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Appendix A | Appendix B

BUSTING $10 MILLION:
Changing Culture

    In any case, the move to a Marketing Mentality is a must. Some do it by learning as they go, slowly lowering their learning curve by trial and error. Others accelerate the process by adding talent and experience to facilitate the change more quickly. Unfortunately, the vast majority who are reluctant to make the switch fail to bust through the elusive $10 million plateau.

HANDS-ON MARKETING

    Here we are again back at the bench with hands-on management. I have expressed a philosophy that a hands-on manager is a necessity for running a growing company. This does not mean you have to do everything yourself. You should still delegate, but you must know how to delegate and how to follow-up. This is especially true when dealing with marketing.

    No doubt about it, marketing should be the driving force of a company. I’ve seen more successful presidents with marketing backgrounds than any other operating discipline. And since marketing is such a vital part of a company’s success, it requires a healthy dose of common sense. Marketing needs internal challenges from the management staff. I’ve seen too many companies where marketing personnel play God. The rest of the staff plays along with it because of the mystique and sense of importance that only marketing can create. This is because the Marketing department buffers the rest of the company from the customers and market. They are on both sides of the bridge. The proper use of the whole management team can provide the right checks and balances on Marketing that will help lead the whole company to success.

    I don’t have to tell you that there are significant changes in the market that apply not only to the high-tech industry but to the traditional markets where companies produce products that are shipped to customers. Some of my hardware clients find it difficult to believe that their customers no longer are interested in a specific product as much as they are in a solution. More companies are customizing their products for customers who are looking for and buying solutions rather than standard off-the-shelf components. This means smaller runs and shorter lead times. Unprecedented effort is going into keeping inventories down while customers demand-and get-more support that ever before. This competition for service has been introduced from outside the product-specific marketplace from companies like Nordstrom and Southwest Airlines that have set new standards and higher expectations for customer service which all industries have to live up to.

    In addition, global competition is increasing, not in the old sense of import pressures on the domestic markets, but in staking a position in the growing global economy. While servicing U.S. companies in the Orient from the USA is becoming less competitive, one of my clients started a factory in China, not so much for the low labor cost but just to be in that market.

    Whether your business is domestic-based or international, it is hard to go it alone, especially if you have a growth mentality. That is why strategic partnerships and mergers, either for business, marketing or financial reasons, are the rage today. You can’t pick up a newspaper without reading about new business alliances, i.e.: Microsoft/Apple, but they are-and can be-very complex, both for customers and competitors.

    During the late 60s and 70s, America’s reputation as the world leader in technology and competitiveness declined. It took nearly a whole decade, but we finally saw in the 90s a resurgence in US industrial leadership, primarily due to a major turnaround in US business practices that increased efficiency. It is a good news/bad news scenario. The good news is that U.S. industry is now lean and mean with smaller runs, customization and innovative technology in manufacturing such as the use of surface-mount components. The bad news is that with all the new technology, fewer people are needed to accomplish the job.

    While “re-engineering” and “downsizing” have become hated buzzwords among America’s workforce, they have been the silver lining for business. Competitive manufacturing is making a return to the United States. I’ve seen a power supply company bring product back. I’ve seen a printer circuit board company prove that it is far more competitive in the States because of improved efficiencies and improved equipment. Japan’s quest to “increase market share” has gone aground because of the need for customized products, short runs, higher customer support and that very important requirement-getting product to market quicker than ever before.

    I think history will show that companies that successfully reengineered themselves while reducing manpower, have now more people employed than before the cut backs. General Electric is one such example.

    The bottom line of this important return of leadership by U.S. marketing and global business practices is the restoration of respect for customers, who have been reinstated as the king and queen of business. Companies that want to compete know where their bread is buttered and treat their customers accordingly.

    To succeed, you and the rest of key management must take charge and serve as champions of product, service and change as needed. If your company has any chance to grow and survive in the marketplace, it is extremely important for you to face any and all changes and to adjust to them swiftly.

    Marketing should direct a company, provide the financial maturity, support the vision and the mission, define the product, define production needs and support functions. Market research, market analysis, product planning and overall strategic planning are vital to a company’s growth. The planning and strategy aspects are essential in providing market penetration, product development, product or service differentiation and market diversification.

    Marketing is responsible for defining a product and what’s needed to sell that product. Marketing is really the bridge between the company and the customer and is built on a foundation of a vision and a mission. Marketing is actually the ability to deal with the customer’s perceptions more than the perceptions of the products. It is better to be first in the mind of the marketplace. And marketing is what puts the idea out there.

    Successful marketing also depends on priorities-resources, customer relationships, common sense and economics. The tendency is to sell a product immediately at a particular price and volume, without researching what the customer needs, without determining if your product is really going to solve his or her problem. To be successful, marketing must be organized with a high degree of planning, execution, development, pricing, promotion and distribution.

    The Marketing department must be the champion of change. Its responsibility is to know the market image, how the product is perceived, who the competition is. It has to interface and support the customer because customer satisfaction is more important than ever. It also must increase the company’s value. The company is not in business solely to make a profit or put cash in the bank. It’s in business to increase the valuation of the company, whether it’s an owner who wants to sell out some day or a start-up that wants to go public.

    Ultimately Marketing and Finance pull the wagon. They are the key elements behind every decision. As the company’s leaders, they must be thorough in their knowledge of the firm’s vision, cost information and competition. As the company matures they must be able to identify new market needs and be able to meet those needs with strong management and customer resources.

