Category Archives: Sales strategy

Revenue Growth: Don’t Let the Funnel Fool Ya!

Sales funnels symbolize a widely-known reality among marketers: s*** happens.

Funnels instantly remind us that interactions between buyers and sellers are fraught with risks – not that we need any reminding. Funnels also represent our fear that we can assiduously attempt to convert a prospect to a customer, but lo, there’s a chance we won’t prevail.

I like funnels because they are easy to understand. Funnels mansplain uncertainty and risk. When you need to justify a pipeline multiplier, or reveal the rationale behind a multi-channel lead generation campaign, simply fire a 2-D trapezoid shape onto the projection screen. Divide the image into equally-spaced horizontal stripes. Use bright colors. Then, dive into funnel taxonomy.  “Raw prospects enter the gauntlet at the top. From there, they undergo a metamorphosis, becoming Leads, then MQL (Marketing Qualified Leads), then SQL (Sales Qualified Leads). Those that emerge will be anointed as Opportunities before moving south, eventually crossing into a hallowed zone marketers call Paying Customers.” My presentation includes a bloated money bag positioned near the funnel’s bottom to drive home the idea. The screen glows even brighter. Warmth envelops the room. This is everyone’s favorite topic.

You already have recognized that my scenario is called The Happy Path. Happy paths, as we know, make people happy. Everything on the slide is linear. Everything is ordinal, with a prominent, single-headed arrow to emphasize the direction of actions, activity, and interest. The partitions between funnel stages are always crisp and distinct. “Questions? . . . No? Great! Let’s move on . . .”

I advance to the next slide to continue my speil when inevitably, someone – often a new hire – lobs a question with the antecedent, “What about . . .” I’m prepared. I press the “back” button, and ask, “Was there a question about the funnel?” Indeed. Many questions, actually. A partial list of ways to complete the interrogative:

. . . Lead qualification and disqualification, changed priorities, low buyer motivation, misaligned or insufficient sales incentives, faulty CRM data, lack of project funding, buyer fear, seller fear, redirected budgets, raised customer expectations, increased ROI hurdles, misunderstood needs, bad assumptions, new assumptions, strategic re-prioritizations, project starts-and-stops, buyer confusion, atrocious sales processes, predatory buying, industrial espionage, new decision hierarchies, flawed business intelligence, process breakdowns, competing internal agendas, technological innovation, tariffs, product recalls, spikes in monetary exchange rates, increases in the cost of capital, mergers and acquisitions, personnel changes, passive aggression, essential conversations that never materialized, relationships gone awry, cruddy demos, software bugs, regulations, external competitive maneuvering, internal competitive maneuvering, and stupid tweets from anyone with access to the company’s “official” Twitter account  . . .”

I don’t consider any of this the Unhappy Path. I call it Life. Here’s the problem: beyond their purpose for symbolizing risk, funnels don’t represent the myriad conditions companies encounter when executing revenue strategy and tactics. These examples obliterate the template funnel’s shape, and shatter that straight North-South arrow into countless, itty-bitty pieces.

For me, the funnel’s most meaningful features are its taper and length. The angle degree at the top should invite concern, interest, and discussion. “Our funnel is wide as a tank container at the top and narrow as a pipette at the bottom, and it takes one year to travel from top to bottom. Perhaps we’ve found the root cause for our cash flow problems.” In practice, few seem interested in dissecting the risks that cause the delta, and how to manage them. A funnel is a funnel. Counter-intuitively, the funnel’s ubiquity as a risk symbol has made us less risk aware.

Time for a fresh look.

Twitter abandoned its egg silhouette in 2017.  Assuming their objective was to render a human-ish image, the replacement – two detached shapes that faintly suggest a human head and shoulders – offers scant improvement. Imagine what we’d be purchasing if design engineers adopted such anonymized forms to use for prototyping. I suppose we’d have a visceral understanding of what daily life was like in the 1700’s. Similarly, how can companies create revenue strategy when using generic funnels as design templates?

Overlooked differences. At best, funnels suggest risk in marketing and sales. But they don’t mirror reality. I love Roadrunner cartoons, but for my safety and that of others, I resist letting them inform my understanding of physics.

