Advertising does not build relationships, it only hopes to influence the moment and convert those few seconds into a buying decision for a product.  Word of Mouth (WOM) is the best and most reliable method of promoting a product.

A Testimonial from one person to another brings with it a level of positive bias and a tested experience. These endorsements or referrals are provided from one trusted person or company to another.  It is the trusted relationship that makes the recommendation more credible.

Word of Mouth (WOM) relationship building is growing rapidly due to wider use of social media applications (e.g. blogs, facebook, myspace, twitter).  How can your company use a WOM approach to expand your loyal customer base?  I am working with an organization that has some new and innovative ways to use this technology to help businesses grow – I will be writing more about this approach next month.   To provide a little more introduction and background to WOM, I am offering you a FREE look at an e-book that is the first of a series on how to use digital applications to expand your presence in your market.

Click here for your FREE eBook access: http://wom10.com/Pages/business-tools-book

PR if done correctly can be a game changer for an organization.  PR can also backfire if not taken seriously and can have a negative impact on your image with prospects, customers and your industry.  I recently read a blog post on bNet that outlined the 10 Breakthrough PR Techniques from a Master. The interview with Lou Hoffman, President and CEO of Hoffman Agency, provides an excellent set of techniques and examples of how to use PR to maximize its effectiveness.

Click here for the interview:  http://blogs.bnet.com/ceo/?p=3620&tag=content;col2

What are your experiences, positive or negative, with PR?

Here are five common reasons why new products fail:

1.  Lack of market knowledge- Whether a company is new or established in a market, a common mistake is underestimating the impact of market change.  Markets change for a variety of reasons, and if a company does not stay connected with their market, they may begin operating under obsolete assumptions.  This leads to poor performance and often enterprise failure.  A few examples   of market change are as follows:

• Lower customer demand- Customers are not interested in the product or service.  Three levels of consumer demand are based on the customer’s needs, wants and desires. Depending on how the customer views the importance of the product will determine if they are going to change their buying pattern.    Companies that do not know how their customers view the company’s product will probably not be conscious of the reasons for the customer demand drop-off.Recessionary times tend to impact those products that customers view as wants or desires.  These are usually products that entertain or follow trends, and are purchased with discretionary income (electronics, trend clothing, high-end cars, etc.).  Needs are those products that are more commodity items and are thought to be indispensible (food and personal items, telephone service, public transportation, etc.).
• A change in customer preference- Customers are migrating to other products. Customer buying decisions can change for several reasons.  These reasons can be due to product differences, technology developments, advertising and brand influences, regulatory requirements, and perceived value increases.  Knowledge of current and upcoming market changes is critical to any company’s ability to respond and sustain operations.
• A change in sales and distribution methods-Customers want to purchase their products in a different way. The Internet has changed the buying habits of much of the world’s economy.  How has it impacted your products in your market?  Brick-n-mortar stores are still strong points-of-sale for products if they provide a positive buying experience. Most business-to-business and retail organizations have added Internet stores to sell their products in addition to their brick-n-mortar stores. Wholesalers and distributors are expanding and contracting in many markets, depending on the product type.  If the company’s strategy is not to have a large sales force to distribute your product, then the Internet, wholesalers and distributors may be helpful.  However, the wholesale/distribution route may not be the best approach if your company wants strict control over the sales and service process, and a strong relationship with your end customers.It all comes down to how the customer wants to buy your product.

2.  Lack of product differentiation-The customer cannot see the value of the product being introduced.  This lack of differentiation can be between your competitor’s and/or your own product.   If you’re releasing a new version of an existing product, how are the two products different?  Why would a customer purchase a new version, if the older product still provides value?  How different is your new product when compared to the competitor’s?  Differences that are valued by the customer will influence their buying decision.  Look at your product’s quality and performance from the customer’s perspective.

• Quality-How does the product hold up in comparison to previous products or the competition? Consider how durable, flexible and adaptable the product or service appears to your customer base.
• Performance- How does the product perform?  Take into consideration speed, usability, features, functions and how well it does what it is supposed to do.

