Got Marketing?
How solid is the marketing process at your company? Here's the Mindpik score card.
New businesses that fail usually fail because of marketing. Venture capitalists know this. They reject more business plans because of weak or poorly thought-out marketing plans than for any other reason. Bill Davidow, former VP of Intel and the guru who drove Intel into early domination of the fledgling microprocessor business, is now a prominent venture capitalist in Silicon Valley. Bill gave us the original. idea for an evaluation list -- some of the thoughts here are borrowed from the list he uses to evaluate how solid the marketing process is at companies asking him for investment capital. How does your company stack up?
1. Does your company have a marketing vision?
The marketing vision consists of a product, a defensible market segment, and a sales/distribution channel that serves that market segment.
Most companies fail because they never identify and understand their target market segment. Because they don't understand the forces that drive that segment, they fail to develop focused products for that segment, the products are not expanded into product lines to beat the competition, and the sales channel is confused by the mismatch between the products and the market.
Occasionally companies succeed without defining their target market and without a strategy for penetrating it, but that's blind luck, not skill. Products are enhanced, but do not add value; sales people call on the wrong customers; inventories sit on distributors' shelves, clogging the channel and forcing the company to make difficult choices. The real market segment is ripe for a competitor with more insight.
Davidow talks about this as the Strategic Principle: "Marketing must invent complete products and drive them to commanding positions in defensible market segments."
He believes that one of the roles marketing must assume is that of matching products to market segments by "completing" them - by adding features, services, positioning, distribution channels, and energy. Without that process the products are orphans, thrown over the wall into the marketplace. The rest of the items in this list are the logical expansion of this first principle of the marketing vision.
2. Is Marketing in touch with your customer base?
Ask marketing what there is about this product that is so compelling, so seductive, that customers will buy it? The answers should be clear and simple statements of how the product fills a basic need better than the alternatives.
Products should be different from competitive products in dramatic and clearly perceptible ways. Some differences can be created by the marketing department through interaction with the sales channel and how the product is presented to the market. Other differences must be designed in by the development group as a response to the original marketing vision.
The only way to be in touch with the market is to be out there face-to-face with the customers, listening to them, pitching products, looking for competitive advantages and opportunities, finding out what's working at the retail level, and working directly with the sales force. Marketing should know the customers on a first-name basis, know what their needs are, when their next buy is going to be, know their problems and why the company products solve those problems. The marketing department should be a fountain of customer information and product anecdotes. This contact is the basis for the gut understanding of why people buy the product.
3. Which rung of the positioning ladder is the company on?
In the market, perception is reality. How do customers perceive your company? What is its position in the customer's mind? Positions are like rungs on a ladder. There is a ladder that is price, a ladder that is performance, and so on. Most customers know about only one rung on each of these ladders -- the cheapest, the fastest, etc. The ladders are things the customers erect for themselves -- the company cannot claim to be the highest performance system under $5000 made by a company east of the Mississippi. That's not a ladder customers keep track of.
First, ask whether or not your product positioning has even been analyzed. Is your position the result of an accident or sheer neglect? Does it fit with corporate goals and image, and is that position reflected in the company promotions? And, is the company itself positioned in the marketplace -- in the minds of the buyers? Does the company actually occupy that position or is it just wishful thinking? Does the company have a backgrounder it can hand to editors? Can the company position be stated simply and quickly to a wide variety of people, including customers, distributors, banks, and financial analysts? Is the position statement built into the marketing plan?
4. How well do you know sales and distribution channels?
Some of the most important strategic alliances are between the company and third party sales organizations like sales representative firms and distributors. Too often great product ideas cannot be taken to market successfully because there is no simple, effective way to get them to the customer. Most products demand sales and distribution channels optimized for their target markets. Building a sales channel from scratch is very expensive and can take years -- sometimes longer than developing the product in the first place. Good companies have found ways to use existing sales channels, but great companies have found ways to use those channels in unique ways.
One of the main reasons companies with innovative new products often fail is that they do not have relationships with the movers and shakers in the industry channels. Better financed, more mature companies that are already in the channel bring out competitive lines and lock the new companies out. Sales channels tend to be relationship driven which favors older, existing companies. It is critical when setting up sales channels to use people that already have relationships in those channels.
Either the sales channels, and relationships with them, should already exist, or the company should have realistic plans to build them. The relationship with the sales and distribution channel should be formalized in written agreements that spell out territories, commissions, inventory practices like stock rotation, credit and debit processes, and the termination procedure.
5. How well do you know the competition?
Someone is out to get you! Intel has used the concept of creative paranoia to drive the company to new heights. They assume that every competitor is constantly working on the widget that's going to knock Intel out of the market. They assume it will be introduced tomorrow, and that the competition is talking to Intel�s customer base right now. Intel uses that paranoia to create better products on tighter development schedules.
