Tag Archives: Product

How Do You Make Sales More Predictable? Five Points of Focus

Situation: A CEO is concerned that year to year sales revenue is unpredictable. Sales reps are averaging 25% of quota and commissions per year. While internally generated sales are up 20%, partner sales are down 83% and up sales from existing customers are down 54% from last year. How do you make sales more predictable?

Advice from the CEOs:

  • It is critical to both understand what is happening in the company’s market, and why up sales and partner sales are down so significantly from last year.
    • What is the total available market – not just broad numbers, but information reflecting both the available market and key trends within the industry?
    • What is known of the latest product introductions from key competitors – are these significantly better than their earlier products?
    • Have cases of lost sales been thoroughly analyzed – either lost competitive bids or customers who have left and why? Was this business lost to internal or external competition?
    • Have an independent 3rd party talk to lost customers.
  • Is the company’s product well-defined, and is there a road map for future development? Do the company’s product definition and road map align with market directions and demands?
  • How good is the company’s competitive analysis? Is there a good understanding of how to position the offering within the market? Are salespeople selling to the right people?
    • These require what is outlined above: who is in the market, old and new products, product features and positioning, product and product acceptance trends.
    • If salespeople don’t have the right weapons, they can’t articulate the company’s advantages: a clear ROI benefit, and Cost/Risk Avoidance Analysis. For these analyses, the sales target is the CFO and Risk Management Officer.
  • There may be too many salespeople.
    • How does the company measure sales productivity? Are salespeople accountable for performance or non-performance?
    • What are the consequences – besides lower commissions – when they don’t produce?
    • Given current trends, it is likely that the company will lose some of the current salespeople. Take control of the situation and remove the poorest performers rather than risking losing the better performers.
  • Do you have the right VP of Sales? While he may have been a great sales rep, few sales reps successfully make the transition to management. The skill set required for success is completely different. The company may better-served by letting him do what he is good at – selling or training other sales reps – and hiring an experienced industry veteran to run the sales operation.

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How Do You Quickly Shift Your Marketing Position? Five Points

Situation: A company wants to shift their marketing position quickly and effectively toward a new focus. The new focus is the result of breakthroughs that they have developed that have opened new product and service opportunities. How do you quickly shift your marketing position?

Advice from the CEOs:

  • Hire a strategic marketing consultant to help analyze the market, identify unmet needs and unaddressed segments of the market where the company can establish a strategic advantage.
  • Pick an area where the company is known or can be known as the best. Create differentiation by specializing in this segment.
  • Add both sales and marketing positions to guide the refocus.
    • Marketing is more than just collateral. It is strategic positioning, understanding changing customer needs, and thinking creatively about how to leverage those needs and the company’s capabilities to maximum advantage to support the sales efforts.
    • A good marketing platform provides salespeople the structure within which to operate.
    • How do you find good candidates? Talk to editors and publishers of trade journals. They know marketing contacts and who is good.
  • As the company shifts the model, look for ways to reduce utilization and down-time for engineers and other staff.
    • Maximize the value of this down time.
    • Develop case studies or materials to support the sales effort.
    • Create new concepts or capabilities to add to the offering.
  • Several other CEOs noted that with the quality of the projects that the company has completed for current clients, the company already has both the capabilities and proof of delivery that many sales and marketing people would love to have. Use these as assets and leverage them.

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Do You Need a Formal Marketing Function? Four Points

Situation: A small company serves a specialized, targeted group of customers. The founder/CEO seeks advice from the group on whether it is time for the company to create and staff a formal marketing function or can this be outsourced. Do you need a formal marketing function?

