Some of the companies with the most efficient operations are also the ones who have the hardest time growing. It’s a counterintuitive idea, but it’s one that has been supported by research and that serves as the basis for this week’s episode of In Process. Joining us on the show this week are Art Saxby and Beth Vanstory. Saxby is the founder of Chief Outsiders, an Executive-as-a-Service firm that allows growing companies to add market-focused senior executives to their leadership teams. Saxby learned his trade in marketing in brand and project management at Frito-Lay, Kellogg’s, Coca-Cola and Compaq/HP, before engaging as an executive turn-around specialist for companies including Imperial Sugar and Hines Horticulture. Vanstory is a strategy and marketing consultant with Chief Outsiders. An experienced general management and marketing executive, her background crosses consumer and B2B sectors and includes experience in media, retailing, entertainment, and ecommerce. She launched and led OfficeDepot.com to profitability in one year and also led the new media group at The Weather Channel, bringing weather.com to one of the most visited sites on the web and initiating interactive advertising for the company.
Both Zaxby and Vanstory came to marketing after building a background in finance—something Saxby laughs off as more of a natural transition than it may seem at first blush. “It’s a profit game,” says Saxby, noting that many business owners don’t see the way that marketing directly relates to the bottom line. “The real role of marketing is to help lead the company forward and figure out where it can profitably attack the market.”
So why do so many finance-minded business leaders have problems translating those instincts into growth? “If we break down what it takes to run a company and what it takes to grow a company, they really are very different skills. Running a company is about metrics, management, process and procedures—it’s what a lot of business owners spend most of our time focused on. ‘We’ve got to figure out how to get the orders into the system, how to get them out, how to produce the product or deliver the service, get the invoices paid and do it better and better, time and time again, and more efficiently each time. Running a business is extremely important. But that is also really internally focused—it’s inside the four walls.”
What Saxby has found, is that running a very efficient company doesn’t necessarily mean those successful business owners know where to go next. What’s the next market to go into? How do you significantly increase the revenue of the company? Saxby says this is when you have to look outside the company at the marketplace and at the market perspective.
“When you’re looking at someone who comes from that technical background or has a particular subject matter expertise, they tend to focus where they’re comfortable—serving current customers or even working in product development,” says Vanstory. This is where even the most successful entrepreneurs can face obstacles in company growth.
“Developing a new product without assuring that there’s a need in the marketplace can get you in a lot of trouble,” she says. Another common mistake she sees in companies is that even businesses with solid marketing staff still lack a strategic marketer on their team. “They don’t have the broad view needed to really identify and evaluate the market or create an effective marketing strategy.”
Get the full conversation on growth tactics and avoiding “random acts of marketing” by streaming the episode in the player below. You can also subscribe on iTunes to receive new episodes of In Process directly on your smartphone.
Are You Still Guilty of Committing Random Acts of Marketing?
Art Saxby and Beth Vanstory, Executives of Chief Outsiders
Chief Outsiders is an executive-as-a-service firm that allows growing companies to add market-focused senior executives to their team.
Evelyn : So, today we’re going to talk about successful companies worrying about growth and the future, John, which I think is a really interesting platform for us. We certainly see it pretty regularly that established businesses are constantly needing to change direction and focus, and often find themselves in the untenable position of kind of hitting a wall, not really thinking about the future sufficiently.
John : Right, I think that’s probably one of the hardest things to do as you’re growing a company, is actually worrying about the future at the same time. There’s so many elements that are going on that it makes it very difficult to do both effectively.
Evelyn : Exactly. So, I think our listeners are really going to be interested in kind of the elements of marketing and how that can actually change, particularly very operationally focused businesses.
John : Yeah, and I think the guest that we have on today, Art Saxby and Beth VanStory of Chief Outsiders are interesting, because we’ve had interim chief financial officers on, but Chief Outsiders is actually an interim chief marketing officer agency, which is different.
Evelyn : Completely different focus.
John : Yeah. And it’s not something that I hear of as much, but is just as much needed.
Evelyn : I agree. I agree, maybe even more so.
John : Exactly. Well, let me introduce our guests. We have Art Saxby. Art Saxby runs the country’s largest strategic growth implementation company, focused on mid-size businesses. His firm, Chief Outsiders, at www dot chiefoutsiders dot com, is an executive as a service firm providing outsourced Chief Marketing Officers, including fractional, interim, special project, and coaching. Chief Outsiders allows growing companies to add market focused Senior Executives to their leadership teams when the cost or complexity of full-time executive hires does not make sense. All 50+ CMOs have held positions of VP of Marketing at one or more operating companies.
