Revenue Enhancement & Sales Effectiveness
Sales are primarily about people, products and services, timing and skills. At the same time, technologies and processes also play pivotal roles and it is the complex intertwining of all these elements that determines the efficiency and effectiveness of a sales channel and its influence on growth.
With the rapid acceleration in technology and communications over the past 20 years, the selling process has become significantly more complex. Our connected world provides new routes to customers, but it has also raised the buyer's expectations. Increasingly buyers demand services that are customized to their individual requirements, an exceedingly higher level of quality, and items at a specific time and specific price point. Today, many of those same buyers want all of that as well as a single point of contact.
The day of the "end of quarter product push" is giving way to a more consultative, long term attitude as buyer's have become increasingly sophisticated, specialized and proficient. Successful organizations have adapted to the new sales paradigm through effective customer identification and satisfaction processes, built not to satisfy short-term needs but to build for the long-term growth of the organization.
At MainStream we can help you by implementing pragmatic solutions that will improve growth and effectiveness.
Understanding Customer Needs
Product and service companies alike know the importance of staying connected to their customers and prospects. Highly effective organizations are aware that markets change, needs during economic cycles shift, and competitors continue to innovate and release new offerings. While wanting to know what their customers and prospects are thinking, many companies do not have a formal process to receive ongoing and unfiltered feedback from their buying segments. They view the work associated with acquiring the information as important, but either too difficult to acquire, too expensive to get, or too far down the list of priorities to focus on.
Traditionally product or brand managers were tasked with the responsibility to acquire customer input at the start of a design cycle. However, at many companies the product development cycle takes nine to eighteen months. What a prospective buyer wanted a year ago can and almost certainly will have shifted before the new product is rolled out. The ability to stay in close proximity to customers today is not something that would be nice to do but is an absolute requirement for a business's success. Understanding customers better combined with the ability to quickly spot trends allows for fine-tuning in development priorities. In addition it establishes requirements for the broader set of needs relative to pricing, packaging, and service throughout the life cycle. This applies equally to new product development as well as refreshing existing products.
MainStream understands that many organizations are resource constrained. We know you want and need to stay close to your customers and prospects as well as to focus investments on activities that will sustain your company long term. Let us help you develop an in-house or outsourced program that provides you with the ability to develop products and services built around your customer needs and their intended future purchases.
Measuring Customer Profitability
Customer profitability is quite simply defined as the difference between the revenue earned from and the total cost associated with the generation of that revenue by a customer over a particular time frame. Generally, a small percentage of your top customers account for a large portion of your net profits. On the contrary, there are a percentage of customers who typically cost more to serve than the revenue that is generated by that customer. These unprofitable customers detract from the overall profitability of a company. Profit winners and losers are a result of variation in products purchased, revenues generated and the actual cost it takes to serve an individual customer. Armed with knowledge on customer profitability, a company can benefit from knowing precisely which customers create value, which take away value and what the difference between the two is. This information is critical not only to affect the performance of your business today, but to accurately target and retain profitable customers in the future.
While the definition above is simple to understand there is often a problem in determining which customers fit into which categories Most management accounting systems focus on product or service-line costs due to regulatory accounting requirements e.g. those requirements of financial institutions, investors and reporting agencies. But for expenses that reside below the gross margin level, including costs for sales, marketing and product/service distribution channels, accounting rules require that they be recognized during the month in which they were incurred. As such these costs cannot be capitalized and placed on the balance sheet in the same way that product inventories can. Accountants refer to these as “period” costs. However, to analyze customer profitability, internal management reporting needs to apply the same costing principles to channel and customer types. Because this type of non-traditional cost accounting does not occur with all companies, customer and product line efficiency is not measured as frequently as it should.
MainStream is ready to guide your organization through this process so that your company has visibility and assignable costs to your customers. Product line and customer based efficiency is a critical component of long-term value creation.
Distribution Channel Assessments
The automobile manufacturing and dealer community may seem like an easy target in today's business world, but a careful examination of the distribution channel framework leads to the question of how the industry had been as successful as they had for such an extended period of time. The first and most obvious issue was that the price of a car was inflated by locked-in labor concessions. A second observation was that manufacturers would pit dealers against other nearby dealers. Dealers were then pressured to accept more vehicles than they could sell. When they were unable to make money from selling new cars they turned to service and trade-ins to make a profit. At the very bottom of the chain were customers who felt trapped in high-pressure negotiations for a car that was not exactly what they wanted to buy. It is safe to say that this is not how one would sketch out the demand chain on a blank piece of paper.
If this sounds even remotely like your distribution channel, or if your channel seems more like a warehouse of lost opportunities that serve neither your company nor your channel partner effectively, then MainStream can help.
MainStream has observed that most channels are constructed from the supplier out rather than from the customer in. In other words, first the product or service is designed and then the supplier thinks about ways to get the product/service out to the customer. A common pitfall is that the chosen channel is an expedient short-term solution created without a great deal of consideration as to suitability of sales and profits.
We believe there are three key disciplines to channel management. They are:
building and editing
aligning and influencing
Call us today and we'll share our thoughts with you on how these three disciplines will make your channel management more effective.
Managing Selling Costs
Companies have great fear when it comes to experimenting with their sales force. After all, the sales force is the engine that drives revenue. Even if our engine isn't running on all cylinders the thought of overhauling it can be scary. However, during uncertain economic times and periods when revenue stagnation has set in with a company, management is compelled to examine and act on opportunities to examine all methods of increasing revenues in a cost effective manner.
The optimal way to avoid mistakes in this process is to partner with an organization that has knowledge on taking a fundamentally different approach to cost effective sales but also has the experience of knowing where the pitfalls are. The journey is not as scary when a company travels with a guide who has successfully completed the trip many times.
The following approach is one that the MainStream team has used in the past to help companies carefully sustain a 10 to 30 percent reduction in their selling costs while minimizing risk of future growth. The process begins with an analysis of your customers allowing us to know:
How much effort really goes into each customer and transaction?
Which services does each of them want and need?
What is my customer profitability?
Which customers and markets are growing and which are shrinking?
When companies understand their customers and the cost of "acquiring" those customers, that knowledge allows them to focus sales resources where they are needed and to eliminate waste. Following this approach, the sales force will become both more effective in driving top-line revenue in a cost effective manner.
This is just one approach that MainStream uses to help organizations become more effective. Call us today. We will be glad to discuss other proven methods that can be customized to your unique set of circumstances.