Advice from the CEOs:

  • The company services a specialized and targeted group of customers. However, they target the high end of this market, so the target market is smaller.
    • A highly targeted promotional and marketing strategy will work best.
  • There are two principal functions within marketing: providing direction to guide product development efforts and creating awareness of the company’s products through promotions and advertisements.
    • To serve a narrow market, the information and insight gathered from trade shows, technical meetings, the company’s sales and design engineers may be sufficient to drive product development efforts.
    • It may not be necessary to do more than this unless the company is planning for substantial growth and wishes to diversify the product offering in a short period of time.
  • To handle promotions and advertising there are two options: hire an individual to do this or utilize the resources of an outside agency.
    • The marketing plan should be refreshed and updated on a regular basis – at least annually.
    • A good task for the company’s marketing committee is to become aware of local resources that could help.
    • Identify marketing themes to guide advertising in specialty magazines, supported by trade shows, technical conferences, and on-site training session for key customers.
    • Create and maintain a calendar of marketing activities and assure that that messaging is consistent across promotional events.
  • If the strategic plan calls for substantially increasing the revenue base or broadening the product offering, consider a merger with a competitor that already has the ability and resources to meet these needs.
    • Just the planning exercise for a merger will help the company to evaluate the issues involved in market expansion.

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What Is Your Exit Strategy? Three Options and Approaches

Situation: Every CEO needs an exit strategy, if only for the good of the business because the future is uncertain. In this case, the Founder CEO wants to reduce her involvement in the business over the next 3-5 years. Her company has an offering that addresses domestic and international concerns about global warming. The CEO seeks help evaluating options. What is your exit strategy?

Advice from the CEOs:

  • The CEO sees several strategic options. Which option is more likely to yield results in a timeline that fits a 3-5 year exit strategy – a major international push, a partnering strategy, or leveraging current business to gain additional sales and market share by tweaking the current product line?
  • International Strategy.
    • The company needs international partners, not just a sales presence. This will require substantial time and upfront commitment from the CEO, not just a salesperson.
    • Where and who are the predominant businesses in the international markets under consideration?
    • Can an international strategy be executed and produce fruit in time to complement the exit strategy?
  • Partnering.
    • Partner with a hardware company to increase visibility and usage.
    • Partner with some of the top prospects for an exit strategy.
  • Focusing on the Product Line.
    • Employ customer shadowing to better understand how customers currently use the software and what challenges they encounter or opportunities they see – involve marketing, and R&D, not just the sales team.
    • Reposition the current offering to take advantage of opportunities.
    • Simplify installation and implementation.
    • Look at the product development strategy. Can revenue be bumped or upgraded from renewal customers? Are there options for “deluxe” versions with a premium price for upgrades, that become the following year’s standard upgrades?
  • Gather the company’s team and work through the scenarios for these options. Once this is done, prioritize them based of timeliness and potential impact on the bottom line and company valuation.
  • Also look at the Board structure – are there gaps in regulatory or sales and marketing expertise. What about adding someone who has connections to a key customer base?

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What is the Best Way to Roll out a Business Opportunity? Six Suggestions

Situation: A CEO is reviewing options for introducing a new offering. The target customers are small companies or projects within larger companies. The offering includes both an initial product and follow-on services. Education or training will be a component of the offering. What is the best way to roll out a business opportunity?

Advice from the CEOs:

  • It is best to position the offering as a straightforward proposition at launch and develop proof of concept. This will provide experience and an income stream to fund more complex offerings based on the initial model.
    • It will also provide insight on how to sell the product and service in different markets – manufacturing, service, and software.
    • Leverage this experience to pursue more complex models.
  • Build a portfolio of case studies before pitching to paying companies.
    • Use companies with whom relationships already exist as the proving base. These will become references for new clients.
    • Develop data to show actual cost savings from the use of the product and services.
  • Establish a relationship with an existing company for which the offering is complimentary and cross-offer products and services on an ad hoc basis.
    • Trial the product and service with one of their clients in return for a royalty or share of the profit.
    • Ask that company to make the introduction.
  • Target start-ups – offer an initial package for a low price. Offer the product to start-ups for free and get them hooked as long-term customers.
  • What would be needed to roll the offering through growth equity firms or venture capitalists?
    • This will require some proof that the offering increases the ROI to growth equity and VC portfolio companies and funds.
    • Note that the portfolio companies of growth equity firms are larger and farther up the growth curve
  • In current economy the key message to prospects may be that the offering will help them to “right size” their company.
    • Take a closer look at the offering and determine whether it is configured appropriately for the current environment.

