Original post December 21, 2006
I am soooo over the hype on the “second coming” of the Web. So here’s my Christmas present to you. Do you want to know what Web 2.0 is about?
The media has been hyping it for what seems like an eternity but I still haven’t seen a good simple explanation. Some like BtoB magazine are even calling it a “Revolution”.
Here’s what I think 2.0 is really about …it is about creating an engaging and useful online experience that is designed by your targeted audience…and of course, all the web tools/applications to enable this (Blogs, Podcast, Social Networks, etc.). Yes, that’s it. Creating opportunities within your digital properties to let visitors give you feedback on their experience — and you (Company X) actually paying attention and doing something about it.
The best part is that you don’t have to wait until the hype and new technologies start rolling out to build your own Web 2.0 site right now. In fact, you probably already have pieces of “Web 2.0” in site right now. A few tips for getting started:
- Track/Determine Interaction Time and/or Engagement Level– go beyond measuring typically web metrics (traffic, clicks, etc.) to measuring Interaction Times. Determine not only if the visitor is returning to your site but also how much time are they spending on it. You also need to understand where they have come from, your sales process by product, where customers spend their time (in what channel to learn, shop and buy) and finally, how long it takes (on average). Hi-Tech customers, for example, surf among channels (both online and offline). Complex sales, as you would expect take much longer and consume more Face-to-Face resource time.
- Build Information “Depots” – if you want customers to give you feedback, give them something to respond to and an opportuntity to do so by giving them vehicles/channels to communicate. HP is experimenting with giving IT professionals new media tools such as Blogs to engage with customers. And Intuit has created a feedback button called “We Hear You” that enables Quickbook users to submit product feedback. Keep in mind, if you want something of value (information) you have to give something of value. If you don’t have an even exchange you will not get the information you want…so get those offers together (white papers, research, etc.).
- Go beyond Community Building – You’ll hear a lot of hype around “communities” and many of you probably have robust user communities. Get the communities more involved in building, testing and promoting your products, website, campaign,etc. Start measuring “Net Promoters” – a metric of customers who would recommend your products. Word of mouth is still THE most powerful marketing tool, but with recent regulatory changes, be careful on how you motivate customers to sing your praises.
- Leverage Existing Tools – years ago we started to leverage an Online Training tool called Brainshark. It allowed us to create On Demand sales and marketing presentations using PowerPoint and a phone…very simple and convenient. But the most valuable part of the tool was the tracking. We were able to see who was viewing the presentation as soon as they opened it, how long they viewed it, how many pages and who they sent it to, etc. We able to measure the interest levels inside a company, decide on who to pursue and predict when we would acquire the account — all by watching how people interacted with us in a “virtual” world. This functionality now resides in most Webcast tools so make sure you are taking advantage of your investments in Webex, Placeware, etc.
- Before, At and After the Web – think about what information you want to collect at each of those stages. Also, think about what you want the visitor to see and retain in each of those areas. This is the “customer experience”. Organize and integrate your activities by segment (customer, product, etc.) against these three stages to create a seamless experience that reinforces your message. With complex products/solutions, for example, each stage should communicate a portion of the total message, and subsequent stage should reinforce the previous stage. Breaking the message up into pieces and then, hopefully, rebuilding it in the mind of the visitor piece by piece as they go throught the buying process. So a customer may see a TV ad, then visit your website and finally call you contact center to place the order. You must anticipate, plan and, hopefully, direct the customer buying behavior to drive the response, conversion, close and yield rates.
The bottom line is that Web 2.0 is not “revolutionary”. The concept is not new, in fact, if we had to do the first round of the Web all over again we would of done it this way…let your visitors/customers design your website the way they want to use it. But what might be different this time is that I think we are ready to listen to them.
Have a great holiday! Talk to you in the New Year.
Over the years I’ve marveled at the speed at which some organzations are able to go from concept to in-market execution…and those who can’t seem to get out of there own way.
Dell, for example can “turn the ship on a dime”…changing promotions, campaigns, and the sales compensation plan for telesales reps within a day or two in order drive greater revenue or profitability based on quarterly performance projections. Other companies struggle for years to get a campaign or product out the door.
