And the truth shall set you free! Fletcher Reede (played by Jim Carrey), Liar, Liar

What does it mean to analyze cause and effect in your sales and marketing process? Does it require statisticians to crunch numbers and produce complicated graphs? New procedures that will just add to the workload?

No, it’s not either of these. It’s simply another way to say that you are going to find the truth, the truth behind what is causing a particular problem in your sales and marketing process. Analyzing cause and effect is what enables you to understand not only what is happening, but why it is happening and what you can do to change it.

And, as Fletcher says in his moment of revelation in “Liar, Liar”, the truth shall set you free. It will set you free because you won’t be guessing what the cause is. Your team won’t be debating the cause based on opinion and anecdote. You’ll know what the cause is. You’ll know why it was causing the problem. You will have tested alternatives and found a way to remove it.

Chefs in a kitchen never just guess why a dish is turning out differently than expected. They analyze the steps in the process, isolate some likely causes, and test alternatives. Meat turning out too dry? Maybe it’s the oven temperature or time in the oven. Try different temperatures and cooking times. Maybe it’s the marinade. Try adjusting the ingredients in the marinade and the length of marination. They know the only way to remove the cause of the problem is with a systematic and objective approach.

Once a company starts to see marketing and sales as a process where it is constantly adding value to the customer, then problems that arise are viewed as process problems and can be fixed using process improvement methods. Direct marketing groups have been approaching their work in this way for a long time. Search marketers also adopted a process approach to optimizing web sites for search engines and to their paid search campaigns. The idea with lean marketing is to extend these practices to the rest of marketing.

One of the biggest complaints that CEO’s have about marketing is that they can’t measure the return on their investment. It is routine for marketing organizations to fund programs for public relations, brand promotion, trade show participation and even lead generation programs without a clear and quantifiable business case for which they are willing to be held accountable.

Once a company starts to bring lean thinking to its marketing process, this situation will improve and CEO’s will have better information with which to make investment decisions.

Here are some examples of situations where lack of measurement and analysis can lead to expensive and unproductive results:

• A company that swipes the card of every visitor to their trade show booth, captures the visitor information in their database, and hands the information to sales as a “lead”. Without analysis of the information and pre-qualification of the possible suspects, this creates wasted effort by sales people and resentment towards marketing.
• Pursuing all revenue as opposed to profitable revenue. Causes of this problem could be lack of information on profitability or the incentives in the sales compensation plan. In either case it leads to lower profitability.
• Too much focus on overall conversion rate on the web site without understanding the different groups that are visiting the site. Avinash Kaushik points out that an overemphasis on overall conversion rate means that we are not investing in efforts to create a great experience for the other segments that are visiting our site.

In God we trust, all others bring data – attributed to W. Edwards Deming

I know a water polo coach who tracks an unusual number for each of his players. He calls it the Plus-Minus score. Plus-Minus captures how well you do at preventing the other team from scoring. Its purpose is to reward players who perhaps don’t score a lot of goals but who are good at making sure the other team doesn’t score either. In other words, it awards defense.

Plus-Minus is measured by tracking the number of times the other team scores while you are in the water playing a game. The coach tracks this number over the course of a season and the players on the team are very aware of how their Plus-Minus score compares to the other guys on the team.

Now I don’t want to give you the wrong idea. This coach does lots of other things to build a successful team. He teaches fundamentals and strategy, he encourages his players to think of their athleticism as a way of life and to “be your best” in everything you do, he’s very competitive and he wants his team to win.

And he tracks numbers. Not just his win-loss record, but lots of numbers. At games and at practice. During the season and during the off-season. And his numbers, like the Plus-Minus score, find relationships and drivers in the system of water polo that help his players improve across many aspects of the game.

Capture the numbers and watch the trends
Unlike this coach, we haven’t been so good in marketing and sales about tracking numbers and using them to be successful. Oh sure, we track our win record (completed sales and revenue), but we rarely track losses, let alone all the other factors that go into finding, winning and keeping a customer. But to improve a process it’s critical to start tracking the actions at each stage. And, like the water polo coach, to track the numbers that really get at what is happening inside your system. Or as Michael Webb says, to get at the facts that drive customer actions.

Here are three considerations for the principle of managing on data and facts:

1. Individual metrics by themselves don’t tell you much. It’s how they fit into the marketing and sales process. Measuring traffic to your website is good, but not if the traffic numbers stand by themselves. What are the sources that are bringing the traffic? What happens once visitors arrive at the site, do they bounce out right away or spend time on the landing page? Do they convert by registering or making a purchase?

2. Focus your measurements on the most critical component in the system. If you try to focus on every number all the time it can quickly become overwhelming. Find the most urgent one or two problems in your marketing/sales process and use data to understand the problem. Then when you start testing ways to fix the problem, continue to refine your use of metrics to measure your progress. Once that problem is fixed, you can move on to the next most urgent problem.