Three real-world deviations from the funnel symbol:

  1. Pathway

Prospects enter sales funnels at many different points, not just at the top. Sales funnels are highly porous, and exit points vary, too.

  1. Re-cycling

Not every lead remains permanently outside the funnel. Prospects that have exited the sales or buying process can re-enter.

  1. Effort

Opportunities in sales funnels generally don’t drop from top to bottom on their own. As leads descend through the funnel, effort and costs increase for both sellers and buyers. In fact, if funnels reflected aggregate cost of sales, the model would be exactly flipped – small at the top, and large (or very large) at the bottom.

. . . And two overlooked similarities:

  1. Connectedness

As cash engines, revenue funnels are connected in several ways to the organizations they serve. They are not free-floating in space, as they are often depicted in presentations. Marketers implicitly understand that revenue funnels often receive inbound leads from a messy universe of opportunities, and that revenue flows from the bottom. But marketing funnels are but one component of a large system. They require additional input such as cash, information, talent, and other resources to operate.

  1. Throughput

With physical funnels, smooth material flow from top to bottom signal that the funnel is operating well.  But marketers often defer to a flawed proxy for funnel health: fullness. The problem is, full funnels can also be clogged. Rather than using funnel fullness as portents for cash-flow vitality, marketers should emphasize velocity and throughput as meaningful metrics.

 

General recommendations for funnel management: 

  1. Make sure the funnel opening is as wide as it needs to be, but no wider.
  2. Match the size of the opening at the bottom with the company’s revenue needs. That includes ensuring orders won’t swamp the company’s ability to fill them.
  3. Don’t take the taper for granted! Make sure it aligns with the company’s risk capacity.
  4. For planning purposes, net the funnel’s cash output against the resources required to operate it.
  5. Remember that throughput velocity is as important to consider as overall funnel value.

I’m not declaring funnels dead. Not by a long shot. The marketing and sales profession has long suffered from lack of probabilistic thinking, and funnels offer a symbolically-accurate representation of revenue generation risk.

Put another way, a picture that tells us  s*** happens is worth a thousand words.

How to Execute Better Strategy

In these tumultuous times, I lust for every bit of surety I can find. I search for rules, immutable truths, and superlatives. My motive is patently self-serving. Limiting my perspectives saves time. Nuance? Things to consider? Outliers and exceptions? Too squishy! Give me something concrete I can hold onto for dear life.

Here’s a superlative that has endured since I learned it in graduate school in 2005:

“All business failures result from using the wrong strategy, or executing right strategy the wrong way.”

If only I could find more like this one.

Over many years, I’ve experienced revenue craters fomented by bad decisions, misguided assumptions, and cruddy planning. I blame myself for some of them, but that’s between us. Regardless, this trusty superlative worms its way into every aftermath I’ve analyzed. Thank you, Professor Todd.

Organizational vitality depends on sound strategy. When planning and executing strategy, companies must grapple with uncertainty. There’s no avoiding it. Executives must recognize what they don’t know, and make assumptions to fill the gaps. That requires a remarkable blend of intelligence, prescience, confidence, and courage. No wonder strategy development scares the bleep out of people. “Our current engineering, supply chain operations, and product planning are based on our expectation that 25 years from now, there will be a robust global market for long-range jetliners. Please pass the Maalox.”

Strategy is defined as a plan of action or policy designed to achieve a major or overall aim. Companies should develop strategies whenever any crucial resource or result is constrained or difficult to achieve. For most companies, that includes securing capital, innovating new products or services, hiring human talent, or capturing revenue. Similarly, strategies are instrumental for achieving objectives such as high customer satisfaction, customer success, and market share percentage. Stuff that every company wants, and there simply isn’t enough to go around. None of these outcomes can be left to chance, assuming, of course, that your goal is longevity.

Without strategy, the central mission of an organization – finding and capitalizing on opportunities – would depend on happenstance. A company without a strategy is like an untethered ship at sea without power, steering, or means for navigation. Unable to harness the forces of wind, tide, or other locomotion to go anywhere, the vessel just bobs around. Many businesses operate the same way, abdicating their outcomes to vicissitude. Que será, será. This is the mantra under which many companies operate, though it’s never used as braggadocio.

