SYB VALUE PROPOSITION CLASS NOTES

1. Almost all of you said that you are here to really learn how to start a business in less than next 3 years. Nikita was the only exception. If so, having a plan is a must ! You will need at least a financial plan ( Profit and Loss statement and the Balance Sheet) for the first year at least. Ideally for 3 years : year wise. Unless you have a plan you will not have an early signal of whether, and to what extent, and in which area, you are succeeding or failing. Also a plan helps in attracting investors and employees and vendors
   
   • From Gayatri's presentation we saw that more of the class was willing to invest when her ideas were converted into a financial plan
2. We saw actual survey data on what new businesses fail. This is an "inverse list" of why new businesses succeed.
   
   • no plan, no milestones
   • no need, no differentiation, no customers
   • no money because it costed more than you thought and/or it sold less than what you thought
   • no manpower, no organization, no competence
3. We discussed why "not having an idea" is not listed as a reason for failure. Because, an idea needs to be converted into action and only then it can be implemented.
4. We took a general format of a P&L account and wrote down the main headings as 
   
   • Sales Revenue - Taxes - Channel Margins = Net Realization
   • Net realization - Material Costs - Processing Costs - Mfg Overheads = Manufacturing Margin
   • Manufacturing Margin - Sales Force Expenses - Sales Expenses - Sales Promotion Costs = Marketing Margin
   • Marketing Margin - HO Overheads - Depreciation - Interest Costs = PBT (Profit Before Tax)
5. We discussed that your objective should be begin making a positive PBT from 12-18 month from set up. Otherwise all round demotivation will set in and you may find going difficult.
6. We saw that probably the most important line in the financial plan is the "Sales Revenue" line and decided to devote the whole day to discussing how to work out the line. I liked your question "how to make a sales forecast when we do not know what to make and we have no experience?". This actually was the purpose of the whole day's proceedings. There does exist a way to - not only work out a good sales forecast - but also to simultaneously decide how much it will cost to make and sell it.
7. The sales forecast depends on the following factors which need to be analyzed by you and factual research needs to be done by you 
   
   • Macro level market definition and characteristics ( How attractive is the market ): size and growth rate of existing market, how many customers are in what readiness to buy, whether your product (means service also) forces them to make a change from what they are used to doing. By looking at two presentations we saw that defining the market needs to be done very carefully. When the market was defined as "Corporate Training", the figure came to Rs 650 Crores but then we realized that this aggregate figure actually consists of several smaller markets (example of a market being :  entry level induction training in companies who do not have their own trainers). The moment we come "closer" to the market, we start seeing it much better and then we can begin making better strategies to enter the market and begin making better sales forecasts.
   • Micro level market connect : ( How attractive is YOUR VALUE PROPOSITION) and it has four components
     
     • The type of customer you have chosen to serve ( called as Target Audience). The mistake done most often in start-ups is to define the target market too broadly - dont say everyone needs my product - the real test is to say who wants it the most and the soonest? Create a business plan for such customers first - they are your "low hanging fruit" - pluck that first !! And only then go after other types of customers.  
     • What are they doing now ( called as Existing Habit)  :  it is necessary to identify the Target Audience - in as vivid a detail as possible - because then it automatically tells you how to serve it better than what they are doing now. For this purpose you may like to segrgate your target audience into 3 groups (1)  they have a need but do nothing (2) they are using some other category of product to satisfy the same need (3) or using a competitor. For example, if you are selling woolen night wear, what the customers who feel cold at bedtime can be divided into the 3 groups as (1) do not use any special product for the cold they feel (2) people who pull a bedsheet or duvet (3) people who wear warm nightwear of a competing brand. 
     • What is the product / service you offer (called as Product / Service Description)
     • How is it better than what they are doing now? ( called as Differentiation) Here you must pick up a specific group (normally the largest) from your "existing habits" answer and then decide why such customers should choose you rather than what they are doing now. 
     • Here let me give you a good example of a good value proposition developed by one of your colleagues :
       
       • Target Audience : Similarly we also saw a very good way of defining the market at the macro level as providing well reserached medical content, on a per page charge basis, to SME in pharma business who cannot afford to have in-house specialists for this work. 
       • Existing Habit : Almost all such companies rely on different types of external doctors for different speciality products
       • Offer : Doorstep service to SME customers from a medical content center staffed with specialists
       • How is it different :  SMEs will save time because they are dealing with a single company which provides medical content for all types of medial speciality subjects. Instead of the SME company going to doctors, they will get service delivered at their desk. The doctors may not do such a good job because their focus is on practice but the company will do a better job because the staff will be Ph D and focused only on this work.
   • Macro level definition HOW COMPETITIVE IS THE INDUSTRY  (This tells you the prices / margin / sales pressure you will feel ) . This is the Porter's 5 Forces analysis as follows (1) How intense is the competition between various players in the industry - particularly those who are directly competing with you (2) How strong is the bargaining power of your vendors - are any of them likely to come into your business through forward integration. This may happen if you are a large customer for them and if the benefit to them is more than what it will costs them (3) How strong is the bargaining power of your customers - are any of them likely to come into your business through backward integration. This may happen if what they buy from you reflects a large part of what they spend and if they are likely to save a lot of money by doing themeselves what you are now doing for them (4) What is the probability of substitute products which will eat into your business (5) What is the probability of new entrants coming into the industry and eating into your business.
     