    If a company is to continue to grow and succeed, marketing must become a part of that company’s mind set. There are several steps you must take:

    Whether or not you are a master marketeer, there are always questions to ask your marketing staff. The answers will make an influence on the product and on the future of your company. Just because it sounds exciting and everybody feels it’s wonderful, you should always question the probability of success by asking:

    Marketing people have a tendency to offer percentage figures as proof of the wisdom of their position; but when you are dealing with growing a company, percentages alone do not really provide the information needed for strategic planning. If your people offer percentage figures, get them to define the kind of need, the timing and what the company is capable of doing. Sure there may be a market need, but are there alternative ways to meet the need? Does the customer really need it? Your marketing person should know what the customer’s position is. Before launching an expensive change, understand the structure of the market, the market size and potential, the priority of the need, availability of customer funds, and the customer’s product awareness.

    Also ask:

• How much it is going to cost to produce?

• How long is it going to take to get to market?

• What is the product’s lifecycle?

• What is the market need?

• Do your internal resources match this?

    And the ultimate question is always:

• How are you going to penetrate the market?

    All these questions may seem overwhelming at first, and of course there are different ways to approach any given market whether it is new, existing or emerging (more on this in the chapter “Market Relativity.”). Marketing is after all a complicated subject. Even in this book I refer to marketing as:

However, as complex as marketing can be, its success is easy to measure. Marketing is successful when sales revenue increases.

SALESMAN OR CON-ARTIST

    There is an old joke: “How do you know when salespeople are lying?”

    After a drum roll, the answer is: “Because their lips are moving.”

    After the sales presentation at a staff meeting, when the sales manager has left, I have heard many frustrated voices complain, “Is he a salesperson, con-artist or what?” This is the perception that non-salespeople have in all fields and markets.

    The non-marketing staff believes salespeople are too quick to support the customer position; that they will get a sale at any price. Often they would like to shoot the messenger because they don’t like the sales person’s input. Senior staff believes salespeople habitually over-commit the company-constantly giving away too much and trying to sell product “that we don’t have.” Because of these perceptions many times no one listens when the salesperson has something important to say. During my short stint as a salesman, I often found it tougher to sell inside the company after a customer had been sold on the outside.

    Salespeople commonly believe that:

    Sally Sales was guilty of most of these sins when she was first given the opportunity to take over the sales manager’s job. In the beginning she got into trouble by going too far in representing customers. When Fred reminded her who signed her paycheck, her retort was, “There would be no paycheck if there were no customers.”

    Given her attitude it was a wonder that she lasted in the position, but her greatest strengths, a passion for the product and a caring attitude, were greatly appreciated by the staff. Their support eventually won over Fred Founder, although he would never acknowledge Sally as a better salesperson than he was.

    Despite Sally’s strengths, which were important for the company’s growth, I winced whenever she spoke of customers as her friends. As good as she was; this was naive thinking. No customer is a friend! That is particularly true when you are dealing with real pros in purchasing. Skilled purchasing people can play with sales personnel like puppets, by making them believe they have the inside track among all the competitors. They are masters at creating the illusion of friendship with what I used to call the old Maxwell Smart trick.

    A purchasing agent leaves the room with a wink and a nod that seems to say: “Look, I’m going to be out of the room. If you can read upside down, you ought to be able to get the confidential information I want you to have.”

    This “friendly” gesture is meant to sell the sales person an illusion, that he or she is clever and respected by the buyer. While the salesperson might discover the specific competitive prices, he or she doesn’t know all the other terms and conditions that went with that price.

    Because their attention is usually fixed exclusively on pricing, salespeople are not primed to understand the total value they are providing to a customer. This includes such intangibles as: volume, total commitment, shipping rates, payment terms, customer supplied information and guaranteed material and customer support.

    It’s downright dangerous when Salespeople believe they work for the customer. It’s nice to support the customer, but they have to keep in mind that their paychecks come from the company.

    No matter what they are told, the sales force thinks the company is holding back. The sales team believes that the company can do more in the way of better schedules and prices. Too often the Sales credo seems to be, “Get as much as you can from the system and let the system worry about itself.” Or, “If I go down to a lower number and the customer accepts it, then the system is going to make it happen.” Fortunately, in growth situations, that is often a reality. However, too often the sales force makes promises to customers they can’t keep. This is terrible, both for the company and salespeople. Once soured, a sales relationship can’t be turned around. If the factory gives the salesperson a promise that never comes true, the credibility with the customer is destroyed and salespeople know that. Salespeople want to own the customer and killing their credibility can be devastating to their future.

    I’ve seen salespeople sell a product even when the product is not available. They love to tell customers they’ve got new things because that is what excites them. They tell the customer that they love them, that they offer the best solutions for them. I attribute this to the unique personality of salespeople. They have to be needed and loved.

    Because of Management staff perceptions on the one side and Sales’ attitudes on the other, sales staffers often adopt an Us vs. Them mentality. You can hear them saying, “Selling inside the company is more difficult than selling to the customer.” This may be true, but salespeople must realize that not everybody inside the company is going to jump at everything they say. They forget that “the insiders” have other priorities, and that they must work harder to make themselves heard.

