Category Archives: Revenue Risk Management

Pfizer’s Ethics Violations Hurt All of Us

Thursday, 05 December 2013 17:19
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“At Pfizer I was expected to increase profits at all costs, even when sales meant endangering lives. I couldn’t do that.”

The sales representative who blew the whistle on Pfizer’s illegal marketing practices, John Kopchinski, made that statement about his now-former employer.

Mr. Kopchinski was fired from the company in 2003. He won’t miss his job. He received over $50 million from the US government for his efforts to prosecute the $2.3 billion fraud settlement from his former employer—the largest such settlement in US history. The product he was assigned to sell, Bextra, is a discontinued medication approved for arthritis and menstrual pain.

Paying $2.3 billion for “fraudulent marketing” should cause every marketing professional and salesperson to break into a nervous sweat. Murky ethics are amazingly common. They begin innocuously, then escalate. According to Mr. Kopchinski, what started as “aggressive promotion” of Bextra mutated into illegal practices. As he put it, “the ethical line kept moving.” And the pharmaceutical industry’s shady sales practices moved back into the spotlight this week, when John Oliver’s Last Week Tonight segment detailed more skeletons tumbling from pharma’s marketing closet.

I’ve seen it elsewhere. Ethical risks are shrouded in code-speak: “we’re a ‘revenue-focused’ organization,” or “our company champions an ‘aggressive sales culture.’” Anyone who doesn’t take heed from Mr. Kopchinski’s ethical-line observation faces the same risks. In Pfizer’s case, the problems didn’t begin with stereotypical predatory salespeople and percolate upward—they began at the top. As the saying goes, “the fish starts rotting at the head.”

How can bright people working for well-regarded companies commit such ruthless dishonesty, when they wouldn’t think of stealing their next-door neighbor’s pension check—arguably a far less-heinous crime? Unfortunately, the answer is all too simple, and all too common: by insulating the perpetrators from the victims. Here’s Pfizer’s approach:

Sales commissions: According to the NPR health blog, a “$50 bounty (was) paid to reps when they got doctors to add Bextra to the standard care for patients before and after surgery. These care protocols would direct patients to take Bextra, often at high doses, a few days before a knee operation, for instance, and then afterward to control pain.”

Telemarketing scripts directed to physicians: Salespeople were coached to tout greater efficacy and safety for Bextra compared to Vioxx, a competing painkiller from Merck. The US Food and Drug Administration never approved these claims.

Sales culture: OK. Let’s call it by its real name—intimidation. “If you don’t aggressively sell your products . . . you’re labeled a non-team player,” Kopchinski said, adding that only by promoting Bextra for unapproved uses could he achieve management’s revenue goals.

You can see the evidence in clear black and white, and it’s all creepy. What was Pfizer’s management thinking? Caught with its pants down, Pfizer cut a check for $2.3 billion. Everybody—just shut up, leave the chicanery behind, and let’s move on! Problem resolved.

But is it? At the same time that jolly Pfizer managers were gloating over PowerPoint slides depicting beautifully soaring revenue curves, people were suffering or dying from taking medications for unapproved uses. Yes, that’s rock bottom. Bad ethics don’t get any worse than that, and even a $2.3 billion mea culpa won’t enable the company to sweep its dark tactics under the rug. A plan to sell cigarettes in elementary schools seems more benign.

Which brings Pfizer’s indiscretions to the everyday salesperson. We’ve all experienced what happens when “baggage” is brought into a sales meeting. A salesperson is often considered guilty before he or she proclaims innocence. It’s understandable. Along with evaluating the performance and features of a product, prospects scrutinize a salesperson’s motivations and integrity. But as Pfizer’s deceit has shown us, prospects now need to look further, and to question whether the top management of a vendor’s company has a moral compass. The answer to that question could reveal buyer risks that were previously unimagined.

Transaction or Transgression? Social Selling Creates Questionable Practices

Thursday, 05 December 2013 17:01
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Originally published 12/9/9

Q: How can you tell when a salesperson is lying?
A: When he or she is using a keyboard.

The popular salesman joke, modified for social media. More contemporary, but equally unfair: not every salesperson is dishonest, and deceit isn’t unique to salespeople. Social selling is inherently collaborative, and misguided motives can exist at many points in a selling network. As customers, we often don’t know—or don’t want to. Human evolution has always depended on trust–even when it’s shaky.