Saxby started his career in corporate finance with a B.S. and MBA in Finance and various financial analysis and planning roles at ATV, Aerospace and Defense, and Frito-Lay. He learned his trade in marketing in brand and project management at Frito-Lay, Kellogg’s, Coca-Cola, and Compaq HP, before engaging as an executive turnaround specialist for companies including Imperial Sugar and Hines Horticulture. He’s also the co-author of The Growth Gears with Pete Hayes.
Beth VanStory, who also works at Chief Outsiders, is a Strategy and Marketing Consultant. An experienced General Management and Marketing Executive, her background crosses consumer and B-to-B sectors and includes experience in media, retailing, entertainment and e-commerce. Previously, Beth served as CEO and CMO of Auto Squad. Earlier, she launched and led Office Depot dot com to profitability in one year. She also led the new media group at the Weather Channel, bringing weather dot com to one of the most visited sites on the web and initiating interactive advertising for the company. Earlier, she held several marketing positions at Bell Atlantic and MCI. Beth is a former Board Member of Michael’s Stores and Shop dot org. She holds an MBA from Northwestern University and an undergraduate degree in Finance and [inaudible 00:04:06] from the University of Virginia.
Evelyn : Beth and Art, welcome to the show.
John : Welcome.
Beth VanStory: Thank you.
Art Saxby: Thank you for having us.
Evelyn : So, I think before we actually start kind of talking a little bit more about Chief Outsiders and its work, I think it’s interesting that both of you actually come from finance and ended up working in marketing. Can-
Art Saxby: It’s a profit game.
Evelyn : Well, it is, I don’t think that people generally think of it that way, and it seems—and well, I don’t know, you tell me—it seems a little unusual to me that to come from finance and end up kind of in that marketing career, because you think of those personalities as being very different people. So, how did that happen for each of you? What were the things that drove you to do something like that?
Art Saxby: Well, it really comes down to what is the purpose of marketing in an organization, and at the appropriate level. Organizations often do need someone who can handle updating the website, and being creative, and doing brochures, but the real role of marketing is to help lead the company forward, figure out where it can profitably attack the market. What I found in finance is it was great. I was an advisor to the king. I was saying, “Yes, we should invest in this new product. No, the economics aren’t right, we’re going to have to fix it. Yes, we should do this marketing program,” but marketing was the white knight leading the charge. I was the advisor. Marketing was the one that says, “I see an opportunity in the marketplace. Do you see what’s happening in this market segment? If we develop a product and we price it this way, and we do, do, do, here’s a great way to make money.” And that was the fun stuff. That’s the exciting stuff.
When we look at most of the Chief Marketing Officers on the team, we’ve got over 50 Chief Marketing Officers, most of them come from engineering, or finance, or some other real business part of the business, not just the creative cool stuff, but the real business leadership, but it’s all focuses on where do you take the company?
Evelyn : So interesting.
Art Saxby: Beth, how about you? You ended up in a different area of marketing than I did, but you also came out of finance.
Beth VanStory: I did, and actually, business school was what really helped my transition there, and I went to Kellogg, which is a very marketing-focused school with terrific, terrific professors, and I enjoyed those marketing classes so much, that I decided to go into marketing. But, I’ll also say that I found that finance was a great background to have, because coming out of business school and working for MCI as a project manager, one of the things you have to do, if you want to do a promotion, or make a pricing change, is you have to build a business case and get it approved by finance. So, having an understanding is really helpful, and as a consultant, I’ve found it very useful as well, in helping customers understand, my clients understand their business better, and be able to analyze opportunities. So, it’s really come in handy. But, I made the transition, initially I liked people better than just numbers, and I love the psychology that is behind marketing, and understanding why people buy something versus just trying to sell something to them, but why is it that they buy. But, at the end of the day, if it isn’t going to have an ROI, it doesn’t make sense to do, so finance has been tremendous for that.
Art Saxby: If a company has a budget just to do cool, fun stuff, sure, give a call. We’ll spend it. But that’s not what marketing is. There’s a million people that can do cool and fun stuff. Marketing needs to be leading a company forward it’s bringing a market-based perspective, what’s happening in the marketplace into the management team to figure out where do you go next. That’s the exciting stuff, and that’s why having a technical business background is so helpful.
