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The Secret to Increased Sales
July 21, 2008
By Mitchell Gooze
The economy is starting to slow, and more companies are focusing attention to make sure their sales are all they can be. Unfortunately, however, most companies focus in the wrong place whenever it comes time to increase their business.
The reason is simple: there are more wrong places than right. And without an understanding of how to focus, the odds are you’re going to get it wrong. So how do you get it right? The answer is to understand the theory of constraints.
A Theory of Constraints
In 1984 Eliyahu Goldratt wrote a groundbreaking book called "The Goal." While the book has become a cult classic in the manufacturing sector of business, it has valuable lessons for sales. "The Goal" introduced thousands of people to the theory of constraints and how this simple (and counter-intuitive) idea can increase throughput.
In sales, throughput is simply selling and delivering more products and services to your customers. It's a simple idea, though not always remembered by those who attempt to manage sales efforts (either their own or a group's). How often have you seen a sales manager attempt to manage the sales process by measuring a single intermediate point—proposals delivered for example? Does this work to increase sales? And, when it does, is it a reliable management method? No.
Measuring Factors
Companies should measure enough intermediate points to determine the constraint to increased sales. For example, when sales are too low, the usual demand in virtually every company is for "more leads." If you just had more leads, you could sell more, right? Maybe, maybe not. It depends if leads are the constraint to throughput. Simplistically put, if the sales force is not able to follow-up on the leads they have, how will generating more leads help? Maybe the new leads will be "better." But then you don't need more leads, just better ones.
So, what is the constraint anyway? A constraint is defined as anything that limits a system from achieving higher performance. To increase throughput (sales) you need to follow a five-step process:
1. Identify all of the constraints in the sales system. All systems have at least one constraint and most have several. Sales is no exception. What are your constraints? Too few leads, too few qualified leads, too few qualified sales people to follow-up on the leads, too few people to create useful proposals to qualified buyers, etc.?
2. Exploit the system's constraints. Make sure you don't bother to increase output of things that are not constrained. If your constraint is "too few people to qualify leads," then increasing raw leads beyond the level you can qualify is a waste of system resources. Maximize the input to the constraints just to the limit of the constraint's ability to handle the input. Any more is a waste of resources.
3. Subordinate everything else to the decisions made in Step 2. This will maximize system efficiency. That is, the cost of selling will be minimized, but it doesn't yet increase sales. The reason is that we have not yet relieved any constraints, we have simply acknowledged that they exist and that trying to "force feed" more through the constrained system is a waste.
4. Elevate the constraints. What is the one step in the process that if you expanded its capacity would increase sales? Make sure you understand what that constraint is and then expand its capacity until it is no longer the constraint.
5. Sales will increase and … there is now another constraint. Go back to Step 1 and repeat the process.
This process sounds simple. It seems obvious, but it’s tough to force yourself to do it. We are too quick to want to jump on a solution without understanding if we are increasing throughput or activity. The purpose of your organization is not to increase activity but throughput. It's not rocket science.
Mitchell Gooze is president and founder of Customer Manufacturing Group. For the last 15 years the company has successfully helped hundreds of companies apply process management to marketing and sales to gain a competitive advantage. Customer Manufacturing Group redesigns marketing and sales processes to create a repeatable and manageable System to Manufacture Customers. Mitch has been a published author and invited guest speaker for more than 15 years on the topics of marketing, sales, customer service, innovation and strategy.
Sales & Marketing Management Magazine
This article is brought to you by Sales & Marketing Management, the leading authority for executives in the sales and marketing field.
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