Is Apple’s response to I phone 4 Issues hurting marketing effectiveness?

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I have to admit; I’m an Apple convert. I bought a MacBook Pro three years ago after my second PC crash lost another load of work in progress. I also own an IPhone 3.

I was even tempted to buy an IPad when they were announced.

I visited an Apple store near Memphis to take a look. I hadn’t been in an Apple retail center in a few years and was amazed at the number of people in the place. This was a weekday, mid-week and the place was jammed with prospective customers.

My point is Apple clearly has a line of products people want and remain loyal to. Why are they taking such a defensive stance on the Iphone 4 reception problem?

I read an article in Bloomberg about Steve Job’s naming competitors phones with similar problems, which those companies denied. (read article here) 

Is it really the best strategy to dance round an issue by telling your customers that your phone works as good or bad as other phones?

Customer and brand loyalty is something to be appreciated and cultivated. Apple clearly has it for many of their products. They need to learn the old adage that it’s best to address a problem head on and not try to deflect it somewhere else. Whether Apple and Mr. Jobs believes they have a technical issue or not is immaterial at this point. Their customer base and the market perceives that they do, and addressing it head on is the only way to insure better marketing results.

Create value to “fight China price”

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I read an article in our local paper entitled Furniture Industry fights China Price”. Northeast Mississippi is a furniture manufacturing hub and is being hit hard by low cost imports. The article covered a workshop developed by the Mississippi State Franklin Furniture Institute and really provided few answers to the problem.

Having grown up in a steel mill town and seeing what happens to an industry that cannot compete with low cost competition I have some historical knowledge of what happens to a region when the key industry is decimated. My hometown has never recovered.

I’ve done some research on the subject of competing with low cost manufactures and competing on price simply doesn’t work. The average burdened labor rate in China in 2007 was between .70 cents and .92 cents per hour depending on where you get the data. The corresponding rate per hour in the United States for manufacturing jobs is about $25.27 fully burdened with benefits.

In addition the Chinese companies don’t have the regulations and environmental rules to follow and we can all agree it isn’t a level playing field.

But come companies are competing and doing well against low cost competition. Those companies are identifying and developing niches to operate within that take advantage of problems with Chinese production:

• Freight costs
• Increases inventory and safety stock necessitated by potential supply interruptions or poor quality
• Lost sales due to stock out and poor quality
•  Poor logistics support within China
•  Duties, fees and taxes.

The reality of the situation in furniture or in any industry if you allow the product to become a commodity, low price will win every time. In high volume production of the same product with no service or customization, low price is the only differentiator.

What are the companies doing that compete?

• Performance improvements alone such as automation or lean will not allow U.S. companies to compete on price. Certainly U.S. manufacturers must get lean and be as productive as possible, but they will never automate to .90 cent and hour.
•  They take advantage of the close proximity to markets and stay close to their customers, quickly turning customer requirements into opportunities.
• They develop the capability to run low volume and high quality products based on customer orders, allowing retailers and distributors to save money on inventory levels. This can be accomplished through Lean Manufacturing.
• They market their competitive advantages such as some level of customization, build to order, or features based on regional preference.
• They provide excellent customer service and warranty policies that offset the Chinese manufacturers distance from the market.
• Identify and market to consumers that are looking for a higher quality, higher tolerance product that can’t be easily produced in China.
• Use logistics and information to develop a competitive advantage within the supply chain.
• Allow the consumer or end user to have some input to the design and selection of the final product.

There are numerous things that U.S. manufacturers can look at strategically to offset some of China’s weaknesses. Allowing a market to be driven by low price is allowing a market to become at risk and expendable, and once a product becomes a commodity it seldom returns, electronics is a great example.

Better strategic planning, better marketing, and better communications with the customer can all be used as a competitive advantage by U.S. Manufacturers, and directly exploit weaknesses of Chinese manufacturers. Allowing them to dictate the market in our regions and establish low prices as the only selling point is giving up on an industry. Government tariffs and tax credits will never be enough to bridge the gap in labor costs. We must find a different way to do business.

