Category Archives: Revenue Risk Management

Can I Sell You a Side Order of Righteousness?

Some people are thrilled by taking extraordinary risks, but most of us prefer less risk.

Strangely, some executives have flipped that idea around by piling on more risk to ones they already have. Economic uncertainty, rabid competition, and now, “My prospective customers might not like my personal politics or social biases.” Bring ‘em on!

I can’t explain this phenomenon, other than perhaps public controversy brings the same invigorating jolt of adrenaline as bungee jumping or riding a motorcycle through quarter-mile long hoops of fire. Regardless, some business leaders have political, religious, or social cards to play, and they expect others to join them. Sure, everyone has a passionate opinion about something, but is it right or fair to embed such beliefs into a business plan? Don’t their investors, creditors, suppliers, employees and customers have financial skin in the game?

Move to the left, or move to the right. Anyone for joining the enigmatic center? Ben & Jerry’s ice cream proudly supported the Occupy Wall Street Movement, and formulated a new flavor, Apple-y Ever After, to market in the UK in support of gay marriage. Even the beloved Muppets have been accused of having a social axe to grind.

On the other side, Chick-fil-a’s CEO Dan Cathy made news last month for his statements against the same marriage rights that Ben & Jerry’s ardently supports. “. . . as an organization we can operate on biblical principles. So that is what we claim to be. [We are] based on biblical principles, asking God and pleading with God to give us wisdom on decisions we make about people and the programs and partnerships we have. And He has blessed us,” he told The Baptist Press in an article, Guilty as Charged, Cathy says of Chick-fil-A’s stand on biblical & family values.

When Mr. Cathy finishes his dinner, it’s doubtful that he puts on a pair of Birkenstocks and heads to his local Ben & Jerry’s in Atlanta for an ice cream dessert. What happened to Peter Drucker’s succinct distillation that “the primary purpose of a business is to have a customer”? For certain consumers, the conflation of business and political or religious beliefs makes buying experiences decidedly cruddy. “I don’t know what to do about it. I mean, I guess I can go through the drive-through where no one will see me,” The Washington Post quoted one woman as saying. Can’t we just simply like chicken or ice cream, and leave it at that?

In my home state of Virginia, a start up bakery, Crumb and Get It, made news this month for refusing to host the Biden entourage during a campaign stop in Danville. The reason? Opposition to President Obama’s economic policies. But another local business, the River City Grill, gladly snapped up the opportunity to host the Veep along with the media. No misgivings. “If you want to throw some Libertarians in there, too, they can feel free to stop in as well,” the owner said. One man gathers what another man spills. Money is still green, no matter whether the person spending it is red or blue. Ask any hotelier in Tampa or Charlotte.

“We’ve got the Papa John’s pizza guys weighing in on the health-care debate, while the burger slingers out West at In-N-Out can’t serve up a cheeseburger without a Bible verse,” Petula Dvorak wrote in a column, Now Featuring filet o’ fracas (The Washington Post, August 15, 2012), “Somehow, it is funny that a place where a single slice of The Meats pizza can run you 400 calories, 19 grams of fat and 1,100 milligrams of sodium decides to weigh in on the health-care debate. Sort of like the Medellin drug cartel taking a stand on border patrol.”

Too absurd. People notice things. Should Enterprise Risk Managers add hypocrisy risk to their portfolios? This is where we might be heading, though that risk pales in comparison to Customer Alienation Risk. Which is why Jon, a former sales colleague, once told me, “Andy, if my prospects have six toes and green skin, then heck! I’m going to ask to join their club!” Well said, and a healthy outlook if you’ve got a quarterly number to make.

An article in The Economist, Speak Low if You Speak God (August 4, 2012), displays a photo of protestors in front of a Chick-fil-a outlet. One holds a sign reading “Stop waffling, support equality.” Most corporate marketers would agree that their vision for raving crowds doesn’t include this image. The magazine shares four tips for avoiding Customer Alienation Risk:

1) “Don’t discuss religion in public. Few people will buy your margarine just because you are Zoroastrian. Plenty may shun it if you loudly espouse dogma they find disagreeable. This tip applies doubly to global firms, which must serve customers of every faith and none.

2) If you must discuss religion in public, keep it bland and woolly.

3) Remember that something which seems trivial to you may be weighty to others.

4) Ride out brouhahas over which you have no control.”

I’ll add my own:

5) Remember, a customer who wants to spend money for your product or service—and who has the money to spend—should always feel completely happy doing so, and should never be made to feel differently.

