13 Insights CFOs Should Know about Marketing & Sales
Several years ago, at an Oregon Society of CPAs event, I gave a talk to a room of about 30 CFOs. The title was something like, “How to Determine if Your Sales-Department’s Sales Forecast is in Touch with Reality.”
During the talk I polled the audience with two questions:
Question 1: How many of you believe the accuracy and soundness of the sales forecasts you are given by your firm’s Marketing & Sales Department?
Question 2: How many of you openly challenge the forecast provided by the Marketing & Sales Department?
I was shocked by the response. So, I asked myself:
If no one is in a position so critical to the success of a firm (the CFO), believes something as important as the projections of top line revenue, why don’t they challenge those projections?
The CFO of a company is a critical position. CFOs have the essential responsibility to keep the business honest and its executive apprised of financial circumstances or performance indicators that might jeopardize survival.
I could think of only two reasons they were not challenging low-credibility sales forecasts: Cowardice and Ignorance.
(I will assume the former is a direct result of the latter. Bravery is easier with the confidence of knowledge.)
If a CFO doesn’t understand some essential truths about Marketing & Sales, they run the risk of being considered poorly informed or being humiliated and blown out of the room by an assertive sales or marketing executive. In such cases it might be safer to let a sleeping dog lie. Discretion is better than conflict.
But discretion doesn’t save a business.
Moving to Knowledge
Being able to identify fallacies, errors and bad decisions in Marketing & Sales can prevent major problems or, conversely, trigger critical adjustments to strategies and budgets that enable breakthroughs. So, to help CFOs with their responsibility to be heard, let me offer 13 insights that will provide the confidence to politely challenge, when circumstances dictate.
1. The Value Quotient is more important than The Value Proposition
Value Proposition is a term that marketing folks love to wield like a magic sword as they charge to penetrate new markets with bothold and new products. However, what is more meaningful than the Value Proposition is the Value Quotient.
The Value Quotient comprehends the Total Value Received by the Customer divided by Total Costs incurred by the customer to acquire, use, and maintain your offering.
All economic value accruing to your firm has, as its source, the customer’s perception that they will receive greater economic, emotional, physical, political or social value from your product or service, than it costs them economically, emotionally, politically, physically or socially to acquire and use.
Unless your marketing, sales and channel team understand the contributions each factor makes to a customer’s decision-making process about your product or service (offering), team members can’t be trained to elicit the customer’s complete spectrum of needs, and communicate your product’s delivery of them in the customer’s context
2. Differentiation is a useless goal…
... unless it can be translated into some set of customer-beneficial benefits and/or costs that enhance your offering’s Value Quotient formula.
3. New Product Introductions (NPIs) do require a lot of money to have a successful launch
New products with unique value quotients and are narrowly focus on markets where those value quotients are compelling, is the fastest path to success. Such a market focus rapidly builds a strong defensible position, as well as a foothold from which to launch additional contiguous segment launch initiatives. Such a focused approach is a lot less costly and achieves rapid market adoption.
Everett Rogers’ book, “The Diffusion of Innovations”, Free Press, is a remarkable study of how innovations can be spread by leveraging the intra-market communications network already in place in most markets.
4. Sales opportunities are lost to “price” and because of good “relationships”
Sales opportunities are lost to a match of customer needs that results in a lower-customer perception of the Value Quotient. They are won because of a match of customer needs to Value Quotient.
Relationships are over-rated as well. A good relationship does not trump a bad “Value Quotient”. Moreover, at the heart of a good relationship is unshakeable Trust. Deep trust, based on promises kept, value quotients smoothly delivered, open and honest communications and a mindset to help (not hype), is what must be developed with customers. Golf-tournament-and-beer-based relationships are nice, but trust is essential.
5. Thirty to fifty percent of a salesperson’s pipeline will be lost to “No Decision”
This statistic has been repeatedly confirmed through research. Its cause is a salesperson’s misjudged, subjective conclusion thatthe prospect has enough self-recognized need to be compelled to buy something to meet that need.
