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Strategy URGENT - Need Help Fast!

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Increasing Revenue 58% On A 1% Budget Increase!
Posted By: bcousins* on 12/18/2006 3:19 PM (CST)	250 Points
My company, a South American manufacturer of an industrial product that's basically a commodity, anticipates going from $130 million US in revenue during 2006, to $200 million US in 2007. They plan to do this with only a very slight increase in the marketing budget...a measly 1%. As the marketing coordinator, it's up to me to play a huge role in this anticipated growth. An obstacle to this acievement is company culture and attitude. We are a HUGE player in the market where the company is based with over 80% of the market in what is a developing nation (a kind term for third world country). In the US, the world's foremost economic power, we have less than 10% of the market. There is a real problem with complacency with regard to marketing here in the US. What strategy would you recommend to do what we can with what's given to help drive sales toward that magical $200 million mark in 2007? I am frustrated, and bewildered. Best regards, Bob

Posted by: Sans Prix	Accepted Answer
12/18/2006 4:30 PM (CST)
If (and its a big "if", given the limted information you've given us) you can raise your prices by approx 4.895%, you should achieve your target. ;-) Jon

Posted by: NoStressXpress	Accepted Answer
12/18/2006 5:17 PM (CST)
Bob, You could give us more information to start off with. That certainly would be appreciated. Is the bulk of your company's sales in the United States? Or, is it in South Africa? Europe? Pacific Rim? You'll probably get mad at me when I tell you that achieving a 58% increase in revenues with a 1% increase in marketing budget is NOT that uncommon - at least where I came from. In 1980 - prior to getting hired as a marketing manager/product manager for Toshiba (Industrial Division) I had to commit to increasing sales 200% with NO increase in marketing budget. (The other qualified candidates wouldn't commit). My bosses back then believed that over 50% of the marketing budget was wasted. You know, they were right! I took that budget and made sure that it was being applied on the RIGHT marketing activities that would maximize marketing ROI. Keep in mind that back in 1980 we didn't have the sophisticated technology that marketers are using today. I suggest you read Marketing ROI and the Sales Funnel by Jim Lenskold and Hugh Macfarlane. You can have access to a copy by simply upgrading to Premium membership at MarketingProfs.com. If you give us more information I believe we can give you more specific advice and recommendations. By the way, the 200% I committed to actually turned out to be a 1000% increase in sales. I hope this helps. Conrad

Posted by: mgoodman	Accepted Answer
12/18/2006 6:55 PM (CST)
Is the sales goal a dream or is it based on something management knows? Obviously growth like that doesn't come free. That doesn't mean it's impossible, but it will almost certainly require that you do something (or many things) differently. Certainly the first thing you need to look at is a price increase. That's a no-brainer. Then you need to find ways to keep your volume up at the higher prices -- short-term trade promotion probably. You didn't say anything about what the long-range plan is. Do you plan to be in business in 2008, or is this a "maximize the volume in 2007 at all costs" last-ditch campaign? If it's the latter, then you don't need anything that looks like relationship-building or advertising. Just promote the hell out of the product in 2007. Sounds like you have a real challenge on your hands. Maybe management needs some education about marketing before they blame you for failing to meet their objectives.

Posted by: CarolBlaha	Accepted Answer
12/18/2006 7:02 PM (CST)
If your biz is a commodity as you say, raising prices is probably not an option. The small budget increase might have been made because they see little return for the investment they already made. Give them that return, "show them the money" and they'll be more open minded. Managing the sales funnel and tuning the sales process will give you a lot of bang. This is what I teach, once a lead goes into the funnel, its either closed, lost, or delayed. Too many times it just leaks out and vanishes. Track every marketing $ spent, and its ROI. The only way you'll do this is have sales accountable. Make sure whatever leads come in are acted on and followed thru. My tagline is "its not the people but the process", build a process to inspect what you expect-- you may find you have more money than you need. Good Luck, Carol automaticsalesperson.com