Six Sales Risks Most Companies Are Afraid to Take

Remember the kid in your elementary school who could skillfully skateboard across broken pavement and out into traffic? He’s grown up, and figured out a killer sales strategy.

He’s not smarter than you. You already knew that. He’s just less fearful. And even though he has more scars, he’s learned much along the way.

It’s not easy being bold. Employers regularly beat the living risk out of marketers and business development professionals. “We want accurate forecasts,” they insist, leading to a mental contagion that rewards playing it safe. People make fewer waves when they’re quietly harvesting low-hanging fruit. But long-term, will squelching risk enable a business to flourish?

Before you answer, reach into your desk drawer, gym bag, or stereo cabinet, and find your Sony Walkman. If you don’t have one, or if you aren’t sure what a Walkman is, I’ve made my point. By playing it safe, Sony ceded the market it created to Apple. The rest is history.

“Financially, the Japanese firms can’t take the risks,” said Yuji Fujimori, a Tokyo-based electronics analyst for Barclays. “. . . The choice not to take risks has its own risks: the danger of falling into a downward spiral. Losses can lead to smaller investments in future technologies or new products,” according to a Wall Street Journal article (How Japan Lost Its Electronic Crown, August 15, 2012).

Sales strategists take note. When it comes to planning for future revenue, playing it safe might be the least safe thing you can do. Here are six selling risks many companies are too afraid to take:

1. Having a physical presence in a country or city. Woody Allen said “half of life is showing up.” Yet, some executives are reluctant to commit to establishing operations locally, preferring to first determine whether there’s demand for their company’s product or service. That can create a self-fulfilling prophecy. “Unless you are there, you’re not perceived as being in the market,” the CEO of a large multi-national government contractor told me last week.

2. Developing customers in new market niches. One executive I talked to found new business opportunity in Europe for his company’s consulting services. When European governments were deregulating energy, he pursued the consulting work, even though the engagements were outside of his company’s core expertise. When energy markets were later deregulated in the US, his company was well positioned to win the contracts.

3. Hiring salespeople with experience outside of an industry or technology. “Hardware people can’t sell software.” I’ve heard that statement in reverse, spoken with equal conviction. Yet, one sales VP told me that provincial mindset doesn’t work for his company. “We used to seek people with experience in our space. But we’ve found that our most successful salespeople have a strong background in solving a range of business problems.”

4. Airing dirty laundry. Few companies like negative sentiment, but some recognize that it’s a business fact of life. The problem is, placing customer service processes into the metaphorical fishbowl of online social media is not something most companies embrace, or are prepared to handle. But companies that consistently resolve customer problems quickly and effectively can use social media to prove a hard-to-replicate competitive advantage.

5. Making the company (really!) personal. The president of a men’s clothing startup told me that people who buy from his online competitors would never expect to meet or speak to the webmaster, shipping staff, or technical personnel. Instead, “people who come here to visit are pleasantly surprised to learn that they can talk to any of us.”

6. Providing an unconditional, money-back guarantee. An anathema to many, one VP of Sales I worked with told me it’s low risk for him. “In twenty years of business, not one customer has ever requested a refund.”

Which of these risks might appeal to the skateboarder you knew as a kid? Hard to say. Maybe none of them. But there’s no doubt he has found others that are worth it.

15-Yard Penalty for Roughing the Fans! Sales Lessons for the NFL’s Roger Goodell

This week, Indianapolis Colts owner Robert Irsay said “Let’s be clear, when our NFL fans talk, we listen. If you’re unhappy, we’re unhappy . . . we’re here to serve you. Everything we do is to please you!”

Feel the love! That’s Customer Centricity! Gosh. When was the last time you saw a CEO unabashedly throw himself at your feet? Maybe after he had just contributed to a series of stupid tactical blunders.

At the risk of being called for a late hit, I’ll pile on to the abundant criticism leveled at the central figure in the NFL referee debacle, commissioner Roger Goodell. There are four sales lessons he should have learned now that the referee strike has been settled:

1) If you don’t understand what your customers are buying from you, you will look stupid. “You’ve never paid for an NFL ticket to watch somebody officiate a game,” Ray Anderson, NFL’s Executive VP of Football Operations said last month. Wrong-a-mundo, Ray! A football game has no meaning without people to ensure that teams compete fairly.

2) Sanitized vocabulary and bad decisions are tightly connected. As E. J. Dionne wrote in The Washington Post (Throw the Flag on NFL Owners, Thursday, September 27th) “ . . . The owners regularly refer to the game loved by tens of millions of Americans—myself included—with a term no doubt invented by some over-paid management consultant: the ‘product.’ What a wonderful way of taking the game out of the game, robbing it of all human feeling and human responsibility.”