Back to northeast Mississippi the furniture industry seems to be more concerned about each other than trying to form a cohesive marketing strategy to change the market.

Do you get a return on investment on your sales dollars?

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Do you even measure return on investment for sales or other normal business functions?  Many companies only look at ROI on capital expenditures and other large dollar investments. The bulk of the money companies spend are spent on normal daily activities, but few look at justifying ROI on anything other than one-time major investments.

Why should you worry about ROI on normal expenses, doesn’t your P & L cover that? The real answer is the P & L will tell you many things but it’s telling you about them after they occur. In my recent book I gave the example of using the P & L as a problem solving tool is like steering a huge ship by looking at the wake. What you see has already happened, and corrections take time.

So how do you measure ROI on sales, and why bother?

Let’s take a hypothetical company as an example. You run a $10MM dollar manufacturing company, sales are flat and margins are declining. You have a current net margin of 2% and high fixed costs. You feel you need additional sales to offset the high fixed costs, and improve margins.

You are currently making $200,000 annually, (2% of $10MM), and you want to double your net margin to 4% in order to attract new capital. How much do you need to increase sales and how much can you afford to invest to get those sales?

Well first you need to understand what return you get from a $1.00 sales increase. At 2% net margin you are only getting .02 cents. That is before any additional costs are added to increase sales.  Based on an assumption that you can’t grow sales at your present level since they are declining, let’s assume you need to invest $100,000 dollars to increase grow the business and margins to where you want to be. How much new business would you need to get in order to accomplish your goal?

Adding 100K in new cost has effectively cut your current margin in half to 1%, so you are already starting in the hole.

Let’s further assume fixed cost are $2.8MM annually. The chart below shows if all support and production functions remained the same you would need to grow sales by $1.1MM in order to achieve your goal of a 300K net profit increase.

So an investment of 100K in sales would get you an increase of 319K in net profit assuming you were able to execute.

You would need to increase sales by about 400K just to cover the cost of the additional sales expenses.

Initially the return looks great, invest 100k and get 319K back in profits, the question becomes one of time and execution. The longer it takes to develop the needed sales increase the lower the ROI.

Understanding the numbers makes it easier to make a decision initially, but it also makes it easier to understand the costs of delay and nonperformance.

How do you improve sales results?

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In nearly all of the companies I talk with the need to improve sales results is one of the top three issues. Either sales results are lagging behind plan, or sales are being made for the wrong reasons. I know, how could there be a wrong reason to close a sale, right? There are actually many:

• Selling too low and cutting into margins
• Selling with unreasonable delivery times driving up production costs.
•  Selling using rebates or “freebies” to get the sale

Those are just a few of the reasons I can think of.

Why then do companies allow these sales to happen if they aren’t a win / win for the company and the client?

The main reason I see is the sales force isn’t performing as well as it should and the company has few options. Bad sales are better than no sales, and “at least they cover overhead”. While that may be a good argument for the short term, you are setting expectations with your customers that are hard to break.

The real answer is increase overall sales effectiveness to have options to take or leave business that may not be desirable.

To do that you need to understand why the sales organization isn’t performing as needed. It’s easy to blame the sales reps, and many companies cycle through numerous people and get the same poor results. In my book, Bottom Line Focus I used the term “everybody sells”, and that concept must be understood and accepted to solve the problem.

The chart below illustrates the concept well.

The organization must have a clearly defined and documented strategy that everyone understands and buys into. If your sales force doesn’t get it, or doesn’t own it, they will invariably let it show to the prospect.

The organizational culture must visibly support sales. All functions have to be aligned to focus on delivering customer value.

The organizational infrastructure must support the sales goals and be aligned to be effective in delivering the product or service.

The sales rep must have the knowledge to sell the product or service. Have they been trained on the benefits to the customer of buying your product or service of do they simply sell features and price? Do they understand the axiom find the problem and sell the solution?

