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.

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

 

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.

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.

ATLAPA blues

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This week my company hosted a big trade show at ATLAPA, Panama’s state ran convention center. The convention center is managed by the Tourism Authority which is as close to a ministry as it gets. They have been heavily advertising ATLAPA as a premium convention location, to the extent of giving away free tickets to speakers, free hotel nights, etc.

The bad thing is the poor and sorry state of the installations. The walls are missing plaster, the floor is dirty beyind repair. Every time we looked up to the ceiling we saw big chunks of insulation foam peeling off AC ducts, and lose wires from unknown sources overhanging. The bathrooms are clean but way outdated, and the carpet has seen better days, with far to many coffee stains.

I reckognize it is a better location than many in Central America. Panama is building a new convention center, part of the reason that maybe no one is investing in maintainance. Yet there is something very dangerous about advertising ATLAPA as a premium location to unsuspecting speakers who might be annoyed when reviewing the premises for the first time. The feeling of over exagerating the reality of the infrastructure is palpable. Many might decide to take their business elsewhere and some might even write about it in their blogs.

There is no second chance for a first impression. ATLAPA’s first impression on me was one of doubt and not of praise.

Where is the Director?

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Boxes of shoes...

Boxes of shoes...

Today the sales team was packing shoes and apparel for the big upcoming trade show in Panama. I noticed they needed a hand and I started assisting in what I could. Working in marketing and strategic planning, I felt the team needed the assistance, not so much for the real manual help (I was more of a liability than an asset when it comes to packing shoes…) Rather, I thought they needed the presence of a Director, since the Sales Director was anywhere to be found. And not a Director to give orders, but one to humbly be quiet and help pack. It sends a strong message to the masses: that management cares and that sometimes sharing the work helps everyone integrate and feel better.

And I admit, I hate packing and there was probably an equally – but not better – use of my time. This is a disciplined, self-directed team. Yet, why do some managers/directors/whatever lose sight of their team like this? Being proud about managing a discipline, self-directed team is something to be reckoned with. Being a creep who dismisses people and petty task and loses sight of the team is not.

I don’t get Facebook (or FaceBook)…

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I am sorry. I don’t get Facebook.

And I did my research. I signed up for an account. I was poked by some friends and poked back. Some people found me and added me as a friend (but I am not sure I wanted to be found…)

I saw some profile pages. Yes, nice. It looks like a lot of blog and websites. Nothing special. Okay, so I can see you, and your friend, and in one case the sister leaves a message for the other sister so they can meet sometime next week. How convenient.

My question is… is this really worth 15 billion dollars?

And maybe it is. I mean, they have a lot of information on a lot of people. And I find hard to believe that people are afraid to post their lives on the Internet (or worried about their privacy) if they so willingly post just about anything on Facebook.

To me the business model always comes back to a basic premise: get a lot of people together in one place, and then sell the advertising. And for what I read, most developers of Facebook applications rely on ad revenue to make a living.

Now, I have seen this many times. It was called back then ICQ, Geocities, MSN, Blogger, MySpace, Xanga, etc. I also remember Lycos, Altavista, and AskJeeves when the search engine boom was high.

And not so long ago it was all about Google. Now it’s Facebook. And hey, this is a free capitalist world. So you made a nice (if rather plain) application that everyone and their mothers love and use, so you can set the price very high. Basic economic axiom: demand and offer, offer and demand.

Now, I am not a visionary. But I am almost sure the bubble will blow some day. If Facebook does the right thing, they will collect cash now, save it in a bank, and haul for the rest of their lives (which I think is why Jerry Yang from Yahoo never worries too much for Google, he has enough money already to last this live and several other reincarnations…) I also foresee some group of developers saying, hey, this is cool. But I bet I can do it much better/nicer/cooler/exciting/cheaper (take your pick and feel free to combine.)

I keep a WordPress blog and a website of my own. And that is already hard enough. I don’t usually have time to update either, and when I do I become a slave of my own device. I think many people will start moving away from Facebook the moment they realize they don’t have time to maintain their new toy and this one. The same way it happened to Geocities a while ago, and the same way it is happening to Xanga (see graph below from Alexa)

Xanga vs Facebook

Now what is interesting is not my point of view but rather what will happen in, say 201o… Only time will tell. But history is full of similar examples, and history tends to repeat itself in a very discouraging way.