Can You Lean The Sales Process?
If you have not been focused on manufacturing industries in the last several years, you might wonder what the title of this article means. If you have been paying attention to those industries, however, you know that “Lean Thinking” (the title of a book by James Womack and Daniel Jones) has been revolutionizing the management of manufacturing organizations, enabling them to radically improve their productivity and responsiveness. Inevitably, people begin to wonder if “Lean” applies to sales and marketing, whether it could smooth out customer order levels and make demand more predictable.
“There are basically two ways to think about leaning the sales process,” wrote Jim Womack, author of “Lean Thinking” (Simon & Schuster, 1996), in answer to a reader’s question.
“One is to examine the process itself-how sales are made and orders handled.” The other is to look at the artificial “incentives built into most selling processes” that cause uneven demand, such as bonuses to salespeople and discounts to customers.
There is an awful lot of potential in examining “how sales are made” that Jim didn’t address. Doing it right synchronizes with customer needs in powerful ways that drive higher profitability. While this is described to some degree in my book, “Sales and Marketing the Six Sigma Way” (Kaplan Publishing, August 2006), this article will provide a brief introduction and some examples.
Sales and Marketing Problems Draw Energy and Profit
Let’s start with some wasteful sales and marketing activities that tend to happen in companies everywhere. This isn’t intended to criticize marketing, sales, or service departments. It is imply a list of things the customer would probably not be willing to pay for (muda):
- Developing and launching products that are not successful in the market because they fail to address real customer needs
- Advertising and “brand awareness” campaigns that create no measurable customer response
- Marketing campaigns and trade shows that generate large numbers of “leads” that do not get followed up by salespeople, and are not qualified prospects in any case
- Salespeople chasing “anything that moves” in their territory, thus spending time selling to the wrong prospects
- Proposal-generating activities that do not get customers to buy
- Servicing repetitive customer complaints that could be eliminated if the product were improved, yet that information never makes its way into the requirements for new products
Chances are you’ve seen one or more of these problems in your company. Sales and marketing departments are trying to bring in customer orders, and of course they want to do it as efficiently as possible. Marketers wouldn’t release their products if they knew they were bad beforehand, after all. Campaigns and tradeshows sometimes do produce qualified prospects. And, salespeople generally do their best to make their quotas. Despite all the brainpower and hard work expended, these problems still happen. What can be done to solve this dilemma?
A High Voltage Idea
Lean Thinking begins to address this dilemma by posing an extremely interesting question: “What value does your process create for the customer?”
As a sales manager eighteen years ago, when I first asked myself this question, I remember distinctly the feeling of hairs standing up on the back of my neck. I didn’t know the answer then. However, I do now, and you need to know it too.
Ask yourself whether your company’s sales and marketing (apart from your products and services) actually can create value specifically for your customers? If so, it means there might be some sales and marketing activities that create more value for the customer, and some that create less. It means winning or losing in the market. And, it means the high-voltage idea of Lean connects directly to the management of sales and marketing organizations.
Think about this for a moment: Why would a customer (or anyone else) give you their attention, their time, or their information (much less their money) unless there was an important reason for them to do so?
Sales and marketing activities absolutely can create value for the customer. Think of a time when you were helped by a really competent salesperson and you’ll know what I mean. Done correctly, sales and marketing provides awareness and education, and helps you make decisions about crucial problems and solutions for your business. (OK, sometimes not so crucial!)
Still, consider the next logical question: “Would a customer be willing to pay for your sales and marketing efforts?”
This question is pivotal, because it focuses your attention on what could cause customers to be willing to pay for it. This is the healthiest attitude your company could have toward its sales and marketing. The answer determines the amount of value your sales and marketing creates, or fails to create. And that determines your market share, growth, and profitability.
Long before people pay for things with their money, they are paying for them with their attention. They are spending time, providing information, and asking questions. They are deciding what they want, and what they don’t want.
Hard, measurable value is created (or destroyed) every day on this playing field. Prospects and customers are deciding what they think about you, your offer, and your company. They are deciding if you are relevant, whether you are worth their time now or in the future, and if they trust you.
On the plant floor you can see value being created: Ingots are transformed into engine blocks on their way to becoming diesel engines. Piles of sand are transformed into silicon chips on their way to becoming computers. Every stage of those transitions is measured intensely.
Most people believe that sales and marketing are an art, rather than a science (i.e, that value creation cannot be measured). This belief is wrong. How can transitions be measured in sales and marketing? The answer is obvious, once you think about it.
Making the Right Connections
Prospects and customers continually ask themselves:
- Which problem should I focus on right now?
- What are my alternatives for solving the problem?
- What are the pros and cons of these alternatives?
- How much do I trust the information I have?
- Who else should I involve?
- What action should I take now?
Answering those questions requires them to take actions. They look for information, purchase magazines and books, respond to offers and promotions, attend seminars, take sales calls, and provide information, among many other things.
Notice the progression. The stages prospects go through are sometimes called “the buyer’s journey.” They are the stages of production in sales and marketing. Further, measuring them provides the crucial feedback your team requires to know they have stayed connected to the customer’s needs. Of course, this presumes the process has been designed to capture such information in the first place.
Inability to measure the stages of production plagued the early years of manufacturing, just as it plagues sales and marketing today. Measurement had to be designed into the process, and leaders had to find the right ways of getting around employee resistance. Further, once companies learned to see the waste, their processes had to be redesigned.
Electrify Your Sales and Marketing Process
The same things are happening today in sales and marketing. The process approach means there is a new and better way of leading marketing and selling organizations. Lean thinking helps leaders understand the role of advertisements, call centers, newsletters, and salespeople in the overall sales production system. Six Sigma enables them to learn why some promotions generate .5% response while others generate 5%, and why some salespeople close 15% of their opportunities while others close 50%. These approaches provide the facts you need to decide between investments such as promotions vs salespeople, websites vs. collateral, CRM software vs sales training, and many others.
For example, like most companies, a division of GE used to simply pass leads to the sales force and hope for the best. Now they have learned to treat leads like inventory, expecting salespeople to process each small batch of leads to a conclusion before they come back for more. Their knowledge of what is happening in their market skyrocketed, as has their productivity.
In another case, a brokerage within HSBC Bank was losing money trading futures. As in many businesses, its sales managers had been conditioned to think any customer was a good customer. Senior management assumed volume would keep costs low (but didn’t know for sure). Of course, it turned out that servicing many of their customers was costing far more than the fees those customers generated.
Just as in manufacturing, where not just any raw material will do, salespeople for this brokerage needed to qualify prospects so they could justify the right levels of service. Although they felt like they were living through an earthquake, in 13 months they culled 50% of the existing customer base, effectively stopping the flow of bad business. Further, they freed up 35% of excess capacity. Once they had proper qualification and methods of selling on value rather than price, not only did they begin turning a profit, they began growing again as well.
Similar stories are cropping up in hydraulics distribution, business forms, computers, mobile phones, and many other industries, even consumer products. The good news is this new way of leading organizations holds real promise for improving long and short-term forecasts, as well as returns on investments in marketing, sales, and service.
November 9, 2006