But how much does strategy matter? The Evergreen Project, conducted between 1986 and 1996, asked that question, and the study revealed that companies with a strategy performed better than those without. That seems obvious, but the study offered another insight by revealing the magnitude of benefits over time:

“Financially successful companies all had a clearly defined and well-articulated strategy. No exceptions. These companies outperformed the losing companies by a 945% to 62% margin in total return to shareholders, had a 415% to 83% advantage in sales, a 358% to 97% advantage in assets, a 326% to 22% advantage in operating income and a 5.45% to -8.52% advantage in return on invested capital,” wrote Rich Horwath in an article, Does Strategy Matter? 

“While many companies have been able to survive without a clearly defined strategy in written form, a question looms: How much better could they be doing with a strategy? The 22% gain last year might seem impressive, unless of course it could have been a 65% gain with a solid strategy behind it.” Of course, Horwath can’t posit the answer, other than “A company or product or service can certainly survive without strategy, but it will never thrive.”

I agree. But even for companies that envision and execute strategy, there’s no such thing as certain survival. More Maalox.

When I taught an undergraduate class, Strategic Uses of IT, I used case studies, and asked my students questions to pique their strategic thinking. “What did [Company X] trade off when its executives decided to implement [name of project]” Many students were able to go well beyond connecting the dots. But some delivered a common response: “they traded off money.” While that’s technically correct, I was looking for deeper insight.

I followed the first question with, “when company X implemented this project, what didn’t – or couldn’t – they do as a direct consequence of that decision?” Examples: Providing customers high-touch luxury experiences trades off low-price leadership. Generating large profit margins sacrifices high inventory turnover. Offering extensive point-to-point airline routes precludes maintaining hub-and-spoke operations.

Over time, I learned that this strategy exercise can be vexing for students and seasoned executives alike. I also learned that when executives are vested in their strategy, the common response changes to “I don’t think we’re trading off anything.” Early-stage strategy ossification, happening before our eyes.

The trade-off concept is key to understanding strategy. When you can parse the answer into more than one outcome or consequence, you’re thinking strategically.

Before undertaking strategic planning, understand its characteristics:  

  • Strategies are based on assumptions – e.g. existence of a customer need, economic forecast, availability of key operational or technological capability, continuation of a trend or trends
  • Every strategy involves making trade-offs – “instead of pursuing [X], we will pursue [Y]”
  • Strategies create potential weaknesses –Effective strategies provide strength, but choices not taken present future vulnerabilities. It’s important to recognize what they are.
  • Strategies contain inherent risks and opportunities – By definition, the purpose of strategy is to capitalize on opportunities, and achieving them carries inherent risks.
  • Strategic execution requires committing and consuming resources – including time, money, and/or physical and mental energy

 

While understanding the characteristics of strategy is an important first step for success, I’ve discovered through practice that effective strategies tend to . . .

  • identify and address consequential matters. Start by asking the right questions. One client told me that they wanted to direct their strategy toward “providing every user in the agency a suite of desktop applications software.” That vision didn’t overcome the “so what?” test. I recommended the organization ask a different question about the results they wanted, and focus effort on a more meaningful outcome.
  • use sound assumptions. A frequent trap. Many strategies are based on outsized or unrealistic estimates, or tenuous predictions.
  • be clear and unambiguous. An example of one that’s not: Customer Obsession is an Employee Engagement Strategy, Too.
  • be difficult to replicate. FedEx, Amazon, Zappos. These companies have been endlessly analyzed, and their strategies are well-known to competitors. But they are also complex, involving the entire company for execution, not just a department or two.
  • be grounded in what’s possible. The Fyre Festival was logistically doomed from the start. Any bets that SpaceX will successfully complete a Mars mission by 2022?
  • minimize potential conflicts of interest. This one just came across my desk: A company developed a strategy that rewards Sales for capturing revenue, but penalizes Operations for failing to meet customer demand. I forecast intense infighting until the strategy is scrapped.

