Monday, December 16, 2013
Sunday, December 15, 2013
Managing Cash Liquidity
Think fast: Name three things most important to the success of your business. If cash management didn’t make your list, you’re not alone. Most businesspeople think more about sales and marketing than the specifics of managing cash.
The term “cash management” is broadly enough defined so as to be perpetually misunderstood. People have a hard time describing it. But, simply put, cash management is about the connection of cash in, cash accumulated, and cash out.
Sounds simple enough. Yet many business owners and managers see their would-be-profitable companies teeter on the brink of loss because they don’t have a handle on what’s coming in and what’s going out. Maybe, since these things are basic, many assume they’re being done; but there are always surprises.
To help minimize unwanted surprises, particularly during tough times, here’s a checklist to keep you on track.
1. Know where you are and where you’re going.
Good cash management begins with a thorough assessment of your business’ current cash position and the development of a forecast based on that. This should tell you whether receivables are being collected quickly enough to pay vendors on time and whether you’re optimizing your float situation.
2. Analyze accounts receivable and payable.
If a cash position analysis turns up more cash out than cash in, the best place to start is receivables. I look at receivables first when a company asks for help with financial troubles. Usually, customers aren’t paying for reasons the business owner had no knowledge of. It leads to a discussion about product quality, service delivery, and other things not being done properly, which leads to excuses for non-payment.
A glance at receivables may also remind you that you’ve been shy about collecting. Many business owners show nine months worth of uncollected receivables. They are afraid to collect because clients might not pay or they may even lose customers. Collecting on time and sticking to credit policies are critical to keeping money flowing in.
An accounts-payable analysis will tell you whether you’re paying vendors too early to capitalize on float. Are you taking advantage of payment discounts? Are you paying too soon?
3. Use your bank’s tools.
With an array of cash management tools available, you never have to be in the dark again about your cash situation. The biggest mistake small-business owners make is using only a checking account to manage cash. Business owners, at minimum, should use an interest-bearing money market account to park excess cash. Limit the number of accounts at different banks. By consolidating accounts with one financial institution you can negotiate more favorable loan terms.
4. Seek financial advice.
The first step on the way out of denial is admitting that you’d much rather be out selling than crunching numbers—and then making sure you have the right person to do that for you. Most businesses have accountants, who tend to focus solely on tax minimization, or bookkeepers, who may not have adequate training to handle more sophisticated corporate finance.
Select a circle of advisers or “elders” whose main thrust is to assist and provide quality suggestions to budding entrepreneurs or managers.
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Sunday, December 8, 2013
Wednesday, June 19, 2013
Response Marketing
Twenty years ago, during the first Asia-Pacific Regional Conference on Direct Response Marketing (DRM) in Hong Kong, approximately 3,000 delegates attended. Only three, including yours truly, were from the Philippines. Worse, when countries in Asia-Pacific where highlighted, the Philippines was left out!
When we returned to Manila, our trio of Filipino marketing practitioners committed ourselves to putting the Philippines on the direct marketing map. Over the intervening years, our DRM efforts have blossomed.
Value Proposition
Response Marketing is the discipline of eliciting an engagement with the reader, listener, or viewer. The benchmark of a 1%–2% success rate in DRM used to be considered the norm. Today—with the advent of testing and improvements in the control of DRM variables—much higher rates are possible.
Response rates as high as 40% are attainable for those who practice DRM at the highest levels. A more modest (but still impressive) 5% success rate is now a reasonable goal.
Many companies have traditionally used only one DRM channel (i.e., mail, fax, and telemarketing). But the name of the game is to use as many DRM channels as needed to get the job done right.
Coordinated DRM campaigns now resemble media campaigns and use complex channel combinations (called “Integrated Direct Marketing”). The challenge, of course, is to ensure the proper coordination of these activities.
The five success factors in Response Marketing are
- FIT in Terms of Product and Positioning – Understand what you are offering and how this should be envisioned or recalled by the market.
- ACCURATE Target Market – Understand the profile or dimensions of your market segments or niches.
- TIMELY Research and Testing – Conduct or initiate up-to-date research and/or analysis to maximize timely results.
- RIGHT Offer – Create the best offer or “incentive” to complement the product or service and, more importantly, capture the attention and interest of the target market.
- CATCHY Creative Solutions – Choose the best possible approach to communicate the total package to the target market.
Response Marketing is not just “couponing” or “placing a reply device” in the medium or channel. DRM requires a Strategy Focus. You have to address important questions like: What do you want? How do you plan to achieve it? What products? What channels? What timing?
Training and knowledge are vital. The information you acquire from reading books, talking to colleagues, or attending seminars is valuable. However, it is just the starting point. You have to do hands-on work and learn by doing. Response Marketing, like the broader discipline of Marketing, is a body of knowledge that must be mastered.
Don’t be overwhelmed. It’s essential to maintain your focus and direction in the face of complex information and equations. You need to be clear on your objectives, while maintaining an open mind.
