Successful business models are not necessarily transferable

The Daily Telegraph of 6 Feb 18 reported that British DIY store, Homebase, which two years ago was profitable is now expected to have an underlying loss of ÂŁ97milllion for the first half of the year.

In 2016, the then profitable Homebase was acquired by the Australian retail conglomerate Westfarmers which is the parent group of Bunnings, an Australian DIY chain.

When acquired two years ago, the aim of Westfarmers was to relaunch Homebase using the business model of its successful Bunnings chain, Unfortunately Westfarmers has now admitted that its business model did not appeal to British customers who shop differently to Australians, particularly in the winter months, and that there was a stark difference between British and Australian markets.
For the commercial manager, responsible for getting and maintaining levels of profitable income for the long term future of the business, there are a number of lessons which can be learnt from this story.

From the Westfarmer’s statement, it would seem that the conglomerate’s management either did not undertake a proper analysis of the British market, or made the classic assumption that markets and consumers in the English speaking world act in the same way. The failure to understand the working of the British consumer DIY market and its difference from that of Australia and New Zealand was an expensive but avoidable error.

Mergers and acquisitions are never simple. At least 50% fail to meet their initial objectives and expectations – sometimes leading to expensive de-mergers. According to KPMG and Wharton studies, 83% of mergers and acquisitions failed to produce any benefits – and over half actually ended up reducing the value instead of increasing it. Businesses undertake mergers and acquisitions for a number of reasons, but all embark upon the process in the expectation of the benefits that they seek will be achieved. So why do so many fail?

The objective of every business is to continually produce and maximize profits for the long-term benefit of owners, staff and customers. For the commercial manager, the objective is to maximize profitable income, sustainable for the long term while minimizing costs and the use of assets.
As a result of a merger or acquisition, the combined business may need a new business model in order to maintain and increase their profitable income. However, it is important to understand that the way such changes are made may have far reaching and unforeseen consequences.
A study by McKinsey concluded that companies often focus too intently on integration and cost cutting, following mergers, so that they neglect day-to-day business, prompting nervous customers to flee and causing revenues, and profits to suffer. Integration and cost cutting may not be the answer when failures in customer satisfaction, a decline in demand or increased competitor activity may be the underlying cause of reduced profits.

The success of a merger or acquisition depends largely on the reaction not only of employees but also customers who should be kept informed about how the changes will affect the continuance of the product and services on which they have come to rely.

While a merger or acquisition may provide opportunities to increase market penetration and increase income, any adverse effects on customers and their demand must be avoided or minimised. Therefore, before considering a new business model, Commercial managers need to ask:

* Is there a full understanding of the current condition of the market?
* Are the buying patterns of customers fully understood?
* Is the market and customer culture understood?
* How will this business model affect the customers?
* Will the customers perceive the change as beneficial or detrimental to them?
* What will be the positive consequences of the change?
* What will be the negative consequences of the change?
* Can the results of the changes be quantified?
* If not quantifiable how are the benefits to be measured?
* How much will the changes cost in time and money?
* Who will benefit from the changes?

Copying a successful business model from another organisation, or from a different market or country is fraught with dangers, for a variety of reasons, but principle the differences lie in market conditions, as well as the market and customer culture.

Commercial managers would do well to remember that business models that work in one market do not necessarily work in another.

© N.C.Watkis, Contract Marketing Service 18 Feb 18

February 20, 2018   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed

Small changes can have bigger effects than large ones.

For the commercial manager, whether of a large of small business, January is a month of contemplation on the past twelve months on what went right and what went wrong, and how the results compared to the business plan and forecast. Regardless of when a financial year begins or ends, there is always pressure on the commercial manager to at least maintain and preferably improve results.

Commercial managers are responsible for producing sustainable profitable income for the long term future of their business. To do this effectively, requires both new ideas, experience of the market and an understanding of the organisation’s previous business getting and retaining activities. Making profitable income results from a combination of price, volume of sales, and the control of costs. Getting the balance of this combination right is fundamental to the commercial manager’s success.

One priority must be to always seek new customers, as they provide a source for additional sales. However, there needs to be a continuous flow of new customers in order to replace the natural wastage from the customer base owing to the effects of customers’ changing requirements and erosion by other competitors. Ultimately, commercial managers are measured by the amount of profitable income that they produce and how efficiently they use their resources in its production.

Ideal pricing identifies those product market combinations that allow a company to achieve its targeted rate of return on all the capital employed. However, achieving an ideal pricing that produces a targeted rate of return is far from easy, especially as emphasising a rate of return in price setting, often ignores market and customer requirements to the detriment of the business.