John : I think that’s even more important for a certain type and segment of client, which I believe that you deal with. Can you tell us a little bit about Chief Outsiders and its primary business focus, and about the profile of your client company?
Art Saxby: Sure. Our client profile is a mid-size company. This of a company with revenue, say 10 million to 300 million dollars. And it’s usually a CEO and owner, often the founder-owner, who has a vision for growth. They’ve got a really good company. They’re at 5, 10 million dollars. They’re at 50, they’re at 100. But that CEO has a vision to take it further, not just, “We want to grow a little more, and some more than we did last year,” but, “Boy, I see big opportunity, something significant. Move into a new market segment, really change the way we go to market. Get this new product launched.”
But that CEO owner’s frustrated. They don’t want someone selling them an ad campaign, or a strategy deck. There’s plenty of people to tell them what they ought to do, or spend their money. What they need is someone on their management team to help them actually do it, someone that’s been there, done that, done it before, but most of these companies, it doesn’t make sense for them to hire a full-time executive level VP of Marketing. They don’t need that skillset forever, and they couldn’t really attract that person. But with a part-time or fractional Chief Marketing Officer, we can bring in absolutely the right person, who’s done it before, as part of the management team, make it happen, come in, be responsible for getting it done, and then leave. Because if they’re not there fighting the day-to-day fire drills, they’re just focused on this key strategic initiative, one to two days a week, over six to 12 months, that company can afford someone like Beth, and really, really impact the company.
Evelyn : So then, Art and Beth, how do you actually find your clients, or do they find you? Is this … Do you kind of have relationships with strategic planning experts? Is that how you actually get into the company, or what’s the source?
Art Saxby: It’s really a broad combination. Vistage is an organization that we’re very involved in. Vistage is a CEO round-table where owners of companies say, “I admit, I don’t know everything. I can learn from other people,” work with a Vistage Chair in a Board setting, work with other business advisors to say, “Help me figure out where to take the company,” but then they need someone to actually get it done. Now, we also work with private equity, where private equity will buy a company, and say, “All right, there’s a great vision, now let’s get it done.” And then, quite frankly, we’re also pretty good at marketing, so we do produce an awful lot of materials as far as blogs and case studies where people are up late at night, stressed about growing, reading articles, and reach out. But most of it is a referral base from a coach, executive leader, another CEO, someone who understands the challenges of making these visions come true.
Evelyn : And so, is there typically a challenge for you in convincing a company that an interim CMO is really what’s going to help them? Or are do you find that clients typically engage pretty quickly? And I guess I asked that question because if I think about an operating, kind of an operationally-focused company versus marketing-focused one, it seems like the personalities would be different.
Art Saxby: It definitely is a challenge, and part of the challenge is a lot of people don’t really understand the difference between sales and marketing. They’ll see that sales isn’t as effective as they want. This item’s not selling. They’re trying to figure out where to go. Sales is a very near term focus activity, where marketing is looking out at the marketplace, focus on where do we take this company, how do we make it happen. So, part of the challenge is helping someone understand that the thing you think of as a sales problem, is actually a marketing problem. Your salespeople aren’t effective. They’re not getting this done because they don’t have the right insights into the market because we haven’t taken and modified your product, your service, your price, your channel to market. You haven’t figured out how to get your message in front of the customers and bring those customers to the sales organization. And you’re right, there’re many companies who are operationally really, really strong. They know how to run a company, but running a company and growing a company are actually two very different things, with different skillsets. One’s focused inside the four walls: process, procedures, metrics, management, where marketing is focused outside the four walls: what does a customer need, what’s happening with the competitive landscape, what new thing is entering the market or likely to affect things.
Evelyn : Interesting. So, we’re going to take a quick break, and then when we come back, we’re going to talk a little bit more about how best run companies have the hardest time growing. We’ll be right back.
John : Welcome back to In Process. We are here with Art Saxby and Beth VanStory of Chief Outsiders. Art and Beth, when we left off we were talking about what companies can do to grow. I know one of the things that you’ve touched on is that even some of the best run companies often have the hardest time growing. Why is that? What are some of the pitfalls that they face?