3.  Lack of brand recognition-The customer does not identify the new product with your company or prior products. Companies that are not concerned about creating brand awareness are making a critical error.  It is important to balance brand recognition with the cost of creating the brand.  Brands evolve over time as the customer’s perceived value from the purchase of products or company services increases.  The objective is to have customers identify the purchase of your product and/or company with their most positive buying experiences just by seeing the brand (name, logo, motto, song, etc.).

4.  Lack of customer support-The customer cannot get the level of support they want.  A company that is only focused on the sales side of their product or service may fail to build strong customer relationships resulting in a loss of customer loyalty.  Without loyalty, there is nothing to keep the customer from switching to your competition without notice.  A company that is focused on developing a long term sustainable operation knows that it is imperative to develop strong relationships with their customers.  This is accomplished by offering effective sales and customer support.  Except for on-line Internet sales, the front line customer care effort should come from the sales force, even after the sale is closed.  Customer care organizations, departments and services can help satisfy the customers when there are issues that must be resolved, but the sales person who closed the sale should still be involved.  We all know it costs more to get a new customer than it does to save one.  New products that are launched without a customer support effort in place are destined for problems.

5.  Lack of product development process- Many new products never get to market because the company does not have a product development process. Product development should be viewed as a process, and not an ad hoc event.  The process starts with an idea.  The more innovative the organization the more ideas.  The idea gets tested as to viability in the market.  Market viability means that the company knows their customers and their buying habits.  The idea gets a development assessment.  The company must then determine how practical it is to create the product out of the idea.  The idea then gets a value test (i.e. what is the value to the company (revenues/profits, market share, etc.) and to the customer (performance, quality, price, availability, etc.).   If the idea passes all tests and assessments, then a project is chartered, prioritized and funded.  A company without a process for product development is taking a significant risk of having the new product effort terminated before reaching the market.

Most students learn about marketing through an explanation of the “Four P’s of Marketing”, as first mentioned by E. Jerome McCarthy.  However, this article expands the discussion of the marketing viewpoint to include a fifth “P.”  These five P’s should be included in any discussion about promoting the organization’s products within a target market.  Our “five Ps” of marketing are:

1. Product
2. Price
3. Place
4. Promotion
5. Profitability

Product- A product comprises a physical item or service which an organization produces for sale to customers within a selected market, whether directly to consumers or through wholesalers/resellers, retailers, original equipment manufacturers (OEMs), value-added resellers (VAR), etc.  Factors that should be considered in marketing the “product” are the following:

• Form

• Functionality

• Quality

• Packaging

• Support

• Warranty/maintenance/repairs

• Branding

Form - The look and feel of a physical item or the description of a service.  How does the product look to the potential consumer?  If the intended consumer cannot visualize how they will benefit from the product at first glance, then the demand for the product must be generated from one of the other attributes of the product.

Functionality- How does the product function? What does it do? How does it do it?  How does the product benefit the intended customer?  How does the product surpass the functionality of that offered by the competition?  Marketing the functionality of the product is a key point in most campaigns.  If the form factor is not distinguishable from the competition’s product or service, but there is a difference in functionality, then a neutral form factor may not be a limiting issue.

Quality- How well does the product function or benefit the customer?  Is it constructed in a way that the customer believes it is worth purchasing?  Does the customer perceive that the service will benefit her?  Does the way it is presented give the prospective customer the feeling of a quality program?  Will the product hold up over time?  Can it be reused repeatedly?  Are the benefits of the service sustainable over time in order to make the expense worthwhile?

Packaging- Is the product packaged in a way that it catches the eye of the prospective customer?  Does the packaging reflect other attributes of the product (functionality, quality, benefits, price, etc.)?  Does the packaging design reflect the mission of the organization as well as the product attributes?  Packaging always should be considered as a piece of advertising for both the product and the organization.

Support- Customer support is a significant product attribute for customers.  The customer wants to know that he will have support if he should have questions or problems with the product.  Is there personal support through a toll free number?  Is there email support? How about the availability of a frequently asked questions (FAQ) listing? Is there a physical location where customers can go for assistance?  Often, customers will pay a higher price if they know they will have good customer support available.

Warranty/maintenance/repairs- In addition to support, how well does the organization stand behind the quality of its product?  How comprehensive is the warranty and what is the warranty coverage period?  How easy is it to return the product to have it maintained, or to return for repair or replacement?  Not mentioning these benefits may cause a customer to shy away from the product.  Assuming all other attributes are comparable, good warranties sell products. Repeat sales come from customers who have been treated well when products have problems.  How the customer is treated when a product fails may determine if that customer makes another purchase.