     • to continue the examples used above we can conclude that (1) there is no other existing rival (2) but the vendors (employees themselves) are likely to get into the business once they know the customers (3) the customers are unlikely to get into the business till they reach a level of business where they can afford to employ a specialist only for content generation (4) there are no easily substitutable products (5) new entrants are unlikely.    
   • Micro level sustainability ( HOW SUSTAINABLE IS YOUR BUSINESS)  Based on the above analysis the steps that could be taken will be (1) bind employees through non-compete agreements and giving delayed bonuses, to frequently change people working on each client account, to monitor the workload for each client and reduce the rates once he reaches a level when he can afford to employ a specialist only for content generation. In general your business is more sustainable if your core competence ( that separates you from your competitors and imparts you with the power to hold your customers and pricing better than your competitors)  
   • Go To Market Strategy : Even if all the 4 above factors are present (1) large and attractive market (2) attractive and differentiated value proposition for your target customers (3) the industry is not very competitive (4) the business has built in competence that enables it to retain the customers and pricing better than competition; THERE STILL IS LEFT  the crucial task of "going to market".
     
     • For standard products the following sequential steps are involved in "go-to-market" strategy (A) Locating target customers and qualifying them as worthy of further and more contact (PROSPECTING ) (B) Contacting and communicating with them (PRESENTING) (C) Overcoming objections, negotiating and getting an order (CLOSING) (D) Conducting the transaction, delivering and collecting (TRANSACTING) (E) Installing, Commissioning and Training (SUPPORT) (F) After sales service including maintenance, upgradation, repair, disposal, replacement etc (CUSTOMER RELATIONSHIP)
     • For customized products the following sequential steps are involved in "go-to-market" strategy of 4 Ds (A) Discovery and exploration of customer business (B) Diagnosis based on the previous stage and concurrence of the customer (C) Design of the solution based on the diagnosis (D) Delivery or implementation of the design.   
8. Going through the above process of not only ensures that your sales forecast has better chances of coming out close but it also ensures that you become ready to do business in a better fashion because the process forces you to consider important fundamentals as above.        

I request each one of you to write back to me individually and give me a feedback

1. How useful did you find the day ?
2. Which were the most useful concepts you learnt that you did not know before ?
3. Which of these concepts did you find most useful for your project ?
4. Did the day bring you closer to your project plan?
5. What improvements could I have done ?  

Dear SYB 07 Batch

It was a pleasure to discuss the topic as applicable to your various ideas. Let me walk you quickly through the main points we made yesterday and the flow of the thought : 

1. Almost all of you said that you are here to really learn how to start a business in less than next 3 years. Nikita was the only exception. If so, having a plan is a must ! You will need at least a financial plan ( Profit and Loss statement and the Balance Sheet) for the first year at least. Ideally for 3 years : year wise. Unless you have a plan you will not have an early signal of whether, and to what extent, and in which area, you are succeeding or failing. Also a plan helps in attracting investors and employees and vendors
   • From Gayatri's presentation we saw that more of the class was willing to invest when her ideas were converted into a financial plan
2. We saw actual survey data on what new businesses fail. This is an "inverse list" of why new businesses succeed.
   • no plan, no milestones
   • no need, no differentiation, no customers
   • no money because it costed more than you thought and/or it sold less than what you thought
   • no manpower, no organization, no competence
3. We discussed why "not having an idea" is not listed as a reason for failure. Because, an idea needs to be converted into action and only then it can be implemented.
4. We took a general format of a P&L account and wrote down the main headings as 
   • Sales Revenue - Taxes - Channel Margins = Net Realization
   • Net realization - Material Costs - Processing Costs - Mfg Overheads = Manufacturing Margin
   • Manufacturing Margin - Sales Force Expenses - Sales Expenses - Sales Promotion Costs = Marketing Margin
   • Marketing Margin - HO Overheads - Depreciation - Interest Costs = PBT (Profit Before Tax)
5. We discussed that your objective should be begin making a positive PBT from 12-18 month from set up. Otherwise all round demotivation will set in and you may find going difficult.
6. We saw that probably the most important line in the financial plan is the "Sales Revenue" line and decided to devote the whole day to discussing how to work out the line. I liked your question "how to make a sales forecast when we do not know what to make and we have no experiece?". This actually was the purpose of the whole day's proceedings. There does exist a way to - not only work out a good sales forecast - but also to simultaneoulsy decide how much it will cost to make and sell it.
7. The sales forecast depends on the following factors which need to be analyzed by you and factual research needs to be done by you 
   • Macro level market definition and characteristics ( How attractive is the market ): size and growth rate of existing market, how many customers are in what readiness to buy, whether your product (means service also) forces them to make a change from what they are used to doing. By looking at two presentations we saw that defining the market needs to be done very carefully. When the market was defined as "Corporate Training", the figure came to Rs 650 Crores but then we realized that this aggregate figure actually consists of several smaller markets (example of a market being :  entry level induction training in companies who do not have their own trainers). The moment we come "closer" to the market, we start seeing it much better and then we can begin making better strategies to enter the market and begin making better sales forecasts.
   • Micro level market connect : ( How attractive is YOUR VALUE PROPOSITION) and it has four components
     • The type of customer you have chosen to serve ( called as Target Audience). The mistake done most often in start-ups is to define the target market too broadly - dont say everyone needs my product - the real test is to say who wants it the most and the soonest? Create a business plan for such customers first - they are your "low hanging fruit" - pluck that first !! And only then go after other types of customers.  
     • What are they doing now ( called as Existing Habit)  :  it is necessary to identify the Target Audience - in as vivid a detail as possible - because then it automatically tells you how to serve it better than what they are doing now. For this purpose you may like to segrgate your target audience into 3 groups (1)  they have a need but do nothing (2) they are using some other category of product to satisfy the same need (3) or using a competitor. For example, if you are selling woolen night wear, what the customers who feel cold at bedtime can be divided into the 3 groups as (1) do not use any special product for the cold they feel (2) people who pull a bedsheet or duvet (3) people who wear warm nightwear of a competing brand. 
     • What is the product / service you offer (called as Product / Service Description)
     • How is it better than what they are doing now? ( called as Differentiation) Here you must pick up a specific group (normally the largest) from your "existing habits" answer and then decide why such customers should choose you rather than what they are doing now. 
     • Here let me give you a good example of a good value proposition developed by one of your colleagues :
       • Target Audience : Similarly we also saw a very good way of defining the market at the macro level as providing well reserached medical content, on a per page charge basis, to SME in pharma business who cannot afford to have in-house specialists for this work. 
       • Existing Habit : Almost all such companies rely on different types of external doctors for different speciality products
       • Offer : Doorstep service to SME customers from a medical content center staffed with specialists
       • How is it different :  SMEs will save time because they are dealing with a single company which provides medical content for all types of medial speciality subjects. Instead of the SME company going to doctors, they will get service delivered at their desk. The doctors may not do such a good job because their focus is on practice but the company will do a better job because the staff will be Ph D and focused only on this work.
   • Macro level definition HOW COMPETITIVE IS THE INDUSTRY  (This tells you the prices / margin / sales pressure you will feel ) . This is the Porter's 5 Forces analysis as follows (1) How intense is the competition between various players in the industry - particularly those who are directly competing with you (2) How strong is the bargaining power of your vendors - are any of them likely to come into your business through forward integration. This may happen if you are a large customer for them and if the benefit to them is more than what it will costs them (3) How strong is the bargaining power of your customers - are any of them likely to come into your business through backward integration. This may happen if what they buy from you reflects a large part of what they spend and if they are likely to save a lot of money by doing themeselves what you are now doing for them (4) What is the probability of substitute products which will eat into your business (5) What is the probability of new entrants coming into the industry and eating into your business.
     • to continue the examples used above we can conclude that (1) there is no other existing rival (2) but the vendors (employees themselves) are likely to get into the business once they know the customers (3) the customers are unlikely to get into the business till they reach a level of business where they can afford to employ a specialist only for content generation (4) there are no easily substitutable products (5) new entrants are unlikely.    
   • Micro level sustainability ( HOW SUSTAINABLE IS YOUR BUSINESS)  Based on the above analysis the steps that could be taken will be (1) bind employees through non-compete agreements and giving delayed bonuses, to frequently change people working on each client account, to monitor the workload for each client and reduce the rates once he reaches a level when he can afford to employ a specialist only for content generation. In general your business is more sustainable if your core competence ( that separates you from your competitors and imparts you with the power to hold your customers and pricing better than your competitors)  
   • Go To Market Strategy : Even if all the 4 above factors are present (1) large and attractive market (2) attractive and differentiated value proposition for your target customers (3) the industry is not very competitive (4) the business has built in competence that enables it to retain the customers and pricing better than competition; THERE STILL IS LEFT  the crucial task of "going to market".
     • For standard products the following sequential steps are involved in "go-to-market" strategy (A) Locating target customers and qualifying them as worthy of further and more contact (PROSPECTING ) (B) Contacting and communicating with them (PRESENTING) (C) Overcoming objections, negotiating and getting an order (CLOSING) (D) Conducting the transaction, delivering and collecting (TRANSACTING) (E) Installing, Commissioning and Training (SUPPORT) (F) After sales service including maintenance, upgradation, repair, disposal, replacement etc (CUSTOMER RELATIONSHIP)
     • For customized products the following sequential steps are involved in "go-to-market" strategy of 4 Ds (A) Discovery and exploration of customer business (B) Diagnosis based on the previous stage and concurrence of the customer (C) Design of the solution based on the diagnosis (D) Delivery or implementation of the design.   
8. Going through the above process of not only ensures that your sales forecast has better chances of coming out close but it also ensures that you become ready to do business in a better fashion because the process forces you to consider important fundamentals as above.        

