The Drawbacks of Overloading Sales

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Overloading sales will hunt you

Overloading sales will hunt you

There is a danger inherent to sales teams and sales people everywhere: overloading. Overloading is evil, but its effects, despite usually short-term, do not seem to affect sales teams, who will soon oversell and overload the market with despicable effect.

Overload happens whenever you sell more than you originally forecasted. I know many forecasts are weak and prone to change according to the dynamics of the market. But in many other cases forecasts are easy to project and analyze. Accounts with a long standing history and little change in the trade channel are good candidates for very accurate forecasting. If you did your math right, and set good targets, you should hit those targets more often than not and come very close to the median of above and below the forecast target. But if you happen to surpass your target by large, let’s say anything above 10%, than you might be a victim of overloading.

I speak from experience. I have seen many times how my sales team surpassed its targets by 40% or more, only to miss them the next month (usually by the same amount, thus losing any advantage gained.) Sales managers should be very dubious of easy numbers. If you met your target and blew it out by the 20th of the month, you either had a weak forecast or most likely you are overloading the market.

Overloading has two principle problems. The first one is that since the channel can only absorb so much product, if you push too much of it you are only choking the channel and promoting a bottleneck. I know brands can gain market share thus expanding sales, but market share gains come a point at the time, sometimes even slower, thus the overload effect is usually not concomitant of market share gains. In simple words, what you sold extra this month is what your customer won’t sell this month, so he or she won’t buy next month.

The second negative effect is when overload hits retail. Too much product at the same time and sales will not grow proportionally. All of the sudden your customer will detect they have too much of your product on hand, but since sell-through will be pretty much the same, turnover of goods on hand will drop. When product moves slowly from the warehouse to the shelves retailers have to start discounting or promoting it in some way, both measures that consume resources, thus reducing their profits on your products. Retailers will not think about the overload effect (they know it, they just won’t think about that.) Retailers will think your product is moving slow and its profits are reducing, and adjust their buy long-term. This is hurtful, since your forecast will now be negatively affected.

Some will say that once the normal flow of product, or even reduced flow, starts to hit the market, retailers will have to refresh their inventories more often and will start buying more. This is truth, but it’s also truth that consumers will buy from your competitor if they cannot find your product more often than not. Lost sales to inventory adjustments from overloading usually don’t come back, again, negating any effects from the initial rush of sales abundance.

So next time your sales team is about to throw a party for that 74% above budget sales result, think twice. Companies do get lucky from time to time, but history tends to repeat itself, and most likely you are the next victim of the overload effect, something that will come back to haunt you soon.

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Good Bye Yahoo!

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After many resets of my blog, a lot of problems trying to update, several good posts lost, and a general sense of emptiness from the folks at Yahoo! who I really love, I decided to transfer the domain meilij.com elsewhere. The process seems a little too lengthy in these days of instant gratification, but I hope the next twelve months prove my articles to be interesting and easy to upload. I did not want to take this decision, but Yahoo! made me do it with tools which either took too long to upload or never loaded at all. I can’t wait forever to change my MySQL database…

 

More news coming soon.

Brute Force Sales

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I used to believe that any sales problem can usually be solved – if not best solved – by brute force sales strategies. Programmers call brute force algorithm a very general problem-solving technique that consists of systematically enumerating all possible candidates for the solution and checking whether each candidate satisfies the problem’s statement.

A brute-force algorithm to find the divisors of a natural number n would enumerate all integers from 1 to the square root of n, and check whether each of them divides n without remainder. A brute-force approach for the eight queens puzzle would examine all possible arrangements of 8 pieces on the 64-square chessboard, and, for each arrangement, check whether each (queen) piece can attack any other.

While a brute-force search is simple to implement, and will always find a solution if it exists, its cost is proportional to the number of candidate solutions – which in many practical problems tends to grow very quickly as the size of the problem increases. Therefore, brute-force search is typically used when the problem size is limited, or when there are problem-specific heuristics that can be used to reduce the set of candidate solutions to a manageable size. The method is also used when the simplicity of implementation is more important than speed.

In real life sales, brute force is usually used not when the simplicity of implementation matters more than speed or when the problem is constrained to few variables, but rather when urgency or lack of resources occur. Do you have too many boxes of product ACME in the warehouse? Brute force sales through discounting will do the trick. Did you run out of marketing budget for product X? Brute force sales with your oldest, best sales rep will do the trick? Is this market down in sales and you need a quick pick me up? Brute force sales with your sales manager and watch the numbers grow!

Or not…

I am beginning to see that brute force sales is – just as in programming – a limited tool for your sales strategy. It works in a limited set of occasions when short-term results will help alleviate short-term problems. But it will never help streamline structural problems of your overall sales or company strategy.