    Problems can arise when salespeople believe their own B.S. Some salespeople believe that reports slow them down from selling. They also believe that the inside doesn’t respond to the customer’s request in enough detail. However, I’ve seen salespeople get quote requests and then give answers that leave out key points or ignore what the customer wants.

    Most salespeople hate terms and conditions and price increases. They thrive on gross margins even though they don’t understand the profit structure. In a sales meeting they try to win a point with the customer by talking about their concern for the gross margin and product integrity. This is dangerous. They don’t like to tell a customer the company wants Net 30. They would rather tell him, “Yeah, we’ll give you six months to pay.” This should signal the customer to get ready for a kill.

    And there is always the “good news/bad news” perceptions and reactions:

    But the worst characteristic in salespeople is when they aren’t very good listeners. A joke about a salesperson’s chronically short attention span goes, “By the time you count to ten, they will have forgotten the first three numbers.”

    I once called on our largest customer with one of our regional sales managers. It was very important to get insight into their purchasing plans for the year. My manager dominated the early part of the meeting with statements like: “You will be buying X units this year, and Y from us,” “You plan to stay with the present product for the next two years,” “You want to evaluate our new product” and on and on.

    Finally, he asked a good question and while waiting for an answer actually paused to take a breath. Our customer’s purchasing manager, who had sat patiently through all this, didn’t miss a beat, and replied, “You have been doing all right until now, so why don’t you answer the question?”

    If we had left then, we would have had no new insight for the year. Fortunately, I had a good rapport with the customer and I jokingly asked him to critique my manager’s inputs, and we got the true scope.

    Another time we asked our salespeople to survey the customer base for a hot new product (at least we thought so). Our marketing people went to great lengths to define the product and all its features, and to provided the salespeople with excellent collateral material. The response from the salespeople was overwhelmingly favorable, so we were surprised when sales didn’t take off. Marketing did some checking and found most customers were asked the following, “If we provided a memory that was faster, smaller, lighter and cheaper, would you like it?” But no attempt was made to tout our features and advantages over competitive products. And the main question didn’t seem to get asked, “Would you pay for it and buy it from us?”

    O.K., enough sales bashing. In my experience, salespeople are seldom appreciated. It’s time to acknowledge the positive traits salespeople can possess. Aggressive salespeople won’t take no for an answer. A good sales person will sit in a parking lot for two to three days to turn an order around, and that is commendable. Sally also got bad vibes from her peers when on occasion she went around the system to get Fred’s attention. I thought this was great-when she couldn’t get enough interest inside to pursue it, she wasn’t going to lose an opportunity that she passionately believed was good for the company.

    I truly believe that salespeople have unique personalities and companies need them. In fact, few other disciplines in the management structure can switch over to sales. It’s not easy to sit in front of a customer while deliveries are late, quality is bad, and you don’t have the lowest price, and have the gall to ask, “Can I have the next order before I leave?” The good salespeople can do this. No one else in the organization can.

    So let’s acknowledge that:

    I was part of the interview process when Fred hired Sally. In fact, I eliminated other candidates because Sally was the only one who said she wanted to make well over $100,000. Better yet, she was willing to gamble more on a commission than on a guaranteed draw.

    Look what she put up with on a daily basis:

    To get the most from your sales staff, you have to look for the following characteristics:

1. People with a high level of passion. I can’t imagine a salesperson being very successful without passion. And that is something you must hire.
     

2. People highly motivated by performance-based rewards. If a salesperson is not competitive (and there’s no better competition than getting commissions), then you have a dangerous situation. Look for people who will work strictly for commissions, although this is a dying breed. If you find one, you’ve probably got a real winner.
     

3. People who will push until they get what they want. Many managers shut that off. I want people who push the organization, which by nature wants to take things easy. It’s extremely important to have personalities that will challenge the people and the system.
     

4. People who will go around the system. I’ve had salespeople that felt so strongly about something they would try to locate the president of the company, even on a Sunday. I like that. I don’t want anybody in the field-anybody who deals with the customer-to walk away from something they really believe in. They may not get their way, but at least upper management should hear about it.
     

5. Look for salespeople who want to make a lot of money. If they make a lot, so will you. Turn away those who would be content just making a “comfortable commission.”

    Keep in mind that salespeople must be positive with the customer even when they are being constantly beaten up over their company’s poor performance and support. I have had good salespeople say they would rather sell a poor product with good company support then sell a good product with poor support.

    So appreciate sales personnel and calibrate them to understand what percentage of the B.S. is real and not real. And, then find out what the real part is.

    With all that in mind, take heed to these words of wisdom. Many small companies start out by calling their top sales person VP of Marketing. Then, three or four years later when the job requires far more than just selling, trouble rears its ugly head. The person has the marketing title but not the skill.

    I have successfully taken engineers and put them into marketing and they have done great. I have taken a finance guy and put him in charge of operations and he was very effective. But it is very difficult to move non-sales people into positions where they are required to sell the company’s products or services. On the other hand making salespeople managers can destroy them.

MARKETEER OR PIED PIPER

    The president could be the best salesperson in the company, or at least he thinks he is. He is the one person that can make a commitment and make it happen. He can guarantee the price and nobody disputes it. But he or she can also get in the way of change.

    Many times while serving as a company director, I have had disagreements with the company president and marketing subordinates when they have tried to use the mystique of “the Market” as a shield to fend off questions about less than stellar performance.

    Even when a company is already in deep trouble, they say, “Well, you just don’t understand our market.”