I request each one of you to write back to me individually and give me a feedback

1. How useful did you find the day ?
2. Which were the most useful concepts you learnt that you did not know before ?
3. Which of these concepts did you find most useful for your project ?
4. Did the day bring you closer to your project plan?
5. What improvements could I have done ?  

quote on jargon

“As we initiate push back on the paradigm shift and gain traction ¬– you know, actionable leverage — by examining gap analysis data on the more seamless core competencies at our centers of excellence, it’s possible to take this to the next level of penetration without having to circle back on predictable low-hanging fruit. In other words, we can bring value-add to the table and capture a win-win solution so long as we stay on the same page and keep everyone in the loop regarding margin factor learnings for deliverables. That’s our takeaway, net-net.”

CASES

BHPL / Babool Case

Situation

1. In  an intensely competitive toothpaste market where Balsara  was fighting  with MNCs like Colgate, Levers and Ciba; Balsara's brand Babool  found  itself in a unique position in 1991.  This  brand, launched in 1988 with a platform of a good family toothpaste at a lower  price  with  the  slogan  “Ghar  bhar  ke  aaye  kaam  aur  kitne  kam  daam  -  aab  sirf  das rupiye  me“  ( Slogan : Good  for  the  whole  family and  oh  what  a  low  price  - now only Rs 10 )  found an  immediate  acceptance.  Market share was 4% by 1989 and by 1992 the volume was 100 tonnes per  month.
2. But by 1992 it was clear that a strategic error had  been made in pegging the price to an absolute norm of Rs 10. Further price increases were inevitable but on the other hand the farther we went from Rs 10, the more the market seemed to resist. We faced a no-win situation of stagnant or declining  volumes on the one hand  and  no  money  to do anything about it on the other hand because  we  were  unable  to  take  price  increase.

Action
The key to achieving  the  price increase   (in spite of  the stiff  internal  resistance  and  in  spite  of  the risks associated with abandoning  the slogan and the positioning which worked and gave  us  volumes)   was in realizing that 70% of the sale came from only 5 out of the  23 states -  UP,  Bihar,  West  Bengal,  MP  and  Gujrat  -  The  traditional  conservative  Hindustani  heartland  belt.

Through  a series of informal evening meetings with the  respective afield forces in the 5  states their support was obtained for taking a price hike and they were promised a  good ad support.

the stage was  thus  set to take an unprecedented-in-the-industry 18% price hike in one single shot.  The campaign to support the price  increase was the key  because  without  an  active  consumer  pull  a  permanent    price  adjustment  could  not  have  gone  through.

