Warning Signs in Sales
The cavemen used signs as communication tools when there were no other means to pass on messages. As time went by, signs have lost its significance and now we use languages instead. With the evolution of language, people have lost the ability to read signals even when signs convey rich meaning. Tribal people who have stubbornly refused to integrate into the civilized world still use signs to communicate to others.
To a caveman, signals may be a powerful means of communication. But in today’s sales parlance it is a cue that conveys information that is unobservable from a sender to recipient. Sales management is all about signaling that ultimately leads to increased revenue. Managers design campaigns through the filter of signaling, a process of sending messages with the objective of influencing purchasing behaviors. Done correctly, this can lead to the desired amount of transactional sales. On the downside, market perception may turn out to be unfavorable.
A signal can mean different things to different users (Spence, 1974). When sales executives use signaling, test the waters by experimenting it with a smaller subset of the market. This will enable them to contain rapidly any undesirable consequences and thus manage it appropriately.
When not to use signaling
However, at times, there are costs involved in marketing signaling. It may result in product line cannibalization whereby customers wait for the signaled action and delay purchasing the existing product. Or circumstances beyond the sender’s control may affect the timely delivery of preannounced product or features of it as promised. Similarly, a price cut could be the result of excess inventory or product elimination. So, it would be in the best interest of all to not engage in price war that would dilute profit.
Sign language used by companies
Price signaling raised turbine generator profit/sales ratios in the 1950s. In 1992 Ford announced a 6% price increase to signal not to start a costly war for market share.
Firms that sell intangible products may indicate their high value through prestigious addresses, fancy club memberships, office décor, etc. Some companies hint to the customers their willingness to work around customer needs. They do it through differential pricing, increasing staff count for peak times and by providing complimentary services.
Airlines are notorious for undercutting fares on those routes that are lucrative to their competitors in a bid to undermine the best efforts of their rivals. In such cases, if the undercutting of fares is done to put a spanner in the works then the rates are brought up to the normal level as soon as the objective has been achieved even before some of the travel agents have found out.
Firms pay dividends to its shareholders as a sign of strength signaling to the market that there is no need to hoard cash. Some investors look for a company’s Corporate Social Responsibility initiatives to gauge the health of the enterprise. Such companies use CSR to signal the appropriate messages.
Restaurants open up in an up-market locale with high rents to signal to the patrons of its five-star status as well as to advertise its good food. Warranties and guarantees are other examples marketers use to show the credibility of the quality of the product. They offer insurance against faulty products to potential buyers. Longer the warranty, higher the quality.
Marketing signaling is also messages sent to other companies within the industry either to convey to or to gain information from competitors. Companies selectively leak information to manipulate the opponent’s choice of actions. Employees find press announcements to be more credible than internal communications.
Types of signaling
Kirmani and Rao (2000) distinguishes between two types of signaling based on the financial consequences. They are:
- Default-independent signals, where companies incur financial loss, such as heavy advertising costs or fixed upfront costs, whether the signals default on their claims or not.
- Default-contingent signals where companies suffer monetary loss only when the signals default on their claims, for instance, when a high price signal matches with equally high quality.
Keys to signaling success
Maintaining a consistency throughout the organization as to the meaning of the signals is crucial to the success of signaling marketing. Once a signaling strategy has been decided by the company executives the information must be passed on to every employee from top to bottom. Failure to do so may not only cause inconsistency in the quality level but also mar the reputation and integrity of the brand. Equally important is how the rival companies interpret the meaning of signaling.
Also, as responsible marketers, it is rather important to examine your conscience before indulging in signal marketing as using it to promote transactional sales at the detriment of brand integrity is unethical and immoral. In light of this, signaling management has become a tricky task of business leaders. The correct interpretation of sales signals enable the executives to brace themselves to avoid any potential threat or to position them to take advantage of the opportunity.
Having said that, with signaling marketing it is still hard to predict the response of the target audience. Neither is it easy to gauge the perception in the minds of the recipients. Moreover, the way one party perceives the meaning of signals may not be the way another party views them. And that is why it is advisable and a prudent strategy to test the signal response on a smaller scale in an area that closely resembles the target market.
Photo Credit: Bart Anestin
Kickstart Your Start-up by Capitalizing on Weaknesses of Multinationals
Start-ups become fat by converting the weaknesses of multinationals into their strengths
Big firms seem to have it all. Audacious business plans that seem to span a lifetime. Intimidating logos that have withstood the test of time. And brand strategy that tells stories like fairy tales. Moreover, they have been in the business for decades. This has enabled them to amass the expertise necessary to withstand any political upheavals, economic uncertainties, and social changes. These pioneers have managed to go through the experience curve.
However, in recent years, entrepreneurial firms have also sprung up like mushrooms despite some setbacks. More often they set their wheels in motion without much planning or strategy. Although market forces have compelled them to do so for future sustenance. They did not have the political, economic or social clout that the giant behemoths claim. They still managed to become successful companies in their earnest desire to satisfy a market need in their respective fields. How did they do it?
What are the competitive advantages of big firms?
Many large corporations and multinational conglomerates consolidate their production processes to cut costs and to centralize their decision-making structure. The economic and trade policies of several governments make it easier for those companies to do so. It gives them a huge advantage. They are able to cut costs. They are able to borrow from the expertise and resources of the geographical area where they base their production activities. For instance, they take advantage of the cheap labor or tax systems, and sometimes even the weather conditions for certain products. They win the favor of labor unions and local communities in which they reside since they create jobs and stimulate the economy. And they seem to have very cozy and symbiotic relationships with peripheral businesses within the industry.
Another advantage multinational companies have is deep pockets that enable them to produce flashy television advertisements during high-profile international events such as Olympics and in popular venues backed by celebrities. Such marketing gimmicks are unrivaled and smaller firms cannot match them because of the high price advertisers demand. Such advertisements have a wider appeal, and at the end of the day, it’s a numbers game.
