This is the second article in a three-part series about technical-based marketing, and explores the relationship between marketing and sales. The concepts and materials used in this article are from Ken Talentino’s book, The Curve.

Smart Marketing Keeps Good Companies off the Downward Spiral
By Ken Talentino

Some organizations make the mistake of thinking that the marketing department comes in to promote products after the R&D team has done their job. But smart companies bring marketing into the process much earlier. In fact, one of the most important roles marketing should play is in new product and program development. Marketing has a keen understanding of the consumer and is able to communicate consumer needs back to the company. When marketing is involved in the creative process right from the start, they are able to help shape products that grow profits.

There are two ways to increase profits: increase sales or reduce costs. History shows that drastically reducing cost as the sole means to realize a profit has a deleveraging effect on the business. The rule of thumb is that you need to cut an equivalent of three dollars in cost to achieve the same profit benefit of increasing sales by one dollar. The failure to grow the top line creates undue pressure to continually slash costs. Increased productivity via continuous improvement is important, while random, across-the-board cost reductions result in weakening an entire organization. This is where the concept of the downward spiral comes into play.

The downward spiral is the result of continuous cost reductions, which result in a reduction in investments that drive growth initiatives, which creates a deterioration of service levels across the business, and eventually a loss in key personnel. This ultimately results in lower sales and the need for further cost reductions. This pattern perpetuates itself until either a radical turnaround strategy is implemented or the business goes bankrupt. The majority of companies caught in the downward spiral have turned away from operating within their core strengths and have not developed robust new product and program processes to identify, qualify, and manage new product and customer programs.

A strong marketing team provides strategic direction for new products and program opportunities. As is well documented, new products can be initiated throughout the organization. They can act as a product development gate system to enable the organization to methodically screen new opportunities and allocate resources in areas with the greatest strategic ROI. We always operate in an environment of limited resources, especially engineering. We must channel and control these resources to work on new products with a higher probability of success. In short, if the products coming out of the pipeline are not saleable, or if there is limited market or if the price point minimizes profit potential, a company will experience major financial problems.

Profitable sales growth is the most effective way to obviate debilitating downward spiral syndrome. New sales also have a highly leveraging effect on profits; remember the three to one sales-to-cost reduction ratio that drives new investments and programs. Thus, methodical selection of the right products and programs is paramount to the future viability of an organization.

In one real-life case study of an organization that came out of a downward spiral to achieve high growth in sales and profits, I was brought in to change the historical trend of low growth and profitability. Employment was high, while new tracking business development was low. This was a harbinger for a decrease in future sales and subsequent financial loss. After doing the usual due diligence, it was quickly discovered that products being developed were not properly screened in regard to definition and market viability. After further investigation, it was apparent that customer requests via sales went directly to engineering without marketing reviews. Sales get paid to sell and are not exposed to the broader aspects of marketing. As you probably know, engineers are very good at designing technical products, but need direction as to market-driven specifications, price or cost targets, and hard timeframes. The combination of a driven sales team working directly with engineering is a very dangerous combination without marketing’s practical influence. Finally, there were no cross-functional teams in the development process to review all aspects of product, including supply chain management and manufacturability. The lack of a cross-functional team contributed to delays in product introduction and failure to consistently produce cost-efficient, quality parts on time. Missed new product launch dates also impacted future sales and profit streams. A new product development process utilizing a gate system and cross-functional teams solved these problems.

It was important that the new system be simple, robust, and fast. Using six-sigma techniques and theories, we created a new product development gate system. This involved a system that encompassed a cross function review team that quickly screened new opportunities to determine their feasibility. Programs that passed the first phase or gate were allocated additional resources. The sale team was quickly notified to communicate the decision to the customer. The ability to close the loop is an important part of a quality new product development system. A PERT Chart was then created to manage the program to facilitate achieving the milestones and ultimate launch date. This also became an important sales forecasting tool for future sales and profits. Another positive result from this system was a reduction in time-to-market (TTM). This was counterintuitive based on additional time taken upfront in the screening process. However, working on the right products with the right information reduced the waste associated with backend modifications and delays. The net result: Products were released to market on time, maximizing sales and profits. Customers received quality product and the operation efficiently improved.

The final results were stunning. We created a robust process that could be continually improved via the cross-functional teams. Sales went from stagnation to more than a 25 percent growth rate, while profitability EBIT improved to more than 20 percent. However, the real impact was the creation of new jobs and career opportunities within the division for current and future generations. Finally, we broke the downward spiral of cost cutting by creating opportunities for new investments and new, viable products in the pipeline.

New product and program development is the future of the company. As a famous GM designer once said “you better plan for the future, since that is where you will be spending your time.”

Ken Talentino has held executive sales and marketing positions with leading technology-based companies over the past 25 years. He has been responsible for selling more than $1 billion worth of products to leading OEMs in a variety of global markets, and has played an upper management role in corporate turnarounds in several technology-based companies, while strategically revamping their sales teams. Ken earned a bachelor of science degree in marketing from Sacred Heart University, an MBA in marketing and finance from the University of Bridgeport, and a Six-Sigma Green Belt Certification from the University of Michigan school of engineering. Contact Ken at kentalentino@verizon.net or 508.789.3211.