3) Corporate hubris will squash sales faster than a voracious competitor. The next time you’re in a planning meeting and an executive says “We’re sending a message here! They’ll just have to suck it up,” sell your stock in the company.

4) Know the value that every employee contributes to supporting customer expectations, and pay accordingly. As everyone now knows, the $3.2 million investment in settling the referee strike proved worth it, given the $9 billion of revenue at risk.

For now, the referee strike has been settled. That’s the easy part. Changing a myopic NFL culture that ignores its own vulnerabilities will prove much harder.

Buyer Behavior: Easier Predicted than Explained

Explanation binds facts together but goes wrong when it increases our impression of understanding,” Naseem Taleb wrote in The Black Swan.

Sometimes we pay homage to explanations just by dint of their having professorial packaging. The Seven Reasons Men Don’t Listen to Women. Quod erat demonstrandum. Puh-leeze! There are an infinity of reasons. Maybe we’re just suckers for bite-sized explanations:

Why salespeople succeed or fail
Why satisfied customers defect
Why customers buy from you
Five reasons why customers want social customer service

Can we accept these explanations when we know the existence of more fundamental unknowns? We don’t yet know what makes us human, how the brain works, or how people decide. We also don’t know the relationship between customer loyalty and profits, how to define Customer Centricity, why consumers value specific brands, or what happens on the buyer’s journey. These are some of marketing’s most intricate issues. Do explanations clarify unknowns, or do they give us pretenses of knowledge and illusions of understanding? As H. L. Mencken wrote, “For every complex problem there is an answer that is clear, simple, and wrong.”

“We are ignorant, and will remain so”, said Emil du Bois-Reymond, a visionary electrophysiologist. Self-deprecation, but we’d all be better off admitting it. That will never happen if advertisers have their way. “The combination of social media analytics with company data predicted customer behavior with up to 90% accuracy in a pilot project . . .” Whoa, Nelly! Thanks to “spot-on” algorithms, we’re more predictable than previously imagined! Huxley’s Brave New World has arrived!

These days, nurturing healthy skepticism about explanatory power seems as rare as sighting a Livestrong bracelet. In Adobe’s Metrics not Myths video advertisement, an underling digital media consultant gets slapped by his superior when he says “measuring ROI on social media is a myth.” The slapping continues for every statement he makes, as he progresses toward his final acquiescence, “you can definitely measure ROI on social media.” “Ahhh, conformity! Now that’s more like it!” It’s a horrible ad.

“Ignorance follows knowledge.” In a May, 2012 interview on NPR’s Diane Rehm show, Columbia University neuroscientist Stuart Firestein said “. . . you know, we all like our ideas so we get invested in them in little ways, and then we get invested in them in big ways, and pretty soon I think you wind up with a bias in the way you look at the data . . . There is an overemphasis on facts and data, even though they can be the most unreliable part of research . . . I think science and medicine has set it up for the public to expect us to expound facts, to know things. And we do know things, but we don’t know them perfectly and we don’t know them forever.”

According to Firestein, “knowledge enables scientists to propose and pursue interesting questions about data that sometimes don’t exist or fully make sense yet. I use that term purposely to be a little provocative. But I don’t mean stupidity. I don’t mean dumb. I don’t mean a callow indifference to facts or data or any of that. Instead, thoughtful ignorance looks at gaps in a community’s understanding and seeks to resolve them.”

I’m convinced. We routinely overestimate what we know, without considering that uncertainty and randomness are extraordinarily consequential. Predictive models don’t accommodate every variable or recognize every contingency. My most thoughtful, reasoned sales forecasts could never have anticipated e coli invading the food supply chain, or more recently, Hurricane Sandy.

I’d still like to know what motivates a purchase decision, why superior products aren’t consistently commercially successful, how social networks influence consumers, and how people gather and use information. I’d also like to know how people perceive value, exactly what thwarts a buying process, and why two salespeople with similar skills, motivation and experience can produce wildly different results.

I’ll keep reading and listening for explanations. As Taleb wrote, “Things work out best when you know where your ignorance lies.”

Twenty-three Marketing and Sales Assumptions to Dump in 2013

Making plan. Hitting revenue targets. Achieving Quota. Forecasting accurately. “Onward, my son or daughter! Make your goal in 2013—and Godspeed!”

