Helen Writings
The latest “expert” discussion and leading indicators continue to point to an uncertain economy. Whether it is the price of energy, reduced consumer confidence (and spending), most manufacturers in North American continue to face a sluggish market.
How does this fact change your marketing/sales approach? How can you maintain the flexibility to succeed in a down market, yet capitalize as market demand returns? Focusing only on the top line may make it difficult to survive a significant recession, yet simply cutting costs to sustain profits may result in irreparable harm to your long-term market position. Market Strategy
There are only a limited number of levers a manufacturer can pull to capture profit, while minimizing any risks to market position, service levels, and revenue. These include;
• Optimizing your spend on marketing programs
• Optimizing the levels and use of channel pricing, discount, & programs
• Managing your sales/marketing organizational structure and costs to align with market objectives
• Boosting the effectiveness of your resource allocation by managing the “hit rate” in the sales process
The first lever is the annual spend on marketing programs. Often, when managing total spend on marketing, the manufacturer takes the path of least resistance, either cutting spending proportionally across all programs, or eliminating certain program elements altogether.
Our experience shows that manufacturers that are most effective at profit capture from their program spending can assign an ROI to each program element. What market constituents are affected by each program? What is the benefit gained by providing the program in the first place? And what risk(s) (if any) are associated with reducing/eliminating the program?
When the answers to these questions are quantified, the manufacturer can make the surgical cuts to program spending where appropriate, sustain profitability and assure long term market position
The second lever available to the manufacturer is channel pricing. Channel Compensation In a boom market, manufacturers often get “lazy” in their channel pricing practices. A discount or rebate structure may no longer accurately reflect the role or value contribution your channel performs in creating and supporting the sale. This may cause redundancies in your overall go to market cost. And as channel pricing often reflects a number as large as 50% of the manufacturer’s sales revenue, the channel pricing structure can be fertile ground to examine for profit capture.
A third profit capture lever for the manufacturer is marketing and sales structure. Total marketing/sales organization costs typically represent well over 10% of revenues. As manufacturers serve markets in high growth mode, there is a tendency toward organization structure “creep”.
A downturn in the market forces reevaluation of the structure. Evaluation of the roles performed by each title in the marketing/sales organization can lead to the most effective cost reduction where such initiatives are necessary.
The fourth lever is what Frank Lynn & Associates labels “hit rate”. Hit rate is defined as how often you win the sale when the customer considers your product/brand for purchase. Hit rate is clearly impacted by how well the manufacturer (and its channel partners) performs in the sales process. But it is also determined by how well your product/support offering aligns to the customer’s needs. Sales Channel Workshops
In boom markets, manufacturers often accept lower hit rates. The goal is to build revenue and market share by getting in front of as many potential customers as possible. However, in a down market, the manufacturer cannot afford a low hit rate. Since there is a significant cost associated with pursing and losing a sale, a powerful profit capture strategy is to build hit rate.
Effective manufacturers that have successfully managed through industry downturns in the past act now to implement profit capture strategies.
Tags: Business, Distribution, Management, Sales, strategy
Posted in Business · March 12th, 2010 · Comments (0)
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Tags: affiliate marketing, Business, internet marketing, online business
Posted in Internet · March 12th, 2010 · Comments (0)