The Power of Quality Thinking in Sales and Marketing

THE POWER OF QUALITY THINKING IN SALES AND MARKETING

Paul Selden, President
Performance Management, Inc.
(From Quality Progress Magazine, Fall 2000)

In the past decade a growing number of pioneers have explored out how quality thinking can be applied to sales and marketing (1, 2, 3, 4). As applied to sales and marketing, quality thinking holds the credo that in the long run, the most effective way to increase earnings is to view revenue as the outcome of a process, and further, that process can be improved systematically by applying principles of quality (see Note 1).

Older ways of looking at sales and marketing field put a straightjacket on our ability to improve. The better we understand how quality thinking can help us break free of limitations imposed by the old constructs, the better we will serve our customers, the more likely we will fulfill the promises of quality programs such as "Six Sigma," and the more success our organizations will achieve.

This article outlines a number of key differences between the old and new ways of looking at sales and marketing, highlighting the concrete benefits of quality thinking. Part One presents an example of how process mapping can help us analyze sales and marketing. Part Two presents examples of how five firms applied quality thinking in their sales and marketing processes to increase profitability and leadership in their field. We finish with three brief personal examples. The conclusion is simple but powerful: because quality thinking offers a new and more systematic approach to improvement, further investigation along these lines should pay great dividends to businesses ready to extend their quality journey into the field of sales and marketing.

Part One: OLD VS. NEW WAYS TO MAP THE PROCESS

For many people, systematic thinking is thrown out the window when examining the world of sales and marketing. In 1999 a popular observer of the sales scene, writing in a respected publication (both shall remain nameless), wrote that what happens in sales is "magic." The author's analysis of the process is that a potential customer appears. Then abacadabra-a sales transaction is consummated-each one a surprising, mysterious, fleeting, and discrete event. We may hope the customer buys again, but if they do not it is nothing to lose sleep over. There's plenty more out there.

The old "Sales as Discrete" event view (hereby dubbed the SAD view of sales, tongue firmly in cheek) is illustrated in Figure One. This approach tends to treat each transaction as the result of a minor miracle.

Figure One. Old "Sales as Discrete" (SAD) View of Sales Process

By contrast, when quality thinking is applied to the field of sales and marketing, we are likely to draw a high-level flow chart that looks more like Figure Two.

Figure Two. New View of Sales Process (High Level)

Figure Two illustrates the flow of much more tangible events across the functional departments typically responsible for them in business to business selling. In smaller companies or in consumer sales environments such as retailing, any given individual may play many roles, but the flow itself is fairly similar. Marketing is typically responsible for attracting potential customers. If Marketing is successful, Sales then meets the potential customer for the first time, and an initial mutual review of customer needs and wants versus the supplier's general capabilities takes place. If a general fit seems to make sense, a more careful needs analysis takes place, often with specialists from Engineering (designers or other technical experts) and Accounting (credit staff, pricing, etc.) working as part of a team coordinated by Sales. If the project looks feasible, a proposal is created, with Sales typically presenting the proposal to the prospective customer. If the deal is approved, Service (or shipping, production, installation, etc.) provides the products and services and deals with complaints regarding the order. Marketing observes what happens in the field to apply any lessons learned, and the cycle begins again. Once a customer has a purchase history, responsibility for getting a customer to return and make repeat purchases often shifts more directly to Sales.

Of course, the process flow for any given business can be different than the generic one illustrated above.

Notice that, even though the process mapped out in Figure Two lends itself to systematic analysis, it does not illustrate the customer's side of the flow. From a customer's perspective in the business to business environment, the buying process often resembles Figure Three.

Figure Three. New View of Buying Process (High Level)

Like the selling process diagrammed from the supplier's point of view in Figure Two, the buying process can be viewed as a sequence of steps. Marketing functions are constantly assessing how the market is reacting to their own current offerings and formulating a "wish list" of desired alterations to the current line up. At some point the desired changes are communicated with other departments. Engineering works out specific ways that Marketing's ideas will impact the current product or service. Internal Users of the proposed change (such as production, service, and installation groups) comment on the quality of how well the previous approach worked in practice, and pros and cons of the new idea. Purchasing reviews its current supply base for potential sources of the product or service, and may help prepare and issue a formal Request for Proposal (RFP). As proposals come in they may be reviewed by any or all of the groups involved in issuing the RFP in the first place. If an agreement is reached, the goods and services purchased are deployed and used, and Accounting pays the supplier. The cycle continues as experience with the new approach is gained and fed back to the company's departments in more or less formal ways. The role of Management is not shown in either diagram, but Management obviously plays an important role. Managers may or may not possess expertise in all the particular functional areas, but they often have financial and personnel responsibilities, must juggle priorities across multiple projects, and are in a position to provide their own inputs to the process or to alter the design of the process itself at various points.

