Author: Margaret McGuire
If you are responsible for sales and marketing performance, here are 4 specific actions you should complete to start the year.
1) Assess your organization’s commercial capabilities and identify priority gaps critical to delivering your 2020 business plan. Best-practice develops the right capability at the right time to address business performance priorities. For example, if a business unit is launching several new products, campaign design (marketing) and campaign execution (sales) are important capabilities and associated gaps to current capability should be a priority. Market Edge has Sales and Marketing Capability Assessments for individuals and business units that can be compared to a database of B2B companies with similar characteristics.
“Do we have the right commercial capability to deliver our strategy and maximize profit?”
2) Fight for Budget and Calendar space now! Have you optimized your organization’s level of strategic marketing, product management and marketing communications resource? Market Edge Benchmarks compare resource allocation by role for similar business units based on size, growth, profit and R&D investment. Once you have the necessary resource in each role, develop the right capability at the right time. Schedule 2020 development priorities so that capability comes on line ‘just in time’. For example, if the business’s most important campaign is in Q3, schedule training in Q2 that delivers applied learning to the coming campaign.
Lead the discussion in your business unit, “Are we investing in the right resources and scheduling our priorities?”
3) Identify priority campaigns and begin campaign planning NOW! Have you agreed the most important campaigns that will make 2020 a commercial success? Campaign design starts with a verb and clear target segment (e.g. launch our new technology in the innovator segment; re-enter the mass market; raise prices in the conservative segment). Do you understand the segment specific ‘moments of truth’ and touchpoints that will make the campaign effective? If not, market research may be necessary before campaign design.
The campaign’s overall objective should be cascaded to a combination of leading and lagging indicators. Consider teaser campaigns or other proactive market activation tactics to build awareness, engagement and anticipation before the heart of the campaign.
4) Update segmentation and targeting to provide guidance to sales so they are focused appropriately in 2020.
Segments are groups of customers that think and behave differently so it is likely that they will have achieved different business results in 2019. Update segment analytics as the year comes to an end. Has the size, growth rate, average margin or retention rates for your segments changed?
Provide Sales fresh targeting and marketing mix guidance to start the new year, paying special attention to segment specific pricing policy (e.g. never discount segment X, price to maintain share in segment Y). Targeting and margin improvements enacted now will provide improved performance throughout the entire year.
Interested in a conversation about campaign planning tools and B2B marketing best practice examples? Contact email@example.com.
Are there industry shifts that require updates to your Value Chain?
When you analyze PEST (Political-Economic-Sociological-Technological) drivers in B2B markets, like the growth of Electric Vehicles (EV) in the automotive market or alternative proteins in food, what are the implications for the Value Chain and how products are brought to market?
In the automotive industry, EVs are moving from the early adoption to the growth phase. The Value Chain steps associated with vehicle assembly are significantly changing as internal combustion engine (ICE) assembly is replaced by battery assembly and installation. If you are a traditional supplier to ICE powered cars, how will this affect your operations (materially, geographically, labor, etc.)? Some of this change is already playing out in the current GM labor dispute, where manufacturing operations are being moved to vehicle assembly locations (where battery installation occurs) versus engine assembly. How will this shift fuel distribution and adjacent services in the future?
In the case of alternative protein development and adoption, how does the growth in plant-based or cellular-based proteins alter the Value Chain? If you are a supplier to traditional meat processing operations, how will the shift to extruded plant proteins and lab-grown cellular proteins affect the strategic direction of your business?
The Value Chain is the backbone of B2B business system analysis and defines how value is created and transferred in a particular market. Raw materials are sourced from a number of plant protein producers or cellular protein manufacturers, processed and formulated into the form and features consumers desire, then distributed through retail to consumers, flowing left to right. Depending on population growth and demand trends, significant shifts in protein production away from animal protein may be seen and affect (geographically) where proteins are produced.