Re-positioned  the  product  so  that  the  previous  strategic  positioning  error  mentioned  above  could  be  corrected.   Although we shall still be in the lower price area  of  the  market, we  did  not  want to  be  anchored  to  an  absolute price slot.  We  decided  that  we  should  be  seen  as  a  good  “value  for  money”  “family”  toothpaste.  The  pricing  policy  of the  brand  was  precisely  defined  in  terms  of  how  much  it  should  be  below  the  brand  leader  Colgate.

Considering  the  slightly  downmarket  nature  of  the  target  audience,  a   slogan of "Babool, Babool,  Paisa vasool" was  coined  and  the  TV  execution  was  woven  around  a  popular Hindi film and  shot  in  a  typical  mushy  Hindi  film  style  because  it  was  realized  that  the  message  format  which  they  liked  and  responded  to  was  the  Hindi  film  format.

Even  the pack was single mindedly focussed on this segment.  All other languages were dropped. Only Hindi was used.

To   clearly   exemplify   the  theme  of   "paise vasool", a first-time-in-the-industry pack of 250g  was  introduced  which  was  priced at par with the brand  leader  Colgate  200g and was  branded  as  "Bada Babool". In keeping  with  the profile of the low price segment being attacked, a relatively less fashionable medium of radio was  used   which  was  heard  and  played in the street. A  special sponsored  program  "Babool Film Bahar"  was introduced on the Vividh  Bharati  channel in the main states with the feature of listener contests.  In fact, the  listenership  of  this program  was  built  up by the   company  in its main towns through posters and mike announcements using  autorikshaws.

Result
   1. The price increase was successfully implemented without any backlash  in  spite of a very stiff hike.
   2. The "price demonstration pack"  of  250g  became firmly entrenched pack contributing about 40 tonnes per month regularly.
   3. Overall,  the  brand tonnage  went  up  from  100 tonnes  per month   to  about 180 per month over two years.
   4. The  profitability  increased  more  due  to the  price  increase.
   5. The radio contest started pulling a response of over 40,000 letters per episode and this level remained the same over the entire period. The idea of the program and the fact that the company built up its listenership through their field force effort was judged to be the best in the world of Leo-Brunet advertising by their Chicago office.
   6. In two out of the five states where we concentrated, Babool became number 3 brand in the market from its number 5 apposition. In the state of West Bengal in fact it even overtook lever’s  brand Close Up to be the number 2 brand.
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STEPAN CHEMICALS LIMITED ( WHEEL )
Based on the meeting at Lever House on 1/10/93 with Vindy Banga, Ashwani Mehta, Jagdeep Sehgal. A description of Lever strategy behind SCL operations.

In the early 80s Levers realized that its attempts were turning out to be futile at fighting off the price-warrior Nirma through the typical MNC route of hitting at Nirma by projecting its brand Surf as costlier-but-better. They concluded that the battle with Nirma cannot be fought by remaining on the MNC-familiar high-value high-price battleground; and that they must go into a different battleground of low-price and fight Nirma on an unfamiliar turf. Nirma was an extremely low-tech, hence legally consuming less than 20 HP electricity, and therefore getting important tax concessions in addition to the advantage of being located in a geographical area where labor costs are lower. Thus, Nirma was already organized for low-cost production but HLL was
not.

SCL is a very very interesting case study of how the MNC HLL, inspite of its own fat-cat weaknesses, identified and leveraged its strengths, to create its own method of being a low-cost producer of popular priced detergent powder; and learnt an entirely new method of selling at low price and still make good money by HLL standards. It learnt how to make money not by higher price but by lower costs. HLL initially took advantage of the tax shield provided by the accumulated losses of SCL by taking it over when it was a sick company. Then it restructured the company by passing some functions to it but retained some sensitive functions  with itself: R&D and brand  ownership/management function was kept by HLL. HLL charges a fee to SCL for it. The Purchasing function is also retained by HLL because it gives economies of scale to SCL. For actual operations, it used the Wheel brand name which they already had in the rural-oriented popular-priced  cake market and then put on a very  good formulation which was competitive in quality as well as price with Nirma.

Apart from the benefits of low cost accruing due to:
1) Central purchasing,
2) R&D guidance in formulation and process cost reduction,
3) Financial tax planning;

they have taken remarkable corporate level decisions regarding
marketing which have reduced their marketing costs also. These
are in the areas of:
4) Selling manpower costs, 
5) Trade margins.

These are described in detail below. Later on it is also described EXACTLY what enabled them to do it.

SELLING MANPOWER COSTSOut of the salesforce who sell SCL products in the market, 90% belong to the stockists and only 10% belongs to SCL. The costs of the this massive stockists' salesforce are NOT reimbursed or subsidized in any way and are borne entirely by the stockists and come out of their usual trade margins. Does it mean that the
stockists get good margins? Actually it is quite the opposite.

STOCKIST MARGINSAre the lowest in the consumer industry at 4%.

HOW DID IT HAPPENThe answer is that by adopting an extremely AGGRESSIVE  and SINGLEMINDED pursuit of simultaneous twin objectives of HIGH VOLUME and LOW WORKING CAPITAL REQUIREMENT FOR STOCKISTS. The company is absolutely and completely consumer-satisfaction and trade-service oriented. Most companies design their stockist selling activities around their own requirements of primary sales and their own inventory requirements BUT this company does exactly opposite: it designs stockists' redistribution activities and its own dispatch and inventory activities around their stockists'  requirements  of  ex-godown  sales  and  their stockists' inventory requirements. When most companies claim to  be customer-driven (but in reality are driven mainly by their own requirements of primary sales targets and need to move their own inventory) and are finding it difficult to market, here is SCL which took responsibility for its customers' rate of return (and thereby chose to be driven by the customers' secondary sale and customers' inventory movement) and has actually succeeded. Just as the Japanese manufacturers say that the pursuit of consumer satisfaction through quality actually reduces the costs rather than increasing it, I could clearly feel at SCL that the pursuit of stockist satisfaction through adequate ROI has actually reduced their selling costs and increased their sale.