Ethics and strategy – it’s complicated, but I’d be remiss if I didn’t address it. For society, business strategies can produce outcomes that are beneficial. The credo for Conscious Capitalism provides both inspiration and guidance:

“We believe that business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity.”

Contrast that lofty ideal with Theranos, a once high-flying startup which used strategy for nefarious purposes. Stakeholders were harmed. People likely died as a direct result of the company’s activities. For a time, the company’s strategy was considered effective, but now Theranos is defunct, leaving destruction and pain in its wake. Never assume an effective strategy is also kind and benevolent.

Ethics problems start when strategies are revenue- and profit-focused, to the exclusion of all other outcomes. Every year, I call out a new list of offenders in the Sales Ethics Hall of Shame award – a showcase for executives who believe the revenue-profit ends justify the means to achieve them.

Ethical strategies don’t occur by prescribing rules or steps, but by asking questions:

  1. Is the premise of the strategy good? This is a central question behind the ethics and efficacy of for-profit prisons. Does a business model that that depends on the incarceration of people for revenue and profit help society as much as it rewards the owners and investors of the company?
  2. Are the intentions of the strategy honest? Strategies that depend on factual obfuscation and deceit are not ethical.
  3. Does the strategy protect stakeholder interests? Ethical strategies include mechanisms for ensuring bad ethics and dishonesty don’t metastasize and harm employees, vendors, customers, and investors.
  4. Does the strategy reward – or penalize – employees who exercise sound moral judgment? Every company inducted into the Sales Ethics Hall of Shame has failed this question.

If we’ve learned anything from the Wells Fargo and VW scandals, protecting companies from calamitous risks requires answering these questions not just in the C-Suite, but by corporate boards. Especially by corporate boards.

Strategies are a progression, a continual work-in-progress. On November 8th, 2018, The Wall Street Journal reported these artifacts:

  • “Ford is getting into the electric scooter business.”
  • “Vice Media plans to shrink its workforce by as much as 15%.”
  • “Google is gearing up for an expansion of its New York City real estate that could add space for more than 12,000 new workers.”

Each, representative that the companies have set their sights on goals necessary for survival or growth. And these objectives will evolve into new ones. With strategy, there is no “final triumph.” There are also no superlatives, rules, or immutable truths to ascribe. Is Vice Media’s plan to shrink its workforce the best strategy? It’s impossible to say. In the strategic analysis, all we can do is judge is whether it was effective at achieving the intended goal – and move on.

Acquisition and Retention: The Yin and Yang of Customer Strategy

For customer retention, which of the following do vendors commonly perform:

  1. Provide outstanding service and loyalty benefits
  2. Impose switching costs through technological impediments and contractual restrictions
  3. Engineer convoluted pathways for customers who want to terminate services
  4. All of these

The correct answer, of course, is All of these. Every enterprise must retain customers. It’s a strategic challenge, and the path can be rocky. But two things are clear: 1) vendors have multiple tools at their disposal, and 2) customers don’t always benefit.

There’s a lot of confusion about customer retention. Some people ask, “which is better: acquisition or retention?”, implying that the matter is either-or. Some argue that companies invest too much on acquisition and too little on retention. Some assert that retention is preferable to acquisition because retention costs less. And finally, some mistakenly believe that retention tactics create only benign outcomes for customers.

With zealots on both sides, it’s easy to fall into the either-or trap, but it’s a false dichotomy. Without acquisition, there’s no retention. No business can survive long-term without acquiring and keeping customers. And as a practical matter, churn is inevitable: Business needs change, customers become insolvent, or they get acquired. Because revenue contribution from each customer is uncertain, companies must build sales pipelines to keep new opportunities flowing. On the other hand, profit margins from existing customers are generally higher than for new ones, so keeping customers is also very important.

In fact, every effective customer strategy involves:

  • Account acquisition: how do we identify, cultivate, and capture new opportunities?
  • Account retention: how do we keep our customers?
  • Account revenue growth: how do we facilitate increased spending or “share-of-wallet”?
  • Account win-back: how do we resuscitate past clients that can continue to benefit from our product or service?
  • Account divestment: how do we jettison customers that we can no longer support profitably?