We forge ahead, our enthusiasm supported by a fragile lattice of assumptions. Among them, that our prospects want to reduce performance gaps, that they are concerned with achieving high financial returns, that they will make decisions that are rational and logical, and that they will be ethical and honest.

We rely on assumptions to shorten tedious fact-finding, and to cut to the chase. Good assumptions improve personal productivity in ways we cannot possibly measure. But bad ones remind us how easily we can get bitten in the rear when we take things for granted.

Once bitten, we get fickle. “Assumptions Are Bad for Business” one article blares, asserting that making assumptions “creates problems where there aren’t actually any.” Hmmmm . . . Try this: at the beginning of your next client meeting with the VP of Operations, say “please tell me whether you intend to mislead me.” Then, let me know how the rest of the conversation goes.

As for me, I’m happier assuming honesty. “Trust, but verify.” The topic was nuclear disarmament, but the assumption should work equally well for selling software, IT services, and specialty cakes and pies.

So I’m not anti-assumption, but like many people, I avoid bad ones—always easier said, than done. If only someone could warn me by tapping me on the shoulder or sending me a Tweet just before every mental lapse. “Hey, Andy, your assumption was . . . disproven multiple times! . . . superseded by new facts, forces, and realities! . . . relentlessly promoted by self-proclaimed experts to sell their services! . . . accepted without anyone questioning the premise! . . . illogical in the first place!”

Assumptions are out there, lacking caveats or fine print, the good mingling with bad. To help you nail your crystal-ball revenue predictions, I recommend dumping these assumptions next year:

1. Assuming that sales engagements should start in the C-Suite. Flaw: simplistic. A holdover from hierarchical organization charts. This assumption ignores collaboration, outsourcing, globalization, and the technologies that support them. Using this assumption, you could get outflanked. Maybe you already have been. Some sales teams use a different assumption, selling from the bottom-up, and enabling the program staff to champion internal project approval.

2. Assuming buyer motivation exists. Flaw: Pain identified might not be painful. Armed with a Product to Sell, many salespeople ask questions about pains that align with what their companies solve. But they’re already myopic, failing to discover the complete picture. They move straight to proposal, forgetting to uncover buyer motivation along the way.

3. Assuming the buying/selling process is linear. Flaw: bad assumption. But one that’s amazingly common. Here’s an artifact: “During the ‘discovery phase’ of the sales process . . .” The problem is, most buying/selling engagements don’t conform to linear representations. A more accurate form involves using multi-path decision boxes, loops, tangents, diversions, distractions, and the use-case symbol for decision purgatory, which is a tight black scribbly blob. So if a funnel juxtaposed to an arrow pointing down depicts your selling process, please comment below.

4. Assuming customers want good service. Flaw: creates delusions of success. A favorable Key Performance Indicator (KPI) might not be cause for celebration, as Bill Price and David Jaffe describe in their book, The Best Service is No Service. “We handled our support calls in record time this year. If our installation guide wasn’t so arcane and convoluted, we would have had a lot fewer of them! Go team!”

5. Assuming technology will fix customer relationship management problems. Flaw: without the right strategies and congruent corporate culture, technology will simply accelerate bad thinking. In The Best Service is No Service, Price and Jaffe emphasize that while self-service and CRM are often technology-based efforts, no technology is needed to adopt a no-service mindset.

6. Assuming customers don’t want to be sold. Flaw: Illogical, like dividing by zero. Buying and selling are reciprocal, so it’s more logical to assume that customers don’t want to be sold the wrong way. Unless you want to cause self-doubt, self-derision, or timid mumbling among members of your sales force, get rid of this one.

7. Assuming customers have information power. Flaw: this assumption is one word too long. Customers have information. It’s the power part that makes it shaky, and leads to other bad assumptions, including customers understand that information, or information available to customers is clear, accurate, engaging, credible, useful, and easily accessible.

8. Assuming customers want relationships with brands. Flaw: weird. When marketers use the term relationship to describe associations to a material item or to an abstraction such as a logo, disturbing distortions result. Bypassing the fundamental idea of human connectedness is one of them.

9. Assuming sellers can accurately profile their customers. Flaws: even the best predictive analytics have limitations, some of which are significant. The models cannot manage all relevant variables that influence purchases. Their statistical algorithms are constrained. They don’t always adapt to rapidly changing conditions. They don’t include cataclysmic events like hurricanes and political revolutions. I could go on . . .

10. Assuming marketing executives need more data about [fill in the blank]. Flaw: Overcome by events. Data is already so abundant, we’re drowning in it. Instead, we need knowledge and insight, which are scarce resources.