Value Chain analysis is the basis for other strategic marketing analyses, such as Porter’s Five Forces and Opportunities and Threats. Often during strategy development, options to reconfigure the Value Chain emerge (e.g. “let’s eliminate distribution and go direct to consumers…”. Before starting on potentially rewarding but very risky strategies that redesign the Value Chain, be sure to develop a thorough understanding of how of the Value Chain is currently structured and the forces that are driving performance and change. If you are seeing significant shifts (e.g. regulatory changes or threat of new entrants), it may be time to reevaluate the Value Chain and the implications for your business.
Click the Icon below for a 2 minute video overview of Value Chains in B2B markets.
What does a Gecko have in common with dating Apps?
Understanding customers creates opportunities from communication today to innovation for tomorrow
“Save 15% or more”
“So easy a caveman can do it”
“Happier than a camel on hump day”
Each of the above has a clear and simple position that conveys a benefit (savings, ease of use, satisfaction) and speaks to a target segment. For Geico, these three positions, and many more, lead customers to one product. That’s correct, one product promoted/ positioned differently to address “needs based” segments within a market. Segmentation supports unique communications and product positions that “speak to a target customer in a way that resonates.”
What does this have to do with dating apps? Spark networks is using the same common principles when addressing the dating market. Spark combines promotion with some product adjustment to offer largely the same product to multiple “demographic” segments.
Using a car analogy, for Sparks, the “engine” is the same, but the promotion and the “paint job” are designed for the target segments – and they are not alone.
Match Group markets the following products using a different segmentation scheme to address the same broad dating market.
In each of these examples, customer understanding leads to segments that are addressed differently. In a B2B environment these same principles apply. Develop in depth customer insight and use that insight for communication, offer development, innovation or any of the myriad of activities in between.
In today’s B2B markets, you may be faced with similar “engines” that are being marketed by competition. Deep customer insight that leads to actionable segmentation can make all the difference.
For examples of the concepts and tools above in practice, contact firstname.lastname@example.org
Marketing Capability Assessments
How do you know your marketing organization has the capability to win?
To be successful in today’s competitive environment, businesses must have effective marketing processes and tools as well as the experience to apply those capabilities appropriately.
Business and marketing leaders need to consider:
- Is my marketing organization equipped with the right capability (processes, skills, experience and enabling technology) to achieve our growth and profit objectives?
- Do we have a Capability Development Road Map that addresses priority gaps at the right time to ensure our most important new product launches and investments are successful?
- How will I know our capability is improving versus the right competitive benchmarks?
Multi-client studies indicate that 70% of marketers do not have a formal marketing background. This is even higher in B2B specialty chemical and materials companies!
Marketing Capability Assessments should be conducted by an independent internal or external resource that can provide comparisons across business units within a company and to external benchmarks in similar industries. The assessment should identify strengths (that can be shared and leveraged) and priority gaps (not all gaps are significant).
After the assessment is complete and priority gaps identified, a Capability Development Road Map is created to ensure the right capability is in place at critical commercial milestones.
Market Edge partners with category leading clients to assess and build the right commercial capabilities needed to deliver profitable growth. Our work includes capability assessment and development in a broad range of markets, including:
- Agriculture (crop protection, seeds, fertilizers and equipment)
- Animal Health
- Building & Construction
- Medical devices
- Specialty chemicals and materials
To learn more about implementing a marketing capability assessment in your organization, reach out to Market Edge at email@example.com
Create Value for Your Most Valuable Customers
Help your sales and marketing teams invest their time understanding and creating value for your most valuable customers with these three quotes and a Market Edge Framework.
“We’re not competitor obsessed, we’re customer obsessed. We start with what the customer needs and we work backwards.” – Jeff Bezoz, CEO Amazon
Understanding how the customer creates value for their customer is key in B2B sales and marketing. Too often, we see a narrow focus on understanding the buying cycle. Mapping the complete customer activity cycle from innovation triggers to product launch to product obsoletion will generate insights into other touchpoints and ways to help your clients. You will know your teams have made the mind-set shift when conversations switch from what makes the product better to how can we make customers more successful and profitable.
“Your most unhappy customers are your greatest source of learning.” – Bill Gates, Microsoft Corporation Founder
There is a need to change the lexicon from “Voice of the Customer” to “Voice of the Market” and then to “Voice of the Target Segment.”
- Voice of the Customer – falling into the trap of just speaking to your current customers, or even worse your current, loyal customers.