Price is that value which the purchaser is prepared to pay for a service or commodity, and is not related to cost. Cost is the sum of materials, labour and overheads in the production of the commodity or service. If the cost of a product or service exceeds the price that the market is prepared to pay, then the product or service will fail. It follows that accurate costing is essential only to establish the level of profit that can be obtained from the price of the product or service. In practice, when margins are low, small movements in price, volume and cost tend to have a magnified effect, but when margins are large, they have diminishing effects on profitability.

Improving profitability by 10 or 20 per cent can be a tall order, especially in businesses where profit margins are small. In such cases, the answer is often given to cut costs and to increase sales, both of which are easier said than done, especially if the demand is for say a 10 per cent cut in costs, or a target of a 10 per cent increase in sales. In fact an increase in sales may well incur an increase in costs, so the answer is never simple.

Small incremental changes to operations are much easier to effect than large ones. It is much easier to cut costs by 1 per cent than it is by ten percent. Similarly it is much easier to make a price increase of one per cent than ten percent, as a one per cent change is hardly noticeable by the consumer and therefore easily acceptable. Likewise, increasing sales by one per cent is much easier to attain than trying to attain a ten per cent increase. It is important to realize that the accumulated effect of small changes can result in a much bigger result.

From the example below it is easy to see the cumulative effect of a 1% increase in volume and price, with a 1% cut in variable costs results in almost 25% increase in profits.
But it follows that care must be taken when prices are cut because there has to be a disproportionate increase in volume to offset the negative effect on profitability.

For the commercial manager, achieving a number of small changes that produce the required result from their cumulative effect, can be much easier than trying to achieve a similar result with a single large change.

© N.C.Watkis, Contract Marketing Service 10 Jan 18

January 11, 2018   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing ROI, performance management, performance measurement indicators  Comments Closed

How healthy is your Business?

Commercial managers have the responsibility of producing and maximising profitable income for the long term future of their business. To do their job effectively, that is, to maximize sustainable profitable revenue, they need to be aware of the market and economic environment in which they operate.

Understanding the state of the market and economic environment in which their business operates is fundamental for the commercial manager. But commercial managers must also be aware of the economic health of the business in which they work. What about the economic state of the business? How well is the business performing, and how do we know? How much is being invested in getting and retaining business and what return is being made on that investment?

Commercial managers must ask questions about the condition of the business and its ability to weather any economic or market storm. While brand, image and market share remain important, the commercial manager must also concentrate on those indicators that show the health of the business and where problems may be arising.

What indicators should the commercial managers look for? The first indicators are for the financial strength of the business. An examination of the balance sheet will show how the assets and liabilities are balanced, from which the ability to pay creditors may be derived. This is done by calculating, what is known as the Current Ratio for Liquidity.

The Current Ratio for Liquidity, is defined as the current assets divided by current liabilities. “General opinion” considers that ideally, the Current Ratio should be 1:1, so that assets should equal liabilities. When assets are larger than liabilities, it is generally considered that the assets are underused. However, when its assets are less than its liabilities, a business is generally considered insolvent. The immediate liquidity of the business, which is the assessment of its ability to pay its immediate creditors, is measured by the Quick Ratio or “Acid Test.” The Quick Ratio is defined as the current assets less stock, divided by the current liabilities.

While these two ratios are good initial indicators to the financial health of the business, they are relevant only at a particular time. Neither the Current Ratio nor Quick Ratio relate to a business’s trading state, marketing position, management resource, workforce or intellectual property. However, while the Current and Quick Ratios provide initial warning signs concerning the overall health of the business, it is important that commercial managers should know what other indicators are relevant in indicting the current and potential trading strength of the business.

If commercial managers are managing their resources responsibly, they should be continually looking at a variety of business indicators, which will quantify performance in a number of specific and significant areas. In reality, many businesses fail to do this. Therefore the commercial manager needs to know which key indicators may act as warning signs of inefficiency and under achievement.

The prime task of the commercial manager is the generation of sustainable profitable revenue, thus the most obvious initial performance indicator, is the current sales income trend. The comparison of sales income levels at different times soon shows the general trend of income, as do the complementary data for units of sales over the same period.

The balance between production and sales is indicated by movements in stock turn. If stock turn is slowing, it indicates that production is starting to outstrip demand, which may store up problems for the future, particularly with cash flow. If the conversion rate from enquiry to order starts to reduce, then it is important to examine the trend in the levels of enquiry, as well as the time taken between an enquiries and orders.

The trend in calling rates for sales staff can be an important indicator, especially when related to trends in the conversion rates of enquiries to orders, and order to sales, as it indicates the state of customer requirements and market awareness. Regular checks of the customer base and order frequency will indicate movements in customer attrition and the maintenance of the customer order base. Any shrinking order base requires the definite attention of the commercial manager.