Branding- How recognizable is the name of the organization or product?  Is the organization or product logo recognizable to most customers?  How powerful is the brand? Can it create a market segment such as Kleenex, Coca-Cola, Google, etc?  When you need a tissue, do you ask for a Kleenex or do you ask for a tissue?  When you are thirsty, do you ask for a cola or a Coke?  If you are searching the Internet, do you say you are searching it or are you “Googling” it?  These are all examples of extensive branding efforts that have survived the test of time.  In order that customers ask for a product by brand name, the goal is to have a brand that reflects the attributes of the products provided by the organization.

Price- Product pricing should always be developed through the collaboration of many disciplines within an organization.  Make sure that the price established will generate adequate profits or returns to the organization after all expenses, including those costs required to produce and sell the product.  Pricing strategies are key issues when developing successful marketing programs and often consume much of the marketing attention in many organizations.  Pricing schemes should include, at a minimum, the following items:

• Base Price

• Discounting

• Discrimination Pricing

Base Price- The price the organization believes is a reasonable starting point for the market they are approaching. This is often called “suggested retail price” (SRP) or “manufacturer’s suggested retail price (MSRP).  The base price is the level on which all further reductions, for whatever reason, are based.  The base price should be at a level being anticipated by the market we are attempting to penetrate.

Discounting- Discounts are price reductions that are extended under defined circumstances.  The primary reasons for providing discounts are to increase the number of units sold or to stay competitive within a price-sensitive market.  A commodity-based market is an example of a price-sensitive market.  This is true because in a commodities market there are very little product function or feature differences between sellers, so the price is the primary differentiator.

There are many ways to provide discounts that are tailored for the purpose of stimulating sales:

- Volume discount-Offering a lower price based on the larger number of product units being purchased or the total dollar volume of the order (can be retail or wholesale).

- Seasonal discount-Offering a lower price for products that will not be demanded due to entering a new season, e.g., summer clothing sales in the fall..

- Bundle discount- Offering a lower price when a customer purchases more than one product at the same time.

- Special Pricing- Offering a special price is a form of discounting that is based on a particular circumstance.  Special pricing may be offered to an organization that partners with the selling organization to cross-sell each other’s products.  Also, special pricing may be offered in a co-branding agreement, which benefits both companies promoting their products or organizations into the future.

Discrimination Pricing- Price discrimination is the process of offering the same product to different customers at different prices.  Price discrimination is done every day, and the only time it becomes visible is when someone calls attention to it.  If an organization sells its product to one organization under the exact same terms as to another organization – but for a different price – it is practicing price discrimination.

There are dangers to the selling organization for treating the organization’s customers differently.  An organization that is exposed for using this practice may lose customers due to their dissatisfaction with this inequality of pricing.  There are state and federal laws that protect consumers and organizations from pure discriminating practices, and an organization may be subject to punitive measures if found guilty of willful price discrimination.

Place- “Placing the product” implies focusing on all of the distribution components required to deliver the product to the customer.  When it comes to placing the product, there are two primary issues that may impact an organization:

• Product availability
• The cost of moving product to each market

Customers do not want to wait for a product.   Instead, they want it is stock when they are ready to purchase it.  Furthermore, organizations do not want to pay a high cost to get the product to those customers.  To balance these two issues, there are four factors that come into play. These factors include:

• Transportation

• Warehousing

• Distribution

• Order/Inventory Control

Transportation- How are the products getting to the customer, to distribution centers and to warehouses?  Which form of transportation highway, rail, air or sea is the most cost effective to satisfy the needs of the market?  Shipping by sea can be the least expensive way to move product overseas, but it may take too long to replenish inventories from the customer’s perspective.  In many cases, there can be a combination of transportation methods used, such as sending by rail to a distribution point and then trucking to the customer location.

Warehousing- Storing products as close as possible to the greatest number of prospective customers is the overall objective of warehousing.

In order to satisfy customer orders, where is the best place to store product in the most cost effective manner while meeting customer demands?

