Archive for June, 2009
There’s a lot of talk about aligning sales and marketing. I’ve given speeches on the topic and have written numerous posts. Company executives know it’s an issue, but what are the costs associated with misalignment?
If our car is out of alignment we know that the tires are going to wear out faster; we are more in danger of the car wandering out of our lane into on-coming traffic; the ride isn’t as smooth; and the car is harder to steer. We know the cost of replacing tires and in our mind we can calculate the risk of an accident. That’s pretty easy.
But, what is the cost if a company’s revenue engine is out of alignment? Believe me, it’s costing you more than a set of new tires.
I want to open this discussion up and let the ideas flow. I have a thesis. I think most companies have been driving in a misaligned state for so long they are settling for sub-par results and resigned to trying to solve the problem. Misalignment is the default situation in most B2B companies.
Here is an excellent reason why an outside executive serving in an interim manager capacity at your firm, or as a consultant is best able to get you out of the rut. They bring objectivity and the knowledge that there is indeed gold at the end of the rainbow.
What is the cost of misalignment? If, as business managers, we can’t put a number to the cost we’ll hesitate to invest in a solution, and that is the way it should be.
Here are a few areas in which misalignment is costing your company.
- Low conversion rates – your proposal to close ratio is static or falling. Research has shown that misaligned companies have a lower conversion rate. What would be the impact if you reduced your cost of customer acquisition by 10% , 20% or more?
- Missed revenue forecasts – unpleasant budget surprises at quarter end when actual sales are significantly below budget.
- Lost customers – research has shown that misaligned companies are not as good at keeping and growing profitable customers. What is the lifetime value of a customer? If you lost 10% or 20% fewer customers each year what would than mean to the top line and bottom line?
- Slow reaction to market dynamics – when marketing and sales have difficulty agreeing on direction and tactics there are delays in action; opportunities are missed. What is the value to you in beating the competition to a market opportunity?
- Internal strife – It’s not fun or productive to work in a company in which marketing and sales are at odds (or at war). Soon egos and politics rule the decision making rather than a focus on progressing buyers through the sales funnel. The cost here, besides low productivity, is employee turnover. What are your recruitment and training costs in sales and marketing?
- Do-overs – programs are often created and never implemented because there is disagreement about what should be done and how. What is the cost of programs that never see the light of day, or what is the cost of do-overs?
- Loss of momentum – the most effective revenue generation plans are those that have coordinated strategies and tactics where sales and marketing are pulling forward together. A dog-sled team is a good metaphor. When the dogs are running out of step or in different directions the sled is not going to progress at optimum speed.
Those areas will give you a start. I’m sure I’ve overlooked a few. Once you’ve identified the cost areas you’re ready to get out your calculator and compute what the chaos is costing you.
Give it a shot. Bring out the calculator, look at your current financial statements and budget. Don’t be shocked if the total cost is 5% or more of your total sales and marketing budget.
Think small if you like. What would a 5% improvement in any area look like? Think big. What would a 20% improvement in any area look like? What would a 5% improvement in all areas look like?
I look forward to reading your comments and sharing more on this topic soon.Read Full Post | Make a Comment ( None so far )
I was speaking with an executive the other day who repeated the concerns of her management team that their existing market was too small to sustain their growth.
Expanding into new markets may look enticing, but there are large risks and costs associated with this strategy. As it turned out in this case I was able to show the company that their market was large enough to provide growth opportunities for the next 3 years.Read Full Post | Make a Comment ( None so far )
One of the first duties of an interim marketing executive starting a new engagement is to assess the marketing budget. How much is being spent on what activities and what is the expected result?
Within the marketing programs budget there should be three categories of investment: Environmental, Lead Generation and Channel Readiness. Research has shown clearly that B2B companies that invest at least 42% of their budget on Lead Generation grow revenue faster than companies in their industry that spend less than that level.
The definitions are straight-forward.
Environmental programs are for branding and letting the market know your company is in a particular category.
Lead Generation are programs that place buyers into the funnel.
Channel Readiness programs are those that make the direct and in-direct sales channel effective.
The research (1400 companies around the world) didn’t reveal any patterns in the sample for spending in the Environmental and Channel Readiness categories, but it was clear that spending too much in Environmental or Channel Readiness at the expense of Lead Generation was harmful to revenue growth.
Before making changes to a marketing budget the smart interim marketing executive will first assess for each product the stage of the market (per Geoffrey Moore), what the appropriate go-to-market strategy is for each market, and then what percentage of budget should be allocated to environmental, channel readiness, or lead generation activities to support that go-to-market strategy.
Take a look. Are you spending less than 42% of your marketing programs budget on lead generation? If so, this is probably restricting your revenue growth.Read Full Post | Make a Comment ( 1 so far )