Since commercial managers are responsible for the production of sales income, they need also to be aware of the level and trends of bad debt and late payment. These two indicators show whether the money promised by the level of invoice sales, actually turns into the necessary cash revenue, and may highlight a need for changes in credit and payment terms

The indicators listed here are not exhaustive, as there are many others, which may be significant to particular businesses and industries. Used regularly, the right indicators can provide timely warning of emerging problems. It is then down to the commercial manager to devise actions to counter negative activity, or engage alternative actions to meet the objectives of the marketing plan.

© N.C.Watkis, Contract Marketing Service 07 Dec 17

December 8, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance measurement indicators  Comments Closed

Does your organisation really know how to communicate?

As individuals, the way that we see ourselves may be quite different from how others perceive us. How businesses see themselves may be different from how their market, customers and competitors perceive them to be. Organisations spend a lot of time and money on communicating with their target audience, but perhaps independent specialist agencies are better able to deliver the message in a manner that is more effective.

Communications in the form of advertising, public relations are an essential tool in supporting sales and company image, to influence the perceptions and decisions of decision makers and influencers. Added to these established methods of communication, is the internet and social media which provide direct interaction with interested parties at an individual level.

For the commercial manager, responsible for producing the profitable income on which the business relies, anticipating and satisfying customer requirements is the fundamental activity. An essential part of that activity is communication with customers, both existing and potential, in order not just to inform the market of the business and its products, but perhaps more importantly to hear the opinions and requirements of the market. Being able to receive genuine opinions and attitude from the market enables a business not only to react quickly to changing conditions, perceptions and attitudes, but also to anticipate change and act accordingly.

The late Robert Townshend, former chairman of Avis and author of the internationally acclaimed best seller, “Up the Organization,” understood that for any business, “Marketing was the name of the game”. By this, he meant that marketing was fundamental to the business as being the management of all those activities involved in producing sustainable profitable income for the long term future of the business. However, while agreeing the fundamental importance of marketing, Townshend was not a believer in marketing departments.
He took the view that marketing strategy should be decided by the chief executive officer, who should be responsible for making overall profits, while a commercial manager would be responsible for efficiently producing and maximizing sustainable profitable income.

Townshend advocated using outside full service marketing agencies, as a cost effective alternative to employing, internal specialists, as this reduced the overhead costs, and gave greater flexibility to use resources. These contracted marketing agencies would provide specialist support as and when required, for marketing communications, research, customer relationship management, and any other specialist services required which could also include the contracting out of selling operations.

The advantage of using outside specialist agencies and contractors, rather than employing internal specialist staff is that their collective experience is usually greater than would be expected from an individual company employee. Agencies and contractors provide services only as and when needed, providing increased flexibility for the client company in their use of assets and investment. At the same time, specialist contractors and agencies usually look for long term associations, providing a stability which may not be apparent with marketing employee who may be guided by short term personal interests. While Townshend’s approach may not appeal to all, it does have some significant advantages, especially for those small and growing businesses with more limited resources requiring greater flexibility in their use.

Using a “full service” Adverting agency, one that provides advertising and Press Relations support as well as social media can provide a good solution to the communications conundrum. Using an independent agency has a number of advantages, namely it is independent, it is selected for its expertise, it is not tied to the organisations view of itself, and it can be changed. Finding, selecting, engaging a suitable agency and then successfully managing the relationship is therefore of great importance.

When managing the relationship with a communications agency, a commercial manager should consider the following principles:

* The objectives, content and target audience for communication need to be defined.
* It is essential that the development of mutual trust and confidence is established with the agency, as its consultants may require access to some confidential company information.
* The agency’s consultants will need to have access to the appropriate people when necessary.
* The client /consultancy relationship should be considered for the longer term in order for its successful development.
* The commercial manager’s organisation knows more about itself than does an agency. Similarly a good agency knows more about advertising, PR, and social media than does the organisation. Thus while retaining an ultimate veto, the commercial manager should not attempt to improve any communication submitted for approval by the agency. Any changes suggested by the commercial manager should be limited to factual defects in the communication.
* Media selection should be the primary responsibility of the agency, but should take advice from the commercial manager in any special situation.

The message that an organisation wants to send to its customers and market should coincide with that which the recipients want to hear.

While a n organisation may create the information that it wants to convey, a specialist agency is best able to deliver it in a manner that the audience wants to receive it and to which it will be most receptive.