Know your core competency. There are many third parties, service bureaus, and consulting firms who can help you implement effective RM campaigns. Don’t try to do everything yourself. Develop relationships with competent third parties (e.g., list brokers, mailing companies, fulfilment companies, telemarketing companies). Ask around, check on previous clients or jobs, and identify win-win strategic partnerships.
Pitfalls and horror stories abound in the fulfillment side of RM. Even if your communications are flowing effectively and you reach your results through certain channels, that effort is wasted if the fulfillment side is not addressed. Either you make sure you can fulfill your promises or find somebody who can help you deliver the goods.
Be serious in your RM commitment. Many companies initially try RM on a “trial run” basis and then delegate it to a very junior marketing or product officer. This is a myopic strategy that makes it hard for DRM to succeed.
There are many reasons RM efforts fail, such as
-Poorly defined target markets
-Failure to take seasonal patterns into account
-Wrong DRM channel selection
-Inadequate logistics
-Poor back room execution
The bottom line is RM now succeeds all over the world—in the US, Europe, Singapore, Hong Kong, Thailand, and the Philippines. DRM works well if the people doing it are serious and professional enough to know what it takes to make it successful!
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Wednesday, April 24, 2013
Pitfalls of The Sales Professional
Believing you are the best is a common tendency for winners. You fall into the trap of believing you have reached the ultimate level of superiority. Although this can serve as a good motivation, it can lead to a string of misguided beliefs that, eventually, end in complacency.
When you begin to think that enough has been done, you become less conscious of the last performance and begin to relax your standards of service and the management of your accounts.
Loyalty Versus Longevity
Successful salespeople also have the tendency to fall into the trap of customer loyalty.
The battle cry of the 1990s was 'The Customer Is King.' This motto has been adopted by many organizations. Some even display large signs that repeatedly remind internal staff to drop whatever they are doing just to give the customer what he wants.
There is nothing wrong with that, for so long as
a) There is only one customer at a time;
b) The customer is asking something that is reasonable and realistic; and
c) There is reciprocity from the customer or prospect.
Based on countless research studies, customer loyalty acquired through the principle of The Customer Is King can turn out to be a double-edge sword.
More often than not, it leads to the belief that the customer will be loyal for as long as you give him what he wants. Once the customer sees you are willing to bend the rules to regularly accommodate his requests, your effectiveness as a salesperson is undermined.
In the first place, this type of customer loyalty mindset is difficult to implement when a customer continues to compare and starts being demanding in terms of the lowest price in the market.
What is more practical to implement is the principle of customer longevity. As the business organization shows signs of support for the customer and gives him incentives and value-added perks, then the customer will continue to engage in a relationship with the company.
Familiarity Breeds...
A professional salesperson knows when and how to distance himself from the client. Distancing yourself provides a certain degree of professionalism and an aura of respect. Putting certain parameters in place early on will ensure that your relationship is not abused.
But even when faced with an unreasonably demanding client, the sales professional cannot act in a resentful or hostile manner. Always act with proper decorum and diplomacy no matter what.
Ethics Versus Volume
As a salesperson, you have to know when to draw the line in every aspect of your relationship with the client. First of all, understand that there are two sides to your relationship: ethics and how much of the client's business do you want to have—although some would say even the aspect of how much business you want has to do with ethics.
The ethics aspect has to do with both the amount of business volume and how strong the company culture is. But in the business aspect, the main issue is sales revenue as well as a keen sense of whether an account is reaching its saturation point.
Pricing
If after all is said and done, your customer continues to dwell on price, then you, the sales professional, have not been successful in building up your customer's understanding of your value-driven proposition. If you had been successful, you would have deflected the price issue.
As you build the relationship with your customer, how much your product costs becomes less of a concern. It should, eventually, be replaced by the quality of your service and your commitment to the relationship.
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Wednesday, February 27, 2013
Wednesday, February 20, 2013
The Pareto Principle
Why It Can Become a Marketing Headache
I don't wonder that many companies use the Pareto Principle (or the 20–80 rule). Looking at it, it does make sense. Majority of the sales revenue will likely come from a minority of the customer base. It is also advantageous to the supplier. Imagine, less accounts to visit, minimal buyer warehouses to deliver goods to, fewer accounts to manage, and less servicing to do.
However, as a consultant, I often give a cautious warning about getting too engrossed with the Pareto Principle for the following reasons.
Tendency to rely on a critical few – The 20-80 concept is very interesting as its tendency is to encourage companies to concentrate sales and service efforts on what is called 'key accounts.' For companies with limited resources, this is a strong motivation.
Thus, the tendency is to segment the total customer base and focus on the top 20 accounts. The rest of the accounts are then assigned to less qualified sales personnel, who are given the task to maintain or attrite the accounts, depending on performance contribution.