    I respond, “Apparently you don’t understand your market either because you are losing money!”

    I have used the term “pied piper” when criticizing marketing people whom I have known and worked with over the years. They ARE like pied pipers. They are great storytellers and they can get people all worked up and excited. And they can often lead them out right of town and into oblivion. As managers, we must make sure that doesn’t happen.

    A marketing Pied Piper would have the entire company build to a forecast regardless of the inputs. The market could be shut down but Marketing believes that Manufacturing should keep building the products and “we’ll sell them.” This puts a lot of companies in trouble.

    The pied piper marketer also believe gross margins will save the day. Even when forecasts are failing, he is happy because he is getting 50 percent gross margin across the board.

    However, Management must look at it differently. The fact that they’re selling less than half their forecast and revenue means that at 50 percent, the contribution in total dollars will be nowhere near necessary to cover the expenses, let alone profit. This is the problem with Marketing’s attitude. They believe that the pricing formula guarantees profit.

    Almost every company I have seen has told me that they have a pricing formula designed to guarantee a 20 percent pre-tax profit, but in fact all they were getting was between 2 and -1 percent. What does that mean? When you don’t get the sales you forecast and your product mix is diverse, each with its own set of margins and complexities, then it stands to reason that your profits are going to take a hit. It comes from the failure to see the big picture.

    Marketing people become heroes in their own minds by being “master of the after-strategy.” They believe the company will die if it doesn’t get the contract. Or they will say, “We can’t afford to let our competition get it.”

    On the other hand, you can expect a rash of excuses from the marketing folks when they don’t get the contract, despite the fact that you’ve given them everything they needed to close the deal.

    You’ll hear excuses like: “Well that would have been a bad job for us anyway.” or “You know that job would have taken too much of our resources,” or “ The margin wasn’t good enough, so it’s better to lose the contract.”

    Marketing tends to over commit the system. Many times this is because they believe the system is better than it is. “We can deliver that in three weeks,” they claim, although you know it normally takes 12. “If we could get a price and you give me twice the order, we’ll get the price reduced by 30 percent.”

    It is all about attitudes. What is the attitude of a marketing person? A sales person? Is it marketeer, pied piper, or what? Staff perceptions about sales and marketing can get downright confusing unless you and your company understand a couple of basic tenets.

1. Sales is really a subset of marketing. The problem is that most salespeople don’t understand the difference. As manager it is your job to ensure that the roles of Sales and Marketing are clearly defined.
     

2. Salesmen will deal in a field of schemes, and to a degree that’s important. But it is my belief that management must always deal with salespeople-and every other discipline in the company-with a degree of cynicism without being antagonistic.

    The first encounter a company president has with a marketing manager almost invariably ends in failure and sometimes disaster. Often he is not as savvy about marketing as he should be and does not realize its importance to the growth of his company. Consequently, he may be reluctant to bring in a marketing person on his own. However, this hesitation is usually wiped away by pressure from directors, investors, trade groups, roundtables or even his own staff, all echoing the words: “What this company needs is marketing” or the old cliché, “We need to change from a technology-driven company to a market-driven company.”

    What Fred Founder, the president, does know is that growth is getting tougher, and a 40 percent growth rate at a $5 million revenue level is far more difficult to maintain than when the company is at the $1 million revenue level. Sally Sales, the sales manager, does a good job, but she fights forecasting future business for fear of being wrong. She provides little insight into where the company should be taking the product. Oh, she has inputs from customers a mile long, but never seems to know if it makes economic sense for the company to undertake a new direction. Engineering is frustrated because her aggressiveness and tenacity continue to interrupt its perception of what the product should be.

    Of course, Ed Engineering hasn’t fared much better in product and market planning since the initial product entry. This starts to worry Fred because he realizes that, until they know what the follow-up product will be, growth will eventually subside and the company could end up in the tank. After to much time passes, Fred realizes the company needs more market insight and declares, “Okay, maybe marketing is the answer.”

    This idea is strengthened as he realizes he personally is being pulled away from the customers, because of his added duties as president in a growth company. He is still not clear on what marketing is, but the echoes around him keep saying, “We need marketing,” and he finally comes to believe the time has come.

    Unfortunately, Fred doesn’t know what lies ahead.

    Fred has two ways to go, run the usual ad in the local newspaper, or hire a search firm. A newspaper ad costing under $500.00 looks the best to him, but he’ll only end up getting what he pays for. Despite the high costs of search firms, his better choice probably would be to retain one to search for such a key person.

    Why?

    The probability of hiring a marketing superstar from an ad in a local paper sits right up there with the odds of winning the lottery. Compare the quality of people generated by the ad to that from the professional firm. Not being experienced in hiring senior people, Fred will write an ad that will dig up all kinds of personnel, from maintenance and service people to office managers, and from leasing people to marketing support personnel. Like most newspaper ads that yield well over 100 resumes, 10 may look worthwhile enough to do a phone interview. Three or four will be worth bringing in. After interviewing the short list, Fred probably won’t be comfortable enough to hire any of them. Weeks have gone by and hours of Fred’s precious time have been expended and he is back at zero.

    In reality, a real winner is a person who is not really looking for a job. If Fred were smart he would have hired the executive search firm. Search firms can get a lot further and deeper with candidates in initial interviews. They know how to ask much more relevant questions than the president might feel comfortable with. If this sounds like a commercial, so be it, but results speak for themselves.