Different products have varying warehousing requirements, e.g., heavy duty equipment, electronics, perishable goods, etc.  Organizations shipping product by rail may find warehousing requirements need to include being next to the rail-line or the availability of a rail spurs to allow for more effective material- handling activities.  Long haul trucking methods for moving product cross country may require warehousing near major interstate highways.

Distribution- Developing the best distribution channel for an organization’s product is important to how an organization will market its product and to what degree.  There are four primary distribution channels. They are:

• Direct- Selling direct to customers through company stores, catalog, Internet, door-to-door, etc.

• Agents- Independent individuals or groups may sell product on behalf of the organization to customers, distributors or retailers.  Agents usually do not purchase product from the selling organization. Generally, they take orders and the selling organization fulfills those orders and pays the agent a commission or other form of compensation.

• Distributors- Independent individuals or groups that purchase the product directly from the selling organization mark up the price for their profit margin and resell to the customer. Distributors are also called wholesalers or resellers.

• Retail- Retailers buy product from the selling organization or agents of the selling organization and sell directly to the customers.

Order/Inventory Control- The order/inventory control process is essential to ensure that product orders are properly handled through delivery to the customer and that adequate quantities of product are available to fulfill orders.  Use of real-time computer systems or Internet systems can provide instantaneous communication between customers and suppliers.  Orders can easily be tracked and customers can feel more confident that their orders are going to be fulfilled properly.  Inventory control systems work through the supply chain to ensure that components and finished product quantities are managed properly so that product is available when the customer places the order.

Promotion- Promotion is the process of communicating information about the organization and its product to target markets with the goal of stimulating demand and, therefore, generating additional sales of product.  Promotion represents several different forms of marketing communication.   Key factors within the marketing communications tactics are as follows:

• Advertising

• Sales Promotion

• Public Relations

Advertising- Advertising is the method used by an organization to publicize and position products to their target market, including product launches, image and brand building.  Organizations control the content, the target audience and timing for their advertising, all with the intention of reaching the greatest number of potential customers.  Forms of advertising include media (TV, Radio, Print, etc); direct mail, brochures, car/bus signage, bill- boards, handouts, web site/web networks and a direct sales force.

Sales Promotions- Sales promotions include several communications activities that attempt to provide added value or incentives to consumers, wholesalers, retailers or other organizational customers in order to stimulate immediate sales. These efforts are an attempt to encourage product interest, product trials, and purchases. Examples of techniques used in sales promotion include event sponsorships, coupons, samples, premiums, point-of-purchase displays, contests, rebates, and give-a ways.

Public Relations- Public relations (PR) consist of a variety of activities that are intended to promote a positive relationship or image with customers and prospective customers.  Image building and maintenance is the role of public relations.  Tools used include press release announcements, trade articles, charity events or contributions, and integration with promotional activities.

Profitability- The fifth “P” of marketing is Profitability, which is calculated as the sales price minus all costs associated with creating and selling the product.  What does marketing have to do with profitability?  Everything!  Marketing people must keep all their activities geared toward the primary goal of creating demand for and the selling of a product at a price that generates the profits planned during the earliest stages of product design.  All too often, marketing people are only concerned about sales, market penetrations and customer response.  However, if all these numbers are excellent and the product is selling below profit targets, the organization will miss its profitability goals.

How does marketing make such a miscalculation?  Occasionally, marketing has full authority for pricing and discounting.  If the product base price is not set correctly or if this base price is discounted improperly, then the end results are reduced profits.  There needs to be a check and balance with leadership to ensure that pricing contributes the correct and anticipated (budgeted) profit margins.

Often, promotion and advertising activities that were planned to generate sales are deemed inadequate; and, therefore, new programs are put in place and executed at a higher price without making a change in selling price.  The effect of this tactic is lower profits.

Whether the organization has a product or a service for sale, in order to be in the most advantageous position to convert prospects into customers, the marketing department must focus its efforts on Product, Price, Place, Promotion and Profitability.

The five Ps are the core disciplines to an effective marketing function within any organization.

In simple terms, marketing is described as the process of stimulating demand for a product or service.  A sale is the process of closing a sale, and I would add an important factor that is often overlooked as a part of the sales process. That is the collection of sales proceeds that are booked as revenues for the organization.  However, if the organization is non-profit, then sales is the process of closing on the contribution AND collecting the funds.  In many organizations, once the salesperson or team arrives back at the office with the signed contract, they consider that sale complete; and, it is then up to accounting to collect the cash from the customer or contributor.

