Why Sales Channels and Marketing Campaigns Fail…A True Story

In August 1999, Selling Power magazine ran an article featuring our firm and the work we’ve done helping clients, like IBM, build new sales channels and increase sales productivity. A few months later, we received a call from the head of a division within NCR asking us to meet with them to see if we could help them with something similar.

The senior executive with whom we met said if we could help IBM we should be able to do this project for them. Excited about the prospect of helping them build a new channel, we agreed and they laid out the challenge.

1. A well-known consulting firm had been previously engaged but had failed
2. ...which left only 41 working days to get the new sales channel up and running
3. An internal NCR tele organization was competing for this…which, we would later learn, tried to sabotage the effort...and us
4. And finally, we were entering the holiday season…good luck

After collecting the previous project work we quickly went to work on assessing what had gone wrong. It took us a while, but we finally discovered "IT". Once found, this insight became the key to unlocking success. Almost ten years later I’ve seen this scenario play out over and over in B2B companies. The following is what we discovered;

This simple equation is just as true today as it was a decade ago when we discovered it. Oh, you may find one or two exceptions but the majority of the time when we do post mordems on failed programs you find this equation at the heart of the problem. When combined with a few related pieces, like a lack of time in the market and/or funding, the initiative is doomed. The degree of “newness” in these three areas will directly impact the likelihood of success or failure.

NEWness kills campaigns and channels because it takes too long, is too expensive and/or is too risky. Here’s why -- customers/prospects have to go through the buying process…Learn, Shop and Buy. They have to become aware of your product/brand/solution, then understand how it fits their need (known or unknown), then assess how you compare to others in the market, how to buy, etc. By the time you get a customer/prospect to do this..bam...the company runs out of patience and pulls the plug.

Sales Channels

• Why they fail – new sales channels fail because companies aim new channels at the wrong targets -- new customers/markets. An investment in a new sales channel means that it is competing with existing channels for funding. If it does not hit expectations/goals quickly, it will be robbed of the necessary funding and/or resources needed to make it successful.


• How to improve the chances for success - The most successful way to build a new sale channel is to do exactly the opposite of what is described above. Shift coverage of existing customers or products to the new channel and use your existing channels to go after the “new.” Shift dormant or flat growth customers to the new channel to give it revenue immediately and free up your existing most knowledgeable, best trained sales folks to go after new.
  
  Pitney Bowes has a great program run by their Marketing Sciences group that constantly monitors account activities. Regional sales managers receive a monthly report of Accounts that have not grown within a certain time period, and as a result, they will be shifted to an inside account manager. We like to call it “shift” and “lift.”

Marketing Campaigns

• Why they fail – new marketing campaigns promoting new products aimed at new customers typically fail because of reasons listed above...they take too long to produce and/or aren't given the time. Here’s another common problem, agencies will tell you the problem is the "creative" or "value prop"...maybe, but they also could telling you this because they make money on creative and production. “New” works with their business model. More likely, if you did your segmentation right, aligned a solid value prop and offer, your problem is that the campaign has had a chance to work yet…don’t pull the plug. Remember customers have to go through the "learn...shop...buy process and it takes time.
  
• How to improve the chances for success – build less individual campaigns and invest more in one or two long term programs with many integrated tactics. Keep the programs in the market longer, closely monitor them and modify tactics based on performance. You don’t need a new campaign every month, you need a program that produces…and with tight budgets this will help you be cost effective/efficient.
  
  Years ago we did an assessment of campaign performance at IBM. We found that the highest performing campaigns had at least 7 integrated tactics and stayed in the market for at least 6 months. Use this as a starting point to design your campaigns and programs.

Keep in mind that the “Recipe” should be thought of as a “guideline” and not as a hard and fast rule. It’s kind of like playing the six degrees of Kevin Bacon ; “How can I connect, or create a connection, from a product to a target? How can I minimize the separation between the three key areas; channels, customers and products?” If you’re still stuck, here are some additional tips;

• New to New thru New = level set expectations and invest for the long haul. You will need time and commitment to make it successful. Companies have short term horizons that are getting shorter every day. If you’re going to lead this effort get everyone to agree on what defines success and stick with your timeline.


• New Product/Service/Solution – try to leverage existing channels, customers or both to start...then migrate to new. This way you can learn if you have the right value prop, messaging, pricing, etc. We like to take existing reps, for example, and use them to help launch a new sales channel, like Tele. We like to use existing customers to test new products, etc.