The sales person’s attitude must be positive toward the company, the product, the and the market. Are they a reflection of the organizational culture? (good or bad)

The sales person must have the skills to relate to the prospect in an articulate manner that fits the market. Can they deliver the message clearly why your product or service is the best value for your prospects money?

Sales effectiveness is an organizational responsibility. Management must develop a product that meets the customer’s needs at a price that fits the market and allows a fair profit to the company.  Manufacturing must provide a quality product and deliver it undamaged and on-time. Administrative support must make the buying process seamless and hassle free. Customer service must treat every customer problem as an opportunity to show the company cares about the business.

Only when you understand the term everybody sells can you develop better sales results.

Use investment to fuel growth and sales & marketing effectiveness

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When companies think of return on investment, (ROI), theytypically consider capital investments. Purchases of new machines or softwareaimed at specific tasks with a measurable return on invested capital such as productivitygains, increased production, faster billing etc.

However does investing in non-tangible items provide a realreturn to your business, and how do you measure that return?

Most companies are reluctant to spend money on intangiblessuch as employee training and development, or nonproduction related expensesrelated to plant and equipment. Let’s face it, its tough to measure a clearreturn on investment of intangibles.

It might be easier to measure the impact of not making theinvestment, such as high employee turnover, poor quality, poor customerservice, and lost market share.

I am working with a client that has made significantinvestment in what would normally be called intangibles, and has seen anexcellent return on that money. I typically don’t name clients but since thisarticle is focused on the positives I think he won’t mind.

Aardvark Memphis is a full service property maintenancecompany, with the largest fleet of sweeper trucks in the tri-state area. Theyalso do warehouse sweeping and scrubbing, retail teardown and build outs, floormaintenance and nearly everything related to maintaining retail or industrialproperty.

I’ve worked with them for about a year on strategicplanning, diversification and sales and marketing effectiveness.

One of the reasons I’ve had to work with them on sales andmarketing is they’ve never done any. The company has been in business for 14years, has been profitable for 13 of those years and has never done any reallevel of sales. They have experienced excellent growth entirely throughcustomer referrals and word of mouth.

What sets them apart? A high level of commitment to qualityand doing whatever they do right. The owner spends money on things that mostowners wouldn’t consider. For instance he washes his fleet of trucks everyday.He maintains all of his equipment to original OEM specifications, and investsin technology from GPS to track routes to maintenance logs. He has a high levelof commitment to employees and customer alike.

While the return on the money he spends on “intangibles” maybe had to justify in hard numbers, the results are hard to argue with. The highlevel of commitment he gives to quality and appearance creates expectations forhis employees. They clearly see his commitment and follow that lead whethercaring for the equipment or performing work at a customer location, theexpectation is, only best effort is enough.

The results speak for themselves, growth, profitability,customer loyalty and limited sales expense.

Educate for better marketing results

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Education based marketing, EBM, is another aspect of inbound marketing. There are two classes of marketing:

•  Sales based marketing, in which you take the role of a salesperson and deliver a sales message.
• Education based marketing, where you take the role of an expert or educator to help prospects understand their problems and the solutions to them.

Sales based marketing is based on a sales pitch or selling message. It is used to help a salesperson reach out to prospective customers, such as cold calling, telephone solicitation, and direct mail, .

These kinds of activities today are called interruption marketing. We are inundated with Emails, television commercials, junk mail, and telephone solicitors. There is so much noise generated by sales based activities that the average prospect no longer listens. My personal method when watching my favorite hockey team is the mute button. I just don’t listen. I also use SPAM blockers, junk mail folders and any other method I can to cut down the volume.

So how do you get through the massive amount of “noise” being generated by millions of companies and directed at your prospect?

Simply put you don’t. Even if a prospect likes your product and your message most won’t take the time to sift through the pile to see what’s worth looking at.