Announcer: You know, it is a really surprising insight. It’s something that we found out working with the University of Texas—we did a research study with three market research professors—but also working on the management team of over 400 companies now, that sometimes those best run companies do have the hardest time growing, and it’s because if we break down what’s it take to run a company, and what’s it take to grow a company, they really are very different skills. Running a company is about metrics, management, process, procedures. It’s what a lot of us business owners spend most of our time focused on. We’ve got to figure out how to get the orders into the system, how to get them out, how to produce the product, or deliver the service, get the invoices paid, and do it better and better and better, time and time again, more efficient each time. Running a company is extremely important, but that is also really internally focused. It’s inside the four walls. And what we’ve often found is that we’ll have companies like an engineer founded the company and there’s three engineers on the management team, and they run a really, really good company. But, when it comes to growth, where do they go next? What’s the next market segment to move into? How do they significantly increase the top line revenue of the company? The skills of process, procedure, metrics and management can’t help them. Whereas growing a company really is different.
Growing a company is looking outside the company at the marketplace, from the marketplace perspective, back in. From the customers perspective, how does your product or service fit into them? What’s happening with the marketplace? What’s happening with competitors? It’s a different skillset from a different focus that often operationally-focused companies struggle with.
Evelyn : So, Beth, in your experience, what are the obstacles that you’ve seen in taking a well-run company and turning it into a growing one?
Beth VanStory: Again, I’ll expand on some of the things that Art said. When you’re looking at someone that maybe comes from that technical background, or has a certain subject matter expertise, they tend to focus where they’re comfortable, which may be serving current customers and it may be in product development. I was on a peer review the other day with a couple other Chief Outsiders, and this was one of the problems that one of the companies was having, is they were very, very focused on product development, but developing new products without assuring that there’s a need in the marketplace can get you in a lot of trouble, and you can invest a lot of money in that. So, what we tend to focus on is helping people look outside of their current world and what other customers could they be acquiring? Are there other markets that they could go into, so that’s one piece. and in other cases, the company just doesn’t have a strategic marketer on their team. They may have some executional people or agencies who run campaigns, or create collateral, but they don’t have the broad view needed to really identify an evaluate, assess the market and create effective marketing strategies to target the best prospects because you can, again, spend a lot of money on things, talking to the wrong people. And as interim and fractional CMOs, our group works side-by-side with the CEO to help them look at that market more closely to turn their vision and their desire for growth into something that they can execute on.
And finally, some of it becomes just a culture and personality challenge, which is there are a lot of people that are resistant to change. So, we can go in there and because of the nature of how we work, we’re not just doing a project or handing someone a plan and saying, “Go implement it,” we stay throughout the project and beyond the project level, for several months, it could be a year. Some of our CMOs have been with people for well over a year, but we help them manage that change within their organization, so that’s another big piece that we see that can be an obstacle.
Evelyn : I find it really, so we deal with a number of engineering-based technology businesses, and they can be very, very successful, and yet engineers can be really hard core about what their opinions are on products, and product development, and what their market is doing. I’m fascinated by this, what is it that happens inside of one of those companies that actually pushes them to a position where it provides with an opportunity to assist? Because, I think that, to me, that there has to be some sort of transition or some failure or something that perhaps has to happen. Is that true?
Art Saxby: Yes, it’s usually a level of frustration. Like you said, these operationally-focused companies, these engineering run companies are really, really good. They run really, really good companies. But we’ve seen examples of a company that said, “We’re really good selling into this one market segment, and there’s this other one that looks just like it. We’re really good selling into accounting firms. We’ve got this great software to help accounting firms, and accounting firms are partnerships with professional people and different levels. Law firms are just like that, but for some reason, we can’t get any traction whatsoever into the law firm.” And it was because they were taking the thing they did, the software they did, and trying to push it at this other organization.
Well, accountants make decisions very differently than lawyers. The customer was really different. Now, a lot of the things in their software could have been applied, but they were just trying to take what worked for an accountant and tell an attorney or a law firm that this is what they should do, versus taking a market-based approach and saying, “Okay, let’s understand the needs of the accounting company, and what were the real needs that we solved? How did we help that company? Now, let’s understand the needs of law firms. They may be similar, but they may be different. They may think about things differently, the length of time they spend with a customer is differently, how they acquire customers, how they … “Their issues are going to be different, even though those two are really, really similar. And then you can take and understand, “Okay, if this is what the new target cares about, here’s how we modify the pricing. Here’s how we modify the bundle and the features, and modify how we talk about it, and modify how we go and approach and get in front of those customers.” That’s the difference between saying, “I’ve got this tool and everyone should buy the tool,” and saying, “I see an opportunity. Let’s modify the tool,” and then get it in front of the customer the way the customer wants to buy.