    Having a search firm would have saved Fred several phases, starting with help in defining the role of the person to be hired. He could explain what he believes he needs, and the search firm would take it from there. After playing this back for Fred’s approval, it is most likely then that every candidate brought to Fred would meet the qualifications. It would then be up to Fred to judge the best one based on chemistry and the ability of that person to adapt to Fred’s culture. Besides helping define the role, the search company also could help to define the compensation and work with him in the negotiations.

    The marketing head is the key position Fred needs to fill. It will have the most significant impact on his continued success and growth, and the value of Fred’s “estate” -the company. Search firms conduct extensive reference checks, and can get answers to any questions Fred was reluctant to ask the candidates. They can also deal with issues that Fred may have been nervous or uncomfortable with. Fred hasn’t had experience in hiring a key senior manager and doesn’t know the pitfalls in identifying losers or non-superstars.

    Fred needs a marketing superstar and to find one, he must avoid the following:

1. Don’t hire someone who is currently unemployed. Remember, we are looking for a superstar. The person has to be in demand. If laid off due to unfortunate circumstances, a person in demand would have no trouble walking into another position.
     

2. Don’t hire someone who has jumped from job to job too soon. Instability is a drawback in any position.
     

3. Don’t hire someone who has followed his or her boss from job to job. You will seldom find a leader among those who have followed all their careers. A superstar is a leader, not a follower.
     

4. Don’t hire someone who isn’t focused. Such people are generally responsive to any job and don’t make it clear what they are interested in. They don’t really know where they are going.
     

5. Don’t hire someone who made more money in two previous jobs, or someone who will take a significant pay cut. There may be some sound reason the candidate wants to join the company, but if you are paying less than what the candidate received in two previous jobs the mindset of your candidate is wrong. Someone who isn’t ambitious on their own behalf will probably not be ambitious on yours either. Anyone should be able to see that this is not a good fit.
     

6. Don’t hire someone who has done no research about your company before the interview. Why hire someone who is not interested enough in the company to find out something about it?
     

7. Don’t hire someone who has not been with a winner. Once a person has had a taste of being on the winning team, nothing else will do-he or she must get there again.
     

8. Don’t hire someone who doesn’t seem intelligent, who has no common sense. It is amazing how good a person sounds when he knows all about the specific job he has done. However, you need to make sure he can walk across the street without jeopardizing traffic.
     

9. Don’t hire someone who has failed to achieve success in his or her previous (or current) position. Do you really want to hire a CFO from a company going bankrupt? Or a Marketing manager who hasn’t successfully launched a new product in years?
     

10. Don’t hire someone who will accept any job available-barber to brain surgeon. This just demonstrates how dangerous that person is.
      

11. Don’t hire someone who was fading in his or her previous company. In the reference check, decode all the fancy titles, and find out if he or she were on a positive or negative trend.
      

12. Don’t hire someone who has worked in the industry for several years and has consistently earned far below the norm. This strongly indicates that the person has a problem you’d be crazy to inherit voluntarily.

    Passion is one very important attribute Fred should look for. With Fred dominating the staff, it is unlikely that many of them, if any, have passion. Marketing and sales require personnel with passion, and the best place to start is at the top. So do hire someone who wants to make a lot of money. That is your chance to be rewarded also.

    Bypassing the search firm, the most likely candidate will come from a referral or someone Fred knows in a vendor or customer company. Fred will be overwhelmed at the person’s polished image, steady flow of buzzwords that spiel out in all conversations, apparent knowledge of the product and market that create a misguided feeling of comfort for Fred.

    The person may even be more of a sales type. If so, Fred hasn’t distinguished between sales and marketing.

    The first person in will probably want a compensation agreement heavy on guaranteed income that Fred will innocently accept, and most likely regret later when the performance doesn’t meet his expectations.

    If he or she comes from a bigger company environment (because that’s where marketing managers come from) that new marketing manager will most likely have a problem with fitting into the existing, smaller culture. A president like Fred, who supports the person all the way and is in awe of his or her style and chatter, will allow his new hire lots of freedom and authority. Ms./ Mr. Nix Fit will change things (even if they are working fine) and actually set the company back. Forecasts will sound so good that Fred will allow product to be built on the come, only to later sit idle in inventory and drag down Fred’s net worth. (If you don’t know about that yet, you need my inventory book)

    All forecasts have great reasons for being missed, but nothing goes away, it’s only delayed. I can’t count the number of times, after being way below forecasts several months into the year, I have heard the marketing manager say, “I will take responsibility for the forecast.”

    My response, “What the hell does that mean?”

    Many Freds defend their marketing manager without realizing that in several months the individual could leave, most likely for a higher paying job, leaving Fred behind with a trail of missed forecasts, unneeded inventory and a great void in new product planning.

    One sad note: after a bad marketing experience there is a lingering sensitivity not to do it again. I have seen this scenario played out time after time, and I try to prevent it by educating the Freds of this world as to what marketing really is. The need is not for Fred to be a marketeer, but to have a good comprehension of what marketing is. Then Fred’s skill and common sense will make the integration effective in his organization. Help and direction can also come from a board of directors or previous mentors. Education is the best pill for shortening that cycle. The old adage applies, “If you fall off the horse try to get back in the saddle as quickly as possible.”