Most prospects today don’t look or read much of anything sent to them, if they have a need or want they do an Internet search, find the product or service they are interested in and learn about it.

What do they learn? In a word everything. They can find shopping services that compare features and price. They can find consumer driven quality reviews.  They can study head-to-head comparisons between competitors.

For example is there a more sales driven industry than auto sales? How do the majority or people buy a car today?  Speaking for myself, I research what I want on-line. I go to Kelly Blue book and price the vehicle with the options I want and print the summary. I then use Kelly again to get a realistic value for my trade and print that. I go to the dealer armed with my information knowing what I want, what it will cost me and what I am willing to pay. The traditional back room haggling is eliminated, if it starts in that direction I get up to leave. The last three vehicles we’ve purchased no one has allowed me to walk out the door. I got my deal because I educated myself.

So education based marketing simply put is educating your customs that you understand their wants or needs, and that your solution is the beat value for their money. Better marketing results today mean getting your message heard because prospects seek you out as a subject matter expert.

We need to acknowledge the fact that marketing has changed. They are going to look for the information somewhere, it’s readily available, how much can you gain if they get it from you?

I have an entire chapter in my book, “Bottom Line Focus” on education for better marketing results.

What is inbound marketing?

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I’m not sure if the term itself is new, but I first heard it used about six months ago. Whether the term is new is irrelevant the concept is not.

The most effective marketing strategy has always been one of educating the customer as to why your product or service is the best value for them. Notice I didn’t say lowest cost, but best value, it provides the best return on their investment.

In my book, Bottom Line Focus, I talk about marketing as providing useful information to your customer base that let’s them know you understand their needs or problems and provide them options for solutions.

But you can't help them understand your products or services and how they will benefit from them unless you understand their needs. You can't start building your branding and marketing strategy around a sales pitch about why your new "turbo widget" is the sexiest thing on the market. You must first understand why people buy turbo widgets.

What are they trying to achieve? Do they want to look younger, prettier, thinner, or more successful? Do they simply want to go faster? What do they want and why? 

Once you pinpoint your prospective customers' problems and needs, you must understand why your widget is the best solution available. If it isn't, you need to determine what you must do to make it the best.

Now, here comes the tough part. You need to convince your prospects to agree with you that your turbo widgets are the best. I say it's the tough part because in this age of the Internet and proliferating channels of communication, traditional marketing approaches – radio, TV, print advertisements, sales literature, and celebrity statements – are all becoming less effective. 

But actually, that's good news for small and mid-size companies. The Internet has leveled the playing field. Big companies used to be able to buy very influential testimonials. Today, Internet blogs and forums are the equalizers. Take any product or any brand and do a blog search on it. You will find dozens, if not hundreds, of comments indicating the marketplace perception of that brand. 

By employing Web 2.0 techniques strategically, you can make a big splash on a limited budget. With the rise of social media marketing, ingenuity is becoming more important than dollars. And it's been proven that consumers respond better to engaging dialogue than to expensive broadcasting. 

So what is inbound marketing? It’s providing enough useful information to your prospective customer base that they seek you out. Your company becomes the recognized expert in your field. Inbound marketing can be viewed as welcome marketing, providing free and useful information about their issue or need and offering great solutions. Traditional marketing can be called invasive marketing, blaring out price, or product features at a mass audience hoping some of the noise finds it’s mark.

While traditional marketing was once the accepted practice it never worked really well. A great direct mail program is one that gets 2% response. Now with the never ending array of TV commercials, Emails, newspaper and magazine ads, you need to find a way of reaching your customer that isn’t “lost in the noise”. Having them seek you out is by far the best return on your investment. You may have less traffic to your website or office, but the traffic you do receive will be much better qualified and knowledgeable about your product or service.

Use a process for better sales results

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Sales is a process just like any other business function.There are steps that every salesperson must go through in order to be successful over the long term.