© N.C.Watkis, Contract Marketing Service 05 NOV 17

November 7, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed

The Joy of Budgets

For the commercial manager responsible for producing and maintaining profitable income, budgets are an essential tool of resource management. While business plans set out the organisation’s commercial and financial objectives, budgets set out the allocation of resources necessary for their achievement. Budgets are not the same as cash flow projections or in fact any financial projection, but form part of the business planning cycle.

In any organisation, budgets should be prepared by those departments to which they relate and not be handed down from higher management levels. Since each department of the organisation must believe in the budget as its own plan for operations, management cannot juggle figures just because it likes to. If senior management seek any changes to the budget, they must persuade and convince the originators of the validity of their reasons, otherwise the process becomes a sham which damages management and employee relations.

The Commercial manager needs to build a budget” which sets out all the planned investments and liabilities which are involved in the getting and retaining of profitable business.
Depending on how a company is organised, some of these costs may fall outside the direct responsibility of the commercial manager, and be under the control of a transport or IT department head. However, such transport and IT which is directly used for getting and retaining business, is of specific interest to the commercial manager as it is part of the overall cost incurred in producing income and the calculation of overall contribution and efficiency.

Although not an exhaustive list the main investments and liabilities that are of interest or direct responsibility for the commercial manager are set out below.

Total income as estimated from expected sales revenue and investment, is the starting point for preparing a balanced budget, as it provides the money for expenditure.

The potential expenditure in a commercial manager’s budget will include the following:
* Warehouse costs which are those incurred by the product, that includes heat, light, power, and warehouse wages. Additional sales volume may require extra storage that will also incur added costs that should be reflected in the budget.
* Distribution costs are those which include fuel, postage, freight, and associated salaries, also allowing for increases in volume
* Advertising and promotional costs should include all agency fees, plus all space placed in the press, television, radio and internet, print expenditure, promotional schemes, exhibition and PR expenditure.
* Website costs should include all design, registration and management charges.
* IT costs should include all software costs and licences required for getting and retaining business and all rents or leasing charges for marketing activities. Where IT hardware is owned, it need only appear in the budget on replacement, but IT support contracts must always be included.
* Selling, Customer Relations and sales administration should include salaries and expenses of all direct sales and support staff, sales office admin staff, heat, light, telephone and stationery. Any additionally planned expansion of sales may also require an increase in staffing and related expenditure.
* Market research costs should include all ad-hoc and continuous research costs.
* Bad debt is an accepted part of any business where credit terms are allowed. Thus a budget should include provision for all the expected bad debts of customers. In budgetary terms this may be expressed simply as a percentage of income, against which actual results may be compared.
* Sales vehicles costs should include the leasing costs of all sales vehicles that are leased, excluding fuel. Where sales vehicles are owned, they only appear in the budget on replacement, but maintenance costs must always be included.

Every budget should always include a contingency element in in order to deal with unexpected situations.

Budgets are meant to be a planned balance of income and expenditure. Thus normally the planned expenditure on fixed and variable costs plus a contingency should be balanced by the income from expected sales. Statements comparing budget to actual should be written not in the usual terms of higher or lower, but in plain English terms of better or worse than predicted by the budget to provide consistent reporting clarity.

Budgetary discipline is the basis of business planning and a fundamental management tool, providing a benchmark against which actual performance may be measured and acting as an effective buffer against unplanned and ad hoc expenditure.

© N.C.Watkis, Contract Marketing Service 21 Sep 17

September 25, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed

Money is not everything.

Anyone who has seen the news recently will know that the BBC has been seriously embarrassed after having to publicly disclose how much it pays its top executives and employees. The embarrassment was caused by the great discrepancy between men and women on its payroll, despite the enactment of equal pay legislation some 20 years ago. The general publicity focused attention not only on a gender pay-gap, but also on the high level of executive pay in some quarters in comparison to average earners.

Employees are at the centre of every business which cannot function without them. They have the essential knowledge of the customers, the product or service, and the business process. Companies rely on their employees to understand their customer’s requirements and to deliver the product which produces the income. Thus retaining and motivating the employees on which the business relies is of major importance. Retaining and rewarding good employees is cheaper than recruiting and training new ones who will still lack the essential knowledge of the customers and the business.

Commercial managers have the responsibility of producing and maximising profitable income for the long term future of the business, by anticipating and satisfying customer demands, but to achieve this, they rely on their employees. To grow and maintain a successful business, the commercial manager must ensure that the morale and motivation of the workforce is maintained.

Crucial to the morale and motivation of employees is the relationship they have with the company and its management. Enthusiastic and committed employees make successful businesses. It is well known that people who are happy in their work in which they take a pride, are more productive and committed in their contribution than those who are only there for the money.