Posted by: mgoodman	Accepted Answer
12/18/2006 7:04 PM (CST)
This scenario sounds like one I dealt with about 8 years ago. The client was a market leader in Brazil, with an almost invisible presence in the United States. They wanted to grow to a 25% market share (in North America) in two years. After a lengthy mating dance, I ended up with the project, and in a meeting in Sao Paulo I convinced them that achieving their objective was going to be very expensive, and that they would be better off with a slower, more modest goal. It was a hard pill for them to swallow, but in the end they accepted my advice, thanked me, and paid my fee without a complaint. They are still a minor player in the United States, but they realize how much better off their shareholders are with the lower share of market in North America. They're still huge in Brazil.

Posted by: wnelson	Accepted Answer
12/18/2006 7:18 PM (CST)
Hi, Bob, From my experience in the industrial B2B market, your company's goal of 58% is made difficult by the design cycles in the market. Generally, in industrial markets, design-ins take up to a year to move into production. If your sales team hasn't achieved print position on 58% more prints this year or the market isn't growing by 58%, then your company is setting it self up for failure. Keep in mind that marketing - especially to the industrial marketplace - is a strategic investment. Through marketing activities like advertising, trade shows, trade publication article writing, direct mail, etc, you can build brand awareness over time, but it's not going to happen within a couple months and have any appreciable effect on your sales. You could double, triple, or increase your marketing budget by an order of magnitude and it won't make a 58% increase in your revenues. For 2007, with respect to your revenue goals, your company has a business development problem, not a marketing problem, It's going to take a consolidated sales effort, realigning sales incentive goals, maybe changing the sales organization/structure, driving design wins, and tracking business to production. Another huge problem you are facing is that many, many companies are designing in the US and production ends up in Asia. Your company will need to track designs as the leave the region and make sure they capture them. As marketing coordinator, I would make sure the sales increase is clearly tagged on your sales Directors and that you document the sales process and customer design-in cycles so everyone knows the score. From your position, you can aim the laser at the right accounts that you would have to capture to gain $70 million in sales. You do this by knowing each account's total available market (how many pieces they buy). Prioritize this by account size and by present relationship, set goals by account, and work account plans with clearly defined actions to unseat your competitors. These actions might be pricing, design mods to meet competitor specs, or developing relationships, but chances are they will be to gain design-ins and print position. Put together a score card by account and fanatically keep this scorecard up to date. Work with sales management to make sure they agree on the accounts, goals, and progress. Stay flexible and responsive to mow down any issues on pricing, product collateral materials and information, product samples, and product definition. Forget traditional marketing activities - they won't help you. If you and your company need help with this, give me a call. I have done this successfully and most likely know your market. Not what you wanted to hear, I'm sure. But, it's reality. I hope this helps. Wayde

