The Science of CRM
As a reader of CRM
magazine, you're probably already halfway to the understanding that sales and marketing are about more than just "the relationship." Although the "art of the relationship" is critical to sales and marketing, in today's world sales and marketing should be as much science as they are "art."
Driving much of the transition from art to science is a process-improvement methodology that comes to us from the manufacturing world, namely Six Sigma. With roots in the mid-80s at Motorola and popularized by Jack Welch and GE in the mid-90s, Six Sigma is fast becoming the latest approach to optimizing the softer side of business: sales, marketing, advertising, and even public relations.
To make sense of applying a process-improvement methodology to these disciplines, you have to get over the first hurdle: Recognize that sales and marketing, advertising, and PR are processes like everything else in a business. Accept this, and the rest will be smooth sailing. Deny it, and you'll soon feel like you're battling the big guns with a bow and arrow.
Take a midsize producer of deep-sea oil and gas drilling equipment, for example. A typical sale for a company like this averages $50 million. It does about $500 million a year in business and has about one-third market share.
Assuming the company is invited to bid on all
projects in the industry, it submits about 30 proposals a year and wins about 10 of them. Where is the process and how is data analysis going to help in this case?
Consider what you do when you submit a proposal and lose. Many would call it the postmortem
. In other words, What did we do wrong and what should we do differently next time? The problem is, maybe you didn't do anything wrong; with a one-third market share, how often do you really expect to win? About one-third of the time perhaps? So, if you can increase the win rate to 45 percent, that would be tremendous, right? But you'd still lose 55 percent of the time.
The Six Sigma approach is very different from the postmortem. In Six Sigma you would look at all proposals over the past several years and characterize each opportunity (the customer, length of prior relationship, quality of relationship, number of visits, price, quality, service commitments, etc.). You might come up with 50 or 100 characteristics of the sales process. Then, you would correlate your wins and losses with those characteristics, and come up with a model that helps you better understand, based on the characteristics of each opportunity, how to bid it. And if you lose the next deal, you stay the course--you still expect to lose sometimes. You are just looking to increase your win rate. Getting to 100 percent simply isn't realistic in the short term.
There are many aspects of sales and marketing that are all about process: lead generation, filtering, follow-up, and closing. Pricing optimization is a big application of Six Sigma. I've never met a company that didn't leave money on the table by mispricing products. Sales forecasting is a process. Choosing marketing mediums, frequency of advertisements, and characteristics of those advertisements is all process-driven. Identify the processes and improve them using quantitative measures.
If you're looking to climb to the top of your industry--whatever industry that might be--take a look at Six Sigma. It might be the answer you've been searching for.
About the Author
David Silverstein's Six Sigma experiences began during his tenure with Seagate Technology, the world's leading independent manufacturer of computer hard-disk drives. In the mid-90s he was responsible for implementing Six Sigma across Seagate's Asia-Pacific manufacturing operations. David and his teammates' work during Seagate's initial Six Sigma deployment was recognized by Mikel Harry of the Six Sigma Academy as setting "a new benchmark for the deployment of Six Sigma."
Since founding Breakthrough Management Group, David has worked with many industry-leading companies, including ABB, Callaway Golf, Chart Industries, Checkfree, DuPont, International Truck & Engine, McKesson, HBOC, Northrop Grumman, Polyclad Technologies, REXAM Beverage Cans, Singapore Technologies, Standard Register, Sunsweet Growers, and Toshiba.
David has participated in every aspect of Six Sigma, ranging from high-level executive mentoring to hands-on work with Six Sigma Black Belts and Champions. David is well known for his ability to lead companies through the implementation and deployment of global Six Sigma initiatives. He is a certified Six Sigma Master Black Belt and has earned a double degree in mathematics and physics from Ithaca College, and an MBA from George Washington University.
Six Sigma: What Went Wrong?
01 Nov 2008
A 60 percent failure rate suggests that process change requires behavior change.