HOW DID THEY DO ITThey did it through adopting important policy guidelines in five areas of marketing operations:
1/ Good product formulation developed keeping Nirma in mind.
2/ Affordable price.
3/ Heavy, nationwide, constant media for high sales volume.
4/ Constant monitoring and fast response.
5/ Different distribution and organization philosophy.

Good product formulation and affordable priceThe formulation was tested against Nirma with the  target
customers and their opinions were taken into account.

Heavy, nationwide, constant media for high sales volumeThey have spent several crores of rupees every year in promoting this brand on TV and through outdoor and rural media to ensure that in every nook and corner of the country there is a very sizable and active demand for this product. Further they are doing this in a very large market (size : Rs 1000 crores +), and hence they have created a Rs 300 Crore sale through only one brand and four packs!

Constant monitoring and fast responseThey constantly monitor through MARKET RESEARCH consumer level information like their buying behavior, effects of competitive ads  etc.  They have  INTEGRATIVE  COMPUTERIZED  themselves extensively right from the factories to main warehouses to C&Fs to ensure smooth and fast production and movement of finished goods. Now they are working on bringing computerization right upto the stockist levels where through hand-held modems, and through telephone links, their salesmen will be able to instantly know the depot stocks, place orders and get confirmation of the invoicing  of the order; all within minutes; through  the computerization. This will enable them to further pare their own as well as the inventories of the stockists; thereby increasing their ROI and thus make way for asking for more redistribution facilities from the stockists. Even right now, there data does not travel through floppies but through on-line links. Every week they know how much they sold till the previous evening. Most of the decisions related to customer service - whether accounting, distribution or sales - are DECENTRALIZED and take place CLOSER TO THE CUSTOMER in the branches where all these functions report to the Branch Manager. However, they do not treat the Branch Manager as a profit centre but a cost centre. They also have BANK ACCOUNTS NOT ONLY IN 50 DEPOT TOWNS where they have bank accounts
but they also have accounts in bigger nearby towns and have appointed "chasers" in some areas to ensure prompt transfer of funds to Bombay. Their national "float" is only 1.5 days.

Different distribution and organization philosophyNot only selling, but all activities connected with the trade customers, like distribution and accounting, are seen to be a part of a larger customer service activity and are decentralised and all people in these functions are trained to think of customer first.

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Simple Postcard to Boost Revenue  and Add Prospects
SUMMARY: Marketers for companies that sell through  through distributors and resellers have a hard time forging relationships with end users. They often don’t know who is buying their products or which prospects are open to receiving marketing materials. Read how a marketer used a direct mail campaign to promote a specific product line and capture names and email addresses for nurturing. The campaign more than tripled sales of one product and added more than 100 names to their prospect list.

CHALLENGEIMC Networks, a networking equipment company, sells exclusively through distributors and resellers. This constrained the efforts of Tim Templeton, Director, Marketing, who must abide by an IMC policy that prevents channel conflict by using a single pricing strategy with discounts based on volume of sales. Templeton can’t engage in widespread channel marketing with systems integrators and resellers. So, this makes it difficult to forge direct relationships with customers and prospects. His team uses search marketing and industry trade shows to reach out to customers, but that tactic also has limitations. “I’m trying to find [a] way to drive people to our products that may not be looking for a new vendor,” says Templeton. “When you do Google or Yahoo! ads, you’re only going to get people looking for a change. You’re not going to reach people who are happy with their product.” A major distributor for IMC offered a direct mail program that allowed vendors to send mailings to up to 5,000 customers who had purchased the same or similar products in the past. Templeton liked the idea, but the one-time list rental service still did not let him see who was on the mailing list. Templeton needed a tactic that would reach prospects not actively searching for a new vendor. His goals were to boost sales for certain product lines and collect email addresses from prospects to enter them into a lead nurturing process.

CAMPAIGNTempleton used a simple postcard with two goals: promote one of the company’s lower-cost products; invite recipients to go to a landing page to register for a related white paper and download more product information. Here are six steps they took:

Step #1. Choose product line to promote : The team built the campaign around the company’s SFP products – electronic transceivers that plug into network switches to accommodate fiber capacity upgrades. Without an SFP, network operators may have to replace all their switches when they upgrade their networks. They chose this product line for several reasons: - Relatively low price point, which meant they could see an immediate sales impact from their promotion. SFPs cost between $37 and $300. IMC’s SFPs tend to be cheaper than their competitors, providing an easy value proposition to convey in a direct mail piece.  IMC wasn’t well known in the SFP category. Templeton wasn’t seeing strong sales for that product line through the distributor providing the mailing list. “That was really a flag to me that we were not reaching the market and they were not aware that we’re selling these products.”

Step #2. Use list of similar SKUs to assemble mailing list : To assemble a mailing list, the distributor provided up to 5,000 customers who had purchased a similar product, based on SKU. Templeton had a problem, though: The distributor didn’t have a unique category for SFPs. Instead, Templeton targeted:- Customers who had bought network switches with SFP ports, figuring they may also be in the market for SFPs. - Customers who had bought similar products from competitors. This required manually analyzing SKU numbers and having the distributor collect names from their database.

Step #3. Mail postcard promoting SFP product line : Templeton’s team created a theme for their postcard that highlighted the company’s larger choice of SFP products than its competitors. The campaign’s tagline was “Cast Your Vote for Choice.” Imagery on the card resembled a ballot, showing checked boxes next to bullet points detailing product capabilities. Key elements of the card also included: - Prominent text noting that SFPs start at $37 to underscore the company’s price advantage. - Table listing the four most popular SFPs, along with product numbers and a brief description of capabilities.