At startup companies, acquisition and retention are immediate concerns. But as companies mature, customer strategies become more complex. Businesses can alter their core offerings or delivery models. In addition, customers can stop buying for many reasons – some preventable, some not. Along the way, once-lucrative accounts can become financially less attractive. Customer strategy isn’t complete unless it addresses all five challenges.

A key business development challenge for every organization is matching its capabilities with external opportunities, and customer strategy must address this mission. That defies relying on “industry standards” for guidance. I searched for “customer strategy best practices,” hoping for insight like “on average, machine tools manufacturers dedicate 28% of their marketing spend on capture, and 72% on retention.” Nothing. Nada.

It’s not hard to understand why. Customer strategies are based on corporate strategies, which are influenced by present and future product portfolios, competitive market position, market share, operating costs, cost of capital, risk capacity, risk tolerance, economic and regulatory forecasts, and industry maturity and growth rate – to name a few. Does Company X spend too much on customer acquisition and too little on retention? Devoid of context, it’s impossible to judge. The most useful clue is whether Company X achieved its quarterly revenue target. If so, they possibly had the right proportion of acquisition and retention. When you have next quarter’s achievement percentage, ask me again. There might be a different answer.

Even without industry standards, I took a swing at generalizations:

Acquisition-intensive companies tend to be

  • New business ventures
  • Companies that are pivoting their business model
  • Operating in young or emerging industries
  • Selling capital goods with low potential for add-on sales
  • Expanding into new markets
  • Services companies that recognize a large portion of revenue at the time of contract signing

Retention-intensive companies tend to be

  • Software-as-a-service (SaaS) companies
  • Offering other subscription-based products or services
  • Providing a low-cost entry product or service that can be readily expanded
  • Selling a product or service with high potential for ongoing consumption
  • Dedicated to supporting a key client or small number of clients
  • Expanding into new markets or developing products targeted toward their legacy accounts

Most companies are in between, confounding our ability to compliment – or assail – their approaches. Blue Apron, for example, must be equally rabid about acquiring new customers and preserving those they’ve signed. It’s a conundrum: for troubled Blue Apron, client retention depends on gaining economies of scale. And how do you achieve economies of scale? By acquiring new clients! Acquisition and retention, therefore, exist in a mutually supportive relationship. I know – it’s complicated. But it’s hardly rare.

Flawed accounting? For most companies, acquiring customers consumes a sizable chunk of the marketing budget. In B2B, buying lead times can drag on for months or years, and conversion rates (ratio of prospects who become customers) can be frustratingly low.  “Depending on which study you believe, and what industry you’re in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one,” wrote Amy Gallo in Harvard Business Review (The Value of Keeping the Right Customers, May 2014). In fact, every executive I spoke with for this article shared that their company’s customer acquisition costs consistently exceed retention costs.

But “cost analysis regarding retention requires sophistication, and results vary widely between companies,” CFO-turned-novelist Pat Kelly told me. “There are many [retention] cost drivers,” and not all of them are aggregated into overall retention costs. For example, much of what companies spend on software development and logistics operations are crucial for customer retention, but most companies don’t categorize them as retention costs. On the other hand, marketing, sales, and lead generation are easier to parse. Many companies know their cost/lead down to the penny. Little wonder that spending on acquisition appears so lopsided. “It’s worth the effort to get better at tracking retention costs, but companies will never get to the right answer,” Kelly said, adding “it’s more important to be directionally accurate.” That’s solid advice. We can endlessly debate the accuracy of acquisition-retention multipliers, but acquisition almost always costs more than retention. Still, for most companies, whatever benefit precision provides doesn’t change the fundamental fact that you still can’t retain a customer that you haven’t first acquired.