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How Do You Plan for Patent Expiration? Six Suggestions

Situation: A company is facing the expiration of the principal patent for its main product. There are subsidiary patents which still have life. Currently, there are no competing products, but several companies understand the technology. How do you plan for patent expiration?

Advice from the CEOs:

  • Think of this as a two-step process:
    • Step 1 – Step back and look at what the company has:
      • Patents – including the claims that have been awarded on all company patents.
      • Facilities – capable of manufacturing current products, but also additional products, perhaps with a minimum of additional equipment.
      • People – competent staff running manufacturing operations, and tight office operations.
    • Step 2 – Loot at where the company could go and evaluate the markets where the existing technology is applicable:
      • Work with outside, imaginative people who can take a fresh look at the options.
  • Looks carefully at the claims in all the company’s patents.
    • What do they cover?
    • Is there an opportunity to extend current claims through process patents?
    • Caveat: a company can file for a process patent on anything that has been for sale on the market for less than a year. However, if they have been selling a product covered by this application for more than a year, they cannot.
  • Look at other markets – companies that could license the company’s technology, or with whom the company could partner to provide new consumer-oriented products:
    • Is there inexpensive, affordable equipment that would enable the company to produce additional products in the current location?
  • Think outside the box: what business is the company in? Think more broadly than the current market about where high value opportunities exist. These can be low to medium volume, high price/margin or high-volume lower price/margin.
  • Patents are not the only protection – trade secrets also work. 3M’s primary IP strategy, particularly on their adhesives, etc. is through trade secret – both for low and high-volume products.
  • “Product” patent extensions have limited utility. They are easy to design around. “Process” patents have more utility. These can be licensed at low cost per application in high volume applications and provide a nice royalty reserve stream.

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How Do You Respond to a Price Increase from a Supplier? Six Points

Situation: A small company has a parts supplier for product that they sell to their most important customer. That customer’s specs are “copy exact” on components for existing products; also, their new products are usually based on existing components. The supplier significantly raised prices on the parts supplied to the company. How you respond to a price increase from a supplier?

Advice from the CEOs:

  • This is an extremely sensitive situation. One solution is to not to rock the boat. The reality is that the company needs the parts, and it will take a lot of effort to replace them with parts from an alternate vendor. Just continue the relationship. Quit worrying about it and milk it for as long as it lasts.
  • Find out what caused the supplier to raise prices. The supplier needs to understand that to preserve the company’s margins they may have to raise prices to the final customer. This may threaten both the company’s and the supplier’s business with the customer.
  • Make sure that the supplier understands the company’s costs: office, salaries, equipment, maintenance, and local regulations that are unfriendly to business and difficult to deal with. Ask them to reconsider or reduce the price increase.
  • Assure that the supplier understands the value that the company provides and the importance of this collaboration to the business and profits and bottom lines of both companies. Leverage this value to get the price that the company needs.
  • Renegotiate the relationship to assure that supplier can’t go around go around the company and sell directly to the final customer.
  • Start building relationships with alternate suppliers.

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How Do You Boost Your Sales and Marketing? Four Points

Situation: A CEO’s company has built an admirable suite of products. The next step in company growth is to create a more structured marketing pipeline. They have experienced salespeople, but these people have come to the end of their rolodexes. A new approach is needed. How do you boost your sales and marketing?