Posted by: stevea	Accepted Answer
12/19/2006 4:16 AM (CST)
Dear Bob There are some further points which I would distil out of my colleague’s postings. You don’t say what your marketing budget actually is, but at the risk of stating the obvious, 1% of $10,000 makes less of an impact than 1% of $5,000,000. And any marketing budget which is spent unwisely is a budget which you can access in totality if you are able to change the entire marketing thrust of your operation. I know that because I’ve done it, producing revenue growth of 243% on UK sales of £5,000,000 without adding a penny to the money they wasted on marketing until I arrived. That was in B2B, in the middle of a recession and in an industry where the enquiry to sale cycle was 6 months. List out the activities in which your operation indulges its marketing spend. Cost them Calculate the revenue and incremental revenue for each of them. If you can’t do the last one, assign it a big fat $0! Then work out what you can do differently, bearing in mind the excellent advice you have received so far. Work out what additional revenue in 12 months you can bring. See if it adds up to 58%. Wayde is right. You can’t drive a 58% growth in 12 months through marketing or price alone. You have to do it through partnership with your sales people and your sales channels. So here’s some questions. The $200M budget came from someone. Challenge them to define how it will be achieved. They have a plant to keep busy and product manufacture has a lead time, so to meet an additional $200 in orders, they should be gearing up to produce the finished product right now. Are they? Ask them. Ask them how they see the new revenues being derived product by product? Ask them if they have divided the products into the mature and dying, mature but milk-cows, new and growing and new and untested? Ask for the breakdown in sales they see over the year to meet the $200M. Next turn to sales Ask the sales team if they have bought into the budget or had it imposed on them? If it is the latter, the clarity of your thinking might be doing everyone a favour! Ask them how they see the target of $200M being split, in terms of budgetary responsibility between sales people and sales channels? Ask the sale people and the channels how they expect to get the additional 58%? What will come form existing clients, due to orders in the pipeline, what will come from existing clients due to new products? Get everyone, internal and external to come up with a sales plan which breaks down the year’s desired bookings, month by month by revenue and, if you are going to make the damned stuff, by product. Where the sales people or the channels cannot put a name to a client who will fill that month’s plan, ask them how they are going to find the business. Then, looking at a sales plan which should have many holes and many unknowns in it, work out how you can spend your entire marketing budget to fill those holes, not just how you can spend the additional 1%, whatever that represents. Look carefully at the ideas here and others that you will get; you need to take such actions as will produce results quickly, so your new marketing mix may involve many “Instant” response initiatives. If they do, don’t go to far quick fixes. Telemoxie on this forum is an expert with more telemarketing experience than everyone I know put together. Where a client has a long order cycle (It’s still less than a year, so you can make it!) he recommends that telemarketing should be medium to long term and involve relationship building, not just a “Get-me-leads-tomorrow” exercise. That doesn’t work. If telemarketing matches the interest cycle, the urgent orders WILL arise! Bring in PR, CRM, direct mail and anything elese where you can get a “Buy” message out of the door in January, but ensure that you have the marketing and sales services to back it up and follow it up through the year. Let’s go back to those sales people. Once you get them to scrutinise their sales plans, they will have more depressing holes in them than a Swiss cheese. Don’t let them become dispirited. Talk to the sales managers and sales director and ensure that they know that you are working to support their team on this ambitious goal. If you get fobbed off by the macho sales type with “My guy’s always deliver, they don’t get employed if they can’t”, revert to “sales analysis type” and start asking them about what the guys are going to be doing on a weekly basis, who they will be phoning and who they will be visiting and invite them to fill in some of the blanks on your sales plan and by-the-way, what will they be doing on Monday to achieve this which is 58% more lucrative than last Monday? Also be the product champion I need to know these figures, “Just so the plant will know what to make and I’ll know what not to spend on initiatives which the sales team don’t need” Lastly, and this should have been firstly, before you spend a penny (Sorry, cent) ask the CEO or President, if this 58% goal involves any acquisitions, because that will totally skew your strategy. You can say that you don’t want to be party to any confidential discussions; but that you want to ensure that the company’s marketing assets are deployed in the most beneficial manner to the group as a whole. By the way, of you pull this off, you ought to get a real reward, it is a tough, tough task. Regards Steve Alker Unimax Solutions

Posted by: telemoxie	Accepted Answer
12/19/2006 7:15 AM (CST)
Great comments above... the good news is that this sort of growth clearly is possible, and that you have a variety of options. Others have given some great advice on how to grow revenues with existing products... Sounds like your company is well established, maybe has some cash in the bank, and possibly you now work for a "go getter" who wants to take things to the next level. If I were in your situation, In addition to do everything possible to increase sales of current products thru current channels, I'd look for agents who can increase sales of existing products in other countries (not just the US) and I would look for acquisitions of companies with related products which could add big bucks to your revenues.

