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Principles of Sales and Marketing Optimization

By understanding these principles of sales and marketing optimization can help give you a new perspective on how to improve your business results.

Sales and Marketing Is an Inter-Connected System

Too many businesses today view their sales and marketing efforts as a disconnected jumbe of activities and expenses. They have a lot of going on --- but without much real alignment, cohesion, or coordination between all of the various activities. As a result, there's often very little to show for all of the energy and resources being expended.  However, when you take a step back and view things as a whole, it becomes clearer that sales and marketing is really just an inter-connected system or process. Of course, this particular system is for turning prospects into profitable customers; and for turning existing customers into even more profits over time. But as a process, your sales and marketing efforts can easily be distilled into a step-by-step series of inter-connected activities, efforts, and outcomes.  Regardless of how separate you think the various aspects of your efforts might be, the reality is that each and every element of this inter-connected system impacts other elements of the system, positively or negatively. And each of these steps, or transition points, in this inter-connected system provides an opportunity for improved throughput and magnified results.

Certain Areas Have Much More Leverage on Profits

In any inter-connected system, there are certain leverage points that have greater influence on the overall throughput of the system. Similarly, in any sales and marketing system there are a relatively small number of growth levers that have magnified influence and impact on the performance and output of the whole system. In these growth-lever areas, relatively small, single-digit improvements in performance can produce double- or even triple-digit impacts on profitability.  In one particular growth-lever area, for example, even a tiny 1% improvement can often increase a company profits by 15% or more. If a 1% improvement can have this kind of impact, just image what a 3-4% improvement could do and I think you'll agree --- this specific growth-lever area has a lot of leverage!

Small Improvements Really Do Make a Big Difference

Recognizing the value of small improvements can be difficult in a typical big numbers are better type of business environment. Getting people fired up about a 2% improvement can be a real challenge --- particularly in an environment where everyone is looking for a big bang. It's just a reality that in some businesses, a 10% improvement in sales revenue will warrant a pizza party and bonuses all around. At the same time, a 1% improvement in pricing will barely get noticed --- even though the pricing improvement might have a much greater impact on profits than the revenue growth.  Regardless, in an inter-connected system where every single thing impacts every other thing, very small tweaks --- particularly tweaks in growth-lever areas --- can make a very big difference. In an inter-connected system, the effects of these small improvements will cascade, combine, and compound as they move through the rest of the system. As a result, small improvements that don’t seem like much on the front-end can ultimately produce massive bottom-line impacts.

Improving Multiple Areas At Once Is Better

In an inter-connected system, baseline performance is governed or constrained by the lowest performing area.  It's a bit like water flowing through a pipe with a series of valves. Your objective is to increase the flow of water out the end of the pipe as quickly as you can. But the valves are very hard to turn more than a little bit at a time. And besides, the pipe is pretty weak and can't take much pressure without bursting.  Now if you work really, really hard for a long time you might manage to open one of the valves all of the way. But in doing this, all that will happen is that the pipe will burst at the next valve. It doesn't take too long to figure out that if you really want to quickly increase the flow of water through the pipe --- without breaking something --- you have to move back and forth along the length of the pipe, opening each valve little by little. And the faster you do this, the faster you'll increase the flow of water through the pipe.  Similarly, to produce exponential growth in sales and marketing performance we’ve found that it's best to improve a number of inter-connected areas slightly, rather than shooting for a huge improvement in just one area. Smaller improvements are usually more achievable and easier to execute. And, by working wide rather than deep, you will improve the performance and throughput of your entire system in a much shorter timeframe. On top of that, you find that small moves in multiple areas have much greater impact as they combine and compound through your entire system. For example, because of the compounding effects, 2% improvements in just three or four inter-connected areas can ultimately produce much greater profit impact than a 10-12% improvement in just one area.

Greater Systemic Profitability Enables Greater Success

Many people have difficulty understanding that systemic profitability actually enables exponential growth, and that it's not the other way around. The ability of a business to consistently and reliably produce profitable outputs is what will allow that business to rapidly scale up the inputs.  Two companies are competing with each other --- Widgets and Gadgets. From an outside perspective, these two entities look very similar. On the inside, however, the picture is radically different.  Widgets spends very little time or energy optimizing their business strategies and tactical approach. As a result, their sales conversion is poor, their pricing practices are lacking, their transaction values are weak, and their promotional efforts are sloppy. The philosophy at Widgets is that as long as their business is producing at least some level of sales and profits, all they need to do is scale up the prospects and leads and, voila, they're generating big, bottom-line dollars.  On the other hand, Gadgets spends quite a bit of time and energy optimizing and improving their sales and marketing to produce more and more contribution-margin-per-prospect. Their perspective is that the more their machine is producing for what they're feeding it, the more they can actually afford to feed it. As a result, they convert well, their pricing practices are sound, their promotional efforts are tight, and their transaction values are strong.  So who's going to win the battle in the end --- Gadgets or Widgets?  The answer is probably obvious to everyone but the managers at Widgets. When push comes to shove, the folks at Widgets are going to discover that they can't just scale up their prospects and leads at will --- because Gadgets can profitably spend much more to attract those same prospects and will be effectively blocking Widgets at every turn.

Identify the Real Problem Before Trying to Solve It

In our experience, there's far too much problem solving and not nearly enough problem identifying going on inside companies today. When a symptom presents itself --- low conversion rates, for example --- the team springs into action and immediately begins to implement a bunch of things that may or may not work to correct the situation.  In doing this, they completely skip the most important optimization step --- the diagnosis. They don't stop for even a minute to ask what might actually be causing the low conversion rates in the first place. Of course, different root-causes might require radically different solutions.  But it doesn't matter --- they'll just implement a bunch of stuff and hope something in the mix actually fixes the real problem.  Now, maybe we're just lazy. Or maybe we're really smart. Whatever the case may be, we prefer to focus our energies and resources on solving real problems. We find that it's just far more efficient and effective to address the true root-causes behind problems or symptoms. That's why diagnostic assessment is such a big part of our process --- identifying the real issues is far more than half the battle. In fact, once the true limiting factors are identified, solutions are relatively easy

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