Bernie Madoff’s Ponzi scheme, 2009’s Granddaddy of all Sales Scandals, reminds us of the power social forces play in organized theft. According to author Stephen Greenspan (“Why We Keep Falling for Financial Scams, The Wall Street Journal, January 3, 2009), “the basic mechanism explaining the success of Ponzi schemes is the tendency of humans to model their actions—especially when dealing with matters they don’t fully understand—on the behavior of other humans.” Ka-Ching! Human behavior has never been more accessible—or more viral. And there’s an unlimited supply of things people don’t understand. What could be a better tool than social media for the unscrupulous salesperson—or his employer?

But wait! Didn’t the advent of the socially empowered consumer create barriers for deceptive sales practices? After all, fast-talking, moussed-hair salespeople were replaced by information and the Wisdom of the Crowd. No sales pressure, no manipulation, no deception. Um-umgawa! Consumers have the powwa! But even with price comparisons and product reviews in the palms of our hands 24/7, we’re still duped. We fall for deceptive sales practices, and companies sell chronically bad products.

Why? According to Robert Shiller, (Animal Spirits Depend on Trust, The Wall Street Journal, January 27, 2009), “The term ‘animal spirits,’ popularized by John Maynard Keynes . . . refers to the sense of trust we have in each other, our sense of fairness in economic dealings, and our sense of the extent of corruption and bad faith. There are good times when people have substantial trust and associated feelings that contribute to an environment of confidence. They make decisions spontaneously. They believe instinctively that they will be successful, and they suspend their suspicions. As long as large groups of people remain trusting, people’s somewhat rash, impulsive decision-making is not discovered.”

For some vendors, “suspension of suspicions” looks like raw steak. Fritz Nelson, Executive Producer of TechWeb TV wrote “assuming a business already believes in using the Web to listen to, follow, and engage customers—and most important, get them to act,” (my emphasis), there are important opportunities to try ideas that will lead to success (A Web Presence Needs Sizzle, For Shizzle, InformationWeek, November 30, 2009). Nelson doesn’t advocate breaking trust, but when it comes to honesty and good customer experience, not every company views “success” the same way. The question becomes, does the end—success—justify the means?

Here are some examples. You be the judge:

Listen to: In 2008, The Washington Post reported “Several Internet and broadband companies have acknowledged using targeted advertising technology without explicitly informing customers.” (Some Web Firms Say They Track Behavior Without Explicit Consent, August 12, 2008).

Follow: The article “Prescription Data Used to Assess Consumers (The Washington Post, August 4, 2008), reported “The practice . . . illustrates how electronic data gathered for one purpose can be used and marketed for another—often without consumers’ knowledge.” Some social media tools bring the stalking practice mainstream. According to blogger Dan Tynan (“Social Media Search: A Stalker’s Paradise,” January 7, 2009) , “Spokeo is a search engine that uses email addresses to find people across the social Web. Give the site your log-on info for Gmail, Hotmail, Yahoo Mail, or AOL – or just upload your personal address book; Spokeo will scour 41 social networks and collect all information associated with each email address. Blog entries, Linked In profiles, Flickr photostreams, Twitter tweets, Digg comments, Amazon wish lists – and a whole lot more – all on one tidy little Web page. And every time they add new content, Spokeo lets you know.” (The company asks on its homepage, “Want to see something Juicy?”)

Engage customers: Under the guise of discussions, social sellers have exploited LinkedIn groups to hawk products, prompting this recent group discussion board comment from Axel Schultze: “Many of us are here to conduct business. But none of us are here to get “sold”. We have enough email spam. As such some of you noticed that we began to ask some of you to move your “announcements” to NEWS and took the liberty to remove it from the Discussion Board.”

Get them to act: It’s called post-transaction marketing. Linda Lindquist, a Movietickets.com customer, describes her experience. (Internet Scam or Post-sale Bargain? Senators Expose Controversial Offers That Follow Online Transactions) “On the confirmation page was a coupon stating, ‘Get $10 off your next purchase.’ So, I clicked on the coupon because it seemed that it was a legitimate offer from Movietickets.com and I thought they were a reputable website,’ Lindquist told a Senate panel investigating online marketing tactics. Little did she know, Lindquist had consented to a paid, monthly subscription to a ‘coupons and discounts’ membership club run by a company independent of Movietickets.com.”