- Voice of the Market – suggesting there is a broader customer landscape which includes customers we have won and lost. This also suggests there are customers we have never spoken too!
- Voice of the Target Segment – knowing your target segment and narrowing your focus to that segment of customers will help you innovate, iterate and sell in shorter sales cycles. When your teams are focused on VOTS, you know it is time well spent!
“People do not care how much you know until they know how much you care.” – Theodore Roosevelt, 26th US President
Avoid the junior folly of “Show up and Throw-Up.” Your company’s marketing collateral, technical expertise, data sheets, and implementation guides are extremely valuable for the clients – just not all at once! (and definitely not at the beginning of the sales cycle) Understanding where the customer is in their value creation journey and feeding them the right information at the appropriate moment shows great respect for their time and understanding of their process.
Below is a Framework that will help teams map your customers value creation journey. We call it the Customer Activity Cycle. Pick a Target Segment and map the roles, actions and desired outcomes for a target segment as they create and sell value to their customers. Do this with a cross functional team and a wealth of actionable insights will emerge. If you need assistance or facilitation, contact us – firstname.lastname@example.org FRAMEWORK
Sales Call Planning in Complex B2B Environments
Closing the deal requires more than the typical transactional sales call plan
Pre-call sales planning is common practice for most organizations, but the nature of sales evolves as the interaction moves from relatively ‘simple’ transactional sales where individual customer requirements generate orders to ‘complicated’ (consultative and solution sales where multiple, connected needs are met with a combination of advice, products and services) to ‘complex’ (enterprise sales where the sale may result in partnering or value sharing models and the precise outcome for both buyer and seller cannot be predicted).
Market Edge recently interviewed a range of Sales leaders in category leading B2B companies who reinforced that their highest value accounts continue to move toward ‘complicated’ and ‘complex’ sales. In these cases, the importance and sophistication of pre-call planning increases.
In transactional sales, relatively simple pre-call sales planning includes:
- Defining call objectives
- Developing talking points that reinforce the value proposition
- Preparing for objections
As the sale becomes more complex, the number of purchasing criteria, individuals involved in the decision-making process and the role of influencers increases. Sellers need a deeper understanding of their customers in order to refine their value propositions and offers accordingly. In these situations, selling organizations need a more sophisticated customer engagement process and pre-call planning.
The customer engagement process starts with customer understanding, summarized in three main areas of analysis:
Account Strategy: Define the account’s strategy: stated strategy, observed strategy, performance indicators and supporting facts
It is difficult to ask the customer directly, “What is your detailed strategy?” However, key insights can be obtained by considering the following:
What are their goals?
- What is their corporate vision and mission?
- Do they have a corporate Balanced Scorecard or some other measure of Key Performance Indicators?
- How is management incentive compensation structured?
Where are they focusing to win?
- What are their key markets?
- What are their target segments?
- Who are their top customers?
What makes them better than their competition?
- Who do they compete against?
- How do they differentiate?
What do you see them doing?
- What are they doing internally?
- What are they doing externally with their customers?
Account Organization: Define the current account Decision Making Unit (DMU), individual roles, and disposition towards your organization
- How do decisions get made? Who has the authority? Do they use a cross functional committee? When do they meet?
- Who do you know at the account? Where are your relationships and strengths? Do you have an organizational chart – Center of Power, Influencers, Users.
- Who are receptive, dissatisfied, neutral?
- Make new contacts on every visit! Expand your network in their organization.
Customer Needs: Map the customer’s activity cycle and implications for pain points and critical purchase criteria
- Develop an in-depth understanding of the customer experience and value creation by mapping the entire activity cycle
- Explore inefficiencies, frustrations and unmet needs as opportunities for innovation
- Understand the customer’s purchase criteria or requirements for the product/service and the experience (what’s the job to be done)
Once these analyses have been completed, is time to reflect: Where do you have shortcomings in your account understanding? Do you have actionable customer insights that your competitors do not have? Pre-call plans should include specific objectives and tactics to close these gaps.
The application of advanced customer engagement and pre-call planning processes enables selling organizations to win more complex B2B sales.