Recommendations:

  1. Balance is key. Companies that get heavily invested in a single component of customer strategy risk harming stakeholders. Comcast abused a customer that they clearly couldn’t afford to relinquish. Solar energy companies inflated acquisition numbers to appear more attractive to investors. And American Express Foreign Exchange offered impossibly low rates to prospects, only to raise them without proper disclosure.
  2. Never use cost considerations as the dominant rationale for favoring retention. Acquisition, retention, growth, win-back, and divestment strategies must first align with the strategies of the organization.
  3. When defining your customer strategy, consider the right measurements. These should include minimum churn rate, expected churn rate, industry growth rate, enterprise revenue growth target, actual revenue-per-account, forecast revenue-per-account, economic forecasts, and foreign exchange rates (for international companies).
  4. Know the right customer for your company, and if that’s too difficult, at least know the wrong one. “Think about the customers you want to serve up front and focus on acquiring the right customers. The goal is to bring in and keep customers who you can provide value to and who are valuable to you,” said Jill Avery of Harvard Business School.

“If you do a good job, your customers will refer new customers, and that’s vital for every organization,” another CFO, Stan Krejci, shared with me today. But he cautioned executives not to see retention as isolated policies, processes and procedures. “Retention is a performance issue,” he said. A company’s obligation to its customers is to consistently fulfill its promises and to provide ongoing reciprocal value. A company that can do those things won’t likely resort to staffing customer call centers with Retention Specialists, and contriving technological and contractual handcuffs to reduce churn.

Acquisition, retention, growth, win-back, divestment. The elements of customer strategy are inter-dependent. “Retention feeds acquisition, and acquisition feeds retention.” Krejci said. “It’s circular.”

Nike and Kaepernick: Oh Baby, Show Me The Money

I’ve often wondered why companies hammer sharp social stakes into the ground. Ben and Jerry’s. Hobby Lobby. Chick-fil-a. Lately, Levi’s – my jeans brand – has advocated for gun restrictions. Gasp!

Ardently promoting a social agenda is antithetical to what I’ve learned about marketing. Don’t alienate people with disposable income or investment capital. Better yet, don’t alienate anyone! Just sell. As one sales rep told me, “if there was a society for people with six toes, I’d join it to mine for prospects.” A man after my own heart.

In over 40 years as a marketeer, I’ve yet to work with an organization that has purposefully promoted social values to its prospects and customers. It’s easy to understand the rationale for remaining scrupulously agnostic: when a customer intends to buy, make it easy for them. Don’t screw things up by injecting politics and personal morals into the mix. Buyers and sellers, let’s just coexist as one big, happy egalitarian value chain. Sunshine, puppy dogs, and daisies. Sometimes, when business is left alone, things do work out for the best for society. Sigh . . .

Back to reality. Social values do influence a vendor’s marketing actions, and when that happens, it can be alarming. Bakeries that turn away gay customers. Restaurants that refuse to serve unpopular political appointees. And Nike featuring Colin Kaepernick in its ads. These events shake our assumptions to the core. How does this happen? Enterprises that eschew revenue uber alle? Criminy! What’s next? Selling without trust? Maybe things are changing faster than ever.

For marketers, the main story isn’t whether Nike endorses Kaepernick’s free speech rights. This is about how to use risk as a competitive weapon. Take notes, because succeed or fail, we’re about to benefit from a powerful lesson. Although Kaepernick is a polarizing personality who doesn’t play for an NFL team, he’s among the most recognizable sports personalities on the planet. For marketers, that alone makes him tantalizing to incorporate into a campaign. Not surprisingly, Nike was not the only company to find Kaepernick attractive for its advertising. Earlier this year, Puma and Adidas dabbled with the idea. But Nike jumped on the opportunity. A deft move. Nike has never been a company that looks a gift horse in the mouth. And it showed up when Kaepernick became the centerpiece of a mounting protest that had both controversy and appeal.

Nike’s choice to use Kaepernick speaks volumes about their brand promise, the customers they want to reach, and their strategy for revenue growth. To use a trite sports metaphor, it’s called “skate to where the puck will be.”

And where the puck will be is spelled m-i-l-l-e-n-n-i-a-l. By 2019, Millennials, Americans between 22 and 37 years old, are projected to become the largest US demographic, surpassing my generation, baby boomers. And – fun fact– 44% of Millennials are non-white. Post-Millennial, the non-white ratio increases to 48% and post-post Millennial (kids who are currently under 10 years old), it’s 50%. You don’t have to be a math whiz to extrapolate the trendline. And you don’t need to be a social scientist to project which brand attributes future buyers will value. If I were in Nike’s executive suite, I’d bet on Kaepernick, too. And believe me, I’m no willy-nilly risk taker.