Social selling incorporates ideas that offer significant opportunities for creating and executing business strategies. But like any good idea, it’s possible to abuse it by pushing it too far. The more things change, the more they stay the same. True that!

Further reading:

NJ Telemarketer Admits Role in Big Internet Scam, October 30, 2009

The Post Transaction Marketing Wall of Shame: Hundreds of Well Known e-commerce Sites Rip off Customers, by Michael Arrington, November 17, 2009

Astroturfing–A New Ethical Dilemma, by Francis Buttle

Six Sales Strategy Mistakes to Avoid in 2016

Thursday, 05 December 2013 16:59
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All sales failures result from executing the wrong strategy, or from executing the right strategy the wrong way.

Companies typically reward success, but along the way, stuff happens. Everyone makes mistakes. Little mistakes are OK—we’ll recover. But big, fat, strategic mistakes—the kind that cost millions, or billions of dollars? No thanks. I’d rather not repeat an error.

For those whose 2016 selling strategies are still percolating, here are some mistakes to avoid:

1. Focus on best practices while waiting to see what the market’s going to do. Remember the proprietary advantages that made you successful in 2015? They will be leapfrogged. While you’re busy best-practicing, your competitors are creating nifty proprietary advantages, and they will use the best ones at every opportunity to win new sales, and keep you off balance.

2. Inhibit organizational learning. I don’t like to hear salespeople whine any more than you do, but a bring-me-solutions-not-problems culture will cause any sales strategy to fail.  Ask salespeople what customers are saying, and what’s working strategy-wise—and what’s not. They’ll tell you. Listen, and take notes. Then share the knowledge.

3. Reward your sales force for producing revenue—but nothing else. A compensation plan based on revenue achievement alone will create unintended results—some of which could undermine customer loyalty. The sales force provides more value to a company than just revenue production – solid customer relationships and competitive intelligence are among them. Whatever you expect and value from your sales force, make sure it’s recognized and rewarded.

4. Accept assumptions without questioning them first. Assumptions are a component of any strategy, but don’t overlook your greatest revenue risks. Ask “which assumptions, if false, will prevent our organization from achieving our strategic goals?” If the worst scenario is also the most likely, consider a new strategy.

5. Disregard your trade-offs. Profit margin versus revenue growth. Proprietary versus open-source. Every strategy requires trading off other ones. Trade-offs are nascent competitive weaknesses. Ask “how will competitors or newcomers to our market exploit the path we didn’t choose?”

6. Design your sales process with your organization at the center. Put your company at the center of your sales process, and nobody will beat a path to your door. Even the most thoughtfully-designed sales process will under-achieve if it doesn’t connect to a buying effort.

Executing the right sales strategy the right way requires accepting the right risks and avoiding others. Mistakes are inevitable. At the end of 2016, you’ll know you’ve been successful if you can say “the mistakes we made were worth it.”

“That Will Close in Q2, Boss!” (psst – Tell Us Why It Might Not)

Thursday, 05 December 2013 16:53
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Originally published 1/22/10

Smoking.
Obesity.
Texting while driving.

Duh! It’s right after New Year’s. We’re well aware of what increases our personal risks.

If only there was a similar consensus for sales risks. Nobody wants to be risky, but the problem is, many people have an incomplete picture of the selling risks that surround them. As my cousin Jim (not his real name) who manages a venture capital company once told me, “we don’t worry about selling risks for our funded companies. If a VP of sales doesn’t make his number, we fire him!”

For Jim, managing sales risks boils down to “don’t hire a Sales VP capable of flawed judgment.” Good luck, Jim. As for the rest of us, it helps to know what sales risks matter. What could prevent you or your organization from meeting its revenue targets? And how do you manage those risks?

We completed a survey of sales risks on February 15th, and received approximately 100 responses from sales, marketing, and business development professionals from around the world. The findings were posted in June in the 2010 Sales Risk Survey.

Genchi Genbutsu Revolutionizes Selling – Again!