Most sales leadership will say that sales should be selling, not collecting; and, they are correct in most cases.  Then again, if the customer or contributor does not follow through by paying the funds as agreed to in the transaction, who then has the best relationship with the customer or contributor? Accounting?  Doubtful.  No, it is the sales person who closed the transaction initially.  They should assist in the collections process if there is a need; after all, the life blood of any organization is cash flow, not signed contracts or donation pledges.

Marketing consists of a number of activities that are required to stimulate demand for a product or service.  Those are covered in detail under the marketing process titled The Four Ps of Marketing by Jerome McCarthy.

Going one step further, Arago Partners LLC has published an article which expands the description of the activities of marketing to The Five Ps of Marketing ( http://www.aragopartnersllc.com/documents/MarketingandSalesDifferencesPDF.pdf) .  The activities for stimulating demand for a product are the structural aspects of the product (design, feature, function, quality, etc.), the price, the placement, the promotion, and the profitability.  Each of these five Ps of marketing is an activity that must be developed, tested and launched in order for the sales process to most effective.  Of course, the sales process can proceed while all activities are being completed; but, they should all be in place to enhance the greatest level of effectiveness for the sales process.

As stated earlier, the sales process has the overall objective of closing the sale.  Closing the sale should mean the customer signs the contract or pledge and commits to the payment of funds to consummate the transaction under the terms of the contract or pledge.  So far, the emphasis of this article is to point to the differences between Sales and Marketing, and that primarily means the “closing of the sale”.  The close is the final step in the sales process, so let’s discuss the initial steps that lead up to the close.

The sales process is made up of seven stages:

• Leads
• Qualifying the lead
• Contact
• Presentation
• Handling objections
• Closing the sale
• Post-sale service

Leads- Finding prospective sales clients or customers can represent up to as much as 60% of a sales person’s time, depending on the market and types of products or services being offered.  Since Marketing has the objective of stimulating demand, if there is an effective marketing program in place, the availability of sales prospects should be adequate.  There are several proven techniques for finding prospects: referrals, networking, and lists.

Referrals are the best form of prospect gathering.  They are often from other satisfied customers and come with an endorsement from a satisfied customer, a certain amount of product or service knowledge and a certain level of commitment toward the product or service.  Always make sure to show gratitude to the appropriate customer for the referral.

Networking requires the effort to reach out to prospects, to introduce them to the products or services and to let them know where to learn more about the products or services.  Networking is most effective within associations, social networking groups, trade shows, publications, and events.  Cold calling is usually the least effective and least desirable method; but, depending on the market and product or service, it may be the method of choice.  One-on-one contact produces the most effective results but comes at the highest cost.  Relationship building on a personal basis will produce the greatest results over time, if the sales process is considered a marathon and not a sprint.

Lists can be purchased or developed; but, in both cases, they will contain a number of prospects who meet a profile that should be conducive to a sale of the product or service.  Lists can be developed as a result of doing a mailing, telemarketing, surveys, contests, a give-away, and follow-up from networking at large events.  There are several listing organizations that will sell a directory or list of names and contact information based on a desired profile.

A method for determining the effectiveness of a lead generation program is to compare its results to the Rule of 45, which simply states that 45% of all leads should be converted into a sale.

Qualifying the lead- Converting a lead into a sale implies that the lead needs to be evaluated to see if they truly are a candidate for the product or service, which, in turn, increases the probability of closing the sale.  This evaluation process requires a certain amount of information about the prospect to determine if there would be a demand for the product or service.

Are they in an industry that would have a need for the product or service? Have they shown interest in the product or service in the past, either directly or indirectly?  Would their operation need the product or service?  Would they have the financial strength to purchase the product or service? Are they similar to other existing or past customers?  All these questions are ways to qualify the prospect before taking the next step.