So why does this happen and what are the keys to quick execution? Beyond corporate culture, which is a major contributor to the ability to execute, there seems to be four essential elements that I like to refer to as the CRAP Process:
- Create – one of the things that I’ve noticed over the years is how efforts can stall or be delayed at the starting point. Getting past the starting gate is typically the hardest and most difficult point in the process. Anxiety builds, expectations are high, everyone is looking for the “big idea”…it all adds up to a huge speed bump slowing the creative process. Lower expectations by getting something-anything into a first draft, no matter how ugly right after the initial discussion or at some point on the first day.
- Refine – after you have the draft, send it around for comment, refining the concept as it goes from person to person. The chain is email and the document is in word; it’s important to use the edit feature. It’s like a game of “hot potato” – you only get so much time to hold onto the email and then you need to through it to someone else.
- Act – the most important point in the process is getting it 70% completed and then get it into the market and/or to a customer and let the market/customer complete the other 30%. Define the “70%” mark early in the process so you know how far to go. Give the team an expectation on the timing (within 3 weeks, etc.) to be in market.
- Perfect – yes, perfect the product or campaign after it is in market. Sounds counter intutive, right, but companies do it all the time…Microsoft comes to mind immediately. The key is setting the expectation on peformance before you launch. Define performance at each stage of the process so that you know what to go back and refine/fix. Too many companies get caught up in trying to create something “perfect” internally without customers or market input. The age of what I like to call the “Incremental Perfectionist” is upon us.
You’ll also need to build your teams around this concept. You need to identify the skills sets and personailities of your team and designate a couple of “starters” (the creative types), the “refiners”(usually specialists – product, industry, etc.), and the “perfectors” (anal types who love the detail). You may find that this approach trumps any typically”Org Chart” approach in creating a high performance team.
The other important thing to remember is if you are afraid that someone is going to scream about a mistake or poor performance then you don’t have enough going on inside your organization. The key is to have lots of activities at various stages of execution, if some fail, folks may not notice because high performing (Perfected Stage) programs will give you air cover to refine the underperformers.
As someone at IBM once said; “if you are going to fail…fail fast”. The real key is go fast at every stage, the best companies learn more from failure than success…they also know how to get CRAP done.
The promise of a “performance-based” contract or a “risk sharing” agreement sounds so appealing on the surface but does it really live up to its lofty billing? Do customers really only “pay for performance”? And/or get what they are paying and if so, what does it take to make that contract work?
The concept has been around for many years and has been used successfully in the Public Sector and Health Care industries. Additionally, it has also been a very successful way to sell certain commodity products. More recently it has caught on with companies providing web and tele services.
Research on the prevalence of this pricing model shows that in marketing, online marketing services are dominated by “pay for performance,” especially in the area of search and advertising.
This trend is also carrying over to non-web based lead generation services like teleprospecting. With companies offering performance-based or risk sharing models, it seems like a good business decision when spending precise and sometimes hard to track marketing dollars.
But not so quick! It does sound good on the surface but read on to find out how it can go wrong.
“At Risk” Contracts
I recently had the opportunity to assess an outsourced lead generation program for a Fortune 500 company. The CMO of the organization was frustrated with the performance of the vendor and was close to terminating what had been a relatively successful 5 year relationship. Before that occurred, she asked me to assess the operation and the performance of the vendor, including the new Performance-Based Contract with an “At Risk” clause… recently forced on the vendor.
After visiting the operation and evaluating the program I concluded that:
- the vendor was actually performing exceptionally well given the situation
- the performance-based clause in the contract was causing counter productive business practices,
- the reason the vendor was not hitting their lead targets was actually the client’s fault and not the vendors.
The interesting part of the story that the CMO didn’t realize was that the vendor had 5 years of response data (by campaign, tactic and channel) including lead conversion rates by campaign type. The vendor also had very precise and predictable conversion rates for each stage of the pipeline. It was only a matter of flowing the right volume of responses from campaign activities into the top of the pipeline to create the number of leads needed to meet the target. All very predictable and a perfect set up for a performance-based contract, right?
Except there was one major problem…guess who was supposed to create the responses? That’s right, the CMO’s marketing team.