There have been numerous books and articles written about the pro’s and con’s of relationship selling but one thing to remember, sales activity invariably involves an interaction between people. We all have our internal thought processes, attitudes, and personality traits and that will spill over to both the buyer and seller in the sales process.

 A quote from Zig Ziglar says it very well, “If people like you they’ll listen to you, but if they trust you they’ll do business with you”.

So they have to like you enough to listen to your preliminary fact finding questions, and you have to use that opportunity to build trust.

The illustration below was discussed in my book, “Bottom Line Focus” relative to the steps in the buying process

The first step is you must develop a basis of trust between you and the prospective customer. They must trust and like you before they will even look beyond that.

Then they have to trust your company. Does your product or service have a solid reputation in the marketplace?

Third they have to have a need and understand that your product or service is the best solution for that need.

Then they will move on to price and delivery.

Taking a shortcut on any of these steps introduces doubt into the equation. If you walk in the door and cut price immediately you may get a quick sale but you will have cheapened you product or service in the eyes of the customer. Any effort to increase prices without establishing value and trust will be met with opposition.

Sales is like any other worthwhile venture, for better sales results, follow the process.

Use inbound marketing for better sales results

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First many of you are probably thinking what the heck is inbound marketing? It’s been around for a while but hasn’t had great exposure until recently.

Traditional marketing or “outbound marketing” is blasting your marketing messages outward. It can be in the form of TV commercials, newspaper and magazine adds, direct mail, email marketing and so on. The biggest question that surrounds this traditional method is how do you know your message is being heard?

Inbound marketing is establishing your company or yourself as the “subject matter expert” in your chosen field. You make relevant, timely, and current information,  that your potential clients are looking for, available, and they’ll find you. When they do you have a prospect that is directly interested in the products or services you’re offering.

As I said this isn’t a new concept, why then is this just getting exposure?  In a word, noise. There is such a glut of information thrown at us everyday it’s impossible to sort through the noise to get at the information we want. We are bombarded with email marketing, TV commercials that we all mute, direct mail that even if excellent provides a 2% hit rate. We are buried with stuff!

It is getting harder and harder to see an acceptable return on investment from traditional marketing methods.

If you can’t get the market’s attention, you can’t get them consider your products or services let alone buy them.

In my book, Bottom Line Focus, I talk about marketing being your platform to educate your market why they need the product or service you are providing, what to look for when they decide to buy in order to get the most value for their money.

The next step toward better sales results is convincing them that with all of the products or services available to them in your particular market, yours is the best value and the obvious choice.

Like someone said long ago, “build a better mousetrap and the world will beat a path to your door”. Update that and to say provide meaningful information and the world will beat a path to your website.

Better sales results often need a different look.

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If you do what you’ve always done, you’ll get what you’ve always got.

Or as Einstein is quoted as saying, “Insanity is doing the same thing over and over and expecting different results”.

Everyone has heard these phrases but many business owners and leaders simply don’t see it as applying to them. When looking at ways to improve sales results, or improve profitability they use the same processes over and over, with the same people and expect different results.

Often a leader and a management team will spend years within the same company and the same industry with little or no knowledge of other markets. While they may be experts in running their plants and making quality products they have had little opportunity to learn from what other companies are doing to improve operating results. Worse the management team often develops a “herd mentality”. Knowing what the boss wants to hear, and not wanting to rock the boat. This is especially true of past ideas have fallen by the wayside. The feeling is nothing is going to change anyway why make waves?

Unfortunately this situation is all too common in small to mid-sized companies, and failure to recognize this shortfall can result in lack of sales growth and decreasing profits.

Working to improve sales results is an area where outside consultation can be especially beneficial. A business coach or consultant with broad experience has seen many industries and markets, and has learned what works as well as what doesn’t

work in the sales process. A competent coach will challenge your views and will make you defend your assumptions while providing you with options to look at.

The world is changing rapidly, your ability as a leader to recognize the need to change is as important as dealing with change, since one must proceed the other.