Contact- Either prospects will initiate contact or the selling organization will initiate contact with the prospect.  In either case, it is important to be prepared for this first contact with a plan as to what is to be accomplished.  The goal is to move the prospect closer to a decision to purchase the product or service.  An effective sales contact establishes a level of interest in the product or service and gains a commitment for a second contact. This can be either a face-to-face appointment or a second call with the potential to send out additional information about the product or service to be used during the second meeting.  As long as the prospect’s final answer is not an unequivocal NO, then the contact was a success and there is still an opportunity to make the sale.

Presentation- This stage provides the opportunity to present the pertinent information about the product or service that is thought to be of most value to the prospect.  All the reasons why the prospect should want to purchase the product or service should be explored during the presentation.  Highlight the strongest benefits of the product or service as well as the potential cost savings or ability to generate greater sales by the prospect.

Show how the prospect can better compete in its marketplace due to the benefits of the product or service.  If the presentation is a telephone call, try to send materials in advance of the call so that the prospect can follow along with your presentation while on the phone. If possible, tailor the presentation to the culture of the prospect.  If they have a casual culture, then do not prepare a long, formal presentation.  Just use talking points and brochures/catalogs that can be referenced by the talking points.  Make sure to rehearse the presentation, try to anticipate any objections, and be prepared to convert the objections into positives.  If the presentation is in person, arrive 10-15 minutes early, dress professionally, know who you are meeting with as well as their direct contact number, and provide handouts of the presentation materials. If applicable, bring a sample product, demonstrate it, and be prepared to make a follow-up appointment before leaving.

Handling objections-There will be objections during the sales presentation.  The handling of these objections in a positive manner can still lead to the sale.  It is important to address each objection head-on.  Objections often point to a lack of understanding by the prospect, and their objection is a way to show they need more information about your product or service.  A few proven techniques for handling objections are as follows:

Ask the prospect to explain their reasons for not wanting to purchase the product; take notes in order to be prepared to address these issues.

If the prospect is incorrect, carefully show the facts about the product that would refute the prospect’s error. Do not say “you’re wrong”, as that will put the prospect on the defensive and bring the conversation to a quick negative close.

Paraphrase the prospect’s objection to make sure you understand their position, soliciting a confirmation from the prospect that you have the correct understanding of their objection.

Closing the sale-This stage separates marketing from sales.  Closing a sale requires a prospect to commit to purchase the product by signing a contract, issuing a purchase order and or making a down payment.  Verbal commitments should not be considered closed sales, no matter how strong the relationship with the prospect.  Sales should be considered closed once the revenues are booked on the selling   firm’s accounting system and the prospect begins making payment, either partial or in full, for the product or service.  There will be signs during the sales process that indicate the prospect’s readiness to purchase the product. Here are a few to look for:

• They ask about specific price, terms, warranties, availability.
• They ask about options and features, especially if customized to their application.
• They request a sample or trial of product or service.  Make this a condition of the sale and make it available once the sale is closed.
• They discuss customer support.
• They ask for references from satisfied customers.

To help the prospect come to the decision to purchase, try the following:

• Incentives can help, whether in price, feature, service or delivery.
• Trials of product or service as a condition of a sale.
• Walk through all the positive reasons the prospect has already mentioned that the product or service is good for their situation.  Make sure to keep a list during the sales presentation, so it can be used at this stage.
• Ask them for the sale.  “We want your business. You understand the benefits of our product or service to your organization, so let’s get your order entered.”
• Fight through the objections until either the prospect declares unequivocally that they do not want the product or they move forward and enter an order.

Post-sale service-The only way to insure future sales to an existing customer base is to make sure they receive the services that they expect.   Long-term relationships built upon positive service results increase the potential for additional sales from existing and referred customers.  Referral prospects provide a much lower sales cost, because they come already interested in your product or service as a result of the benefits they have seen from the organization referring them.  That existing customer has done most of the “heavy lifting” of the sales process and now the closing process is all that is left.

Post-sale service is most often neglected by organizations and is one of the primary causes for unsatisfied customers and loss of future business.  Organizations invest heavily in marketing and public relations to promote their product and organizational image, all for the purpose to increase sales or donations.  Yet, if the post-sales services are not maintained in a positive fashion, then those investments are not likely to produce the desired results.

Marketing and Sales are very much aligned in the purpose of increasing revenues for most organizations, but they clearly are different functions, requiring different skill sets and strategies.   Another way to look at it is marketing hooks prospects and sales lands customers.