Just as in Figure Two, Figure Three is a generic process map meant to convey the general idea of how quality thinking can demystify a heretofore "mysterious" process. The experienced reader will also understand that Figures Two and Three only begin to hint at how easy it is for a myriad of inefficiencies, breakdowns, bottlenecks, delays, cost overruns, missed communications, and quality problems of all sorts to play havoc throughout the cycle. Even these simple process flowcharts underscore Dr.Deming's observation that process stability is rarely a natural condition, and that to achieve it requires active management. (5)

Moments of Truth

Mapping one's own selling process helps to surface a host of opportunities to improve. Quality thinking tells us, however, that we will not get very far by improving areas that do not matter to the customer. Stated in more precise behavioral terms, what "matters" to the customer are antecedent stimuli that prompt the customer to approach a supplier and enter into purchase agreements, and the consequences of doing so at each step that reinforce (or weaken) this chain of behaviors in the future. The map of the customer's buying process helps us see these observable stimuli and events with more clarity.

A powerful strategy on the road to Six Sigma is to learn what is most important to the customer at each point the supplier and customer come into contact during the buying cycle, and to focus quality assurance and improvement efforts on those critical and highly visible "moments of truth." A number of such moments of truth are shown in Figure Four.

Figure Four. Moments of Truth in the Buy-Sell Cycle

Supplier improvements that are not noticeable to the customer or that address the customer's concerns of yesterday but not the needs of today or tomorrow means resources may be spent on improving services and products without having any impact on overall sales volume or market share. This point has not been lost on JackWelch, who has stated, "The best Six Sigma projects begin not inside the business but outside it, focused on answering the question-how can we make the customer more competitive? … One thing we have discovered with certainty is that anything we do that makes that customer more successful inevitably results in a financial return for us." (6)

Part Two: FIVE DIMENSIONS OF SAD vs. QUALITY THINKING

The old-fashioned point of view puts the sales rep at the center of the universe. By treating each sale as the result of mysterious forces, that is, by failing to distinguish special from common causes, the old approach is constrained by its refusal to even attempt to distinguish the two. Consequently, the old school usually seeks to improve sales chiefly by focusing on how reps can increase their activities and close more deals. Unless we know what contributes to or hinders a sale at each step throughout the entire process, of course the only approach is to do more of whatever it is that you are doing, and hope it results in more output. Hence the "sage" advice to new sales reps, "It's a numbers game." The old way of thinking is not entirely wrong, but it's like a one-note musical instrument, much too limited.

Quality thinking leads us to is a much larger view of what generating revenue is all about than the "sale-as-discrete-transaction" approach. By contrast, quality thinking considers the entire set of variables that govern customer purchase behavior, separates special from common causes, and seeks to improve the systems that deliver or affects these variables.

Consider how the "sale as discrete" transaction crowd treats five common business process dimensions: quantity, money, time, quality, and variability. (Tongue in cheek, we will continue to saddle the old view with the acronym, SAD.) As the examples show, the old, SAD approach limits profitability in many ways.

Quantity

SAD Focuses On: How much time reps spend with customers (see Figure Five).

Figure Five. SAD vs. Quality Thinking: Dimension of Quantity

Typical Recommendation: "Increase customer face time and watch your sales soar."
How Limits Profitability: Two people are involved in this equation to increase face time. If the customer does not see the value in longer or more frequent visits, this tactic is bound to add cost unmatched by income.
Ignores: Engineering principle that the best alternative is the one that most economically satisfies customer requirements.

By contrast, sales quality thinking understands that the best approach may be a coordinated mix of techniques that cuts across traditional functional departments. In 1993 VictorHunter bought a floundering company called Team TBA, a distributor which sold Shell-branded tires, batteries, and accessories to Shell service stations. Hunter immediately asked the service station managers how THEY would like to receive information about new products and receive service: by email, fax, phone, or in person? Many dealers chose to receive their information by email, fax, or by phone. Hunter cut his field rep force from 83 people to 18, hired 6 outbound telesales reps and 7 inbound customer service reps. The result? By honoring his customer's preferences, dealer satisfaction increased, total sales expense dropped 65%, sales increased, and Team TBA made its first profit in years. Amazingly, even though the number of face-to-face contacts went down by 70%, dealers perceived that face-to-face contacts increased by 17%. (7)

Money

SAD Approach Focuses On: How much money can I make off this deal? (See Figure Six.)