Being victimized by the law of diminishing returns – We found in many cases that, by pushing on a few critical key accounts, eventually, the window for potential opportunities becomes smaller. Every year, the absolute amount of business volume derived from key accounts becomes bigger and the gap (or the potential business from the buyer not yet with the seller) diminishes.
Sooner or later, the key account will have given almost all potential business to the seller. So, the percentage growth becomes smaller with each passing year.
'Customer Is King' era – This is still the motto of many companies that believe the customer must be followed at all costs. This is not an issue, for so long as the key account being serviced also knows its obligations or responsibilities. But what I see happening is, in certain cases, the key account violates the arrangement and policies. There is also a tendency to pamper key accounts, since losing them will be more costly.
Missing the bottom line focus – With a focus on sales revenue, the pitch is therefore more orders, more sales, more Pos. So the top-line is a healthy picture with graphs showing a northward trend.
The concern now is whether the bottom line or margins are still protected. At times, sales to key accounts increase, but margins are sacrificed in negotiations. In the end, the resulting sales are not as profitable anymore, a case of familiarity breeds contempt.
The smart buyer will always use the additional business sales they are giving you as a reason to ask for more concessions, lower pricing, and even better upgrade of service resources, all affecting contribution margins from the seller's point of view.
Shifting from growth to protect – Companies eventually realize, painfully, is that keeping key accounts translates to the strategy of 'protect' rather than 'growth.' Since more efforts and resources are given to big accounts, losing them becomes a reality.
The strategic intent of a company now moves from growth into protect mode. The company starts to think that 80% of the accounts should not have been merely relegated to the rest of the sales force. Rather, another tier (perhaps, the next 30%) should have been selected and aligned within the account team. In case the first 20% key accounts are moved into protect mode, growth can still be viable in the next 30%.
The good thing about the Pareto Principle is it places priority on accounts management and servicing. But to be blinded by the concept of 'key accounts' will create a disaster waiting to happen in any business organization. So rethink the pitfalls of the Pareto Principle before you start planning your strategies for the year ahead.
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Wednesday, February 13, 2013
Monday, February 4, 2013
National Sales Rally on February 12, 2013
Friday, January 25, 2013
Time To Move Up
FROM TEAM BUILDING TO TEAM ALIGNMENT
When was the last time your company had a Team Building session? How many times in the last five years has your company done Team Building? Ever wonder why during Team Building, most of the participants can hit the targets of each activity—but when they get back to the workplace, after a few weeks, things begins to fall apart again?
Maybe its time we get serious and understand one thing: Team building is not the answer for everything that goes wrong!
Following are the common pitfalls of organizations that engage in Team Building activities.
1) Team Building is not a sportsfest where physical strength between teams are tested. It is obvious from many companies that they infuse the concept of Team Building during games where departments are pitted against other departments. By doing this, the gap and differences among departments become even more pronounced. Thus you end up with winners and losers instead of building camaraderie.
2) Team Building is not a summer outing of games and more games. To cut on costs, companies resort to merging the annual summer outing with Team Building. They use this single event to rally everyone to work closer and more intently. How can this be achieved when (a) Summer outings are generally voluntary and there is usually no perfect attendance? and (b) How can over 100 employees (we have witnessed even 200, 300, 500 employees) all be herded into a one-day sportsfest-cum-teambuilding! You may create a venue for mass protest not Team Building!
3) Team Building should ideally not be conducted by employees involved in the organization. How can there be credibility with a facilitator who is an employee, who may be part of the concern, and who is too immersed in (or eaten up by) the organization. You may hear participants remark “But her department is part of the problem!” or “What gives him the right to tell us we are not working as a team when he is the cause of the problem!” Again, when companies begin to cut costs, the first one to suffer is Training and Team Building.
4) Team Building is not about the venue or the food. Sadly, whenever a company plans to have Team Building, the main debate among employees and management revolves around where it will be held and what kind of food will be served. Doesn’t this downplay the value of the event? As a consultant, it bothers me when the focus of Team Building for some companies is having fun, exploring the new venue, and trying out new food. The more pressing concerns that must be addressed should be (a) What gaps are not being fulfilled by the company? (b) What attributes do not support achieving team goals, (c) What issues and concerns need to be addressed, and (d) Why does the company believe Team Building can answer all these questions?
5) Team Building is not the answer for all concerns. How often has Team Building been conducted in your organization Every year? Every two years? Every three years? Have there been significant changes in personnel attitudes? Have there been significant attitude changes in the management as well as the company's direction? If not, it may be because your company thinks that the solution for any and all concerns is Team Building!
Thousands of companies now realize that after Team Building, there is a need to go to the next higher stage: Team Alignment.
When issues are solvable, then Team Building works. However, when the gaps and concerns keep getting bigger and unmanageable, then Team Building is a failure. Team Alignment introduces critical attributes outside the usual scope of Team Building.
Before you jump into your next Team Building seminar, think twice.
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