A salesperson’s opinion can be challenged by asking a few simple questions:
- Can the prospect do nothing?
- Have they told you, (or have you asked), whether the situation demands action?
- Do you and the prospect agree that they must do something?
The only opinion that matters is the customer’s recognition of that need with enough intensity to confidently predict they will actually buy something.
These types of non-compelling or “no-decision-ever” opportunities filter into a salesperson’s pipeline to make it appear there is a lot of opportunity, when in reality it’s simply a false front.
6. Focus is better than broad attacks on a marketplace.
Not every customer receives the same magnitude and type of value from your product or service. It makes sense that those who perceive the greatest value are more likely to buy it, pay more for it, be happier with it, tell others like themselves about it and return when they need more. Always begin there.
7. The customer’s decision-making process is more important than your sales process
If the salesperson doesn’t understand the buyer’s decision-making process, they can’t anticipate needs and facilitate progress.
8. Tactical marketing budgets are mostly …
9. Marketing automation is not the universal answer
Automating fundamentally unsound strategies and processes only produces waste at a faster automated rate. Prove the Value Quotient and target market focus first – then automate.
10. Sales training is useless if the market strategy is ill-conceived.
Most everyone believes that sales deficiencies can be fixed by improving the sales function. Truth is: The fastest way to overcome a sales deficiency is with an improved market strategy.
Canoes do not make much progress if the is no water in the stream. Pick markets with positive economic momentum and that realize very high value quotients from your offerings.
11. Branding does the drive success. It is the result of success.
Branding is the result of proven customer value delivered. That delivered value is the meaning of your brand. Invest first is the industry best value Quotient, the branding will take care of itself.
12. The biggest deficiency in most marketing and sales functions is the lack of Analytics, the lack, or availability, ofData
Your sales team is a captive, readily available resource for gathering customer, value quotient, competitive, market and economic data. Just as a general would not tolerate soldiers not reporting on the conditions in the battlefield (the enemy’s position, disposition, strength, armaments, and the effectiveness of their weapons), you MUST learn to tap your sales force experiences and capture the data.
In general, salespeople hate to sit at a computer and write things down. But this is not about what they enjoy or don’t enjoy – it’s important, Data must be collected, reported, compiled, and analyzed. So, a resource must be assigned to do the analysis, interpretits meaning, recommend strategic adjustments, and test them.
The greatest breakthroughs I have experienced in 30 years of consulting have been generated from analysis of data and information already within the grasp of the marketing & sales team.
13. The Fallacy of “Recruiting for the Rolodex”
For those too young to remember, (though they still exist), a Rolodex is a mechanical, circular business card holder and quick retrieval device. Even in this world of cloud-based CRMs and magic super-powered cell phones, a Rolodex is a simple desktop mechanical convenience which still has many adherents.
It is not uncommon for sales departments to want to hire an experienced salesperson with a substantial “Rolodex” of industry contacts. As you might imagine, the person being recruited usually commands a salary premium for that Rolodex information – the implication being that increased market penetration and market share capture from competitors will be much easier. Sales Managers dream of a shortcut to a competitive coup well-worth the budget-busting salary premium.
The truth is Rolodex hires don’t work.
While a Rolodex might enable an easy entrée into a potential client, it does not:
- Overcome the cost to the customer of switching suppliers
- Guarantee that your offering has a competitively better Value Quotient
- Eliminate the customer’s need to expend already committed resources to evaluate, test, change
design and requalify your firm and product as a supplier
If you have a compelling Value Quotient go with that – not a Rolodex wizard.
There they are: 13 insights.
For those of you who recognize your firm in these misconceptions, WAGDAI? (What Are You Going to Do About It?)
Silence is complicit malpractice. Learn, steel your courage, and save your firm.
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