I have seen it many times. Companies believe they can push for ever higher sales targets pushing promotions, discounting, or just sending their best sales reps to lunch with accounts and execute sales through sheer courage. It works the first or second time, but managers begin to puzzle after the third time why the diminishing returns. The surprise is that managers keep insisting in brute force sales despite its ineffectiveness long-term.

Do not get me wrong, I know that sales people need to continuously push for sales. I do it all the time, and I use brute force sales now and then. The case is I know how and when to use it in an effective way. Brute sales force will not solve a major category or product problem. If your product became obsolete brute sales force will not help. No matter how hard you push, you will never be able to sell 3 ½ inch diskettes. No matter how hard you try, some brands lose their positioning and appeal and the target consumer moves on to another. Then it becomes a marketing problem, an innovation problem, an advertising problem, but not one that can be solved thru brute force. It’s not about attacking the symptoms, but rather truly overcoming the illness.

Brute Force Sales

 

On Java Rearview Mirror

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Java

The Java Mascot

I am rediscovering Java again, and my mind was transported to Fabricio, an excellent programmer I met and the person who opened my eyes to the language. Back then, I knew a little bit about programming. I knew BASIC, Pascal, and some COBOL. I had a very solid yet incomplete knowledge of Assembler, based on a reduced macro-instruction set. So you can safely say I was not a newcomer to programming, yet I lacked an important piece: object-oriented programming.

But back then – circa 1997 – Fabricio told me that Java was the greatest because it would do all kinds of things. First, it was its own environment. I thought he meant it was its own OS, but he said no, that the idea was complex, but the language could be written once and ran on all platforms. He told me Java was so complete, no other tools were needed, that it could sustain a programming environment on its own, making it ubiquitous to the extreme. In a nutshell, to my then young and naïve mind, it sounded like programming magic.

Very soon I started looking for Java tools and downloaded Sun’s primers and Java compiler. My first attempt if I remember well was creating a java applet that ran on the browser and opened a small window with a canvas where polygonal figures were drawn. I remember the example being extremely complex. I quickly forgot everything and left Java to its own devices.

A lot farther down the road I went back to college to learn Java right. That was my big introduction to all manners of OOP concepts, from static classes to encapsulation, heritage, composition, polymorphism, etc. My knowledge of the language was now strong, but I noticed the language itself had changed a lot to adapt to modern web needs and it looked a lot like C++.

Now enter the next wave of modern languages. I did not understand all concepts in Java, so while reading Bruce Eckel’s books I came upon Python. I tried Python to see if some of the more obscure examples of Java collections made sense to me. It was love at first sight. I was doing things in Python that were simpler to read and understand, while more complex in design, that I would not even envision in Java. My love for Java began to fade.

The next departure came to me while trying to make an active web page work. Java web applications with their plethora of XML files, classes, servlets, and such were making me suffer while getting nothing done. Then I discovered a Ruby On Rails tutorial and found myself even more alienated from Java. I was doing things in hours that took me days in Java.

One concept needs to be clear: I am not a programmer by trade. I use programming to solve business problems from time to time when Excel and other tools find lacking. I never needed any of these abilities as a must, rather as a compliment to my other core competencies.

A week ago I found Fabricio. I think he doesn’t remember me. Before I call him to my office to talk, I began to think how much I had grown programming wise, how much had Java grown, and how much had other languages grown.

Java became the COBOL of old companies and legacy systems. Why? I am not sure, but I bet it had to do with several factors. One is the cool wave of Ruby programmers. Twitter made Rails cool, and 37signals made of Rails a success story. Another is the wave of intellectual programmers doing Scala and Smalltalk and other even Clojure. Can’t say much about them, other than the fact they don’t use Java. There is a third body of people, running what I call conservative systems in Python and Perl. Perl hasn’t moved a lot, but I never see a Linux distro that doesn’t depend a lot on Perl. When it comes to run-of-the-mill web applications, PHP is king where I live. I cannot think of an uglier language, but people who love PHP swear and live by PHP.

And of couse, .NET did not die. Banks and corporations tied to Microsoft use .NET depend on .NET technology for all their applications.

Java does many things right, but it is a big beast to tame. For console programming and solving general problems, Java is not better than C++ or C#. I have already mentioned web programming. Javascript seems to have taken over the client-side script mission Java was intended for. On the server side, PHP, Perl, Python and Ruby look to be faster, simpler solutions with 99.9% of the robustness of strict typed languages. On the desktop, Java Swing is good, but so is wxPython, Gtk and QT classes for C, and don’t even get me started on the eye candy of Objective C.

Java owns to Android not disappearing from the mobile app environment. I honestly thought the mobile world had Objective C to look-up to from now on.

Today, Oracle owns Java and I think to them it’s just a good language on which to found their database engine empire. The COBOL of 2010 if you will. But Java did one thing that I think we usually take for granted. In a moment where .NET could have been the only option left in a world where mainframes began to disappear, Java challenged Microsoft on the web battleground. Despite not becoming the de-facto web language, it opened the doors for a whole plethora of other languages – OOP or not – to thrive.