Evelyn : Force it into the market, basically, as opposed to being strategic about it. So, I think that’s a great segue of you talk about the three growth gears of insight strategy and execution in your book. Talk to us a little bit, I think your description there is actually a great lead in for, talk to us a little bit about what your research and your work has actually identified in those areas.
Art Saxby: Well, as we said, operationally-focused companies run really, really good businesses, but they struggle with growth. What we found out is the challenge isn’t trying to take them and shake them up and make them wacky and cool. You don’t have to put a ping-pong table in the break room to be a growth company. What operationally-focused companies need to do is take the things that made them great: process, procedure, linear thinking, logical, financial acumen, and apply that to growth, because growth shouldn’t be the cool, creative, “Hey, I’ve got an idea.” It shouldn’t be, “Hey, those guys are doing this, why don’t we do that?” It really does need to start out with understanding the marketplace.
Let’s start by understanding the customer and the competitor, and your own company from an external perspective, including things like customer profitability and things that drive your profitability. Let’s look at the economics and which market segments are likely to be growing or declining, based on external things. From that understanding, that first gear, that leads to the strategy gear, which says, “Okay, we’re going to go after these types of customers, but to do it, we need to change the product, or the service. We may need to change how it’s priced and bundled. How do we get it to market? What are we position ourselves, how do we talk about ourselves?” That second gear strategy actually drives an even bigger gear called operations, which may change the way you operate your company. If this new market segment, you’ve got to be next-day delivery, then you’re going to have to be changing some of your operations. But then, that strategy gear then also drives the third gear of execution, which is what a lot of people think of as marketing. That’s going to be things like how do you do the lead generation, the demand generation, your websites, your outreach. Often, companies will say, “My marketing’s not working. The trade shows aren’t working the way they used to. My salespeople have gotten lazy and they’re not bringing in new business.” The problem’s not in that third gear of the things you’re doing. You might be doing all the right things, but you’re not doing them against a solid strategy that’s based on the customer market insights.
John : Welcome back to In Process. We are here with Art Saxby and Beth VanStory with Chief Outsiders. When we left off, Art, you were talking about the gears, the growth gears, inside strategy and execution. I was wondering, Beth, do you have any experiences, especially with the insights, the customer insights, how that can be valuable? Do you have any customer, or client experiences with that?
Beth VanStory: I do. You know, I was working with a client in a subscription business, and they hired me originally just … They wanted to execute some things. They had already decided what they were going to do and they wanted to just execute some marketing programs, and I asked them, “Well, what do you really know about your club members who subscribe to you?” “Well, we know that some people buy it for themselves, and some people get it as a gift.” And that was all they knew.
So, I recommended that we do a customer survey to understand better why customers subscribe to this service, and why, what was it they liked best about it. We also wanted to test out some concepts for them. And what we found, is that not only did we discover why people bought, and this was in the wine area, and people bought because of the access to a wine expert, someone who is choosing wine for them that they could put trust in. And having that information, along with questions about how did they find out about wine, how do they buy, who do they look to learn about wine.
We got so much information that we ended up walking away from the things they were originally going to do in terms of execution, and really focusing on those main benefits that people saw in being a member of the club, and it also gave us insight into where to find these people. What were other interests of theirs? So focusing on more behavioral things, rather than just demographics of particular customers. And it completely changed how we went about acquiring customers, and we ended up raising by about 20% the numbers of subscribers in a very short period of time.
Evelyn : Wow.
John : Yeah, that’s really interesting because that’s one insight that seems to have led to many more valuable insights. For a lot of companies, I feel like that’s probably true, where they have about one insight as to why people are their clients, or their customers, but it’s not very nuanced. So, I imagine that figuring, solving that problem is quite valuable.
Evelyn : So, you also talk about understanding your competition, and when you’re looking for insight into competitors, what are the challenges there?
Art Saxby: One of the biggest challenges in collecting information is the fact that the companies often rely on their sales force. They say, “Well, my sales force is out in the market every day. My sales force is competing. Sales force is talking to customers.” Unfortunately, the sales force is really a difficult or poor way to gather information, because every time they’re having a customer conversation, the customer knows there’s an order book in the back pocket, so they’re not as open. Every time they’re talking with a competitor, or at a market industry event, they know there’s this bias. The customer’s not going to open up and tell them what’s really needed, if they think it’s going to affect the price, or they think they’re going to affect the order book.