Advice from the CEOs:

  • Create a profile of the ideal customer. This is the customer who can create the greatest leverage using the company’s suite of product. Aim for the top management of this customer.
  • Incentivize the sales reps to target high value accounts. To create targeting incentives, graduate the commission base.
    • Set initial commission based on the size of the customer.
    • Differentiate commission by product – pay the highest commission for highest gross profit products or the company’s highest priority products.
  • Salespeople need to be able to close sales by themselves.
    • Currently, salespeople are acting as lead generators and are counting on the CEO to close the sale.
    • Create a different set of expectations, including thresholds to limit the CEO’s direct involvement in the sales process – for example, limit CEO involvement to accounts with a revenue value over $500K.
    • Train the salespeople to communicate the value proposition for initial conversations as they qualify a new client. Create a set of resources to assist them along the way.
  • Is it a good idea to pay ongoing commissions forever?
    • Another CEO used to do this but has moved to X% for the first period/project and X/2% on follow-on-periods/projects. This keeps them hungry for new customers who will pay the higher commissions.
    • Don’t create a perpetual annuity – the way insurance brokers are paid. Reduce commissions on existing accounts so that they decline over time – keep salespeople focused on bringing in new accounts to maintain their income levels.
    • Decide on an acceptable level of total compensation for salespeople. Plan the commission structure to allow them to reach this level, but they have to keep selling to maintain this level. Keep them hungry.

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How Do You Best Exploit a New Opportunity? Three Observations

Situation: A service company has developed the capacity to produce and sell a product. The CEO is considering two options for this new opportunity: create a separate entity for the new business or run the businesses in parallel under the current umbrella. How do you best exploit a new opportunity?

Advice from the CEOs:

  • Option 1: Create separate entity for the new business while the existing business continues in parallel.
    • How big is the potential win? The current company competes successfully for about 10% of the market. The new capability would allow the company to potentially compete for 100% of a larger market.
    • How different are the two opportunities? The current business requires specialized talent – it is a low volume, high margin business. The new opportunity is the reverse – high potential volume but lower margin. It is a more generic market with fewer specialized needs.
    • The separate entity option provides the most flexibility. The current model already functions well. A spin-off provides an additional option without losing what already exists.
    • Bring in another individual to develop and run the new entity. It’s a different game and requires a different focus. However, it will be a great opportunity for the right person.
    • The spin-off model will be more sustainable under separate management than under the current company.
  • Option 2: Operate both businesses under a single entity.
    • This option looks like a double compromise – it alters both the company’s current strengths and the fundamental business model.
  • A long-term alternative is to look for a financial acquisition for the current company. It produces good net margins, has good cash flow, a and spins off cash. This can be valuable to a financial buyer.

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How Do You Choose Between Strategic Options? Four Points

Situation: The founding CEO of a technology company is considering options for the future. The company is doing well, with two options for future development either within or outside the company. How do you choose between strategic options?

Advice from the CEOs:

  • Domain expertise is less important than business experience, P&L experience, and fund-raising success. A diversified background and successful experience as a CEO are as important as specialty industry experience.
    • Continue to pursue all options for the time being. See how the new opportunities mature before making final choices, and either split time between the options or assign good managers to oversee each.
    • Ownership agreements should be based on cash investment of the parties – not time and effort.
  • Option #1 – Focus on the primary company.
    • A challenge is that most of the Board members just see the numbers, not the dynamics of day-to-day operations. They don’t know the CEO’s contribution.
    • Assure that the Board understands the CEO’s contribution and is rewarding the CEO appropriately.
  • Option #2 – Focus on New Opportunity #1.
    • Is this option more like a product or a company?
    • Consider this option as a product incubator rather than a single product company – producing and spinning off a series of ideas for development.
    • This can be done either within the primary company or as an outside effort.
  • Option #3 – Focus on New Opportunity #2.
    • Software development can be self-funding. Compared with manufacturing, software is inexpensive to develop and requires little investment to scale and sell once the code is written.
    • The trick is to rigorously focus on market opportunity while minimizing cost.
    • Watch staffing commitments. Use scarce resources to lock up irreplaceable capabilities. Hire or offer equity only for significant contributions such as IP development. For labor, use consultants, independent contract arrangements, or look for what can be outsourced.
    • Like Option #2 this can be done either within the primary company or as an outside effort.

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