Step #4. White paper offer to capture email addresses : On the back page of the postcard, the team added a note about a “Bonus” offer – the opportunity to download a relevant white paper by visiting a unique URL.- They chose a white paper that detailed the benefits of a type of networking technology called single-strand fiber, because the company’s SFPs support that technology. - They created a new landing page for the campaign that included   œ  Same photo used on the postcard, with additional ballot imagery to match the tagline   œ  Registration form, requiring name and email address and with optional fields for company name, phone number and promotional code  œ  Link to a PDF of complete SFP product information, with product numbers for easy ordering   œ  Pre-checked opt-in box to request additional email communications. Visitors who registered for the white paper were sent an email with a link to download the PDF. That way, Templeton’s team could verify whether they had submitted a valid address. Bounce-backs were not added to the company’s marketing database.

Step #5. Nurture names collected in white paper registration :  The team added the valid names and email addresses collected during the campaign to the company’s CRM system. From there, they could engage in further nurturing of those prospects. - The inside sales team could periodically call prospects to ask qualifying questions, such as whether they had any upcoming projects requiring SFPs or other equipment. - Registrants who opted in to receive additional email were sent œ NetNews, the company’s email newsletter that features new product information and technical articles  œ  Announcements of new white papers available   œ  Announcements of company appearances at trade shows

Step #6. Monitor sales through distributor to gauge impact : To determine ROI, Templeton’s team had to monitor sales of SFPs through the distributor. Because this was the only ongoing marketing at the time that drove prospects to that distributor, the team could be confident of attributing sales increases to the campaign.

RESULTS
The campaign achieved both of Templeton’s goals: There was an immediate impact on sales, and they added new names to their marketing database. - SFP sales jumped in one month to 14% from 4% of overall revenue from the distributor.- Overall revenue from that distributor also went up 30%.

“We’re pretty excited about that, because this tends to be a recurring purchase,” he says. “Every switch that’s sold, you need an SFP, and when you need to upgrade your networks, you need new SFPs.”

Initial sales allowed the campaign to break even.

The white paper attracted more than 100 registrations for lead nurturing – or roughly a 2% conversion rate, about average, according to MarketingSherpa benchmark data on direct mail to third-party lists. But Templeton expects their new, direct relationship with end users will continue to pay dividends.

“We’re getting some nice results and are already at breakeven for what costs are,” he says. “We figure we’ve got mind share with these people, and expect to see recurring revenue down the road.”

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Met Dr Balakrishna Grandhi, DEAN on 21/2/10


MARKETING TYPE = B2B , B2C
PRODUCT TYPE = Product, Service
GO TO MARKET = Direct Sales, Channel Sales
CUSTOMER TYPE = High end, Low end


Ask the students to find a company of that type and then ask them to say a few things about them!


Time period = 75 Minutes + 45 Minutes + 75 Minutes

Many are 5-6 years workex. This is a core course ( means they will need to undergo this course even if they specialize in any field = marketing, operations, finance or HR ) hence it is an appreciation course and should clarify cross-functional inter-dependencies.

Ask the student groups to bring a problem to the table every 2nd lecture. Give a group quiz to ensure everyone prepares.  

B2B spends

B2B spends
•    Trade Shows/Events -- $17.3
•    Internet/Electronic Media -- $12.5
•    Promotion/Market Support -- $10.9
•    Magazine Advertising -- $10.8
•    Publicity/Public Relations -- $10.5
•    Direct Mail -- $9.4
•    Dealer/Distributor Materials -- $5.2
•    Market Research -- $3.8
•    Telemarketing -- $2.4
•    Directories -- $1.4
•    Other -- $5.1

B2B Marketing Course

B2B Marketing Course

Half day overview sets context for B2B marketing



Many business-to-business Marketers lack an understanding of the skills and tools required to set multi-level strategy, ready the market and create demand. Serving as an overview, content touches on the key elements of a business-to-business marketing planning framework for earning more customers that is covered more deeply in four two-day modules. Introduction says  strategy comes in two-tiered level:

    * Whole-of-company strategy, and
    * Go-to-market strategy

The module highlights the need to build

1.      a strategy that sets the general direction of the organization

2.      a go-to-market strategy to sell right product, to right buyer, through the best channel.

The content then outlines the critical components for taking strategy into action

1.      campaign planning

2.      sizing your funnel

3.      selecting the best tactics

Set Strategy for Business Markets

how to get a seat at the strategy table; and earn the right to stay there.

    * How to set, and guide, the overall strategy for the whole business. You need it to accelerate quickly from its current position, leave its competition for dead and be strong enough to last the distance.
    * How to set the go-to-market strategy for your products and services. This includes deciding how much effort to give each (and which to get rid of), how to balance your portfolio and how to alter your strategy when the market changes.
    * How to select and evolve your product, pricing, segmentation, channel and tactics; because what’s a great strategy one year can be a dud the next.
    * How to translate your strategy into a clear plan, and then into action; because you need to drive your killer strategy home with an execution to match.

How to Size the Funnel and Measure Progress

2-day module to learn how to dimension your funnel

    * How to determine how big the market needs to be for you to meet your revenue objectives. Armed with this new insight, you’ll decide whether to focus more narrowly, persevere with your current market or choose new markets to add.
    * What the most critical levers are for your funnel: volume, size and velocity, and what effect each of these has on your success.
    * How to build a model funnel with three different rates of effectiveness using starting measures drawn from other markets. You’ll then adjust this model using your own data (or assumptions) to understand the effect of each.
    * How, and where, to get reliable data to build your funnel model.
    * How to resolve the disconnects between what you want to achieve and what your model tells you is likely; in order to build a realistic picture of your future funnels.
    * How to measure actual progress so that you can know what you need to change, to keep on track, as you execute your funnel plans.

How to Plan Campaigns that Move Buyers

2-day module to learn how to design and plan campaigns

The market needs to be ready to hear your message. Your demand generation efforts will fail if the market isn’t ready. By the same token, if you spend all your efforts getting the market ready and fail to follow through with demand generation, then it’s all for nothing. How to Plan Campaigns that Move Buyers outlines how to condition the market; softening it up, and positioning a strong brand, and how to follow that up with rhythmic demand generation.

