process, the salesperson (or people) is responsible for prospecting, data entry, literature fulfilment, appointment scheduling, face-to-face selling, the preparation of reports, customer service and even for expediting orders through the factory.

In such a sales process, a salesperson spends a small fraction of her time selling. The rest of her time is devoted to clerical duties, or duties that could be better performed by other specialists (or by specialist business systems).

This situation appears even more ludicrous when you consider that a typical salesperson is paid more than a trade-qualified production worker — and perhaps even more than a production manager!

There are three main problems associated with delegating responsibility for your sales process (or any complex process) to a single individual:

1. The process becomes highly inefficient. Your salesperson is so busy performing clerical duties that she doesn’t have time to sell.
2. The process suffers from limited capacity (it’s not scalable). Because salespeople are expensive, it’s hard to justify employing more salespeople in an effort to increase sales.  (Especially if sales opportunities are in limited supply.)
3. The process is all but unmanageable. Because a single individual owns the process, it is possible only to measure output. It is not possible to micro-manage the steps that make up the process as a whole.

Your sales process should be an organisational process, not a personal process.

If the idea of your spray painter doubling as a forklift operator is ludicrous, so too should the prospect of your salesperson performing clerical duties.

Your salesperson should perform only those duties to which they are ideally suited (both by skill and by salary level).

Your sales process should be managed by a person with a global view of the process (and not by a salesperson). Our article entitled Is your marketing manager redundant? suggests that a typical organisation should consider redesigning its marketing manager’s role so that this person becomes a sales process manager.

Design for volume

We’re now standing between two parallel assembly lines. On one line, the mechanical components of your product are being assembled and, on the other, the discrete electronics are being soldered into the controller boards.

What’s fascinating is that, even though quite different tasks are being performed on each line, the lines are synchronised so that the controller board for each product is finished (and tested) just as the final nut is tightened on the mechanical assembly.

Watching your production process at work is like watching a race car driver in action. Each of his movements is so deliberate, precise and obviously well rehearsed that it’s easy to forget he is travelling around the racetrack at speeds exceeding 300km an hour.

Like a racing car, your manufacturing process has been designed for speed (or, more correctly, volume). This is because, as the volume of your manufacturing process goes up, the organisational resources (capital) consumed by this process (on a per-unit-of-output basis) goes down. (Which would you prefer: two slow-moving production lines, or one production line that operates at twice the speed, to deliver the same volume of output?)

In comparison with your manufacturing process, a typical sales process has been designed to maximise conversion rates, rather than to optimise volume. In a typical organisation, each salesperson represents an entire process (each salesperson is responsible for acquiring and managing relationships, for generating sales opportunities and for converting sales opportunities into sales).

Accordingly, a typical organisation has multiple sales production lines, each with very limited capacity.

The obsessive pursuit of unrealistically high conversion rates results in the sub-optimisation of most sales processes. (If you show me a sales process with a conversion rate of greater than 90%, I’ll show you a process that can’t be scaled!)

Your process should be designed to optimise volume for two simple reasons:

Just as a fast-moving production line consumes less organisational resources (capital), a high-volume sales process consumes less sales resources (salespeople’s time).

Your efforts to increase conversion rates (more sales training, new technology, better sales aids) will only ever produce incremental (and rapidly-diminishing) gains in output. However a similar investment in volume (more relationships under management) will produce geometric increases in sales (even if conversion rates go down).

Manage the constraint

We’ve now stopped at what appears to be the most important step in your manufacturing process.

We’re looking at a particularly unimpressive machine (it stamps your product’s main housing out of sheets of aluminium). But, for some reason, this machine is attracting a disproportionate share of attention.

This machine has three operators. One is hand-feeding it aluminium sheets from a small pile of inventory. (This is the first time we’ve seen any inventory in your plant.)  Another is removing the finished housings from the machine, checking them and then handing them off to a nearby workstation. And the third is watching the whole process and graphing the output of the machine on a piece of chart paper!

There’s a simple reason why this machine is receiving all this attention: it’s the bottleneck (or constraint) in your manufacturing process.

Your manufacturing team knows that the output of their process as a whole is limited to the output of this constraint. In other words, if this machine can stamp just 20 housings an hour, your manufacturing process can produce no more than 20 complete units an hour.