Posted by: bcousins*	Author Response
12/19/2006 7:41 AM (CST)
Thank you one and all for your very insightful comments and suggestions. Here's a little more information for you. Our marketing budget for '07 is $808,237. We've cut back on the number of trade shows from ten to five, and even scaled down to 10 x 10, or 10 x 20 booths. We've also cut back on advertising, from eight publications to five. The good news is that we (I) will be using Harris Selectory to help generate leads. We manufacture in Brazil, and export to the US. About 35% of last year's revenue came from US sales. Oh, and we are increasing prices in January. I report to the marketing and inside sales manager, who also has responsibility for all of our distributors so he travels about two days out of each week. He's a very controlling task master who doesn't seek input from anyone else in marketing. A native of Central America, his speaking and grammar skills are poor, yet he insists on writing some marketing communcations himself. When I offer to help, he tells me not to worry so much about those kind of details. The marketing department consists of myself and a marketing assistant / graphic designer. About 75% of our company brochures come from Brazil and are badly translated to what they believe to be American English. The company Web site is administrated in Brazil, with the US site translated as badly as the brochures. I am beginning to understand the Brazilian business culture to be one that is very patriarchal with little to no input permitted from anyone except what they call their executive committees. There is a real insensitivity to the US marketplace and the way business is done in the US. I am concerned that the poor communications will drive a lot of potential business away. We already suffer from much longer lead times than our US competitors, and have numerous stock outs on items that should be on hand and ready to ship quickly. I've been here six months and with the way things are going here am feeling like I want to change companies already! Thanks again for all of the terrific responses. Bob

Posted by: Frank Hurtte	Accepted Answer
12/19/2006 11:18 AM (CST)
Bob, Thanks for the additional information. In regard to trade shows... a number of us have discussed the value or perhaps better stated lack of value of trade shows in America today. There are only a few that are worthy of the expense. So taking money from tradeshows and focusing on other things is probably a good thing. The literature and brochures dilema is a sound issue. But if your product is truly a commodity, the real issue may well become what is the competitive cross reference. Delivery issues will hurt you. You might need to put together some kind of interim plan to combat the issues that fall out of this one. Perhaps, it would be a good use of your bosses time - visiting these people appologizing.

Posted by: john.blackmore*	Accepted Answer
12/19/2006 2:50 PM (CST)
Three thoughts to offer a colleague: 1. Push Sales to quantify exactly where they see the additional revenue coming from. What products, what regions, what "named accounts", from what partners, and whether this is green field space or competitive in nature. Results like these need an iron-clad plan and upfront thinking. Marketing (at least in the position you describe yourself as having) cannot wave a magic wand and make revenue appear. Because even if you did, if your Sales team isn't ready for it, you've wasted your energy. 2. Look at incrementals, or base hits, rather than home runs. If you can increase your list to lead conversion rate by 5%, and then your lead to sales conversion rate by 5%...and then increase your average deal size by 5%, you start to hit a compounding interest type of return. As others have said, you're going to have to monitor this like a hawk. 3. Get the hell out of there because it doesn't sound like any fun. And what's the point in making such a big difference to a company where you're not having fun? John

Posted by: KathySmithFilms*	Accepted Answer
12/19/2006 3:31 PM (CST)
Bob, Thank you for posting a thread that opens key factors in marketing. I have been inspired by the above experts and your answers. A good company for you to follow as an example is Nestles. Let this video buffer and listen to their CEO and what he is doing for third world countries as a legacy. http://h30294.www3.hp.com/hp/pub/changeartists Another example is Apple Computers (I like PC too) - The main objective is to increase visibility of the Apple Store and generate strong online sales. To achieve this, Apple use an integrated approach to performance-based marketing, where different activities are integrated to achieve results in - Sales generation Direct marketing Brand building - Affiliation is a firm commitment to a long-term marketing plan, closely followed and animated by a highly motivated team, which is in charge of supervising and developing any potential partnerships. This program provides: Commission segmentation based on sales transacted on AppleStore Special incentives to support vertical markets or hot product launches Regular communication via monthly newsletters Up-to-date creative with strong messages to increase conversions Result: It's worldwide and anyone that submits and qualifies gets a huge commission as an indie or affiliate. The point the communication barrier is no longer a problem and they have a great translations unit. Giving examples in your area of whatever the product or service is to your exec strata as well as gathering surveys from english speaking people in your area and presenting the difference like you see in the Nestles CEO expansion above will back up the importance that the lost in translation does equal lost sales worldwide. Have a prosperous new year Kathy