11. Assuming buyers want frequent vendor contact. Flaws: a) disproven, and b) utterly self-serving. Somehow, the finding, “it takes an average of seven touches to convert a suspect to a prospect,” went viral, and infected internal PowerPoint slides in marketing departments around the world. From there, it became a de-facto rule, then a commandment, until somebody—possibly a marketing intern—finally wondered, “is this what our prospects want?”

12. Assuming prospect interactions mean prospect interest. As Ardath Albee wrote in her blog “One interaction with your content doesn’t prove a thing. How do you know it was really what they were looking for? Did it resonate or did they walk away after viewing it, unimpressed?”

13. Assuming that being correct means being persuasive. Flaw: unsupported by reality. Being correct doesn’t hurt, but persuasiveness requires communicating a compelling vision, describing a plan to achieve it, empathy, understanding, and a few other things, too. I’m still not sure what all of them are. But simply “proving the business case,” and “showing prospects the numbers” can be a trap, because accurate numbers alone won’t encourage people to internalize your idea or cause, let alone buy your product. Ask any Republican strategist.

14. Assuming a job candidate’s prior gig leading a team qualifies him or her as a leader. Flaw: should never be assumed. A prior management role might infer that a job candidate has appropriate skills and useful experiences. But some hiring managers mistakenly use job title as a proxy for the check-box named has leadership talent.

15. Assuming that it costs more to acquire a new customer than to keep an existing one. Flaw: old math. Besides, you might want to ask yourself whether value returned to the company is a better consideration than cost. Not surprisingly, customer loyalty consultants in particular like this assumption, and they have chanted it in webinars and industry conferences since the idea was first hatched in the early 1600’s.

16. Assuming that customers are looking for win-win relationships with vendors. Flaw: delusional, except in limited cases. When buyers and suppliers have high financial stakes in co-developing innovations, the assumption holds. Otherwise, “win-win is a company strategy, not the customer’s strategy,” as Bob Thompson wrote in a blog Customer-Centricity is Dead! What’s Next?

17. Assuming customers don’t like change. Flaw: a cliché that few people question. Is it change that people resist? Or uncertainty?

18. Assuming that your customers are dependent on your technology. Flaw: fatuous. As reported on National Public Radio yesterday, “Energizer announced recently that production at plants in Malaysia, Missouri and Vermont won’t keep going. That’s because disposable battery sales are way down. The market research firm Symphony IRI Group says sales are off by 21 percent, since 2009.” Executives at Eastman Kodak no longer make this assumption, either.

19. Assuming social media disasters occur at other companies, but not at yours. Flaw: bad assumption. Very bad. These stories will assure you that they can happen at any organization: McDonalds McDStories, National Rifle Assocation’s Tweet following the Aurora, Colorado shooting, Microsoft insults Ann Coulter on Twitter, Macy’s partnership with Donald Trump.

20. Assuming you know why your customers buy from you. Flaw: you probably don’t. Even if you did, no company can afford the arrogance that comes with feeling certain. In a blog, What Really Drives Customer Loyalty? It’s Not Just about the Experience, Bob Thompson wrote, “While there is no one ‘best’ method for finding loyalty drivers, in my research of top performing companies I find that leaders are obsessed with asking and answering these questions: What do customers in our target markets really value, which issues make our customers unhappy and cause them to leave, what pleases customers and causes them to recommend us to others, how can we turn customers into true advocates for our business?”

21. Assuming one of your “inside connections” at an account will give you an advantage over your competition. Flaw: your prospects scrutinize decision-making more than you realize. I frequently hear statements like “one of our execs knows a board member at [name of prospect company]!” But as one of my managers told me many years ago, “that, and fifty cents will get you coffee.”

22. Assuming that the reasons your sales reps give for lost sales opportunities are lame excuses. Flaw: this should never be assumed. Maybe the reasons are lame, but what if they’re not?

23. Assuming you can precisely determine the financial return from your social media investments. Flaw: you can’t. Executives want precision. I get that. But social media has changed rapidly in the past five years. Facebook and LinkedIn are now described as platforms, and in 2011, YouTube became the second-largest search engine after Google. It’s hard to name a corporate department that doesn’t use social networks every hour of the business day, now chunked into 24-hour segments. Your CFO will tell you: when it comes to understanding value returned to your company, it’s easier to measure projects than platforms.

Letting go of some of these assumptions might feel like discarding a pair of worn, but comfortable shoes that you’ve taken on trips around the world. I understand. There’s always that pang of remorse. But don’t worry, 2013 will bring you plenty of new assumptions to replace them!

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