Surprisingly, customers or competitors will tell you just about everything you need to know on their websites. They’ll often really broadcast what they’re trying to do especially if they’re a more advanced competitor. The challenge then is figuring out what to do differently. I was in an industry where we were selling a commodity product, and this was a high volume commodity product sold into very large customers. Everyone just said, “Look, this is an old industry, it’s a commodity product, we have very, very sophisticated customers, price is the only thing that matters.” And the sales force kept telling us price is the only thing that matters. If we lost a deal, it was the price of the competitors.
When we really dug into what the customer cared about, absolutely, price was important, but this customer was really worried that if they didn’t have this high volume commodity, their production lines would shut down. The customer was worried that it took so much time to order and be sure that they had the right product, that that was their biggest concern. So yeah, price was important, but while everyone else kept focused on the product, we determined that the best way to compete was to become the best supply chain in that industry, to do something none of our competitors thought to do, to put in an extra-net system, to allow the customer to order or status their orders online and see where their products, their trucks and delivery was on the road, and when they’d get to their factory.
So, as a B-to-B environment, but by becoming the easiest to work with, by becoming the best supply chain in the industry, none of our competitors even knew what we were doing. They would just say, “Hey, we make this stuff, and our stuff is really good. And we make really good stuff.” We were telling the customer, “We’ll help you run your business better. We’ll be more efficient. We’ll be the easiest for you to deal with,” and that’s what drove the business. Our competitors never even understood the strategy we led with.
Evelyn : That’s so interesting. I think that it just comes back to the whole idea of you have to have a 360 view, essentially, of what’s going on in your business in order to really move it forward a lot of times. So, we did a podcast last year on Blue Ocean Strategy, which you know, very much is kind of oriented toward ignored the competition, just focus in your own way. Your description of this makes much better sense to me. Be aware of what the competitor is doing, but then figure out what the customer insights actually lead, and mesh those together for, to build your strategy.
Art Saxby: Yep.
Evelyn : Yep. So, let’s talk a little bit about strategy. So, you gather this information on your customers, your competition. How does the strategy actually come to be, and who has to participate in the company in the development of that, or do they typically?
Art Saxby: You know, I’d love to hear what Beth thinks about this, but I believe that strategy is a responsibility of the whole management team, led by the CEO, facilitated by marketing. Marketing needs to facilitate it because it’s bringing those market-based perspectives, but it’s bringing in the market-based perspectives and highlighting, “There’s an opportunity here, with these implications, here these implications, and here with these implications.” Then you need the rest of the management team, operations, whether that’s the manufacturing or software development, whatever that happens to be saying, “Well, if we did that, here’s the cost implications, here’s what we could do,” you need finance, you need sales. It needs to be something where the whole orchestra is going on. The CEO is going to be the decider, but you need someone prompting the orchestra and facilitating.
Beth VanStory: I think also, having been a CEO before, I’ve seen how important it is to include people from very early on, so that they don’t feel like you’re creating this strategy in a vacuum and then handing it down to them, and telling them what to do. So in addition to different groups and representatives being able to see different things, such as cost implications or operational issues, logistics issues, what have you, it also helps gain buy-in to include everyone early on in the development of the strategic plan.
John : When you’re talking about forming the strategic plan for marketing, sometimes you’re thinking about growing your market. How do you figure out whether that needs to be a chief part of your strategy, whether we’re really talking about growing your market or entering into different markets at that time?
Art Saxby: Beth, you want to talk about how you’ve addressed that?
Beth VanStory: Sure, well, there’s different ways to grow. And so, you talk about, you mentioned one of them which is growing within your market, but there are a lot of other ways to grow, which is going into new markets, and going into new customer areas, or even new products. So, growing in your market that you live in now, where your current customers are is just one way. And that market could be stagnating, so it’s really taking a more holistic picture of growth and the different ways that you can grow, by going into new markets, new products, and by analyzing which of these areas are growing, because sometimes there’s an industry that’s become saturated and the growth is slowing. So where can you, if you want to keep growing your company, where else can you look outside of your current market.