For example, at NCR, we got the tele channel up and running in 41 days. We transitioned existing field account managers to TeleAccount managers and built their territories around their customers. We then began to backfill them with new lower cost resources over time. You'll be happy to now that the manager of the group that tried to sabotage the effort got fired. The program hit our first year sales targets, reduced the expense to revenue ratio from 13% to 6% and grew sales productivity from $1.7M to $3.1M per rep. As a result, NCR then built a full scale tele channel with close to 80 reps. Interesting sidebar, the program was shut down a few years later.

It's a long story as to why, but I'll try to summarize. John Patterson, who bought the company that would become National Cash Register (NCR) in 1884 tried to sell the company back after he learned the hard way that no one saw the need for his new technology. So he developed what is viewed as the first modern concepts on sales territories, sales compensation plans, sales training, etc. Bottom line, the company has a strong field sales tradition and culture.

Mark Hurd, now CEO of HP, became the CEO of NCR a couple of years later and decided to shut the channel down, redirecting the resources to the field. Remember my comment about competing for resources…Mark’s a traditionalist...a FTF sales fan.

Culture runs deep, and can also kill channels and programs. Mabye I should update the "Recipe" to include the forth "New"...new leadership. As I said, the "Recipe” should be thought of as a “guideline” and not as a hard and fast rule.

TARP Guidelines for Sales & Marketing Spending – much ado about nothing

This post was linked to a story on CNN (see the bottom section "From the Blogs")
Last Tuesday, I was quoted by BtoB magazine in an article entitled “Bank bailout a game changer. ” The focus of the story is the impact of the economic downturn and potential TARP guidelines on the financial services industry. What I said and what was written didn’t exactly match…so let me clarify.

What was quoted; “They can’t do anything flashy” said Scott Gillum, senior VP at consulting firm MarketBridge. “These guys are notorious because of relationship marketing. They have to relook at their investments. This is a PR nightmare now.”

“I’m expecting banks and insurance companies that are financially stable and sound to really take advantage of this opportunity,” he said. This is a business that has been relationship-based. You get the people, you get the customers.”

The first quote was in response to the Northern Trust involvement/sponsorship in a golf tournament. It’s the “These guys are notorious because of relationship marketing” part that needs to be clarified. What I said was that in the B2B world of Financial Services (Investment Banking, Commercial Insurance, etc.) marketing investments go to “strengthening the brand and the relationship.” Businesses are built on relationships and relationship managers...one of reason why Wall Street firms and AIG risk public outcry over paying bonuses to their top sales folks. If they leave, the business tends to go with them…the second part of my quote was correct.

What has driven this industry prior to the meltdown:

• The Brand – in the good times, a name actually meant something
• The Relationship – who you know and what they control
• The Deal – economic models, which we have now come to learn may or may not have been right/legal

FS companies have long invested millions in sponsorships, events and sports marketing. Not just to have their name/brand associated with the event but more importantly to invite clients for some good old relationship building. The industry has grown up that way and it is a culture of entitlement. Getting tickets to a prestigious golf tournament or a box seat at the "big game" has been a part of doing business. “These guys” aren’t “notorious because of relationship marketing”…they’re notorious because they are now spending someone else’s money (ours) to do it.

So with all the public flogging about their spending habits will anything change? In February, a Coalition representing various groups from the Travel and Events industries put together “guidelines’ to try and preempt the US Treasury . The group created a set of guidelines for companies who received TARP funds regarding Meeting, Events and Incentives. It could be one of the most transparent cases of the “fox in the hen house” I’ve ever seen. I’m sure that lobbyist are trying to get these guidelines “approved” as THE US Treasury endorsed guidelines.

But to this point, it appears that no formal guidelines or regulation have been issued by the US Treasury or anyone else, despite a lot of noise coming out of Barney Frank (Financial Services Committee Chairman, oh BTW check out his Top donors – good luck on getting real reform), and other opportunistic politicians who’ve taken companies to task for their spending. From what I’ve seen (or lack of) so far, nothing indicates that this industry will be forced to change.

Most likely, the practices that have driven the industry pre-meltdown will most like drive the industry post-meltdown...old habits are hard to change, unfortunately. In October of 2008, we conducted research in the Commercial Insurance industry on ways to improve the go to market model; a broker gave us this feedback.

"I thoroughly enjoyed the discussion and look forward to reviewing your results. I apologize if I came across too strong, but this is a subject near and dear to my heart…and wallet. The insurance industry is in dire need of change. Our long history of profitable results (both sides) has done nothing but perpetuate mediocrity. Eventually, those days will come to an end."