    Even when Fred finally decides the new person and program is not working, it is already too late. Unfortunately, given his lack of marketing experience, Fred has a hard time confronting this new breed of manger.

    However, Fred can avoid the months of reorganization by asking one simple question, “Have Sales Increased?”

    There are many dimensions to marketing, but the one real purpose is to increase sales. And this should be easy to measure.

    I have found the most effective way to focus on this is to structure the new marketing manager’s compensation on the growth of sales.

    When the right candidate says, “I want a compensation agreement heavy on guaranteed income,” Fred’s line will be, “We are going to do $5 million in revenue without you, so how about basing your compensation heavily on the additional sales?”

    The Marketing/Sales management team should drive the selling effort. It is important to have salespeople you know are brazen, bold and willing to try to reach the president of a client company. You can’t just deal with the buyer alone. You’ll never get the proper insight for your marketing need.

    Some handy tips are:

    Keep the following points in mind:

1. Never walk away willingly from a customer. Keeping a customer is important, since one unsatisfied customer can result in 10 bad referrals. You can take a bad customer and turn him into an opportunity, if you work hard enough at it. There are times when it seems impossible, but experts tell you it costs five times more to develop a new customer than to service an old one.
     

2. If you really want to or have to drop a customer, there are far better ways to end the relationship than by just walking away. First raise prices and explain to the customer how your costs have risen. On the other hand you can even offer to find him another supplier. I have done both and come away with good will from the customer and praise from the corporate headquarters for turning my division around.
     

3. Breaking into new markets is very difficult. You can’t develop credibility and confidence with new customers overnight. When it comes to marketing, companies exist to serve customers with goods and services they need and are willing and able to pay for. The trick is to match those needs with your resources and be able to serve it.
     

4. When dealing with customers and supporting your sales and marketing personnel, keep in mind that customers like to deal with a winner. They like a positive attitude. They want to deal with the best, a leader. A good strategy is to be conscious of the customer’s perceptions and deal with mystique. Never go with your hat in your hand.

    Now, you should have a pretty good idea about how I feel about sales and marketing. I never professed to be a marketeer per se, but I do believe that my years of experience and product successes have given me a good understanding and working knowledge of marketing. I can quickly pick out the good marketing plans from the bad ones, and I can spot a good marketer from a pied piper in the blink of an eye.

MARKETING AIN'T MANAGEMENT

    The most important difference between sales and marketing is profit consciousness. Sales personnel should try to get the order from a customer under any conditions possible. It is up to Marketing and the system to put the restraint and cap on sales so that the orders make strategic and profit sense.

    Marketing, on the other hand, should have both Profit and Return on Investment (ROI) in mind at all times. However, marketing is not solely responsible for Profit and ROI-the general manager must also watch over them. In addition, Marketing must be concerned with serving the customer and ensuring a comfortable, easy path between the customer and the company.

    Marketing personnel, while trying to please the customer, are often determined to create their own mystique within the company. Marketing personnel set themselves above everyone else by virtue of their influence with, and total access to, both the inside and outside world. Marketing personnel have knowledge of the products from both the technical and market viewpoints. These global overviews encourage arrogance which is OK, because in dealing with the outside world they must believe they know it all and know best how to solve everyone’s problems and needs.

    But this high and mighty attitude must be corralled. It is essential for management to look out for the signs that the marketing mystique is getting out of hand.

    In every marketing person, there are good and bad characteristics, which, depending on the person, can either have a positive or negative effect. I observed Mary Marketing for years and saw a continual improvement. She got better every day, strengthening the positive side of the balance sheet. She knew what it took to make a buck. However, there are other facets of running a company, such as product mix, scheduling resources and finance, that Mary had not encountered in her role as Marketer. As good as Mary became she still had the characteristics of a marketing person that needed to be understood and watched.

    You could observe Mary Marketing for hours before realizing the make up of her personality included the following:

    This is one of Mary’s most powerful methods for creating her image. She is a master at fitting strategy to a result after the result occurs. For instance, she chases a major customer for months, soliciting everyone’s help to close but with no success. Shortly after losing the customer’s order, the customer goes bankrupt. Mary now claims, “She didn’t really want the order because she knew the customer was in trouble and it would be an unnecessary drain on the company.”

    Mary got so used to touting and selling the company that she started to believing everything she had said. This may be okay in selling the company image, but should never be allowed to work its way internally into decision-making.

    Mary is so intent on solving a customer’s problem and winning him over, she will pitch products and solutions that are neither available nor realistic.

    It’s said that next to poor cash management, the second most listed reason for small companies failing is their effort “to be all things to all people.” Remember, the god-like attitude of Mary drives her to this mindset.

    This is a great attitude in selling and marketing (if obsession doesn’t drive them past the line of common sense). It takes time, some bent ears and pushed in noses for people like Mary to realize you can at times win by losing, by walking away from a bad deal for the company.

    Mary is always trying to please the customer and may offer services to close an order. Of course, it is also perceived inside the company she is giving too much away.

    It can be the unilateral pressure of getting an order, or the desire to please, but if you keep giving in to a customer and get nothing in return, the giving will never stop. Common sense says, “I’ll give you this but you must give me that.” When the customer asks for a gimme, Mary should say, “I’ll give you a lower price, but I want a larger commitment, or a better delivery schedule.”

    After all, someone must take the customer’s part, particularly when the staff starts vying for priorities. The danger can be when Mary goes too far and acts like she is the customer, and forgets the company always comes first.