Art Saxby: In talking about the current markets, often one of the conversations we’ll have with a customer is, “Do you treat all your customers the same?” And amazingly, a lot of people say, “Absolutely. We treat all of our customers the same. We treat all of our customers with integrity. We treat all of our customers the same.” And the question is, should you? And one exercise is a simple four quadrant chart. Quite frankly, we use a four quadrant chart for a couple reasons. One is well, we’re consultants and if we don’t use a four quadrant chart, they’re going to [inaudible 00:33:35]. It’s kind of one of those things you got to do.
Evelyn : Where’s the chart?
Art Saxby: Yes, exactly. But it can be a useful tool to facilitate the discussion in the management team. And on the left-hand side, it’s, you’re looking … You’re going to be placing your customers on this chart, your top customers. And it’s from low dollars to high dollars, small volume customers up to high volume customers. And then from left to right, it’s growing sales, declining to slow growing sales, to fast growing sales on the right. And when you really take the time as an organization, as the management team to place them, you can see, okay up in the right, these are high dollar customers who are growing rapidly.
Should we treat them differently than the customers that are on the bottom left, which are small customers not growing, or declining? Absolutely. You make look and say, “Look, there’s these small customers that aren’t growing, or declining, are actually taking an awful lot of our management team time, taking an awful lot of customer service time.” Maybe the first thing we do is we start raising the price on them, either make them quit, you don’t want to necessarily fire your customers, but you can take the price up until they quit, or they’re reasonable to keep around.
But you would treat the big customers that are growing differently than the big customers who aren’t growing, and saying, “How do we get them to grow their business?” Or the customers that are growing fast but aren’t big yet. Just by putting them on a chart, you can say, “How should we treat them and act differently?” And from that, which market segments are more likely to be in one quadrant than the other? Where do we focus? Focus is a magical word. If you tell sales to go out and sell more, they’re all going to go out and do what they can to sell more, but they’re going to-
Evelyn : Without focus.
Art Saxby: They’re going to end up with their own strategy. The CEO doesn’t want to abdicate the growth strategy to 12 individuals selling to whoever they thing they can sell best to.
Beth VanStory: And at the strategic level, the point of what Art is saying is really focusing on profitable growth, because growth itself isn’t necessarily good if it’s not profitable.
Evelyn : Absolutely. So we’re going to-
Art Saxby: Remember, we’re both finance people. This is a profit game, you know.
Evelyn : Yeah, exactly. You have a balance you have to strike there. So, we’re going to take-
Art Saxby: It’s great for everyone to run around and do a whole lot of work, but if at the end of the day, there’s not more profit in the bank, it’s like, “What were we doing all this work for?”
Evelyn : Right, not worth it.
Art Saxby: It’s amazing how rarely customers really understand profitability by customer. Which customers, they know who they like to sell to, sales likes to sell this, manufacturer likes to do this, we sell a lot to these people, these people have a high price, these people have a low price. There’s been plenty of times we’ve looked and we’ve said, “You realize your low price customer is your most profitable customer, because they take up less customer service time. They buy differently, they order differently.” There’s a number of companies I’ve been with where Walmart turned out to be their most profitable customer.
Evelyn : Wow.
Art Saxby: They had the lowest price, but Walmart never had bad debt issues. Walmart was never playing games with the invoices. Customer service was really easy because everything was automated. Once we modified the way we sold, and the way we produced and delivered, we got really efficient delivering to Walmart.
Evelyn : Amazing. So, we’re going to take a quick break and we’ll be right back.
John : Welcome back to In Process. We are here with Art Saxby and Beth VanStory of Chief Outsiders. All right, Beth, when we left off, we were talking about strategy and sort of … But I want to shift to marketing tactics. One of the things that was in to book was speaking about random acts of marketing, and we’ve all seen this where people sort of jump around when they see a new, exciting marketing tactic being taken by a competitor, or they have a new idea. How can CEOs use planned out marketing tactics to avoid doing random acts of marketing?
Evelyn : And what’s wrong with random acts of marketing?
John : Yeah.
Beth VanStory: Well, I’ve seen this quite a bit with customers. They’ll call us and want us to help them execute the latest marketing du jour, whether it’s social media or SAM, SEO et cetera, [inaudible 00:38:14] and it really has to start with what are you trying to accomplish? In order to answer that question, it’s how are you going to measure success? What does success look like? Is it more customers? Or in the case of maybe an e-commerce site, is it more visits?