Ideally, jobs should be evaluated on their contribution and importance to the organisation and paid accordingly. Employees should be paid for the job they do, the responsibilities they carry and the necessary experience they have. Regardless of their gender; men or women doing the same job should get the same pay. Individuals may get differential increments based on their relevant qualifications and experience, while bonuses should be paid at an agreed rate related to performance. However, while pay is important, it is not the sole motivator. Through leadership and good management, commercial managers need to create the conditions where employees feel that they can contribute to their maximum potential

In order to develop and maintain the moral and motivation of all those employees engaged in anticipating and satisfying customer requirements, a commercial manager should:
* Ensure that each employee has a job description that states their responsibilities, and their reporting chain,
* Take time regularly to speak to employees at their work stations, listening to understand their opinions, concerns and suggestions. If they have problems, offer assistance.
* Be approachable and let employees know that they can talk to you in confidence whenever they need to.
* Give employees the authority to make their own decisions, such as providing service for a client up to a certain point without needing to get prior approval
* Regard mistakes as learning opportunities.
* Treat all employees with the importance and the respect that they deserve.
* Give employees more of a say in how they do their job. Ask for their input and get suggestions on how they can improve their performance. Use regular employee reviews to discuss these improvements, and be prepared to take their advice and implement it.
* Offering training that gives employees the skills they need to climb their career ladder. Grooming young employees to move on to better opportunities also develops a company’s reputation as a good place to work.

* By recognising good work, giving praise where it is due, and rewarding success, staff will know that their contributions are valued and that management is confident in their capabilities, helping to inspire greater creativity and initiative.

The best assets that a commercial manager has to produce the necessary profitable income are well, trained, committed, creative and enthusiastic employees. Developing and maintaining the motivation of those employees on which the business relies should always be of particular importance to every commercial manager.
© N.C.Watkis, Contract Marketing Service 04 Aug 17

August 9, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, performance management  Comments Closed

Business vulnerabilities from Social Media

Business vulnerabilities from Social Media

Attacks on businesses through social media are becoming more common. In 2010, Nestle’s sourcing of palm oil was attacked by Greenpeace through social media. Since then it is not unusual for businesses to be attacked through social media by persons of malicious intent who seek to damage or blackmail an organisation

In any business, the commercial manager, has the responsibility of producing a sustainable flow of profitable income for the long term future of the organisation. Amongst the many aspects that effect modern business, the risks and threats posed by social media and computer communications have potential to do serious damage. Thus it is increasingly important that the commercial manager, as well as other senior managers have a policy and plan for dealing with any problem caused by social media or a breach of computer security.

Social media can very quickly become extremely damaging, when manipulated by those with malicious intent. Recent IT attacks originating in Ukraine have spread rapidly across Europe and beyond, affecting both Government departments and commercial businesses. Companies find themselves facing attacks not only against their IT systems but also against their operations from social media.

Businesses are increasingly represented on social media because it has proved revolutionary for launching advertising and promotional campaigns and is an ideal way to interact with customers, clients and prospects. However it is just as easy for the attacker to use an organization’s hashtags as a means to target the organization, its employees and customers. Social media provides an ideal platform for attackers to launch highly effective technical or behavioural attacks, for the purpose of phishing, malicious impersonations or malware, because of the trusted nature of social networks. Attackers can distribute malicious links to amplify their message to their target audience, hijacking legitimate internet traffic, and distributing malware on an organization’s hashtags.
The principal targets for attacks are an organization’s publicly facing accounts. If an attacker gains control of an account, they can do serious damage, be it slander, malware or phishing. By planting malicious links where users are interacting, discussing and sharing, attacks can spread organically and touch a wide array of potential victims.
Malicious attackers often target an organization’s customers by posing as customer support or providing fake offers, so that it is difficult for the average user to distinguish between a coupon and a phishing or malware link. These actions undermine trust in the organisation and can result in the loss of previously loyal customers.
Corporate and executive impersonations also operate in social media. Here a well-made account can send phishing links and malware to associates, slandering the company, as well as scamming customers or employees. While businesses may be well aware of the dangers of external attacks via IT or social media, it is often the case that the real threat comes from within, where errors and misjudgements on the part of employees create vulnerabilities that are open to malicious exploitation.