3. Connect your measurements to the financial system. Most of your metrics will not be financial measurements and thus won’t tie directly into your company’s financial system. What you will mainly be tracking are actions in the marketing/sales process, outputs from one stage which become inputs to the next stage. But the more you can do to map marketing and sales activities to your costs, the easier it will be to see how the results of your sales process fit into the larger financial picture of your company.

And finally, you will want to develop ways to not only measure results, but also to find what drives those results. Like the Plus-Minus score, these drivers inside your system will start to reveal the relationship between cause and effect in your sales process. Cause and effect will be the subject of my next post on lean marketing principles.

The purpose of any company is to provide something of value to customers. And in turn customers pay to receive the thing of value. But they start paying earlier than when they make an actual purchase. Payment begins when they give their time to read your advertisement, visit your website, watch your demo, or listen to a sales person.

When I first read about this principle of lean marketing from Michael Webb, it made me think hard about my current projects and whether each of the marketing activities we were conducting were adding value to the customer. It’s a way of thinking about marketing that makes it easy to get out of the mindset of focusing primarily on what we as marketers want to say about our products.

Webb’s analogy of a manufacturing process made it easier to visualize. The process in a manufacturing plant begins with raw materials. The manufacturing process adds value to the raw materials at each step of the way until, at the end, the process produces a finished good.

In marketing, potential customers are the raw material. At each step of the process, marketing and sales adds value to the potential customer by providing information and experiences. At some point a sale occurs and a customer is created. Of course, it doesn’t end there. Companies keep customers by continuing to add value; they support their use of the product and help them apply the product to their unique environment.

Wax on, wax off. – Mr. Miyagi, from the film “The Karate Kid”

Two hundred years ago, expert craftspersons didn’t need a lot of process to produce a product or service. Whether it was a butcher, a baker, or a candlestick maker, they were thoroughly familiar with all aspects of their operation and with what their customers wanted.

As the production of goods became industrialized, processes to improve the efficiency, productivity, and quality of manufacturing were developed. Well-known figures like Charles Taylor, Frank Gilbrith and W. Edwards Deming made major contributions to process improvement in manufacturing.

More recently these process improvement methods have been applied to domains beyond manufacturing. These domains include health care, professional services and marketing and sales. Just as manufacturing is a value-adding process which takes raw materials and produces a finished good, Michael Webb explains that marketing and sales is similar. Marketing and sales “takes the raw materials of people in the marketplace who have the kinds of problems your company solves and adds value to them until they are transformed into customers.”

Danny Russo had to learn from Mr. Miyagi that developing the spirit is as much a part of martial arts as training the body. Similarly, we have to study the principles of process improvement methods before applying them to marketing and sales.

You’ll get different lists of these principles depending on which expert you ask. I’m using the principles from Michael Webb in his book Sales and Marketing the Six Sigma Way. I’ll summarize the principles here and then write about each one in a future post.

Creating value for customers. The purpose of a company is to create value for customers, who in turn pay the company for the value received. Companies create value for customers at each stage of the marketing and sales process of finding, winning and keeping customers. Process improvement in marketing and sales is constantly looking for ways to add value for customers at each of these stages in the process. Activities which don’t add value to the customer are discarded.

Managing on data and facts. Process improvement requires more than measuring the end result (sales figures). It means measuring activities and results at each stage of the process. Without these measurements the marketing and sales teams only have opinion and past practice to rely on. By approaching marketing and sales as a process, the organization can break up the process into many steps, measure the inputs and outputs of each step, and discover which steps are most in need of improvement.

Analyzing cause and effect. Once you start to collect the data and facts of your marketing and sales process, you can not only see what is happening, you can start to learn why it’s happening and do something to change it.

Minimizing waste, errors, and defects. In many companies, sales and marketing is a kind of black box. Leads go in one end and customers come out the other, but no one really knows how it works inside. Attempts to increase the number of customers are based on throwing more activity into the front end of the box. Getting a 2% click-through-rate on your search advertising? Buy more keywords. Process improvement looks for ways to remove waste from the system. Are you capturing lots of unqualified leads at trade shows? These are all waste if you can’t find a way to add value to these leads. They are errors and defects if the results are unwanted.

Setting the context for collaboration. It’s common in marketing and sales for groups to believe that the other departments are preventing me from getting my job done. Sales believes that they could make their number if marketing would just give them enough good leads. Marketing perceives that sales doesn’t follow up on the leads they worked so hard to get. Process improvement methods recognize that every activity and result is interconnected. These methods make the connections explicit by making all the activities and results explicit. Once everyone can see what is happening and why, it is much easier to begin working collaboratively to solve the problems.

Companies are accustomed to capturing the major metrics of demand generation – sales quantity, revenue, profit. But these measurements aren’t enough to know what is happening in sales and marketing and why. They aren’t enough to let individuals and groups know what to fix and whether the change is working. Process improvement is the method by which marketing and sales can look at the details of what they do, see how the parts are connected, and improve the quality and productivity of how they add value to customers.