Even though no new real sales & marketing reform exists today or seems close, there are some things that have the potential to change the business, at least temporarily, such as:

• The Media – lots of villains out there that fit their 4 “C’s” of FS (Crisis, Controversy, Conflict and Crime). What has been amazing to watch is how “locked in a box” CEO’s of companies who have received TARP funding are when it comes to their business practices. How could you not know that people would be outraged at paying bonuses, or holding lavish meeting events…c'mon.
• Your buddy is no longer there – another 44K jobs lost last month in the FS industry
• Your buddy is there, but no longer has power - uh, oh, what happens to the relationship?
• The US Treasury might grow a “set” and create guidelines with some real teeth

But will this be enough to create real lasting change? When profitability returns to the industry, will anyone have the guts to do something different? Probably not, but it might be enough for a new competitor or two to enter and stir things up.

Years ago I read an interview with Charles Schwab in a business magazine about the success of his company. He said that the reason he knew he was onto something (a direct model) was because his competitors refused to believe that customers wanted to conduct transactions in any other way than face to face.

As others get back to "business as usual," a company that has a disruptive model might just slip in unnoticed and change the way the game is played. If you look at what has happened in other industries, new companies emerge by catering to the needs of customers who feel/are neglected and/or who distrust the current system/providers.

Sounds like the setting is right, now let’s see what emerges. We might not get reform but we just might get a renegade.

Data Driven Action

Tell me if you’ve seen this movie before. After spending months debating about the right type of segmentation to do, you finally agree, do the research and…it never gets used. Or how about this one, you get a request from sales for information you’ve already sent to them…multiple times.

It’s a horror movie and it gets play out every day in organizations all across the country. Why? Why is it that we want “the data” but then we don’t end up using it? Based on my experiences with clients, I believe it comes down to few common problems that are manageable, if known.

The top 5 problems I see:

1. Insight – as in the lack of it…it’s the #1 reason why data doesn’t get used. Far too often the Ph.D’s will put out data without having interpreting it for the intended audience which then sets up the next problem.


2. Language/Communication – call it taxonomy, communication style, whatever, data folks and everyone else (in particular, sales & marketing) speak different languages.


3. Overload & Timing – yes, analysis paralysis does exist but not the way you might think. If you’re in a data rich environment, you’ve probably experienced this. Just too much info flying around and as a result, it often gets ignored. It’s not that it causes people to not take action, as much as it is people taken action and ignoring the data. In other situations, especially involving marketers, it may be a matter of timing. They may be in too much of a hurry to get something out the door to wait on the data.


4. 60-70% Complete - critical pieces are sometimes missing so you can’t see the insight. The dots haven’t been connected. The person responsible for supplying the data doesn’t, and/or wouldn’t, see the connection.


5. Skill set – CMO’s when asked the top reasons (see the chart in the post below) for the need for new skills in their organizations mentioned; “greater segmentation of market” and “increase demands for analytics” in their top 5. The problem is that there aren’t many of them out there.

Why is this important now? Because everything you do or want to do, or are thinking about doing, will have to be backed by data in this economic environment…you’ll need a rock solid reason for getting, or spending a budget.

Five things to do about it:

1. Apply the “So What” rule – yes, this rule is typically used to help define a feature from a benefit but it’s also effective at drawing out insight from raw data. If the data guys are presenting information that you don’t “get” ask them “so what?”…as in, what is this data suppose to tell me? And keep asking until you get to the “so what.”


2. Help connect the Dots – if the story is missing help supply/coach on how or where to connect the other pieces. If you’re the user know what you’re looking for and provide guidance on where to find it. As I mention above, researchers may not know or wouldn’t understand the connection. This also applies to coaching on communication. Help them understand the language you speak.


3. Chunk it up – sometimes there is just too much to take in and process. Chunk information into more digestible pieces. Take some time and think about what various groups can digest and how often…especially if you’re in a data rich environment.


4. Provide plenty of lead time and direction – don’t expect to get something insightful and/or useful if you don’t give adequate notice or direction. Getting a report on market share won’t tell you how to increase it, or why you’re losing it. Combining trended quarterly market share, key consideration drivers, and sales coverage will...but it takes time to collect. Know what you’re looking for and how to get it.


5. Hire an expert – as was mentioned above there is more demand than supply of talented people who can pull insight out of data and drive action from the insight. If you have to, partner with a vendor. It should also help with the timing/speed issue mentioned earlier. Additionally, they will have tools/approaches that help force out insight.