Having outlined the potential threats from social media, there are a number of things that the commercial manager should do.
* Recognise that the security of the computer systems is not the sole responsibility of the IT manager. Security of customer and commercial data is the responsibility of the commercial manager.
* Train and Empower Staff, to identify and resolve problems before they escalate to online channels, with regular refresher training.
* Organizations need to be watching social media for unauthorised usage of their logo, verbiage and brand when assessing all types of social media threats.
* Have a Social Media Policy to clearly outline guidelines for employee conduct and stressing the importance of responsiveness, respect and integrity in all communications. Include a crisis management component that identifies responsibilities and communication channels.
* Protect social accounts like any other high-value asset. Two factor authentication and robust passwords are critical first steps, but organizations need to be actively monitoring their own accounts for indicators of compromise.
* Prevent hacking by creating strong passwords, maintaining different passwords for each social network, and changing them regularly. Limit admin rights to administrators and senior managers.
* When an employee leaves, ensure that all admin rights are withdrawn promptly.
* Use alerts and monitoring tools to keep track of mentions, and conduct periodic reputation audits by searching your company or brand name.
* If there are complaints about staff or policies, don’t wait for things to escalate to resolve the problem. If the problem cannot be resolved satisfactorily, be transparent with customers and compensate generously when performance fails customer expectations.
* Publish a Response to a complaint, to explain what happened, and how it is being rectified. Post it to your website, blog or wherever you’re receiving the brunt of criticism, and direct inquiries there.
Social media and computer hacking exploits any errors made by employees, which can cause serious problems. Commercial managers while exploiting the potential of social media to benefit the business, must ensure that employees are trained to understand and avoid its potential dangers, and to have a policy for dealing with attacks from social media and computer security.
Social media is now firmly a part of the business equation, thus the commercial manager must take it seriously and regard it as a potential resource, but one over which they have limited control or influence.
© N.C.Watkis, Contract Marketing Service 4 Jul 17

July 7, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, performance measurement indicators, Uncategorized  Comments Closed

If you don’t like the message, Don’t shoot the messenger

Of communication, Air Chief Marshal Sir Hugh Dowding, victor of the Battle of Britain said “ If a junior officer puts forward a suggestion, the implication is that the senior officer ought to have thought of it and didn’t. The response given is that the proposal has been thoroughly considered by wiser heads and rejected for good reasons. After being squashed a sufficient number of times, the junior officer ceases to put forward unwelcome suggestions.” While this observation was related to military forces and government organisations, it applies equally to commercial businesses.

Good communications are at the heart of every successful business. Commercial managers know how important it is to get the business message out to the market and the customers. But good communications requires a two way traffic, talking to the market but also listening to the returning message. Problems arise when senior management don’t want to listen to opinions that are contrary to their thinking, and may often block or ignore inconvenient information.

That returning message may come directly from the customer or indirectly through market research and other means. Good news from the market is always welcome and develops confidence within a company, but bad news, however unwelcome can bring useful results. Unfortunately, bad news is generally unwelcome, especially if it is contrary to the ideas of senior management, and can often be ignored if considered inconvenient, resulting in negative consequences. The only bad news is not knowing unwelcome information.

In business as in everything else, good leadership requires the balancing of the needs of the task, the team and the individual. Leadership and management are not interchangeable as they are not the same thing. Good leaders are not necessarily good managers, and good managers may not be good leaders. Leadership is about inspiring others to achieve specific goals, while management is about organising people and resources to complete tasks efficiently. True leadership does not supress criticism or discourage constructive dissent, but encourages the discussion of alternative views

Commercial managers are responsible for producing and maximising profitable income for the long term future of their business by anticipating and satisfying their customer requirements. To achieve this, commercial managers must have the ability to see and assess situations as they are rather than how they are imagined to be. Thus it is necessary for them to ensure that they receive all relevant information and news regardless of its origin. Having such insight should always be both dispassionate and questioning.

In every business the workforce have a day to day understanding of how the business operate. While senior management may provide overall direction, business operations are carried out at a lower level.

For the commercial manager, this means that the detailed understanding of customer requirements and how they are satisfied resides in the employees who are generally in closer contact with customers and the market than senior management.
It follows that employees with that knowledge will be the first to know when things go right or wrong, and how processes may be failing or be improved. Commercial managers must foster trust, so that employees can freely comment directly to them on activities, including bad news and uncomfortable truths. Employees should be encouraged to ask questions and engage in valid criticism of actions and processes that affect the customer and the efficiency and effectiveness of business operations. By encouraging employees to speak out, commercial managers will have the advantage of being able to assess divergent points of view and be better able to assess solutions to problems, based on a clear-sighted appreciation of business realities rather than business illusions.