The social and business network that large consumer packaged goods (CPG) companies have gained due to being in the business market for a very extended period gives them access for prominent placements on shelves. In the cases of large service firms, this gives them the enviable position to gain access to huge conglomerates through providing consultancy support. If nothing, public perception favors big company brands.
What are the weaknesses of start-ups?
Start-ups on the other hand, by them being in the infancy stage, unfortunately, do not have many of the power and privileges that big businesses have. Mostly people who have either failed in the job market or out of stark economic necessity found a company which implies less financial resources. Often they are at the disposal of friends, families or fools to lend them money to scale their business operations. Although venture capitalists and angel investors have risen in recent years, the brutal bureaucratic procedures involved in getting to pitch in front of such capitalists deter many start-up entrepreneurs to abandon their efforts at a very early stage of the process.
What is then left for them to do, is to start from the grassroots level that entails knocking on the doors of prospective customers. It takes an enormous amount of motivation, ambition, and drive which are rare commodities in this age of instant gratification because the efforts take a long time to yield results, if at all. Sometimes the lukewarm response from the market can take a toll on the individual and can sap the energy level. It can lead to frustration, disenchantment and a lack of self-worth.
Hope – yes we can!
Hope is at hand. Think about the risks involved in consolidated manufacturing enjoyed by many multinational companies. In most cases, the companies have a stake in the real estate of the production system – land, factories, and capital-intensive machinery. They are vulnerable to single currency swings as well as the economic chaos that may ensue after that. Start-up companies who are smart enough outsource their production of goods and services. Any pitfalls then will be borne by the companies who own the production infrastructure. In other words, start-ups get to make hay while the sun shines and can quickly withdraw when times are rough.
Thanks to the time we live in, the Internet has made it possible for start-ups to reach out to an equal number of people using social media and digital marketing in the comfort of their dens or basements that they use to start their businesses. Hence they do not have to resort to the flashy television advertisements.
Online distribution network companies such as Amazon works as a perfect substitute to prominent shelf placement for start-up companies. It has enormous potential for entrepreneurial firms for secure delivery as well as to scale their operations to the magnitude of that of multinationals if done right.
Take a piggy-back ride
Outsourcing the production processes as well as online marketing and distribution can all be done with a fraction of the cost sometimes even free of charge. For example, the success of content marketing relies predominantly on the quality of the content. If one looks around one can find hundreds of tools and tactics that is being made possible in this day and age for a start-up company to grow and make money. So the moral of the story is to take a piggy-back ride on the times we are!
Additionally, in most industries barriers to entry are falling making it irresistible for an entrepreneur. The Internet gives us real-time information about the market thereby making start-ups more attuned to the needs of the market. What all these factors do for a start-up is give them much-needed agility, dexterity, and nimbleness in the decision-making.
Photo: Verne Ho
There is an old saying in the sales community that if you can’t sell yourself, you won’t be able to sell anything else. I see this happen in every salesperson’s life when they use their relationship selling skills in personal day to day life. Any long term project in sales needs the same amount of patience as required in selecting a life partner. This theory is easily understood if the sales process is applied to selecting a life partner as seen in the following process of selling to a new mining project.
In both cases (whether it be applied to relationship selling or selecting a life partner) you have a clear objective in mind. The objective in sales for a new mining project is to sell your products and solutions to new green field mining job and in the second case is to select a suitable life partner.
This is a critical first step in either mining sales or selecting a life partner. Identifying a mining project starts with networking and seeking geologists that inform you which project sites are under evaluation. Another form of seeking a new mining project is through different media channels, such as TV and newspaper. On the other hand, when you start searching for a life partner, your friends play the role of the “geologists” by introducing you to possible partners. Also, media channels such as social media and dating websites are used to search for the perfect partner.
Once you identify a new mining job, you start prospecting by finding who is the owner, EPC (Engineering, Procurement, and Construction) and financiers for that job. Similarly, in the case of a life partner, you start gathering data about his/her personality, parents, friends, family friends and professional life. In both cases, you normally stop chasing either the project or the person at this point if it is not the right fit for you.
This is the point where you use all your sales skills. You start working with all stakeholders in the mining project who you identified at the time of prospecting. You discuss their needs, present your products and solutions, show them your references and finally discuss financials. Similarly, in the other scenario, you mutually understand each other, present yourself to each other’s family, introduce your family and friends and discuss your financial standings.
Knowing your competitors
This is the most important step in both scenarios. In mining sales, you always want to be aware of your competitors. Any kind of relationship (any applicable past contract) the company is having with any competitors which can affect this project. Similarly, in other case, you also want to know from your future life partner about their present commitment level and make sure that they are not interested in someone else.
After you’ve finished handling all objections in the mining job, you finalize the deal and get an order through a negotiation. Also, in the case of looking for a life partner, you mutually decide about the marriage date, expenses, size and perhaps the value of the ring, etc. The time taken in winning a mining project can take a number of years or sometimes the project becomes dead at any step. Similarly, in the other scenario, it also takes times and in some cases a relationship doesn’t achieve soul mate status.
A good relationship selling sales person never gets depressed in the initial stages, as he is always working on multiple opportunities; but, in the other scenario, it all depends on each individual whether he is working with others before completing the prospecting stage.
Relationship selling is fun and you use sales in almost all aspects of your life. The only difference in the scenarios is that you stop prospecting in real life after you select a life partner unless the deal goes bad after a few months or years, but in mining sales, you are always working on new sales.
Photo: Yoann Boyer
Sanjeev Neb, CME, CSE, Sales Account Manager- Siemens Canada, Director-Sales and Marketing Executives International Inc. (SMEI)