Figure Six. SAD vs. Quality Thinking: Dimension of Money

Typical Recommendation: "See each customer as a bag of groceries."
How Limits Profitability: Sales reps are trained to screen out or "qualify" prospects with apparently low initial purchasing power. Inevitably this means that customers with potentially larger follow-on purchases or a stream of steady purchases will be repulsed, both literally and figuratively, by the behavior of the sales rep. The words of the immortal W.C.Fields come to mind at this point, "Go away son, you bother me."
Ignores: Economic principle that the lifetime value of a customer is often 10-20 times larger than any single transaction. (8) (See Note 2.)

By contrast, sales process thinking shows up in the work of DanSewell, who calculated that his lifetime customers will spend some $332,000 at his Dallas auto dealerships. Sewell created systems that increase the likelihood that his customers will do just that, citing the work of Deming, Taguchi, and Ohno among the chief positive influences on his own thinking, and remarking, "Systems, not smiles," are the most important part of customer service. (9) At the time he made that observation, his reps were selling 15 cars per month, nearly twice the national average. Sewell's techniques for achieving this goal are spelled out in his highly readable book. In addition to familiar techniques, such as using surveys to better understand customer opinions and ongoing employee training in customer service, Sewell has instituted quality oriented measurements (for example, percent of retained customers) to help guide an explicit cycle for improvement and support a more fact-based approach to management.

Time

SAD Focuses On: Techniques to create quick close (see Figure Seven).

Figure Seven. SAD vs. Process Thinking: Dimension of Time

Typical Recommendation: Verbal tricks, such as "Get the prospect to say YES seven times, and they'll say YES to your offer."
How Limits Profitability: Customers buying something they are not satisfied with may later return the purchase and/or refuse to make or defer making similar purchases in the future.
Ignores: Psychological principle that the consequences following an individual's action govern the probability that their behavior will occur again in the future. (10)

By contrast, sales quality thinking shows up in the action of legendary retailer Nordstrom, whose salespeople will go to just about any lengths to make sure customers are treated like honored friends and family before, during, and after they purchase an item. "Top associates don't look for the one spectacular sale that will make their day. Instead, they are committed to planting the seed for an ongoing business relationship and doing what's necessary to nurture that seed. … JoeDover finds he 'hooks' the customer when he calls him back a few days later to ask how the shoes are working out. 'Ninety percent of the time, they're so stunned that you called, they remember you,' Dover attest(s)." The customers of Nordstrom are delighted; no doubt Nordstrom is too, with the huge value of free publicity it receives as a result! (11) Where product quality between competitors is at parity, good service after the sale is critical.

Quality

SAD Focuses On: Sales personnel best practices (see Figure Eight).

Figure Eight. SAD vs. Process Thinking: Dimension of Quality

Typical Recommendation: "Watch your best reps in action, ask them why they're successful, and teach what they do to the rest."
How Limits Profitability: Spending money to train all reps to follow "best practices" may actually decrease profits if the reps' behavior is not the main reason sales are lower than desired.
Ignores: Process principle that a company's ability to generate revenue is limited by its greatest constraint, which may not have anything to do with the sales reps themselves. (12)

By contrast, sales quality thinking may lead companies to bypass their reps entirely. This type of creative thinking led Vaughan's Seed Company (a division of Swiss giant Novartis) to give their biggest customers computers, modems, and the ability to directly place their own orders through Vaughan's on-line catalog. Millions of dollars of orders now flow in untouched by the traditional sales rep. (13) Of course, this is the same technique that Dell Computer uses in their hugely successful internet-based PC catalog. Yet another example comes from Arby's and MacDonald's restaurant chains, which are testing the use of self-serve ordering devices. The advantages to customers are many: the devices can be made multi-lingual, can be stationed in play areas so that parents supervising their children don't have to leave them to place and order, and may provide a more pleasant ordering experience. To the business manager, hard to find staff becomes less of an issue, errors in making change are reduced, and, interestingly enough, some tests showed that the average order size actually increased! (14)

Variability

SAD Focuses On: The sales reps' responsibility in meeting their "plan" or quota (see Figure Nine).

Figure Nine. SAD vs. Process Thinking: Dimension of Variability

Traditional Recommendation: "If you aren't meeting your numbers, you better have a darn good reason."
How Limits Profitability: By confusing common and special causes of, extra resources are spent in unnecessary troubleshooting; overall variability is actually increased; and, personnel are stressed, which increases costs due to unwarranted turnover.
Ignores: Quality engineering principle that, as long as the process is operating in a state of statistical control, failure to meet specifications is almost certainly the result of management's design of the process itself or the nature of the inputs it receives, and not due to "operator error."