For examples of the concepts and tools above in practice, contact email@example.com
Strategic Marketing Programs
What return on investment are you realizing for your marketing efforts?
Many B2B companies struggle to identify and measure the value they expect to receive from their marketing efforts. Customer interactions often focus on sales rep relationships and promoting offers with slick collateral and fact sheets. In those situations, marketing is relegated to a support function to the sales organization. In difficult economic times, it is often marketing roles that are sacrificed to control fixed costs and remain on budget as the near-term return on investment is not clear.
However, in leading B2B organizations, strategic marketing creates the bridge between business strategy and the specific, tactical actions to execute the strategy. Highly capable marketing organizations:
- understand how market drivers shape volume and profitability
- segment using both application and customer perspectives
- target the most attractive segments where the business has a competitive advantage (for resource allocation)
- create segment specific positioning and communicate compelling value propositions to distinguish their offers from competition
So, while marketing does develop eye catching content, it also provides the sales organization with direction to deliver tailored value propositions and market activation plans to the target segment(s), improving sales efficiency and effectiveness. Marketing also identifies segments and activities that are not priorities and non-value added activities can be stopped.
What is the expected return on investment in your marketing organization? In short, the value of strategic marketing is targeting your organization’s limited resources to achieve the business strategy. Strategic marketing aligns the business to create, communicate and capture value in the right customer segments.
NPV in MLB
How Could the Philadelphia Phillies Give Bryce Harper a $330M Contract?
by Dave Anshen, Sr. Consultant, Market Edge
Image from USA Today
As we approach the start of the 2019 baseball season, baseball fans and analysts are debating the decisions by the California Angels and Philadelphia Phillies to give such lucrative contracts to Mike Trout and Bryce Harper respectively. Just a few weeks ago, Bryce Harper received an unprecedented $330 Million (13 year) contract. Until Mike Trout’s deal with the Angels, Harper’s deal was the largest contract in the history of the big four U.S. professional sports (MLB, NHL, NFL and even the NBA). While some observers might want to believe that these deals are based upon emotions, these contracts are purely financial decisions. For example, if we take a deeper look at the Phillies’ deal with Harper, the financial analysis looks very attractive.
Whether it’s a Fortune 500 company, private enterprise or professional sports, business decisions must consider both strategic and financial metrics. In the case of the Philadelphia Phillies, a Net Present Value analysis is all that is needed.
The NPV Analysis
It is now public knowledge that Bryce Harper had several non-negotiable items, and a 13-year contract was at the top of his list.
As the Phillies considered various scenarios, they also needed to assess their risks and key assumptions that should be incorporated into their analysis. This type of discussion is similar to a company decision to enter into a new business venture, or develop a new product. Bryce Harper is the new business venture and there are potential risks to be considered. Also, there are minimum, likely, and optimistic scenarios regarding revenue streams. In the corporate world, this would be primarily driven by market size, market share, and the selling price of a product / service. In the case of professional sports, it is primarily driven by stadium attendance and TV revenue. Other revenue contributors include parking fees, apparel licensing and stadium concessions.
The biggest factor is the assumption that signing Bryce Harper will increase the attendance at the Phillies home stadium. Just considering the regular season, there are 81 home games. If the Phillies make the playoffs (beyond the wild card game), there could be an additional 4-12 home games each season. Based upon historical data, the Phillies attendance increased by more than 500,000 per (regular) season in years when they made the playoffs.
- For the Net Present Value analysis, we will assume they will make the playoffs in year 1, 3, 5, 7 and 9 (only 5 out of the 13 years of his contract).
- During these playoff years, there will be additional TV revenue and attendance revenue as well.
- Ticket prices have weighted average of $65 each.
- 50% of the attendees will park at the stadium (with an average of three persons per vehicle).
- No additional apparel revenue is included in this assumption (this will be considered upside). Note: there are already reports that apparel sales are increasing significantly
- No additional TV revenue is included in the model – because that information is not easily available, but certainly can be estimated by the Phillies management team
- Bryce Harper will be injured 3 years (of the 13) and this is reflected in assumption #1
In this equation:
Rt = net cash inflow-outflows during a single period t
i = discount rate or return that could be earned in alternative investments
t = number of time periods
As a simplified scenario, let’s consider the following:
T = The number of time periods = 13 (years)
i = 10% (or .10); This is a reasonable assumption for the current market environment
The net cash flows over the 13 years is estimated as follows:
Based upon the assumptions, the Net Present Value is a positive $9,251,339.