This tele-qualification program was an inbound group that qualified responses coming from the client’s marketing efforts. Unfortunately, the client was not producing enough response for many reasons: under performing campaigns, inconsistent campaign activity with some months being totally dark, etc.
What is a vendor to do?
They start running their own campaigns to fill the gap because they don’t want to see their fees get hit. Here’s the not so funny part — their marketing campaigns start outperforming those of the client. Ha, Ha …the client is paying the vendor to follow up on their campaigns’, the only problem is that when they do the vendor loses productivity.
The vendor now doesn’t want to follow up on certain campaigns that it knows will be produce less than 10% response rates (because its own programs are producing 14%). Keep in mind the vendor owns 5 years of campaign response rate data it also can predict the lead yield from the client’s campaigns and so it begin to decline to participate in certain campaigns.
The vendor has now turned the tables on the client and is actually holding the client to its own version of a “performance-based” metric for campaigns, except it doesn’t tell the client that and it appears to the client that the vendor is now not only underperforming but also hard to work with because it doesn’t want to do certain things it knows are of low value.
Are you starting to see the mess?
Making it Work
First, create a real partnership with your vendor. Don’t put them in a situation where the performance clause of risking fees is used as a threat. A true “At Risk” model can be very appealing to senior management but may make the day-to-day vendor managers life a living nightmare.
If you decide to create an “At Risk” clause, be willing to add the “At Reward” clause as well. I’ve seen plenty of companies go for the fees at risk but balk at paying for performance that exceed targets. If you’re not willing to pay for the upside then don’t bother with the downside.
Finally, performance-based contracts can be a win for everyone just know that a vendor can’t do it all by themselves. It takes two to dance “the high performance dance” and if you’re not willing to do the “Tango” the dance can turn ugly. You start stepping on toes, tripping over each other and dancing to a different tune. I’m talking real ugly…think Jerry Springer on Dancing with the Stars.
Remember when you had a unique product, a top-notch sales force, customers who couldn’t get enough of your product and were willing to pay anything for it. Sales reps couldn’t close deals fast enough and the factory couldn’t keep pace with the orders. Little to no inventory cost, high margins, an incredibly productive sales force, big bonuses, soaring stock, etc…things couldn’t be better. But what happens when demand begins to slip?
One of the first things to occur is that your best customers, who in the past had no leverage, begin to feel the advantage shift their way and sales reps (unknowingly and for the most part unwillingly) help that transition.
As demand cools, good sales reps who are trained negotiators and born manipulators, begin turning their finely tuned sales skills on the organization. Feeling the pressure to close business and meet quota, reps begin “selling” the organization on what they need in order to get the deal done.
Instead of driving customers into existing solutions with a premium price, they take the course of least resistance, demanding that the organization bend to meet the customer’s (not the company’s) requirements. The company “customization” party goes on for as long as the sales quotas exceed market demand for the product.
The Hangover Effect
What does the company look like after the party? Unfortunately, like most good parties, the news of the festivities grows and involves most of the organization. At the end, it is not a pretty site and it take years to clean up. Here’s a list of the mess left behind:
- Large contract departments – When demand is high, customers typically agree to standard terms and conditions in order to get the product as quickly as possible. As demand slows customers begin to try to gain leverage by modifying the “T’s & C’s” of a contract to their advantage. Reps desperate to get the deal signed before the end of the quarter apply pressure to the legal and contract departments to accept customer terms. This results in contracts so complex to manage, that additional staff is needed to administer them. In one hi-tech firm, for example, it takes a staff of four to perform administrative tasks related to just one large customer contract. Multiply that by twenty large customers and you begin to see the problem.
- Complex product and price configurations – In the eyes of the customer, the value of the rep shifts from problem solver and solution provider to personal customer advocate. The same demand for customization of “T&C” is applied to product configuration and pricing arrangements. The result is highly customized solutions, hard-to-write service agreements, and complex payment terms that may end up costing the company money. The response from the product management team of an ATM manufacturer working on standardizing product configuration was: “We have been trying to do this for years, but the sales force wouldn’t let us.”