Millennials are “very different than earlier generations,” according to demographer William Frey, author of Diversity Explosion: How New Racial Demographics are Remaking America.  As sports columnist Sally Jenkins wrote in The Washington Post (Nike Knows What the Future Looks Like, September 5, 2018), “They are more prone to interracial marrying, friendlier to immigration and often want their consumption to have a social component. If Nike is willing to offend its graying buyers in order to court these multiple generations with a racial justice campaign, ‘it’s a good bet that a lot of younger people will be attracted and go along with that,’ Frey said.” Yepper.  56% of Millennials said they found the Kaepernick’s anthem-kneeling protest appropriate. Someone needs to figure out how to parlay that into revenue . . .

Nike is betting that younger, active buyers will also continue to buy lots of athletic shoes and athletic wear, and with Kaepernick tied to the brand, they have given them greater reason to identify with Nike. And of course, it doesn’t hurt that Nike’s NFL contract will propel that distinctive swoosh logo onto millions of viewing screens this fall.  I picture commissioner Roger Goodell slamming his head against the wall as I type this. Woulda, coulda, shoulda . . . I think you did this to yourself, pal.

With Kaepernick, Nike has alienated older buyers and Republicans, who overwhelmingly find his anthem protests objectionable (only 10% of Republicans approved, according to a Wall Street Journal article, Nike Faces Kaepernick Backlash). No doubt many of them have already torched their shoes at the end of their driveways. But Nike has clearly set its sights on high-use consumers: Millennials who grind through athletic footwear like popcorn, by skateboarding, running marathons, or walking to an Uber pickup spot after the concert downtown. They’re less interested in appealing to my fellow boomers who spring for a shiny pair of white sneakers to wear on the cruise, or to walk the ultra-smooth sanitized floors at the mall. Those shoes will look pristine forever. Yawn.

Nike, which coined, Just do it, knows its customers desire more than shoes and apparel. They want inspiration, which is already embedded in the brand. And the company’s big hairy audacious bet is that a sizable chunk of the world’s population will align with Colin Kaepernick for his resolve to take an unpopular, but principled stance. That’s an American theme, shared globally. The bet carries risk, but it’s an intelligent choice. I predict that Nike will weather the backlash and reap financial rewards. Not every company has the backbone, brand equity and financial capacity to sustain the problems, and I have no doubt the depth of Nike’s risk capacity played a role in the company’s decision concerning Kaepernick. Assuming Nike wins, their campaign will inform marketers that risk isn’t something to tremble about. When used strategically with proper intelligence, it can become a powerful competitive weapon.

Ethical Selling: American Express Offers a Teachable Moment

“Every ethics question a business person could face comes down to a question you face on your very first sale: what are you willing to do for a buck?”, Philip Broughton wrote in his book, Mastering the Art of the Sale.

The question needs to be asked at every company. From the mom-and-pop Custom Cupcakes by Diane, to this week’s ethical letdown, financial behemoth American Express. The Wall Street Journal reported ongoing sales chicanery at the company, and traced its roots back to 2004 (American Express Gave Small Business Customers One Rate, Then Secretly Raised It), July 31, 2018).

Perhaps it began even earlier. AmEx reaped the benefits through 2018 – around the time Wells Fargo was accused of the same distortion. When it was publicly called out, an AmEx manager got nervous, and “told salespeople they would need his approval before offering prospective clients a margin of less than 0.70 of a percentage point, according to an email reviewed by the Journal. Current and former employees said the price changes were common knowledge within the forex business . . . Amex’s foreign-exchange international payments department routinely increased conversion rates without notifying customers in a bid to boost revenue and employee commissions,”  Journal reporter AnnaMaria Andriotis wrote in the article.

AmEx spokeswoman Marina Norville, responded, saying, “We constantly reinforce the importance of acting in the best interest of our customers.”