Getting employees to speak freely in order to voice criticisms and positive ideas requires commercial managers to exhibit leadership by developing and fostering a culture of openness in the business environment. To achieve this commercial managers need to develop mutual trust and confidence between their staff and themselves. While some may advocate team building exercises, the development of trust and confidence between the commercial manager and their employees, is better served by the commercial manager taking an active interest in employees as individuals. This means that commercial managers should:
* take an interest in the work of every employee,
* give appreciation to individuals of their activities and contribution
* Provide objectives and direction, while involving staff with every level of operational planning and fulfilment.
* Make sure that employees understand that they are not simply “cogs in the wheel”, but an integral part of achieving the business success that sustains the income and thus their livelyhoods
* Remember that while final decisions rest with the commercial manager, the making of the best decisions and taking the necessary actions is dependent on the information and actions derived from all employees.
* Get staff to identify problems and suggest solutions.
* Explain the objective or problem and invite employees to engage in discussion, and encourage constructive dissent.
* Encourage employee confidence by listening to concerns while providing help and advice when and where needed.
* Admit mistakes and encourage others to do likewise.

In an era where fake new abounds it becomes increasingly important to distinguish false information from true fact. This is especially important for the commercial manager, as wrong assumptions based on inaccurate or false information produces bad decisions which could affect future income.

When evaluating information employees should be encouraged to ask some important questions.
* How reliable is the source? How do you know?
* How credible is the information? Is the information probably or likely to be true? How do you know?
* Is the information confirmed by another source, is that source reliable? How do you know?

When information is received via social media or e-mail the following additional questions must be considered.
* Is the URL real or a closely matched look-alike? Has it been checked?
* Is the story written by a source that you trust for reputation or accuracy? Can the source be verified as the originator?
* Is there unusual formatting? – Many false news sites have misspellings or awkward layouts.
* Apparent confirmation from other social media sites does not imply accuracy or truthfulness as the reliability of all social media sites is questionable.

For the benefit of the business, it is important that communication goes up to management as well as down to the employees Enabling employees to have the confidence to give their views and to give constructive dissent when necessary based on their experience and understanding, is a valuable asset for any commercial manager in order to make better informed decisions and judgements. Even if you don’t like the message, don’t shoot the messenger, because the message might be true.

© N.C.Watkis, Contract Marketing Service 22 May 17

May 28, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement  Comments Closed

Adapt to Survive

Business schools generally consider large companies for their case studies in order to try and identify successful best practice. Looking at the companies that inhabit the FTSE 100 list, there is a general assumption that by copying the practices of these firms, smaller firms can replicate their success. In reality, small businesses can learn very little by copying the ways of large firms, because while the principles may be transferable, the practices generally are not, as the circumstances under which large and small firms operate are different.

In any business large or small, the commercial manager has the task of producing and maximising profitable income for the long term future of the organisation.
While their initial priority will the maximising of current profitable income, their major concern will be the source and production of future revenue. In consumer markets in particular, changes in fashion, technology and economics occur more quickly than ever. Product life cycles in many cases become shorter, so that the opportunity to produce profit is reduced while the costs of development, bids and proposals increase.

In a volatile commercial market, smaller companies can have an advantage over their bigger rivals by being or becoming more agile and adaptable. It is easier for small businesses to innovate and adapt quickly to changing markets and circumstances than it is for larger organisations. However to become more agile and adaptable in a volatile business world requires an element of analysis and foresight by the commercial manager.

In the absence of a crystal ball, commercial managers must rely on information obtained from market knowledge and internal data, on which to base their interpretation, judgements and decisions. Over the past decade or so, especially in consumer related markets, there has been an increasing use of information derived from social media and Customer Relationship Management (CRM) programs. In the Business to Business area, while there has been an increase in information derived from CRM, there is still a greater reliance on that originating from direct customer contact. The reason for this difference is that companies such as Amazon which deal directly with consumers, may well have many thousands of customers, while an engineering company in the business to business sector, might have a customer base of hundreds.

In order to secure business income for the future, the commercial manager has to have a detailed understanding of the vagaries of the market and the changing needs of the customer base. Changes in the customer base may be indicative of the level of demand for the type of product in general or the acceptability of the company’s product in particular. A falling customer base may indicate a reducing market, but a reduced customer base may result in an over reliance on specific customers.

What is generally known as the 80/20 rule, reveals that in any customer base, approximately 80 % of the profitable income comes from about 20% of the customer base. The convention is that businesses should then concentrate on the 20% that produce the revenue, rather than the remainder where profitability tends to be lower. However, it may be that the 20% are at maximum capacity for sales, and so more effort and resources concentrated on them would produce disproportionately little result. Alternatively, the other 80% might produce more with more attention, but equally, might be an indication of declining demand and different requirements.
For future planning, commercial managers need to be aware of their current position in the product life cycle especially for technical products, where development can be expensive but the life cycle short. Similarly, understanding the position regarding growing, maturing or declining markets is essential for planning investment requirement and income potential.