Posted by: stevea	Accepted Answer
12/19/2006 4:32 PM (CST)
Dear Bob Is the focus still electric motors? If so, your options for change in marketing are limitless, if the rulers will let you! As for the patrician nature of the senior management – it sounds just like old American Wasp corporate culture but with Latin overtones: Would-be aristocrats. So learn to ride a horse and play polo or grasp the nettle and take your case to the top. I used to have to deal with some Oklahoman owners who thought that they were grander than a Lord, until I took them round our House of Lords and introduced them to some real ones who hailed me “Steven, my lad! How’s your father these days?” These people probably appreciate straight talk from an educated business person with a well argued, watertight business case, more than the creeping obsequies they are likely to be presented with by their toadies. If their intermediate management are peeing away their investment and their potential, you have only your job to lose and it seems that you are half contemplating a change in the face of intransigence in any case. Get the CV out though before you go for broke! I agree, trade shows are a waste of time. If you can identify all the potential users of your wound products, why not go out to them, rather than invite them to visit you alongside all of your competitors? If the immediate management doesn’t listen, then ask them the difficult questions we outlined earlier. There is a difference between not listening and not answering. Refusing to face up to a question which begs an unpalatable answer is tantamount to negligence. You can jump over people’s heads for that. I’d be inclined to have the interviews lined up first though, because you can’t know what vested interests, or even worse, what family interests you are going to upset. The real test though is the reaction at the top. If the owners are prepared to ignore a case which shows that they are going to lose out, whilst no other manger is prepared to refute it, you don’t stand a chance and you might as well bail out. If you get out-argued, that’s tough, but that’s business and you might just be respected for it. If the scales fall from the board’s eyes and they see the light, then you have the chance of a lifetime. All strategies which involve radical change involve risk, but so does signing up, sheep like to a sales plan which doesn’t have a hope in hell of being achieved. You then end up with the sack, but you also then have partial responsibility for the strategy which failed, and no amount of whinging about not being listened to will impress the executive who interviews you for your next job. Good luck – you will need it. Steve Alker Unimax Solutions

Posted by: mbarber	Accepted Answer
12/19/2006 4:43 PM (CST)
Mmmm - nice problem to have Bob! Great advice already on offer so I'll take a tanget to expand your options by trying to turn your esicting problems into an advantage. Okay I'd use the really poor english skills (of the person you mentioned) in all of your advertising. Use a deliberately broken English in all of your copy, throughout the entire piece, even making it a tad worse in parts. Then finish with just ONE tag line - 'Sure we might not have the best English, but we DO have the BEST OIL!' or to stick with the broken english theme go with 'Sure we not have the English best, but we Do have the BEST OIL'

Posted by: mbarber	Accepted Answer
12/19/2006 4:44 PM (CST)
Mmmm - nice problem to have Bob! Great advice already on offer so I'll take a tanget to expand your options by trying to turn your existing problems into an advantage. Okay I'd use the really poor english skills (of the person you mentioned) in all of your advertising. Use a deliberately broken English in all of your copy, throughout the entire piece, even making it a tad worse in parts. Then finish with just ONE tag line - "Sure we might not have the best English, but we DO have the BEST 'X'!" or to stick with the broken english theme go with 'Sure we not have the English best, but we Do have the BEST 'X'!"

Posted by: bcousins*	Author Response
12/20/2006 7:20 AM (CST)
Thank you one and all for your comments and suggestions. I certainly have a lot to consider. Merry Christmas and Happy New Year! Kind regards, Bob

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