4 posts tagged “sales”

Three practical rules anyone could benefit from are the 80/20 rule, the rule of 72 and the rule of 150.  Alone or together these rules provide an easy way to make better business management decisions.

The 80/20 rule was developed by  Pareto.  An Italian economist who observed that 80% of income in Italy went to 20% of the population.  Today, this rule is widely applied.  When in doubt it is a good rule of thumb.  For example, 80% of sales comes from 20% of the customer base.

Rule of 72 is a financial rule.  Perhaps the most important rule when it comes to understanding the power of compounding interest and investments.  It is powerful for its simplicity, yet quickly gives you a good grasp in understanding your money.

The rule of 72 simply states that if you invest your money at a certain rate of return your money will double by dividing the rate into 72.  For example, if you are getting an 8% return on your investments then (72/8) your money ought to double in 9 years.  It also works if you want to know what rate of return you need to double your money.  For example, if you want to double your money in 6 years you will need a rate of return of (72/6) 12%.  Please note this assumes that the rate is consistent throughout the life of your investment.

The Rule of 150 states that the optimal size for a group size is 150. Humans could only properly maintain proper relationships in a group no bigger than 150.  Perhaps the best example of the use of this rule is Gore Associates, the maker of Gore-Tex fabric.  When asked when they know to build a new plant, the answer is simple, when all 150 parking spots are full.

Three simple, practical business management rules that help.

Marketing guru and the inventor of the of the 4ps (Product, Place, Promotion, Price) Phip Kotler maintains that the two most important things that marketers should be doing today is:

1. Getting to know your customer better and to get closer to them

2. Differentiating your product through branding

Getting to know the customer is exactly what Lou Gesner did when he transformed IBM from a hardware focused company to a solutions based company.  

Between 1991 and 1993 IBM was bleeding cash, it reported losses of $16 Billion.  The market research IBM conducted showed that customers cared less about computer parts and where more concerned about solving IT related problems.   As a result Gesner created IBM Global Services, and today arguably IBM is the third most recognized brand behind Coke and Microsoft.  Listening and getting closer to the customer has paid off great dividends for IBM.

It is easy to create a package for your product or service, by having a nifty logo, and catchy slogan.   But this does not represent a brand.  A brand is a promise by your company to your customer.  It entails everything a company does from manufacturing to the way a retail person greets a customer at a store.  Any violation of your promise erodes any brand equity you might have built up.
 

So how does a company build a solid brand?  The brand is direct reflection of the company’s mission, vision and values.  In other words the company brand is a reflection of the company’s leadership.  If a company has great leadership it can create a brand that will provide it with the opportunity to differentiate itself in the market place.  A great brand lives vividly in a customer’s mind and provides a competitive advantage.

I recently tuned into an interview with Henry Mintzberg.  He talks about his upcoming book  "Managing Right Now".  Professor Mintzberg succinctly defines managerial work by referring to four planes:

Plane #1.  The Thinking Plane---which involves strategizing, insights, big picture stuff

Plane#2. The Information Plane---processing information, finding out what is going on, issuing orders etc.

Plane#3.  The People Plane--Leading people and linking to people externally.  I agree with his point that leadership and management are one in the same.  He asks, "Have you ever seen a leader that is a bad manager or vice-versa?"  The answer is clearly, no.  So he does not understand why people tend to  separate the two, although he says it is ok to separate some characteristics..  But ultimately his view is" ..the separation [of] leaders and managers is nonsense and creates a lot of misery.  Managers have to be leaders and leaders have to be managers.."

Plane#4. The Action Plane--Managing projects, fighting fighters internally, and doing deals externally.

Pretty basic stuff that should not leave anyone guessing what management is about.

Can Canadian companies compete in a global economy?

This will easily be another story that could be part of the new book "Why Mexicans don't drink Molson".  Essentially,  the book criticizes Canadian companies for having a domestic mentality and not being able to compete internationally.