Current and former AmEx employees voiced a different take. They “describe an environment focused on bringing in as many new clients as possible and squeezing revenue out of them before they depart. Employees were told that the average forex [foreign exchange] customer did business with AmEx for around three years. ‘Who cares if they come or go? Let’s make money while we have them,’ one current employee said, referring to the attitude within the division,” according to the Journal.

Well, Amex, which is it? – because it’s not both.

The article describes AmEx’s tactics: “The salespeople didn’t inform customers that the margin, a markup that AmEx tacks on to the base currency exchange rate, was subject to increase without notice,” current and former employees were quoted as saying in the article. “Some time later, salespeople would increase the margin without informing the customers . . . Managers directed salespeople to keep the details of the payment arrangements hazy when speaking with potential customers and to avoid putting pricing terms in emails,” according to current and former employees.

This reveal got me wondering: how does this American Express division recruit salespeople? How do their online solicitations represent their selling culture and expectations?

This June, 2018 post for FXIP Manager popped up first in my search:

“FX International Payments (FXIP) is a cross-border payments solution developed to meet the foreign currency payment needs of small to mid-size corporate and financial institution clients. www.americanexpress.com/fxip.

The FXIP Manager reports to the Director FXIP Americas and is responsible for managing a portfolio of existing corporate clients. He/she will develop and maintain relationships, drive expansion sales of new product solutions, and make outbound calls to encourage transaction activity. The incumbent is responsible for achieving client revenue targets and overseeing the effective management across the end-to-end client life cycle, including, early engagement, loyalty and retention. He or She will work closely with colleagues in sales, marketing and operations to deliver superior service to our clients. This role includes a broad range of responsibilities, including: business development, relationship management, portfolio analysis, and requires interaction with both internal and external partners. This position will own and drive work streams and strategic initiatives to increase overall portfolio performance.

The candidate will have demonstrated success in proactively driving organic growth, client retention, revenue obtainment and related metrics in a foreign exchange environment focused on profitable expansion in a time-sensitive, well defined compliance and risk conscious environment.

Following this description, AmEx lists desired qualifications – eleven of them. Usual stuff: demonstrated experience in . . . strong knowledge . . . high proficiency . . .

Then, this one, halfway down the list:

“Must understand the individual and group responsibilities impact to department profit and revenue targets,”

And this,

“Demonstrated strong negotiation and influencing skills in order to handle objections [to] convert and activate prospects.”

Except for “deliver superior service to our clients” in the job description, this is a Revenue Focused job with a capital R, and a capital F, not unlike most sales positions. But this posting hints at the AmEx sales culture:

Drive organic growth . . . profitable expansion . . . revenue obtainment [sic] . . . Impact to department profit and revenue targets . . . Strong negotiation . . . influencing . . . handle objections . . . convert and activate . . .

Make no mistake: this is a high-pressure selling environment. If you like serving customers and relish a pat on the back for doing so, AmEx might not be the place for you. Unless, of course, you’re making goal.

What are you willing to do for a buck? And, what aren’t you willing to do? Two straightforward questions with complex answers that might vary, depending on a company’s momentary situation. Or, the sale rep’s.

This case offers a teachable moment for sales managers and salespeople to engage in conversations, and to answer further questions:

  1. Which conflicts of interest exist between AmEx and its customers? Do the same conflicts occur in our sales engagements?
  2. How might the conflicts be mitigated?
  3. Is intentional omission of facts during the sales process equivalent to lying?
  4. In the AmEx scenario, who is responsible for misleading customers? Management? Salespeople?
  5. Is it justifiable for salespeople to execute management requests, even if they perceive those requests are morally or ethically wrong?
  6. How would you resolve a conflict of interest if it happened with one of your customers?
  7. How should companies balance achieving revenue targets, and preserving the best interests of customers?

“This ought to be a moment when people stop and remember how dangerous the system is when you don’t have the proper protections in place . . . This is a wake-up call. It should remind all of us and firms that culture and compensation make a difference . . . How you reward people, how you motivate people and what values you hold people to matter,” former US Treasury Secretary Jack Lew said. He was talking about Wells Fargo.

No company is immune to the corrosive impact of dishonest and unethical sales practices. If you’re not already discussing the issues, the time to start is now.