Accordingly, your team recognises that it must do everything it can to maximise the output of this machine. (This also explains the small pile of inventory in front of this machine. Because this machine is the constraint, if it stops due to a lack of inventory, the whole manufacturing process grinds to a halt.)

You can learn more about the Theory of Constraints by reading The Goal (by Eliyahu Goldratt). This brilliant book is a must for those interested in our sales process design methodology.

In a typical sales process, the constraint is the acquisition of sales opportunities.

However, rather than mustering all available resources to manage (and preferably, eliminate) this constraint, most organisations do the exact opposite!

As mentioned previously, most organisations focus their resources on attempting to convert the small number of available sales opportunities into sales.

Meanwhile, the activities that are supposed to generate sales opportunities are either totally ineffective (most branding campaigns), cost-prohibitive (cold calling), or unscalable (referrals).

If the generation of sales opportunities is the constraint in your sales process, you need to focus all your management attention on eliminating this constraint.

You need a scalable and cost-effective method to generate a predictable flow of sales opportunities. And you need a stockpile of inventory in front of your opportunity acquisition machine to ensure that this machine never suffers a stock-outage.

Our Relationship-centric methodology explains that sales opportunities are generated by the active (and strategic) management of relationships with clients, potential clients and centres of influence.

Accordingly, you need to pay close attention to your management of the relationships under your custodianship to ensure that you are optimising the flow of sales opportunities.  (See following article.)

Furthermore, you must ensure that you have more than enough relationships under management to generate the volume of sales opportunities that you require.

Manage by numbers

By the time we complete our factory tour it’s approaching closing time. We catch Elliott’s attention just as he’s about to make a dash for his car, with an armload of control charts and his Hewlett Packard calculator (every engineers’ best friend).

We thank Elliott for letting us tour his factory and congratulate him on his efficient manufacturing process.

Elliott’s armload of control charts alerts us to the fact that he manages his production process with scientific precision.

He performs regular measurements on the productivity and the volume of each component of his process, as well as on the process as a whole. And he uses these measurements to continually fine-tune its design and operation.

It’s rare that we find a sales process that’s managed with this kind of precision. Which is strange, when you consider that a sales process is just as complex and just as critical as a manufacturing process.

In a typical organisation, the marketing manager manages promotional activities (which should be a component of the sales process). And the sales manager manages the opportunity management process (which is obviously a component of the sales process). But no one manages the process as a whole.

Just imagine what would happen to your manufacturing process if it were treated with the same neglect!

Someone in your organisation must be made responsible for your entire sales process. They must be responsible for both the productivity and the output of the process as a whole. And they must manage this process by numbers, rather than by intuition. (For more information, read our article entitled How to establish a clear cause and effect relationship between promotional expenditure and sales.)

When we look at most organisations, we discover that the sales process is the constraint on the growth of the business. We also discover that the sales process is operating at peak capacity (at least with its current structure).

If this is the case with your business, your sales process needs urgent management attention. Until you reengineer this process so that it is both manageable and scalable, your business is limited to organic (incremental) growth.

But don’t despair, the answer to your problem is close at hand.

You don’t need marketing consultants, sales trainers or sales force automation software, you just need to take a wide-eyed stroll around a modern manufacturing facility.

From a marketing department’s perspective, every relationship looks like a sales opportunity!

At best, most marketing communications are irrelevant to most of their recipients, most of the time.

At worst, these communications run the risk of damaging the very relationships they are supposed to be cultivating.

The problem is, from a marketing department’s perspective; every relationship looks like a sales opportunity.

Accordingly, marketing (and sales) people tend to design communications based upon the assumption that every recipient is in the process of making a purchasing decision.

Few potential clients are sales opportunities

Unfortunately, as the diagram below illustrates, nothing could be further from the truth.

This diagram portrays a marketplace consisting of six potential customers. Each makes a buying decision every 25 days. The duration of each decision-making process is two days.

If a marketing person (‘you’ in the diagram) were to view this marketplace for a total of eight days, only two sales opportunities would come into view.

Of course, if the marketer were to notice these two sales opportunities and assume that they were representative of the market as a whole, he would be sorely mistaken.

In the real world, the odds of a marketing communication striking a potential customer within her decision-making process are nowhere near as generous as those illustrated in this diagram.