Data…leads to Insight…leads to Action…leads to Data…the cycle of life. It’s time to turn this horror movie into an action thriller.

CMO to Chief Revenue Officer

What will the post downturn CMO look like and how can you position yourself now?

My inbox is full of resumes of good marketers that I’ve been fortunate to come to know or work with over the years. Solid people, with great experience who are now having a challenging time finding new opportunities in this incredibly difficult economic environment. Many of these people could have had their pick of jobs as recently as last year. Given the situation, I thought I’d try to help by providing a viewpoint on what skills set, background and experience companies will be seeking once they start hiring again. I'll use two data sources to make the case.

A few years ago, we teamed up with a professor (John Josephs)at Kellogg on a couple of research projects aimed at getting a better understand of what creates a high performance marketing organizations. Internally, we thought of it as the “head” and “body” studies because we first studied the marketing organization (the body) and then the follow year CMO’s (the head). We surveyed not only CMO’s and marketers, but also CEO’s, about their views on what makes marketing effective. The research was then published by the CMO Council. Here are a few things we discovered along the way.

CEO’s view on how to measure marketings performance

CMO’s view on what is driving the need for new skill sets.
This information is a few years old now, but I can tell you that based on client work that the down turn has done nothing to change this, if anything, it has placed greater importance on the top 3-4 responses. And I’d bet that "Analytics and Accountability demands" has move up the chart. Keep the top responses on these charts in mind as we move to the next section.

Last month, I was given access to a database of senior level marketers (SVP and up) to do some analysis for the organization that owns it. We looked at the background and experience of over 800 marketers with the following titles:

• 50% were CMO’s
• 32% EVP’s of Marketing
• 8% SVP’s of Marketing
• And interestingly enough 10% had CEO titles but had recently been the head of marketing

They came from large, medium and small companies including start ups:

• 25% - Large (over $500M)
• 32% - Medium ($100-$500M)
• 23% - Small ($50-$100M)
• 22% - Start up or under $50K

We were interested in assessing their area of expertise, experience and tenure.

Experience & Expertise

Tenure by year
Although executives with Product Management and Sales Enablement/Demand Gen experience represent only 27% of the total group, they represented a disproportionate amount of executives with the longest tenure. In fact, they were twice as likely (as a representative percentage) to be in the 2-5 years tenure category than those with Brand, Advertising and Corp Comm backgrounds. And they made up half of the individuals in the more than 5 year category.

Another interesting thing we picked up is that markerters in the NYC area were more likely to be new in role versus other regions (higher than average churn...probably attributed to a higher supply of talent).

Spencer Stuart has for many years reported CMO tenure rates (less than the life of a gold fish) but I’ve never seen them look at tenure by background…which makes a difference based on our assessment.

Finally, let’s look at Supply & Demand.

The Top 20 Advertisers in the US have been decimated. Think about…half of the Top 10 advertisers in 2007 were automobile manufactures. As a result, agencies have put hordes of people on the street. GDP in Q4 2008 is estimated to have declined by 6.2% from Q3 that declined by 0.5%. Revenues are down on average of 30-40% from the prior year in most firms (at least the ones we work with).

As a result, there are a slew of marketers with advertising, branding, and corporate comm backgrounds (73% of the database that we analyzed) in the market.

Let's put it all together:

1. CEO's measure marketing effectiveness by revenue growth and market share
2. CMO's see the greatest need for new talent being driven by the integration of sales & marketing
3. A large supply of "above the line" marketers exist in the marketplace
4. Conclusion - potentially high demand and a low supply of marketers who can drive revenue

So…the marketers that will be in the highest demand coming out of the recession will be the ones who have been aligned or have had direct responsibility for growing revenue. Marketers that can speak the language of sales. Unfortunately, it will be a slow process for folks with a Brand PR and Corp Comm or the Ex-Agency/Media guys.

Marketers with backgrounds in Product Management/Marketing who have owned a P&L, folks with sales backgrounds and/or marketers who can show that they can drive revenue/growth will be in demand first. The challenge for the other groups is that of supply. It’s not to say that good Brand and Agency folks won't find positions it’s that it’s going to be hard. Expect that you will be competiting with many other qualified candidates and it may be difficult to differentiate yourself.