The Commercial Mind

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My official title in the company is Commercial Director. No one seems to understand exactly what that means. When I worked at marketing everyone knew what I did: advertising, promotions, etc. Before that I would work on retail and everyone knew what I did: fixtures, store design, etc. But when my company decided to revamp our sales team and I became the commercial director everyone got confused… Most of the time they call me the sales manager since I manage sales functions.

It’s more than that.

The commercial mind is aware of other competences in the company and uses the sinergies of all to empower the company and brand. Whenever we undertake a project (door expansion, product launch, or new business unit) I make sure to include participants from the product, marketing, retail, logistics and others as needed. Sometimes that means I have to balance resources and needs in lieu of the sales department. But that is exactly what the commercial mind does: it looks beyond short term sales and into long term company needs sharing execution with other teams.

Not every process needs input from every department. Most day-to-day operations is very basic and sales focused. But any project of tactical and strategic value deserves a multi-functional approach, best addressed when the commercial mind drives it. The commercial mind has but one agenda, the common good of the organization. When the commercial mind drives a project, it does so with the best interest of everyone in mind.

Sweet Tamarindo

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Sweet Tamarindo - A great place to eat

If you are ever in Panama and in the road happen to pass Penonome City, please stop by Sweet Tamarindo, one of the nicest restaurants in Panama.

The location is a little hard to get to. We found it by mistake once with my brother and our respective wives while looking for a place for coffee. My brother joked we wouldn’t a decent place. Then out of the blue we found this distinctive old house redecorated fusion style.

The food is based around fish and seafood with Panama taste and modernized versions. The desserts are awesome, and if instead of lunch you want to do coffee, its outside patio is the place to be in the afternoons.

A great place to dine!

The Discomfort Zone

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I heard a lot of things and read some about the importance of getting out of your comfort zone. The comfort zone is that area of work competencies and tasks where the person performs at acceptable or even superb levels. A person will sometimes remain in their comfort zone to avoid the problems involving change and trying something new. This applies even in situations where the person might not be doing so well and change would be preferable. Coaches often recommend getting out of one’s comfort zone to learn new skills and develop new competencies.

Somewhat motivated by this notion I took a Sales position which came with a sort of promotion. I rationalized that coming from Strategic Planning (and before that Marketing), the change would help me build valuable skills such as customer management, team management, character building and such.

Many months into the position I began to develop such skills. I had to take difficult decisions, say no many times, establish strategy and order, and work more hours than I had previously done. The goals set by my regional superior where being met. I was working the schedule set and developing some important new set of abilities for professional growth.

Some time later I began to detect a dangerous pattern. Despite performing my job and dedicating ample time, my mood and attitude towards people was quickly changing. I would lose patience with people, I found it hard to treat customers well, and I started to miss my previous positions a lot. Soon I was hating my job and all it implied.

This is going on today, and it is the reason why I put a date on which I will quit. Some might think I should quit now, as working with no passion is perhaps the worst thing an executive can do. But management has requested my presence at least for the end of the fiscal year.

Yet what I want to focus on is the existence of something opposite to the comfort zone which is perverse in nature: the discomfort zone.

The discomfort zone is dangerous because it puts a manager in the worst spot possible: one where he or she dreads to be. This is not to mean the person is doing a bad job. The manager could be doing a stellar job yet hating every moment of it.

The discomfort zone affects a manager in several ways, but four of them are specially poignant to a career.

The first effect is diminished performance. No matter how good a manager is, the loss of passion and care will catch-up and performance will drop. If the effect is not immediate, it will boil down inside the person until it explodes in disaster. An executive who loses performance is risking it all, for a proven track record is vital for future promotion.

The second effect is forthcoming from the previous. The loss of performance will lead upper management to consider the removal or reassignment of said manager. Reassignment can be benevolous, but it is usually not, and just as nefarious in effect as being fired. The danger of remaining in one’s discomfort zone could jeopardize the very position one works – and hates.

The third effect – and to me the more dangerous – is lost time. A passionate manager doing a job he loves will go to extremes to deliver. This includes results, team building, innovation and creative jumps. If you are spending time doing something you hate you are also losing invaluable time where you could be reinventing the future somewhere else. To me losing time is the biggest loss of all.

The fourth effect is the personal change that affects attitude. In me it involved a sudden shift in mood towards colleagues and family alike. I began to avoid people and act violent in meetings and projects. Other times I would fall into long periods of silence unlike me that took everyone by surprise.

The discomfort zone is an area that instead of taking you into new fields and developing your skills takes you into negative territory and draws your creativity and passion. It should be avoided at all costs, as it brings the worst of you and adds little to developing your career.