I'm constantly astounded what normally sane CEOs and senior executives do when it comes to managing their marketing and sales efforts. These leaders insist on reviewing all kinds of metrics from their manufacturing operations and machine availability to inventory turnover. They launch plant-wide initiatives to improve cycle time. They pursue lean or Six Sigma philosophies to drive out waste. In short, they drive production by watching their manufacturing dashboard -- all the gauges that tell you whether you're going somewhere, or nowhere. Yet these same executives look at their marketing and sales operations and say, "Well, it's an art form." Or: "Managing sales people is like herding cats." Or: "It's too expensive to track down all those cost-per-lead and profitability numbers." Huh? This lack of management science has direct and deleterious effects on the bottom line. Even more insidious is the fact that only one of these effects is easy to see: Flat or barely increasing sales. Yet the hidden effects of this head-in-the-sand approach are even more deadly to long-term profitability:
- Production can't plan adequately, buying too much or too little of key materials, budgeting too many or too few hours and spending excess dollars on expediting or inventory storage;
- Finance can't adequately forecast revenues for senior executives or shareholders, limiting financial flexibility, diminishing profits and driving up borrowing costs;
- Supply-chain partners can't forecast demand, causing them to raise prices to maintain viability;
- Customers experience service that oscillates between delayed shipments and sudden end-of-quarter "deals" as the company tries to move overstocked inventory.
Sales and marketing doesn't have to be a black box art. But it does require that manufacturing execs apply the same intellectual rigor they use in production to the customer acquisition process -- and that they demand that same sort of accountability. How much more profitable would your company be if you know the real costs of:
Everybody watches easy-to-track numbers such as salaries, commissions and expenses -- but are you also monitoring the costs of proposals, presale engineering, etc.? More important than the numbers themselves is the process of correlating each expense with measures of effectiveness. All sales are not created equal; those at higher margins build your ability to invest in new product development and employee training. Sales (and market access costs) that generate volume without margin suck the life out of your company. Unfortunately, most companies don't have enough data to know the difference.
Too many firms look at their catalogs, trade advertising and Web sites as the sum total of their "marketing" activities. Yet demand generation involves every activity that creates a positive impression or willingness to buy, including public relations, trade show expenses and customer training. Savvy execs will report expenses in any format their accountants want, but insist that they get a view of the data that looks across all aspects of brand management.
Most execs don't know how much it costs to process an order at their firm, much less the profitability for each major customer. Yet these same leaders sign huge checks for CRM systems to maximize their opportunities to be in front of these customers -- whether profitable or not. Why not invest a little of that CRM money in determining how much order processing, freight and expediting, EDI, and warranty service make a given customer worth serving? Better yet, why not make a commitment to using this analysis to raise prices for low-margin customers -- making their business either profitable for you or unprofitable for your competitors? What does your sales and marketing dashboard look like?
John R. Brandt, formerly editor-in-chief of IndustryWeek, is CEO of the Manufacturing Performance Institute, a research and consulting firm based in Shaker Heights, Ohio.