Thursday, 05 December 2013 16:42
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I love Big Data as much as the next person. But it weirds me out, too. How much can data scientists really know about human behavior when they are not right there, at the Point-of-Decision, Point-of-Use, or Point-of-Sale? Are people who have crayon drawings on their office wall and use running shoes for everyday footwear more likely purchasers of felt markers? We’ll never know for sure when we’re only breathing digital exhaust.

Akio Toyoda, CEO of Toyota, faced a similar challenge recently. Confounded by quality problems and frustrated by the insight limitations for what The Numbers could expose, he revived revived genchi genbutsu—the practice of leaving the office and visiting the source of a problem—to help his company restore its tarnished reputation.

Before social media technology, genchi genbutsu was how things got sold. Except we didn’t call it genchi genbutsu. Most of us called it conducting a face-to-face meeting, performing a walk-through, or making an on-site visit. As salespeople, we were there at the point-of-trouble, where we could see, feel, and understand.

But what worked once upon a time has powerful competition today. A salesperson can just as likely “be present” with a prospect by watching Tweets scroll across a web page or conducting a meeting connected through broadband. One article crows, “the advent of video conferencing technology has opened up new possibilities for conducting fully effective and personalized face-to-face meetings without ever leaving your office.” Pressed for greater efficiency and demands to reduce selling costs, millions of salespeople replace face-to-face sales calls with–well, I’m not sure. Let’s call it something else.

With good reason. We can no longer assume that being there will always improve sales outcomes. According to Seth Finn, who authored a survey on automation and sales productivity, “managers generally believe the assumption that supplying information technology to their sales people will contribute to enhanced productivity as frequency of customer communication increases and customer relationships are deepened.”

But whether technology is truly helpful at deepening customer relations is unclear. Why? Because we’re buried in data, according to a recent cover story in The Economist (The Data Deluge, February 27, 2010), and not every company can cope. Still, the Economist article offers fascinating insights that have been teased from terabytes of 1’s and 0’s:

Wal-Mart discovered that before hurricanes strike, consumers not only expectedly purchased flashlights and batteries—but also Pop-Tarts, a breakfast snack that can be eaten straight out of the box.

Best Buy found that 7% of its customers accounted for (drum roll) . . . 43% of its sales!

The best predictor an airline passenger will post for a flight is whether he or she has ordered a vegetarian meal.

No doubt that for uncovering sales insight, data has great seductive power. But before CFO’s rush to ditch the sales force’s fleet-purchased Chevy Malibu to buy more laptops and tablet computers, there are dangers in the allure. According to another article in The Economist (The Net Generation, Unplugged, March 6th, 2010), “not everyone . . . has access to digital technology: many in the developing world do not.” So, when sales organizations embrace social selling, which communities are ignored? What’s traded off? What risks are exposed by replacing being-there-in-person with digital communication? Is it possible that some great sales opportunities are undiscovered because the key players driving an initiative don’t use Twitter?

A few years ago, a blandly-titled article peeped out in my newsfeed, Dow Chemical Chief Pushes Ahead (The Wall Street Journal, January 25, 2010). Andrew Liveris, Dow’s CEO, was asked “Your strategy to move into more-specialized chemical products means you need to anticipate customers’ needs better. How are you doing this?”

He responded that he was “calling fellow CEOs to enable my sales force and engineers to get access to customers’ marketing and R&D organizations to look at their future needs . . . Every salesperson has to be an evangelist for understanding customer needs and bring back that to our R&D side, so we can make the right choices of where to put our precious resources.” Genchi genbutsu, a-la-Dow—a wicked-smart idea that incorporates rethinking the sales force as a strategic R&D asset.

When asked “have sales(people) come up with any ideas?” Mr. Liveris responded, “Our low VOC coating we use in architectural paints to not only replace solvents but to have low odor. That came out of our sales force. Our people in China have been driving the low odor aspect of that.” Could that insight have been achieved without genchi genbutsu? Probably not. When thinking of places where information and ideas are free-flowing and widely shared, China doesn’t bubble to the top of the list.

Referring to the value of genchi genbutsu, one engineer said, “data is of course important in manufacturing, but I place the greatest emphasis on facts,” which he gleans from being on the production floor. For the same reason, leaving the office and visiting the source of the problem is a potent tactic for selling. As Tom Vanderbilt wrote in his recent book, Traffic, “the human cognitive mechanism is powerful equipment.”

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