If you’re selling a service or a ‘major’ product, your customers’ buying cycle (time between sales opportunities) is likely to be three or more years. The duration of a sales opportunity may be one or two months. And the persistence of your marketing communication (how long it stays top-of-mind) may be less than a week. (In this more realistic scenario, only one out of every 144 recipients of your communication would be in the process of making a purchasing decision.)

The real cost of irrelevant communication

In other words, the odds of your communication striking any given customer at just the right time is comparable to the odds of your being able to spear a particular fish in a pond, while wearing a blindfold!

Marketers traditionally compensate for these lousy odds by broadcasting their sales communications to large numbers of potential customers simultaneously.

Now, this approach is like electrifying the pond. You’ll get your fish, but the pond will sustain a lot of collateral damage in the process!

Obviously, repeated exposure to irrelevant communications (perhaps for a period of many years) is likely to damage your relationships with potential clients. If these communications are delivered by e-mail, many recipients will eventually unsubscribe themselves from your list — cutting-off your future access to them.

You could argue that this collateral damage is likely to be minor, because those individuals for whom your communications are irrelevant are more likely to simply treat them with indifference.

This is a valid argument.  However it ignores the opportunity cost of this promotional approach.

What if, instead of deliberately creating and distributing communications that will be treated with indifference by the greater majority of your marketplace, you were to create communications that were relevant to recipients, at any stage of their buying cycles?

If this were possible, each communication would make a positive contribution to a developing relationship with your potential customers.

Well it is possible.

Invest in relationships, not sales opportunities

All you have to do, is identify a basis for communication that transcends your quest for sales opportunities. Our article entitled The importance of getting religion explains that this basis for communication should consist of the intersection between your market’s interests and your expertise (and credibility).

These relationship-building communications may be less effective at inciting action from that small percentage of recipients who are in the midst of their decision-making processes — but that’s okay.

The effectiveness of your communication should not be measured on an individual-to-individual basis; it should be measured across the marketplace as a whole.

Remember, when you broadcast a communication to your marketplace, those potential customers who are ready to buy today are a tiny minority. You’ll enjoy a significantly greater return on investment if you design your communications to be relevant to those individuals who are not currently sales opportunities!

Feedback: AdVerb 10

In the feature article of AdVerb 10 (Marketing by numbers), I offered a bottle of Glenfiddich to the first person who could correctly identify why the Correlex CEO chose to assume an unsubscribe rate of 42 when he was determining his optimal relationship acquisition rate!

Well, I never envisaged the flood of e-mails this little competition would unleash. Within 24 hours of AdVerb 10 being broadcast, I had received 47 competition entries — the entries continued to trickle in for the following two weeks!

Michael Axe of Economic Water was the first to identify the correct answer. Congratulations, Michael!

Many subscribers spotted the link between the number '42' and Douglas Adam's Hitch Hikers' Guide to the Galaxy.

To quote AdVerb subscriber, Robert Tait, "42 is the number that poked fun at those who seek solutions to the universe's unanswerable questions."

As creative as these answers were, they were incorrect! The correct rationale follows:

You'll remember that I chose arbitrarily (for valuation purposes) to assume that the life of a subscriber is the same as the life of a client: 3 years.

If you assume that Correlex had acquired its current database of 1,500 subscribers at a steady rate, you would have to also assume that, every year, one third of these subscribers reach the end of this three-year lifespan.

1500 subscribers / 3 years / 12 months = 41.66/month

If this (particularly conservative) assumption were correct, Correlex would have to acquire 42 subscribers each month simply to replace those that had reached the end of their three-year lifespan.

General feedback

As well as numerous Glenfiddich quiz entries, AdVerb 10 received plenty of positive feedback.  The following are indicative of subscriber e-mails:

A special thank you to Unexpected (an anonymous AdVerb subscriber) who sent the following clarification.  Although my maths is reasonably sound, I don't have formal commerce training.  I suspect Unexpected does!  

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AdVerb 10

Event update: Relationship-centric Marketing breakfasts

We have just conducted our first two Relationship-centric Marketing breakfasts for the year — in Sydney and Melbourne.

Each event attracted more than 130 executives and business owners. And each generated tremendous feedback.

Our next Brisbane breakfast will be conducted on April 11, and our next Melbourne and Sydney events on May 28 and 30 respectively.

If you're interested in attending any of these events, you can purchase a ticket now!  You can also purchase tickets for our annual one-day event in October (Reengineering the Sales Process).

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