    Mary was so proud when she could report to anyone within earshot that she had bookings with high margins on small orders. She finally realized that in most cases although the margin percentage may be good, the total dollar margin covering all the expenses in place is more important.

    One of the biggest weaknesses in Mary’s mindset was the refusal to give up on a forecast and make the necessary and timely adjustments.

    I sat on the board of a company that recognized in the fourth month that the forecast was in jeopardy, but the marketing manager hedged on, believing in the Sacred Forecast up until the start of the 12th month. The year ended up a disaster. If the problem had been recognized earlier several actions could have been taken to improve the situation and lessen the blow?

    It seems that no matter what Ed Engineering or Max Manufacturing told Mary about the time it takes to do things, Mary would violate their position and promise far better. Mary’s motto was “promise the impossible or lose the order.”

    Fortunately (or unfortunately on many occasions) the company actually performs under those conditions, which encourages Mary to continue to set her own standards for performance.

    It seems the competition hardly exists, even though every customer order isn’t won. I have had situations of complete incompatibility and confusion presented by Mary and her kind.

    Point of issue: Early on Mary had claimed that the market supported $100 million in sales with no competition in place. However, when she was only doing $6 million in the same market, the illogic of her previous claim drove the board crazy.

    Mary will promise the customer whatever he wants: different packaging, daily reports, etc.

    As Mary matured many of these characteristics became balanced, and because the staff constantly challenged her, the negative ones became manageable. The bad news was that had Mary been left to her ways, she could have driven the company and system far beyond its capability. The good news is, having passion and winning spirit, Mary could drive a company and system far beyond its capability.

    The most important difference between sales and marketing is profit consciousness. Sales personnel should try to get the order from a customer under any conditions possible. It is up to Marketing and the system to put the restraint and cap on sales so that the orders make strategic and profit sense.

    Marketing, on the other hand, should have both Profit and Return on Investment (ROI) in mind at all times. However, marketing is not solely responsible for Profit and ROI-the general manager must also watch over them. In addition, Marketing must be concerned with serving the customer and ensuring a comfortable, easy path between the customer and the company.

    Marketing personnel, while trying to please the customer, are often determined to create their own mystique within the company. Marketing personnel set themselves above everyone else by virtue of their influence with, and total access to, both the inside and outside world. Marketing personnel have knowledge of the products from both the technical and market viewpoints. These global overviews encourage arrogance which is OK, because in dealing with the outside world they must believe they know it all and know best how to solve everyone’s problems and needs.

    But this high and mighty attitude must be corralled. It is essential for management to look out for the signs that the marketing mystique is getting out of hand.

    In every marketing person, there are good and bad characteristics, which, depending on the person, can either have a positive or negative effect. I observed Mary Marketing for years and saw a continual improvement. She got better every day, strengthening the positive side of the balance sheet. She knew what it took to make a buck. However, there are other facets of running a company, such as product mix, scheduling resources and finance, that Mary had not encountered in her role as Marketer. As good as Mary became she still had the characteristics of a marketing person that needed to be understood and watched.

    You could observe Mary Marketing for hours before realizing the make up of her personality included the following:

    This is one of Mary’s most powerful methods for creating her image. She is a master at fitting strategy to a result after the result occurs. For instance, she chases a major customer for months, soliciting everyone’s help to close but with no success. Shortly after losing the customer’s order, the customer goes bankrupt. Mary now claims, “She didn’t really want the order because she knew the customer was in trouble and it would be an unnecessary drain on the company.”

    Mary got so used to touting and selling the company that she started to believing everything she had said. This may be okay in selling the company image, but should never be allowed to work its way internally into decision-making.

    Mary is so intent on solving a customer’s problem and winning him over, she will pitch products and solutions that are neither available nor realistic.

    It’s said that next to poor cash management, the second most listed reason for small companies failing is their effort “to be all things to all people.” Remember, the god-like attitude of Mary drives her to this mindset.

    This is a great attitude in selling and marketing (if obsession doesn’t drive them past the line of common sense). It takes time, some bent ears and pushed in noses for people like Mary to realize you can at times win by losing, by walking away from a bad deal for the company.

    Mary is always trying to please the customer and may offer services to close an order. Of course, it is also perceived inside the company she is giving too much away.

    It can be the unilateral pressure of getting an order, or the desire to please, but if you keep giving in to a customer and get nothing in return, the giving will never stop. Common sense says, “I’ll give you this but you must give me that.” When the customer asks for a gimme, Mary should say, “I’ll give you a lower price, but I want a larger commitment, or a better delivery schedule.”

    After all, someone must take the customer’s part, particularly when the staff starts vying for priorities. The danger can be when Mary goes too far and acts like she is the customer, and forgets the company always comes first.

    Mary was so proud when she could report to anyone within earshot that she had bookings with high margins on small orders. She finally realized that in most cases although the margin percentage may be good, the total dollar margin covering all the expenses in place is more important.

    One of the biggest weaknesses in Mary’s mindset was the refusal to give up on a forecast and make the necessary and timely adjustments.

    I sat on the board of a company that recognized in the fourth month that the forecast was in jeopardy, but the marketing manager hedged on, believing in the Sacred Forecast up until the start of the 12th month. The year ended up a disaster. If the problem had been recognized earlier several actions could have been taken to improve the situation and lessen the blow?