Well, I can tell you when I ran Office Depot dot com, getting more visits wasn’t my primary goal, because you could do a lot of different things, random acts of marketing, for example, and acquire visitors, get people to come to their site, but if they aren’t the right customers, they’re not going to drive that profitable growth. So that was a B-to-B site, and we needed to understand that we needed to get the right visitors to our site. So these were small business people, and so how were we going to define success? Well, first of all, looking at if you’re trying to drive revenue, it’s a pretty simple equation. It’s the number of people who come and it’s how many of those convert, what’s the average order size, and what’s the frequency. So, we had to define measurements for all of those things to figure out whether we were moving closer to our goal or not. And so, starting with those measurements, not only just identifying the criteria, but also figuring out what tools are you going to use to measure things? How are you going to measure, so that then you can look at things and say, “Okay, this is working,” or, “This is not working, and what do we need to change?”
Evelyn : And so, when you’re actually putting that together, this does come back to earlier we said the CEO really has to lead this, and you have to have the various departments also on board and moving forward. So as part of creating that measurements, are all of those departments typically involved?
Beth VanStory: Yes, and they need to be because you need everyone buying into the plan, and also acknowledging that these are what you’re trying to accomplish. So if something isn’t working and is not helping you reach your goal, and you need to move to a different strategy or a different set of tactics, people are on board and understand why that is happening.
John : How do you determine an appropriate timeframe for measuring success? I mean, I would love for it to be add water, get clients, but I don’t think it’s that easy or short.
Beth VanStory: Art, do you want to take that?
Art Saxby: Yeah, we often kind of refer that as a gumball machine. We would love to find the gumball machine where you put in a quarter, you turn the dial and out drops a gumball. And you go, “Great, let’s just keep feeding that thing quarters.” You can get there, but it really is, it takes some time, and it’s really going to be dependent on the industry. There are some industries where the sales cycle is well over a year. There’s some enterprise software sales where you’ve got to be working closely with them for well over a year before things are going to, they’re going to make the purchase, so they’re going to do the tests, and then the rollout and then the implementation.
There are other things, as Beth was talking about with Office Depot, where she can be testing things on an hourly basis. They can be testing things weekly, daily, and looking at numbers, and looking at, “When we did this we brought in this type of a customer, and they bought these types of things. Those are the types of things we want to sell, or we don’t really want to push that as much as we want to push these other things,” so it really does come back to every business is different. And it truly is. There’s not a one-size-fits-all explanation. There’s not a one-size-fits-all strategy. It’s what are you trying to accomplish?
Evelyn : So, sorry. I’m curious to know, you help the company develop their strategy. You are there to kind of oversee the execution of it, so companies ever become totally addicted with the Chief Marketing Officer? Do you end up going in to the company full-time? Or what happens there?
Art Saxby: What we’ve found is that the skills to create and develop something are different than the skills to run it once it’s there. Determining how are we going to get into this marketplace and making it happen, is a different skillset than, “Okay, we’re there, it’s running good. Now let’s make it a little more efficient.” And that’s one of the challenges companies can often have with a full-time hire. They might be able to attract the person who will help them get into that market because it’s really important. “This is a $20 million opportunity and we’re going to spend the money and make it happen.” And once you’re there, unfortunately, you’re way overkill. That level of marketing person is way more than you need to run it once it’s there.
Evelyn : On an ongoing basis.
Art Saxby: They might start getting bored, they’re not really as … You’re not using the high dollar stuff that you really need from them. That’s why often, the way we leave is six to 12 months of hands on being on the management team, one to days a week, so they could afford someone like Beth. But then once it’s there, once it’s running, we can help them figure out what is the skillset that they really need? What skills do they need in their department? Should they hire one or two 20-, 30-something-year-olds to handle this stuff in a marketing manager. So in the vast majority of times, literally in eight years, I think we’ve had four people hired full-time. Most of the time, they’ll end up replacing us with a marketing manager, a director, and a couple of marketing people. A couple times they have said, “Wow, if this is what a CMO delivers, I’ll go buy one of those.
John : Well, Art and Beth, we really appreciate it. We’re out of time, and I feel like we have so much more to discuss.
Evelyn : Yep, we could keep going.
John : Thank you, so much, for joining us today. It was a great conversation focusing on the intersection between growth and marketing. We hope everyone enjoyed In Process. For more about Chief Outsiders, visit chiefoutsiders dot com. If you have any questions on the topic, please reach out to info at trusted-counsel dot com. If you are interested in learning more about us, please visit our website at trusted-counsel dot com, where you will also find the list of our past and upcoming shows.