It details:

    * What branding means for business, and how to create yours so that it’s respected and well positioned.
    * How to generate strong and constant demand. Creating too many leads is as much a problem as having too few. Therefore, you’ll learn how to generate the ‘right’ amount, and how to do it without turning your Marketing department inside out.
    * How businesses buy; and why Marketing and Sales need to be aligned.
    * How to adjust your strategy based on your execution plans; because sticking to a great strategy that you can’t execute well never works.
    * How to recruit the best channel to sell and create influence; because you need help to reach and influence your market.
    * How to align all stakeholders: Marketing, Sales and Channels around your plan.

How to Select Tactics that Progress Buyers

2-day module to learn best practice on key B2B tactics

A great strategy means nothing if it isn’t executed well. So tactics matter; but they need to be deliberately aligned to the strategy, and executed with rhythm. Learn how to translate your strategy into a series of actionable tactics to execute and evolve.

It details:

    * How to select the best tactics for each stage of your buyer’s journey, and how to build and execute them with precision. Although you’ll be introduced to a whole range of tactics, emphasis will be upon those that are proven to be the most powerful in business markets. You need to select tactics that work, drop those that don’t and execute them properly (over and over).
    * Tactics, including list management, direct mail, electronic DM, whitepapers, surveys, events, webinars, search engine marketing (ads) and search engine optimisation.
    * How to achieve momentum, so that each contact with your buyer builds on the last, and how to do it without breaking your business (or the bank).
    * How to get the rest of the team on board. Your staff, bosses, peers from Marketing and colleagues from other departments; you need them all behind you.

Benefits for you as an individual

You will understand the essential differences between B2B and business-to-consumer (B2C) marketing. By identifying current best practice in the field of B2B marketing you will be able to contribute more effectively to the marketing process within your organisation. This workshop will give you a foundation of B2B marketing principles that can be applied in your workplace.

You will learn how to

    * Apply the basic concepts and principles of B2B marketing
    * Segment your customers and position your organisation in the marketplace
    * Understand your markets and customers
    * Manage customer relationship management
    * Build a value proposition
    * Understand product, service and channel management
    * Develop an integrated marketing mix
    * Identify current developments in B2B marketing
    * Understand the relationship between marketing and sales
    * Contribute more effectively to the marketing activities of your organisation

Course content

    * Understanding the business market
    * B2B vs B2C market
    * Marketing orientation
    * Knowing your market
    * Defining the value proposition
    * Market segmentation, targeting and positioning
    * Product and service marketing
    * Delivering value added solutions
    * Managing business relationships
    * Development of buyer seller relationships
    * Understanding the network of relationships
    * Customers relationship management
    * Marketing strategy and planning
    * Pricing
    * Marketing communications
    * Distribution

SYB07 - NOV 09 - VALUE PROPOSITIONING

Let me walk you quickly through the main points we made yesterday and the flow of the thought :
 

1. a plan is a must ! You will need at least a financial plan ( Profit and Loss statement and the Balance Sheet) for the first year.  Ideally for 3 years. You must do it year wise.  
2. Unless you have a plan you will not have an early signal of whether, and to what extent, and in which area, you are succeeding or failing. And, without a plan you cannot attract  investors and employees and vendors. From Gayatri's presentation we saw that most of the class was willing to invest when her ideas were converted into a financial plan than when they were presented as ideas by themselves. 
3. We saw actual survey data on what new businesses fail. This is an "inverse list" of why new businesses succeed. No plan, no milestones. No need, no differentiation, no customers. No money because it costed more and/or you sold less. No manpower, no organization, no competence.   We discussed why "not having an idea" is not listed as a reason for failure. Because, an idea needs to be converted into action and only then it can be implemented. 
4. We took a general format of a P&L account and wrote down the main headings as
   