This does not even include any incremental TV revenue or apparel licensing revenue. So, even with these (arguably) conservative estimates, it seems to be a sound business and financial decision for the Phillies.
In summary, all significant business decisions need to consider both strategic and financial implications. In this case, an unbelievably large (and unprecedented) contract appears to be a sound financial decision – even on a risk adjusted basis. When you have financial discussions in your company, it’s absolutely critical that you identify potential risks and assumptions, and agree upon the key assumptions that will have the largest impact on the NPV analysis. In situations where you have many scenarios and probability factors associated with each assumption, you may need to consider more advanced analytical tools (e.g. Crystal Ball®). The Market Edge team helps clients with strategic decision making and the qualitative and quantitative assumptions that help guide sound decisions.
How do we lead the discussion from Price to Value?
If we do not understand our value, we are destined to give it away
Does your organization have the required commercial capabilities to quantify and capture the value associated with your offer?
Our clients face increased pressure to define and hold value in markets with professional purchasing, increased transparency and consolidated downstream power.
However, not all businesses have the required commercial (sales AND marketing) capabilities to raise or hold prices effectively in this environment.
Our experience with a range of global, category leading B2B companies shows the following are critical to defining and holding value.
Customer selection – Targeting the right customers is a critical first step in a value-oriented approach. Leading organizations understand that “average is the enemy” and focus on target customer segments, not simply the average customer.
Actionable customer insight – Detailed identification of the value drivers for a target segment or account is critical to developing a value proposition and focusing on the most important components of value.
Value quantification – Defining the value associated with customer offers involves more than product performance and benefits. Leading organizations uncover other operational or efficiency components that can be validated and quantified.
Value communication – Disciplined value proposition development, negotiation preparation and campaign development ensure that value messages are delivered clearly and concisely in a way that resonates with the target customer.
Value capture discipline – Organizations have an agreed price strategy and are ready to capture the value confidently. Value discipline extends from marketing to operations, sales and technical departments and ensures that the aligned organization has process and metrics to capture the value it delivers.
Developing B2B Sales Capability: Can B2C examples be used to develop B2B Selling Capability?
We are often asked if B2C tactics and examples are relevant for developing B2B Sales Capability. The answer (as with most consulting answers) is, “it depends”.
In both B2C and B2B, the sales function helps move customers through the buying cycle (awareness, consideration, decision, acquisition) deliberately and efficiently. In B2C purchases, there is usually one decision maker and procurement cycles are shorter. B2B sales, however, must target multiple roles with varying needs and problems to be solved. Typically, B2B sales must communicate:
- Technical advantages to engineering
- Processability improvements to operations
- End use differentiation to marketing
- Total value created to procurement
Great sales managers know how to develop and communicate their value proposition to the right role at the right time.
Both B2C and B2B customers want to “feel good” about their purchase decisions (i.e. I paid a fair price for good value…). B2B decision makers have business as well as personal wins to consider. The Business Win is proving value. The seller’s value proposition articulates how their offer increases the customer’s profitability. The Personal Win is achieved by linking the purchase to the decision maker’s performance criteria (e.g. reduce variable spend for a purchasing manager) or by increasing the decision maker’s status (e.g. delivering a new product launch on time and on budget).
B2B selling skills are not art (although there can be a lot of creative license in delivery styles) but do follow disciplined approaches and proven practices to maximize strategic and tactical selling investments. Sales capability is a product of knowing and practicing the right skills. Those who consistently outperform their peers usually follow a disciplined approach to engaging, understanding and anticipating the needs of their customers.
Market Edge has worked with category leading B2B companies to develop effective selling programs for the past 25 years. To learn more about our programs related to Selling Skills or to attend a Market Edge Academy program on this subject or other related Marketing and Sales topics, CLICK HERE.