- Order Taking vs. Order Making — A nasty side effect of this hangover is that when demand slows it reveals flaws that would otherwise had been hidden. One of those is seen in the quality of the sales force. The difference between “order takers” and “order makers” becomes apparent in a slow marketplace. In this environment of longer sales cycles and fickle customers, sales reps must work harder than ever for the sale that doesn’t hold much appeal for reps who are used to making quota without much effort. A sales rep at a one-time highflying manufacturer of telecom and web equipment was overheard saying in the hall to a colleague; “…I’m afraid we are back to the bad old days when customers required a business case and ROI for every purchase decision…”
- A Service Nightmare – When product configuration becomes so highly customized, it limits the number of service reps who have the competency to work on the equipment. This results in long service times. Worse yet is when service reps turn over, new reps, which lack the knowledge of the original configuration, begin applying short term service “band-aids” that sacrifice product performance. In addition, complex product configurations bring complex service agreements. As is the case for orders, service contracts become incredibly difficult to administer and manage. For example, one customer of an equipment manufacturer demanded that each component of the product have its’ own unique service agreement…all 200 parts.
- Remarketing vs. Marketing – Marketing gets the opportunity to host the party. Because demand for most products already exists, marketers focus their efforts on having fun catering to big customers and satisfying the whims of the sales organization (big expensive customer events, sponsorships of sporting events, etc.). Their activities are nothing more than “remarketing” to existing customers to keep the party going.
As the downturn comes, marketing is stuck with pre-conditioned customers and reps who are looking for “fun” and “fluff”. Unfortunately in this environment, marketing never develops the types of programs and core competencies needed to effectively sell products and acquire new customers right when the company needs it the most.
Best Cure for the Hangover
It’s not the hair of the dog that bit you that’s for sure and unfortunately, this hangover does not respond to a quick fix like a couple of aspirin or a new technology. Here are a few tips for getting started:
- Map out a plan – you didn’t get into this overnight and you’re not getting out quickly. Start small and stay focused.
- Find/Create opportunities to standardize and/or simplify– force events such as technology implementation or new product introduction to standardize process, price and services.
- Understand that not everyone is going to make it – the hiring profile for reps and managers 10 to 20 years ago when the sales force was built may not make it – order takers vs. order makers. The service and marketing departments may also need retooling. New competencies, skill sets and training are also necessary for those who make it.
- Utilize new sales and marketing channels and retrain existing channels – introduce and pilot new sales and marketing channels that increase customer coverage, reduce overall sales cost, and improve customer acquisition. Help field sales reps find their “sweet spot” (closing large complex orders in new accounts) by providing training on multi-channel coverage models.
- Draw a line with customers – Analyze and determine the profitability of your customer base. Segment it into three groups: 1) Profitable, 2) Marginal but with Potential, 3) Unprofitable with no potential. Begin the process of re-conditioning the way customers in segment #2 buy. You’ve created the monster and now you have to tame it. In segment #3, begin the process of terminating the relationship.
In the end, it is like any hangover. You feel terrible, you have a few (or a lot) of regrets, you promise to yourself and others that you’ll never do it again — but…it was fun while it lasted.
Once upon a time there was a Prince named CMO and he lived in the magic kingdom of Marketing. The kingdom of Marketing was under attack from the kingdoms of Sales & Finance. The kingdoms were fighting over the “holy grail” of performance and ROI. So the Prince decided that he would build a Marketing Dashboard that would lead him to the Holy Grail.
The Prince commissioned a band of Knights called Consultants to lead the crusade and help him search the world for information. This journey was difficult and exhausted much of the Prince’s fortune but finally, the Knights built the Prince a magnificent and magical Dashboard…and the Prince was happy.
The Prince showed the Kingdoms of Sales & Finance his Dashboard and they were impressed. He told them that he was close to discovering where the Holy Gail of performance and ROI was hidden. Every month the Prince met with his people to talk about the Dashboard, and ogle at its magnificence but then, one day, something happened. The Dashboard started to lose its magic. The Prince and his people could not make it better and it steadily got worse; the Prince and the Kingdom of Marketing were very concerned and unhappy.
The Prince of Sales started to question the magnificence of the Dashboard and the power of Prince CMO. Prince Finance believed that the magic Dashboard was showing him how Prince CMO was squandering the wealth of his people. The Prince was under attack and eventually lost his kingdom.