While on-line surveys may provide some insight into customer intensions, they may often be biased to those with strong views or complaints, as most customers will not spend the time to fill in on line questionnaires or paper based forms. However, there is still no real substitute for the personal connection to customers as provided by professional salespeople which can provide valuable insight into the customers’ requirements both present and future.

In order to understand the present situation and plan for the future, commercial managers need to:

* Encourage staff to continually seek ways to improve their service and efficiency
* Engage directly with customers to understand their current and future needs
* Be aware of the opportunities and threats in customers markets as well their own
* Consider alternative products and services their strengths a weaknesses and how to exploit them.
* Encourage staff to look for alternative ways to work and organise to maximise efficiency and flexibility.

In the current business situation, demand and markets are in frequent and rapid change.
If firms are to survive they need to be able to detect change and be adaptable to meet such change. Commercial managers are expected to produce income for long term, and thus must constantly be looking for the threats and opportunities that will affect it. To achieve this they need to look for and identify the indicators of change, to consider their implications and act accordingly.

© N.C.Watkis, Contract Marketing Service 12 Apr 17

April 18, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed

Management Requires Performance Measurement.

How effectively business assets are managed may often be the difference between profit and loss. For the commercial manager with the responsibility of producing profitable income for the long term future of the business, being able to manage the customer related assets efficiently and effectively to anticipate and satisfy customer demand is essential .
There is no magic formula for managing the use of customer related assets in a business, but it was the world famous management consultant, the late Peter Drucker who said “ you can’t manage it if you can’t measure it”. Thus using performance measurements across all the customer related activities would seem to be the basis for their effective management.

Measuring performance other than sales levels has never been a strong point with those involved with marketing. Terms such as metrics, benchmarks and measurements are frequently used interchangeably as if they were the same, when they are quite different in meaning. However, the sensible and forensic use of performance measurements, not only enables a commercial manager to see and analyse how efficiently and effectively customer satisfaction is being achieved, and to produce business plans based on sound information.
When it comes to verifying their contribution to the business and justifying the investment, Commercial Managers must look at their contribution to the whole of the business getting and retaining activities and not consider their functions and contribution in isolation. Reporting on business performance must therefore be across the all the activities involved in getting and retaining customers and their profitable revenue. Commercial managers must include all areas of the business that directly relate to anticipating and satisfying customer demand, even if they have no direct management responsibility for them, which may for example include production and credit control.

The only measurements which have true value are those which are quantifiable which are usually of inputs and output; such as costs, investments and revenue. In order to achieve these, Commercial Managers need to list all the activities that provide direct and indirect support to sales and customer satisfaction as well as quantify separately all the costs involved in providing both direct and indirect support

Commercial Managers must provide a detailed analysis of the contribution that all the various business areas collectively make to the gaining and retaining of business. This should include an analysis of all sales made by: product, customer group, customer market, market sector, market segment, geographical area. In addition it should identify the source of sales including web produced, direct sales, agents, etc.

The overall cost of sales must be carefully analysed. This analysis should include all costs relating to product, customer group, customer market, market sector, market segment, geographical area. It should identify the cost of sales by direct sales, agents, and web page.

Commercial Managers should be able to report regularly on the general performance of business getting activities in terms of:

* Orders: number, average value, total value – to establish the productivity of the sales organisation
* Enquiry/quotation conversion rate –- to indicate the level of customer acceptance of the sales price with the sales proposition

* Quotation/order conversion rate – to establish the level of customer satisfaction with the sales proposition

* Analysis of lost orders – why lost – is there a trend?

* Levels of product return – does this indicate a problem in quality control.
* Order/delivery time – how long does it take, is it too long?
* Invoice to payment time – how much time is given for payment?
* Total marketing cost per order – what are the total costs involved in getting and completing an order?
* Operating Profit – what is it and how is it calculated?
* Net Profit/unit sale – are all sales profitable? If not why not?
* Debtors/sales- how much or the expected income is unpaid debt?
* Stock Turn – how many times is the stock turned annually?
* Growth in Customers – what is the annual growth/ shrinkage of the customer base?

Where Commercial Managers do not have senior executive responsibility for generating revenue, they must be the providers of all the quantified “sales and marketing” information on a continuous and regular basis to the senior decision makers. Reporting data for the sake of it is counter productive and wasteful. Always the marketer must ask “What do we need to know? Who needs to know? For what purpose is the information required and in what form will it be needed?” Commercial Managers must ensure that those decision makers have suitable performance indicators in order to prompt the necessary questions that enable informed decisions to be made.

(747) © N.C.Watkis, Contract Marketing Service 15 Feb 17

February 16, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed