5 Signs it's Time for a New Strategy

I have written often about making strategic marketing changes. This post addresses the question “How will I know when it's time for a change?”


1.) It's Always about Price

If your customers are always making buying decisions based primarily on price, then its time to thoroughly re-examine your marketing strategy. An effective strategy offers your customers things they need and want, and that they can't get from the competition. Your customers have a vivid imagination, and their “nice-to-have” list is continually expanding. If you do a good job of delivering those results, the “nice-to-haves” migrate to “must-haves”, and you have outmaneuvered the competition. Additionally, your price and margin situation will also improve.

If you don't offer your customers these distinctions, you'll never get out of the downward price spiral.


2.) You're Losing Good People

If your best staff are looking to move on, this is another sign that it's time for reconsideration. Really good employees are looking for a challenge, and for a place where they can grow. If they have decided that working for you is no longer interesting or challenging, they will look elsewhere. Further, your best people are on the look-out for innovative ways to address the market. If you can't provide that, others will. Address this situation now, before the best are gone and only the mediocre remain. That will make it even harder to turn things around.


3.) The Annual Plan is a Photocopy

Perhaps a more up-to-date sign would be if this year's plan is really just a cut-and-paste version of the last one. Try this test: Pull out the plan from 5 years ago, and highlight 3 major differences in this year's plan. Hard to do? Then it is time for major change. No business can succeed today with the same plan it ran 5 years ago. Too many market factors have changed. Some, radically.


4.) People Confuse You with the Competition

Is this scene familiar: you introduce yourself and your company at some business event, and people think you work for your competition? If people don't automatically know who you are, and how you differ from the competition, that's a sign that some change is needed. When people don't know what sets you apart from the competition, it's because you haven't told them. Some new ideas are in order.


5.) It Just isn't Fun Anymore.

Here is the final and most important sign. Time for a truly honest gut-check. Are things still fun? Is there a sense of adventure everyday when you get to work? Are you always interested in telling people what wonderful things your company is doing? Perhaps more interested than they are in listening to you go on and on?

This is an instinctual assessment, rather than the quantifiable ones listed above. But it is no less valid. If it isn't fun, exciting, and challenging anymore, then you (and your staff) run the risk of just going through the motions.

If these points hit home, then it is time for a change. Some real change, not just tinkering with the details. You need something radically new, and you need to shake things up.

Like the Nike ad says: Just Do It!

Dea(r)th of a Salesman, Part 2.

(With apologies again to Arthur Miller)

In last week's post, I wrote about the death of sales training initiatives. This week, I will focus on how sales compensation programs often don't provide the motivation that they should.

Three compensation strategies in common use are:

• The100% monthly commission program.
• The “extra bonus when you hit your target” strategy.
• The geographic quota plan.

Each of these plans can work, but they also have pitfalls. And, too often, I find them used in place of active sales management.

The 100% Monthly Commission Solution

Managers like simple plans. Simple to understand, simple to forecast, simple to implement.

An obvious strategy is to pay a commission on every sale. Period. No salary, no bonus, no SPIFFs, just a straight commission. This is easy to administer. No budgets, quotas, or targets are required. And it has a good cost control mechanism built in: if sales fall, so does compensation.

So, what's not to like?

In this scheme, the salesman very quickly sees that his ability to put food on the table this month is directly related to the number of deals he closes this month. And so, predictably, he focuses all of his attention on those “high-potential” prospects that are likely to buy this month. Those that need some extra attention, or aren't quite ready to sign, will (maybe) get looked at later.

Ironically, the common sign of a problem with this approach is the management complaint that sales people won't spend time on long-term relationship building activities.

If you want your sales staff to spend time working on long-term projects, you need to think beyond the 100% commission program. Options could include:

• A base salary with a lower commission rate on top.
• A bonus program that includes incentives for completing non-sales objectives (cold calls, relationship building meetings, competitive analysis, new account recruiting, etc.)
• A multiple rate commission plan that puts special reward on certain types of accounts.

Each of these can help shift the salesman's focus into different time frames and activities. Unfortunately, they also require a higher level of active management on the part of the Boss.

The “Extra pay when you hit your Target” Program.

This approach ties commissions and bonuses to annual targets or quotas. Again, this has a cost control benefit: those that hit the higher sales numbers get the extra amounts. It can be very effective, but you should be aware of the downsides.

First, targets set exclusively by senior management are often viewed sceptically by the sales staff. They are perceived as a strategy for Not Paying Commissions, which obviously decreases their motivational impact.

Second, they really only motivate the sales people that believe their normal performance will get them close to the goal. Those that believe they are very unlikely to hit their targets are not motivated to work harder. Similarly, those that think their normal efforts will put them well beyond the targets aren't motivated either. Consequently, only the staff in the middle of the pack will think of this extra money as a reason to put forth extra effort.

The Geographic Quota Plan

This common strategy bases sales quotas on population stats. It is certainly convenient, and takes the appearance of arbitrary decision-making out of the equation. It is also easy to sell to senior management, who may not know much about the sales staff, but can read a map and population tables.

Unfortunately, I have rarely seen a population-only quota system that actually works. Too many other factors can come into play:

• Different economic activity levels in the regions, for reasons other than population.
• Different competitive positions in the regions.
• Different strategic account penetrations among the regions, etc.

All of these factors can produce good and bad sales performances among the regions, not directly tied to the skill and efforts of the sales staff. As a consequence, motivation suffers.

I once worked in partnership with a company in Canada that had 7 sales reps across the country. Each rep had an annual sale quota based on population but, because of outside economic issues, one region significantly outperformed year after year (and one rep significantly out-earned all of the others.) In order to keep the plan “simple” and still keep it “fair”, the company took the expedient of capping that one rep's annual compensation. He responded by only working 3 days a week every summer, giving him more time to spend on his boat.

The point I would like to end with is this:

• It is easy to come up with a sales compensation plan that is simple to implement and manage.
  
• It is hard to come up with one that actually keeps all of your sales staff motivated, unless you add some significant sales management effort.

Keeping your sales staff motivated takes a lot more than just a simple commission plan.

Make a New Plan, Stan.

I have worked for companies large and small, US and Canadian, with Japanese and domestic management. I have seen a wide variety of planning techniques, strategies, and implementations. And, you won't be surprised to learn, much of the effort put into their planning was wasted.

In large organizations, senior management assembles The Plan at the start of the year. It is then set in stone, and set on the shelf to collect dust. In my opinion, a very poor approach.

In small organizations, by contrast, there often really isn't a Plan. Also a poor approach.

So what makes a Good Plan?

Successful companies see planning as an on-going process that periodically produces a temporary document, called The Plan.

The purpose of the process is to determine:

• What's working, and what's not
• What shifts in the marketplace are creating challenges
• What adjustments need to be made NOW to meet those challenges

The process should be a collaboration between those that are close to the market (sales, marketing, customer-facing staff), those in touch with industry trends, and those that can re-allocate resources.

The purpose of the document is to:

• Communicate the near-term goals to every staff member
• Coordinate everyone's efforts
• Keep resources from getting dissipated on secondary tasks

If your planning process hasn't providing the bang you had hoped for, here are some thoughts:

First, Scrap the Annual Plan

I saw this in action while working for Japanese organizations. They prefer a 6-month planning time frame, and base their performance compensation on the 6-month goals.

A 12-month program stretches out too far. Market conditions can change significantly over that length of time, making the plan irrelevant. Also, a 12-month deadline is so far off that the hard projects just keep getting push back.

A 6-month time horizon is long enough to tackle big projects, and short enough to keep everyone focused.

Next, Don't make the Plan about Numbers

The focus of the plan should be on:

• the projects you want to get done
• the people you want to train
• the new markets you want to open up
• the new products you want to get out on the store shelves
• etc.

It should be about the changes you want to make so that the company is better positioned for the future.

If you are doing the right things and focusing on the right issues, the numbers will follow. Putting too much emphasis on the numbers causes staff to take short cuts that look good in the near-term, but don't move the company forward.

Finally, Share the Plan with Everybody

Don't keep it a secret from your staff. Share the plan, share the logic behind the plan, share your belief in how achieving the plan will make the future better, and (often the hard part) solicit their opinions. The further you go down in the company hierarchy, the closer you get to the customer. And that's where you will find the ideas that can really make a difference.

Practical Tip of the Day:

• Can everyone in the company tell you what the key objectives are for this quarter?
• Do you staff refer to the plan regularly to see which projects should be given priority?
• If the answer is No, throw out the plan binder that's just sitting on your shelf, and start over.