The moral of the story is that a Dashboard is not the “holy grail” of performance and ROI. CMO’s are under a tremendous amount of pressure to show the organization how they are providing value and producing a positive return on what can be very sizeable investments (3-6% of revenues). CMO’s believe that they need to have the data to prove their case…and they are right. The difficult part is knowing what to do with the data once they have it, and how to move the numbers in the right direction. Although the story above is written as a fairy tale, it is based on a true story.
The most important thing that a CMO can do to improve the performance of marketing is teach/train country marketing managers the basics of pipeline management because it is their results that show up on the Dashboard. Effective pipeline management is built on four key principals:
- Volume – the flow of incoming response, leads, opportunity coming into the pipeline
- Conversion – the percent of opportunity that makes its way from one stage to another
- Cycle Time – the average time it takes for opportunity to move from one stage to the next
- Transaction Size – the average order size of the opportunity closed
If CMO’s can effectively coach their teams on how to manage by these prinicipals then they will have achieve the “Holy Grail”…and they will get to keep their kingdoms.
Original post date November 15, 2006
Over the last 25 years, I’ve had the opportunity to work with well over 100 companies. Some of them recognized as “best in class” while others brought up the rear…so to speak. What has been interesting is the consistent themes, trends, and/or characteristics that determine where they land on that list.
Below are what I’ve observed to be the “Top 10 Truisms” of business behavior.
The TOP 10
- Corporate Culture – is directly related to the CEO. He or she sets the tone that everyone else emulates.
- Trust – is the difference between a dysfunctional and a high performance team. If you can not trust the people you work with and/or who work for you, you can not perform at the highest level.
- 80/20 Rule – the Pareto Principal always, ALWAYS applies, whether it is revenue, profit, sales, people, etc.
- No New Customers – if you are an established company that has been in business for 10 years or more, you can achieve revenue and profit objectives solely based on doing a better job of capturing the opportunity in existing accounts (see the 80/20 rule).
- Marketing Contribution – 10-15% of Revenues– if you are in a mature marketplace and you have to use marketing to acquire new customers, sell new products, etc., know that it will not product more than 10-15% of your total revenues. The other 85-90% will come from the sales channels.
- The Rule of 70% – given the speed of today’s market, competitors, and customers, getting a product and/or marketing campaign/program 70% complete and out the door is good “enough.” Let customers/prospects complete the rest of the 30% for you. Less internal debate and more customer feedback makes for successful programs and products.
- NEW does not mean BETTER – everyone loves something new but it is the last thing that any company should focus on. Building/ selling/thinking NEW takes too long, cost too much and will have the lowest ROI. Focus first on getting more out of existing…and then invest in new (see 80/20 rule..again).
- Elephant in the Room syndrome – there are big problems impacting performance in every organization that everyone knows about but no one talks about or attempts to fix. They will treat the symptoms but not the core problem…call it career preservation. High performing companies (and leaders) create a culture that is open to addressing difficult issues.
- Risk Tolerance – fast growing and “best in class” companies have a culture of tolerating risk and/or failure. It is a HIGHLY valuable and a very real competitive advantage.
- Performance Dashboards – we recently completed a research study with the CMO Council that surveyed over 400 CMO’s in companies over $500 Million in revenue. 50% of the responders said that they have a Dashboard and 38% said that they were working on one. Here’s the truth…they don’t have a dashboard; they have an excel based “Report Card” of what they did, where they spent marketing dollars and what they got in return (hopefully). The reality is that a real Dashboard has real time information and can allow you to forecast at least 30 days forward. Don’t show everyone in the organization your “numbers” until you know how to move them in the right direction.
Since this posting, I’ve recognized two other “Truisms.”
- Sales Force Behavior – is consistent regardless of what they are selling, who they are selling it to, or the industry they work in. As a result, it’s somewhat easy to predict how they will react in certain situations and/or to certain changes or challenges. Good insight for marketers to know.
- Smart companies can’t tell you what they do – professional services firms are terrible at creating the “elevator” speech. The reason is that they view the company as a reflection of the work they do with clients. Each client and project being different, they form different opinions as to the organization’s value.
Please add your “Truism” in the comment section below.