o    Sales Revenue - Taxes - Channel Margins = Net Realization
o    Net realization - Material Costs - Processing Costs - Mfg Overheads = Manufacturing Margin
o    Manufacturing Margin - Sales Force Expenses - Sales Expenses - Sales Promotion Costs = Marketing Margin
o    Marketing Margin - HO Overheads - Depreciation - Interest Costs = PBT (Profit Before Tax)
5.    We discussed that your objective should be begin making a positive PBT from 12-18 month from set up. Otherwise all round demotivation will set in and you may find going difficult.
6.    We saw that probably the most important line in the financial plan is the "Sales Revenue" line and decided to devote the whole day to discussing how to work out the line. I liked your question "how to make a sales forecast when we do not know what to make and we have no experiece?". This actually was the purpose of the whole day's proceedings. There does exist a way to - not only work out a good sales forecast - but also to simultaneoulsy decide how much it will cost to make and sell it.
7.    The sales forecast depends on the following factors which need to be analyzed by you and factual research needs to be done by you
o    Macro level market definition and characteristics ( How attractive is the market ): size and growth rate of existing market, how many customers are in what readiness to buy, whether your product (means service also) forces them to make a change from what they are used to doing. By looking at two presentations we saw that defining the market needs to be done very carefully. When the market was defined as "Corporate Training", the figure came to Rs 650 Crores but then we realized that this aggregate figure actually consists of several smaller markets (example of a market being :  entry level induction training in companies who do not have their own trainers). The moment we come "closer" to the market, we start seeing it much better and then we can begin making better strategies to enter the market and begin making better sales forecasts.
o    Micro level market connect : ( How attractive is YOUR VALUE PROPOSITION) and it has four components
    The type of customer you have chosen to serve ( called as Target Audience). The mistake done most often in start-ups is to define the target market too broadly - dont say everyone needs my product - the real test is to say who wants it the most and the soonest? Create a business plan for such customers first - they are your "low hanging fruit" - pluck that first !! And only then go after other types of customers. 
    What are they doing now ( called as Existing Habit)  :  it is necessary to identify the Target Audience - in as vivid a detail as possible - because then it automatically tells you how to serve it better than what they are doing now. For this purpose you may like to segrgate your target audience into 3 groups (1)  they have a need but do nothing (2) they are using some other category of product to satisfy the same need (3) or using a competitor. For example, if you are selling woolen night wear, what the customers who feel cold at bedtime can be divided into the 3 groups as (1) do not use any special product for the cold they feel (2) people who pull a bedsheet or duvet (3) people who wear warm nightwear of a competing brand.
    What is the product / service you offer (called as Product / Service Description)
    How is it better than what they are doing now? ( called as Differentiation) Here you must pick up a specific group (normally the largest) from your "existing habits" answer and then decide why such customers should choose you rather than what they are doing now.
    Here let me give you a good example of a good value proposition developed by one of your colleagues :
    Target Audience : Similarly we also saw a very good way of defining the market at the macro level as providing well reserached medical content, on a per page charge basis, to SME in pharma business who cannot afford to have in-house specialists for this work.
    Existing Habit : Almost all such companies rely on different types of external doctors for different speciality products
    Offer : Doorstep service to SME customers from a medical content center staffed with specialists
    How is it different :  SMEs will save time because they are dealing with a single company which provides medical content for all types of medial speciality subjects. Instead of the SME company going to doctors, they will get service delivered at their desk. The doctors may not do such a good job because their focus is on practice but the company will do a better job because the staff will be Ph D and focused only on this work.
o    Macro level definition HOW COMPETITIVE IS THE INDUSTRY  (This tells you the prices / margin / sales pressure you will feel ) . This is the Porter's 5 Forces analysis as follows (1) How intense is the competition between various players in the industry - particularly those who are directly competing with you (2) How strong is the bargaining power of your vendors - are any of them likely to come into your business through forward integration. This may happen if you are a large customer for them and if the benefit to them is more than what it will costs them (3) How strong is the bargaining power of your customers - are any of them likely to come into your business through backward integration. This may happen if what they buy from you reflects a large part of what they spend and if they are likely to save a lot of money by doing themeselves what you are now doing for them (4) What is the probability of substitute products which will eat into your business (5) What is the probability of new entrants coming into the industry and eating into your business.
    to continue the examples used above we can conclude that (1) there is no other existing rival (2) but the vendors (employees themselves) are likely to get into the business once they know the customers (3) the customers are unlikely to get into the business till they reach a level of business where they can afford to employ a specialist only for content generation (4) there are no easily substitutable products (5) new entrants are unlikely.   
o    Micro level sustainability ( HOW SUSTAINABLE IS YOUR BUSINESS)  Based on the above analysis the steps that could be taken will be (1) bind employees through non-compete agreements and giving delayed bonuses, to frequently change people working on each client account, to monitor the workload for each client and reduce the rates once he reaches a level when he can afford to employ a specialist only for content generation. In general your business is more sustainable if your core competence ( that separates you from your competitors and imparts you with the power to hold your customers and pricing better than your competitors) 
o    Go To Market Strategy : Even if all the 4 above factors are present (1) large and attractive market (2) attractive and differentiated value proposition for your target customers (3) the industry is not very competitive (4) the business has built in competence that enables it to retain the customers and pricing better than competition; THERE STILL IS LEFT  the crucial task of "going to market".
    For standard products the following sequential steps are involved in "go-to-market" strategy (A) Locating target customers and qualifying them as worthy of further and more contact (PROSPECTING ) (B) Contacting and communicating with them (PRESENTING) (C) Overcoming objections, negotiating and getting an order (CLOSING) (D) Conducting the transaction, delivering and collecting (TRANSACTING) (E) Installing, Commissioning and Training (SUPPORT) (F) After sales service including maintenance, upgradation, repair, disposal, replacement etc (CUSTOMER RELATIONSHIP)
    For customized products the following sequential steps are involved in "go-to-market" strategy of 4 Ds (A) Discovery and exploration of customer business (B) Diagnosis based on the previous stage and concurrence of the customer (C) Design of the solution based on the diagnosis (D) Delivery or implementation of the design.  
8.    Going through the above process of not only ensures that your sales forecast has better chances of coming out close but it also ensures that you become ready to do business in a better fashion because the process forces you to consider important fundamentals as above.       
 
I request each one of you to write back to me individually and give me a feedback
 
1.    How useful did you find the day ?
2.    Which were the most useful concepts you learnt that you did not know before ?
3.    Which of these concepts did you find most useful for your project ?
4.    Did the day bring you closer to your project plan?
5.    What improvements could I have done ? 
 
 
- Show quoted text -
•  It helps you to identify the target customer
•    who needs it the most
•    who will buy soonest ( who has need, budget, authority )
•    who is willing to change his habit
•    who is willing to change his vendor
•  It helps you to check if it generates a compelling motivation for the target customers to switch to you
•    from your competitor
•    from what he is doing now
•  It helps you to make a financial plan because
•    it helps you forecast sales well by identifying
o    what kind of customers are likely to get attracted to you 
o    how many such customers are there in the first place 
o    what % will buy your product from these (depending on the strength of your value proposition)
•    it helps you forecast costs by clearly identifying activities you will need to conduct


# It helps you to identify the target customer

    * who needs it the most
    * who will buy soonest ( who has need, budget, authority )
    * who is willing to change his habit
    * who is willing to change his vendor

# It helps you to check if it generates a compelling motivation for the target customers to switch to you

    * from your competitor
    * from what he is doing now

# It helps you to make a financial plan because

    * it helps you forecast sales well by identifying
          o what kind of customers are likely to get attracted to you
          o how many such customers are there in the first place
          o what % will buy your product from these (depending on the strength of your value proposition)
    * it helps you forecast costs by clearly identifying activities you will need to conduct