    It seems that no matter what Ed Engineering or Max Manufacturing told Mary about the time it takes to do things, Mary would violate their position and promise far better. Mary’s motto was “promise the impossible or lose the order.”

    Fortunately (or unfortunately on many occasions) the company actually performs under those conditions, which encourages Mary to continue to set her own standards for performance.

    It seems the competition hardly exists, even though every customer order isn’t won. I have had situations of complete incompatibility and confusion presented by Mary and her kind.

    Point of issue: Early on Mary had claimed that the market supported $100 million in sales with no competition in place. However, when she was only doing $6 million in the same market, the illogic of her previous claim drove the board crazy.

    Mary will promise the customer whatever he wants: different packaging, daily reports, etc.

    As Mary matured many of these characteristics became balanced, and because the staff constantly challenged her, the negative ones became manageable. The bad news was that had Mary been left to her ways, she could have driven the company and system far beyond its capability. The good news is, having passion and winning spirit, Mary could drive a company and system far beyond its capability.

SALES AIN'T MARKETING

    It is more common than not for a company to mistake sales for marketing. I have seen companies that call their head of sales a manager, director or VP of marketing. Although sales is really a subset of marketing, with a salesperson in the lead, we can expect that the "marketing" function in these companies will be one-dimensional-sales.

    Because a new or small company has to focus on selling, the sales function is established long before the marketing function. In fact, the president usually starts out as the sales manager because he knows the product and the market niche he is trying to establish.

    Sales is important, no doubt, but to continue growth and success the marketing dimension needs to be added.

    Here again, the president may have a "gut" feel for marketing, but without education and experience in marketing, he certainly will not have the capability to perform all the functions of marketing manager.

    Presidents with technical backgrounds will believe they are experts in marketing because they have a total understanding of the product and application. But the technology-driven company serves a very limited market. In my experience, most technical presidents run out of gas in the market when it comes to deciding on the next product, beyond the initial one that got the company running. For those companies success came largely because the customer took the product as delivered and built upon it. While a supplier may possess technical genius, it usually lacks knowledge about fulfilling customer needs, designing a whole product that takes care of the customer. In a market driven company, product quality is still number one, but additional things like training, system interface, manuals and service are as much a part of the product as the gadget itself.

    Sales personnel will think they are great marketers because they get to know all the players and buzzwords in the markets they serve. Couple this with their inflated egos, and bam! In their own minds, they are marketers.

    The one attribute that clearly reveals that sales people are not marketing-minded is their lack of planning discipline, a key attribute of effective marketing. The second is the short time-span mentality that is characteristic of salespeople. The desire for a quick "kill," fast results and lack of patience in a person's make-up will be the force that gravitates them to selling.

    Patience is a virtue needed by good marketing personnel, but it doesn't always exist. Then again there are also times when marketing patience gets in the way of good business -- like when marketing refuses to give up on a forecast on a sales opportunity. If the marketing person is strong and overpowering, the long overdue adjustments that are needed will be fought until the last hour of the last day of the last month.

    The desire to win and never-give-up can also be destructive to a company when resources are overcommitted and potential orders are chased relentlessly. I first learned that you could win by losing -- by walking away from a bad deal -- in a large corporation. I later learned this also applies to small companies.

    Many of the in-house functions and responsibilities of marketing that go far beyond sales:

• Market Definition

• Matching Company Resources to Market Needs

• Product Planning

• Pricing

• Return on Investment

• Promotion

• Order Entry

• Revenue Forecasts

• Production Builds

• Research

• Market Analysis

• Product Distribution - Sales

• Strategic Planning

Outside the company, marketing is responsible for:

• Company Image (Position) in the Market

• Customer Satisfaction

• Interface

• Support

• Business

• Knowing the Competition

• Protecting the Customer Base

• Identifying Market Needs

• Penetrating the Market

    Marketing has to drive the company when it comes to planning. It has to be the force that helps:

• Provide Financial Maturity

• Support the Company Vision and Mission

• Define Products Project Manufacturing Builds

• Define the Support Functions needed to play in the Market

    Most of all Marketing needs to be the Champion of New Product and Change.

    When he started the company, Fred Founder made the mistake of calling Sally Sales the VP of Marketing. He was quite high on Sally from the old company after spending many hours selling together in the field. Sally was a great salesperson, so Fred talked her into joining his new company and the title was part of the inducement. Even though sales is only one dimension of marketing, Sally was instrumental in helping the company grow.

    When Fred realized that in order to move even higher he needed more than Sally could provide, he spent many hours agonizing over making a change. Naturally, Sally was against any change and her lack of marketing understanding kept her from comprehending the need to change. Unfortunately, the first attempt at solving the marketing problem failed because the individual was more of a pied piper than a manager.

    After that debacle, Fred had to work hard to keep Sally in the company. Fortunately, Mary Marketing came along, and Sally related to her and came to believe she could actually learn from Mary. Sally finally realized the sales function was actually responsible for developing and winning the account, and that Marketing was responsible for ALL the other activities associated with identifying, developing and retaining customers.

    To understand the difference between Marketing and Sales consider a company entering the market of high-speed Internet access. A salesperson will take the package and start calling on everyone within striking distance, including all the apartment complexes in the area. On the other hand, before making one call, a marketing person will study the demographics of homeowners to find a community of medium income households with PCs and look to see if the wiring is already in place.