What to do:

• Downplay the advertising awards (Clio’s, Echo’s, etc.)
• Play up your experience in driving revenue and results
• Find contract work that is connected to driving sales/revenue
• Invest time in learning more about digital and analytics
• Seriously consider relocation, especially if you live in the NYC area

Unclogging the Pipeline

This post was recently featured in an article on MarketingProf's

Pipeline slowed to a trickle? Opportunities backing up, lead-to-close time seem like forever…yea, welcome to the recession. With customers delaying and/or postponing decisions altogether the ol’ pipeline ain’t what it used to be.

Here are 7 Pipeline Management Best Practice tips taken from leading companies that might help:

1. Weekly Pipeline Meetings with Sales AND Marketing - yes weekly…and with Marketing, do it in country and at the region level. You may also do it at the corporate level with the CEO , like IBM.
   
2. Apply BANT – CRM is great at increasing visibility into opportunities but it tells you nothing about why opportunities aren’t advancing. BANT will. By qualifying and re-qualifying opportunities based on Budget, Authority, Need and Time you will get to the bottom line on why leads are not advancing. Reps will say that it’s “B” but I wouldn’t assume that. Companies are still spending (not as much) but now it takes a C-Level to approve (is your sales force getting to “A)? Budgets have moved higher in the organization and have been centralized. Also, business cases are required for EVERYTHING so if you aren’t submitting one with every proposal you’re not address “N”. Timing (T) of course, things are slow so you need to find out as much as you can about when budgets might get released and then check again, then again...


3. 90 day Movement Limit – this is one of my personal favorites. If a lead (that is truly a lead) does not advance within a 90 day window it moves back to the previous stage in pipeline or is killed. Given that lead cycle times have lengthened…considerably, you may want to make the window 120 days. Up or Out…learn it, live it, love it.
   
4. Define a lead and stick to it – look, it’s going to be difficult road but be honest with yourself on what is truly a lead. A response to a campaign offering a free gift card, or a download of a white paper off the website, aren’t leads…they’re responses and should be treated that way. Leads are defined by meeting a BANT criteria…see above. People will want to get fast and loose with the facts to satisfy the sales force or make marketing targets but don’t let them…stay firm, you’ll thank me when the recovery starts.
   
5. Response Management – so now that you’ve removed the “junk” out of the pipeline it’s time to do something with it. In reality responses aren’t “junk” (well, some are), they’re potential leads that just need to be nurtured…for a long time in today’s environment. Don’t disregard them, I’ve seen too many companies do nothing with this group. In the good times most of them would be leads. How to find them? Simple, ask this question during you pipeline call; “who owns responses that aren’t qualified leads…” wait for the silence. Bingo, there’s your answer. Take the last 6 months of campaign response and start digging.
   
   Sort through the “junk” and find the diamonds in the rough, pick out the ones who are in the right companies or have the right titles and work them. These are folks who are in the learning process, they may see the need but may not have the funding or approval yet. Make an effort to nurture it will pay off in the long run.
   
6. Lead Gen to Sales Enablement – it’s time to move marketing down the pipeline. Lead generation aimed at acquiring new opportunities is a waste of money in a recession. The cost of a qualified lead has skyrocketed…don’t believe me go do the analysis you will be surprised and in some cases shocked. So it’s time to invest against sales enablement and helping the sales force move opportunities already in the pipeline. Here’s another fact for you…B2B sales channels create 80-85% of all leads so cutting lead generation programs will not hurt you…I’ll say it again, redirecting investments away for lead gen activities will not hurt the pipeline. What is sales enablement, and how does it help the sales force? Well, it’s things like business tools that can prove a ROI, sales presentations loaded with proof points (case studies) on your value, and a robust customer reference program (see the graph above). By aligning marketing activities to moving the BANT levers you will be investing marketing dollars were they can have the greatest return…and your sales force will thank you for it.


7. Comp on or Emphasize Customer Meetings – if you build comp plans based on revenue and lead targets/production you may want to consider over emphasizing face time in front of the customer for the first half of the year. You’re probably saying to yourself, “but Scott, why would I do that if customers aren’t buying?” Right, but they can tell you why, when things might loosen, and who you need to get to (see my rant on BANT in bullet #2). It’s during these times that you need to have your reps in front of customers so they can collect the information needed to provide you with update during the weekly pipeline call. Use your sales enablement team (see paragraph above) to provide them with high value material to share with customers in order to get those meetings. See how it all connects?

I hope this helps. Unfortunately, it looks like we’re going to be stuck in this situation for all of 2009. Be strong…the bad times, just like the good times, don’t last forever.