Do you know the size of your competitors, how many employees they have, what their sales are and how profitable they are? Who their biggest customers are and how they hold them? Which of their sales reps are thinking of leaving? How are your competitors financed and who are their strategic allies? Do you get copies of their annual reports and 10-K filings? What are your competitors doing to knock you out and, more importantly, what is your strategy for knocking them out? Is it formalized in your marketing plan? Does it list the competitors by name and identify their strengths and weaknesses? Does it spell out a separate strategy for each?
Most companies keep their competitive information in the form of unorganized anecdotes, but competitive data is much too important to leave in that form. There should be files on the competition in the marketing group, continually updated and reviewed... because that's how your competitors are keeping track of you!
6. Have the Key Customers and Marketing Segments Been Identified?
The basic principle of marketing is segmentation -- separating customers into categories based on how they use products and how they buy, i.e., whether they buy through distribution or through direct sales channels, whether they buy on quality or price (or both)-- whether they are driven by performance or by cost. There are as many ways to segment markets as there are marketing people analyzing them, but some ways can provide insight into what it takes to sell effectively against the competition. That's what Davidow means when he talks about finding a defensible market segment -- one that you can defend against the largest and most aggressive competitors.
Just as important as segmenting the market so it fits your marketing vision is the need to identify customers and place them in the appropriate segments. When you do that, it will become clear how to best serve those customers -- with products, with pricing, and with a sales channel targeting them. Mindpik believes in ranking customers as well. Doing that leads to clear guidelines for directing the sales force, providing customer services, pricing, and even sales commissions.
7. Does the company have a written marketing plan?
A coherent marketing vision is not enough if the people in the company don't know about it. The marketing vision should be set in written form as the marketing plan. It should be the basis of the company's product development, manufacturing, and financial forecasting systems. It should be continually reviewed and tuned to reflect the reality of the market. It should be as elaborate as the marketing department can make it, and it should be backed by other groups, especially sales, engineering, and manufacturing -- all of whom make major contributions to the plan. Without a written marketing plan that is shared among key company groups, people have no sense of the company vision and what is expected of them. The vision should be constantly restated so that everyone from receptionist to CEO knows and understands it. The plan should form the working document around which the monthly or quarterly business review is conducted. And the manufacturing plans and sales quotas should be derived from it.
8. Has the company articulated a clear marketing message?
The marketing message, sometimes called the unique sales proposition, USP, is basically the distillation of the marketing vision coupled with customer and market knowledge in a way that drives the company onto the right rung of the right positioning ladder. That marketing message has to come out of the marketing vision, not the other way around. In the same way, the advertising, promotion, and PR programs have to evolve from that marketing message and deliver it in a clear, focused way. And it has to be articulated to the strategic partners and allies as well, in fact acting as a filter to find the right partners for the company.
The marketing vision should address the alliances that must be created or strengthened. The alliances that matter are those that come out of the corporate position statement, the finance department's concerns about capital investments, the marketing group's key customer list, the development group's list of key vendors, and the public relations group's list of key editors. The list should be formalized and contact people assigned to each name. Nothing withers faster than alliances not kept current.
9. Is a forecasting system in place?
Forecasting is a painful process for everyone, but the pain is nothing compared to that from inflated inventories and overly optimistic revenue plans. A formal forecasting process should be in place and it should be followed religiously. Good systems forecast billings, but the best systems forecast both billings and bookings so that shortfalls are immediately apparent.
Does marketing have a copy of the current backlog? Are they involved in scheduling meetings? Do they respond to customer inquiries for shipping information? Can they ship parts allocated for one customer to another? Does marketing have some of their blood in the shipping process?
Intel is one of the best companies at forecasting. Sales people turn in six month forecasts each month. Intel has been known to fire salesmen that were a day late with their forecast. They are rolled up in a large company forecast and analyzed by senior management in the form of waterfall charts. Intel even tracked how optimistic or pessimistic the sales people were month by month -- they knew that six month projections tended to be optimistic, but kept getting lowered as time ran out. Then, near the end, the projections would climb again as other opportunities arose, opportunities that were unknown at the time of the original forecast. Intel felt that driving the forecast was one of the most important marketing functions in the whole sales cycle.
10. Does marketing drive the company?
Marketing is the shell a company builds around itself to interface to the marketplace and the customer base. The marketing group, combined with the sales force, is the point in the company where the market understanding resides. And it is this group that must present the needs of the market to the development team. It is this group that must work with the manufacturing group to be certain the product inventory mix is optimized to the market demands, and is constantly in contact with customers passing information back and forth. This is the group that trains and directs the sales force on the product line, that works out the strategies for dealing with competitors, and that worries about the product margins. This should be the group that drives the company, that sells the marketing vision and message internally, and if that is not happening or doesn't seem appropriate, there is something seriously wrong.
