Marketing Expert's Corner

This article written in 2009

 

Looking at the American news media, you'll notice that a Big Story seems to dominate for a few days, and then evaporates overnight.  It is replaced with the next Big Story:  they come though the news machine in waves, in what somebody brilliant* called "serial obsessions."  It's as if the public can't deal with two important things happening at the same time, such as an immediate crisis (flooding) going on at the same time as long-term crises (inability to prepare for inevitable floods).  TV has us stuck in the tyranny of the present tense.

Somebody else brilliant* once said, "the mind is a serial device."  For you non-EEs, this means that people can't deal with a lot of information at once, and our thinking is very vulnerable to the sequence of data.   Ironically, it's hard for us to perceive issues of timing and sequence because we're always "in the moment."

And so with this month's issue, we're looking at something that is very dependent on timing and sequence:  the revenue engine.  We'll try to give it a tune up, so to speak.  

The Revenue Engine

Let me expand on the engine metaphor a bit.  The purpose of Sales and Marketing is to generate revenue -- its output is dollars, and its efficiency is measured in what I'll call "Revenue System Margin" (gross margin minus fully loaded sales and marketing costs).  The work achieved by this engine is the propulsion of the corporation.

Following the auto-engine metaphor, the Sales guys are the sparkplugs, marketing is the fuel injectors, marketing program dollars are the fuel, prospects are the air, executives are the valves, compression is the sales cycle, and the explosion is a signed deal.

So here's my point:  make any part of the engine -- or even all the parts -- perfect in design, materials, and construction, and the engine still won't work.  The secret to the piston engine is the sequence and timing of the actions of the parts.  Go ahead, invest in a huge sales team or an elaborate marketing program.  Revenue will come in fits and starts, and may actually go down with increased (but unbalanced) investment. Without the right timing, you'll have to keep cranking the engine with VC money (the electric starter motor).  You'll hear backfires of angry sales reps or dissatisfied customers.  You'll have to rebuild the engine with new VPs of Sales and Marketing when they get bent out of shape or become burned out.  

An engine is a dynamic system, not a bunch of static parts.

Firing on All Cylinders

It's amazing how apt this Wall Street expression of Sales and Marketing success is.  Yet most people ignore it.

A reciprocating piston engine is a beautiful peace of machinery -- you can see and feel it in the smoothness of its motion.  What makes it beautiful is the timing of compression, spark, and explosion.  When it isn't in balance and synchrony, it's unpleasant to see, hear, feel, and even smell.  How apt the comparison to a revenue engine.

So making the revenue engine run smoothly isn't an issue of fixing any one part in isolation:  it's about bringing balance, timing, and correct sequence to the activities of the engine.

The Timing Chain

For public companies, it's important to have reliability and predictability of deals closing within the quarter.  Since executives can lose their jobs over this one, this is the ultimate timing of the revenue engine.

What separates success from failure is working backwards from the end of the quarter, ensuring that the right activities have the resources at the right time to be completed in sequence.  Work backwards through your sales cycle:

  • Examine your sales and pipeline waterfall from the perspective of "deals to be done by week 13."  Understand the volume and age of prospects in the pipeline (as most B2B products have sales cycles that are longer than 3 months, look at your pipeline over two or three quarters).

  • For those contracts to be signed and booked, what legal and CFO resources need to be lined up from week 10 of the quarter onwards?

  • To overcome last-minute prospect jitters and politics, what customer references and industry analysts need to be at the ready during that same period?

  • To deal with contingencies and last-minute objections, which executives need to be available for "Hail Mary" customer visits?

  • When will your reps need to have understood the "signature loop" for the contract?  When will they need to have identified the decision makers, the blockers, and the decision process?

  • When will proofs of concept and detailed technical evaluations need to be done?  When will sales engineers and consultants need to be available?

  • Who will be doing customer requirements discovery, and when does that need to be completed?

  • How will the required quantity and quality of leads be generated, and what are the logistical requirements for the marketing programs?

Timing Means Not Doing Some Things

From the list above, it should be pretty obvious that certain things are counterproductive at certain times.  The guiding principle is that you must avoid putting further strain on any constrained resource, and the ultimate constrained resources involve time (and lead perishability):

  • DO NOT generate leads in weeks 8-11 of the quarter (because they would generate requests for appointments during weeks 10-13, when the reps need to be closing).  In the final quarter of your fiscal year, don't generate leads in weeks 8-13, or even the first couple of weeks of the new year (to account for reorgs, inevitable vacation, new territories, etc.)  Leads are perishable, so generate them when the organization is ready to work with them.

  • DO NOT let telesales / telemarketing take vacation during weeks 1-8 or 12-13 of the quarter.

  • DO introduce products at a relatively consistent time of the quarter, hopefully in weeks 3-6 (to give yourself time to train reps), but DON'T introduce a product without sufficient inventory for the channel's immediate needs.

  • DO put in "anti-hockey-stick" incentives, but DON'T expect them to move more than 20% of the deals (because customers have their own reasons for doing deals at the end of the quarter).

  • DO look for shortages at critical times (not enough appointments in weeks 2-8?) but DON'T confuse symptoms with root causes.  You may not have enough appointments because you're going after the wrong customers or, worse, your product isn't complete for any customer.

  • DO look for surpluses at critical times (too many things for someone to do?), but DON'T assume the only solution is more resources.  Could the surplus be moved in time, or be handled in a different way?  

Of FIATs and Ferraris

Some of the finest specimens of auto engine design (if not manufacture) are Italian.   At the low end of the food chain, a FIAT is an efficient and inexpensive design for a light-duty engine.  For the high-end set, it's hard to find a work of mechanical art more beautiful than a Ferrari engine.  But you'd never confuse the two:  a FIAT design does not scale to 12 cylinders and 550 horsepower, and a Ferrari can't be made cheaply.

So it is with revenue engines.  Everybody knows that what works brilliantly for a small startup won't work at $100 M or $1 B sales rates -- yet when things are going wrong people still make recommendations for marketing programs or sales personnel that are appropriate only for the other end of the spectrum.  Be mindful of scalability issues, both large and small.

 

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