Social Media: What is the ROI?

Social media measurement is one of those topics about which everyone has an opinion, but nobody agrees on the solution. The question about how to measure the return on investment (ROI) for social media participation, as definitive, statistic-based metrics seem to be the primary way communicators feel they can secure approval and budget for these programs from their management teams.

 The ROI (return on investment) is how much profit or cost saving is realized, for a given use of money in an enterprise,. An ROI calculation is sometimes used along with other approaches to develop a business case for a given proposal. The overall ROI for an enterprise is sometimes used as a way to grade how well a company is managed.

Return on investment (ROI) measures how effectively a business uses its capital to generate profit; the higher the ROI, the better. ROI is arguably the most popular metric to use when comparing the attractiveness of one investment to another.

Since “Social Media & ROI” is a topic of much discussion it should be interesting to read a few expert commentaries:

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Aaron Uhrmacher, a Social Media Consultant, writes: “If you’re waiting for someone to provide that magic bean, then put away your watering can. It ain’t gonna happen. That’s one of the reasons why I tend to think that social media (by which I mean actual conversations and relationship building exercises, not widgets and Facebook) is more aligned with the goals of a PR program than it is with marketing.

In the absence of any accepted metrics, businesses still need to be able to determine whether or not a social media program is moving the needle, moving product or otherwise making an impact. This largely depends on the company’s social media objectives. Because these dramatically differ based on the organization, it’s impossible to agree upon standards. That doesn’t mean we can’t measure ROI at the company level, regardless of how your company chooses to measure engagement, is that you have a success metric in mind before you begin. Without some sort of benchmark, it’s impossible to determine your ROI.”

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“The Rocket Blog” writes: “It’s all about the relationships, baby! When we are trying to convince people to do social media, the first question they will ask is, “What is the Return on Investment? As in dollars?” Well that is pretty difficult to measure.  “The problem with trying to determine ROI for social media is you are trying to put numeric quantities around human interactions and conversations, which are not quantifiable,” says Jason Falls from Social Media Explorer.

In social media it is much easier to measure how many people are following you, linking to you and befriending you. The companies that are well known for successful Social Media Marketing (SMM) campaigns will be the first to tell you there is value in SMM but it’s not always measured in dollars. The value is in the relationships that you create with your customers and community”.  
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Augustine Fou writes:  “A year and half ago I wrote the column, “The ROI of Social Media Is Zero”. Today, I assert that the ROI of social media is still zero. Let me explain. A September 2010 survey by ‘Econsultancy’ found nearly half the respondents said they were not able to measure the return on investment of social media activities or even compare it to the return of other marketing activities. This comes on the heels of another study in April 2010 by ‘R2 Integrated’ which showed that the biggest obstacle to using social media is the respondents’ belief that there is not enough data or analytics with which to calculate a return.

Let me introduce a way to think about social media investment which may help to align spending and actions – “social media total value of ownership.” Just like companies shifted to thinking about the total cost of ownership versus the one-time cost of capital purchases (e.g., computer hardware), companies should think of the longer-term “total value of ownership” for social media.

So, if companies start to think of the “social media total value of ownership” or the “lifetime value of social media” they would allocate spending as if it were a longer-term investment to create assets which produce value over time. The short-term, campaign-based ROI of social media will likely still be zero, as the payoff comes in other forms and accrues to the advertiser over time”.

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Joe Chernov, Director of Content for Eloqua, a marketing automation software provider, writes “When it comes to social media, tracking ROI may be fool’s gold. A distraction. A red herring. A trap. It’s something your CMO might demand, but chasing it could be your undoing. Why? Two reasons.

First, social content spreads only when it’s “set free.” A form – even a short one – is the fastest way to “cure” content of its virility. Influencers won’t spread even the most share-worthy materials if their followers are required to self-identify before viewing. To them, gates (and the marketers who install them) tear the very fabric of the social Web.

Avoid the ROI trap by looking instead at leading indicators. Ask what behavior is consistent with your best customers? (Do they view your online demos? Maybe they register for your webinars? Are there pages on your website that they visit disproportionately?) Map the lifts in desirable prospect behavior to corresponding spikes in social media activities. Successful social marketing should correlate to purchase-ready indicators.

The second trap is that blind pursuit of ROI is likely to tempt you into applying a campaign model to your social media efforts. As marketing superstar Paul Dunay of Avaya cautioned, “social media is not a campaign, it’s a commitment.”  To reduce relationship-building to one-off promotions is to reduce a friendship to a single interaction. It just doesn’t work that way.

Of course, it is certainly possible to run a social media campaign designed to accomplish a single objective. Depending on the objective, it may even be relatively easy to assign ROI to the program. But don’t confuse a discrete project with a fully integrated program. Integrating social media across marketing, sales, public relations, events, support and recruiting should be your ultimate goal. Not figuring out how many sales a Facebook contest might have triggered.

When put in that context, it is not only daunting to measure the true financial impact of social marketing … it’s also limiting. A more appropriate comparison would be a lighthouse. How many ships reached port safely thanks to the presence of a lighthouse? The answer, while impossible to quantify, is self-evident”.

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Denis Pombriant, Managing Principal of the Beagle Research Group, a CRM market research firm, and he writes “We’ve been in the “Gee, isn’t this cool technology?” phase for a while now with social CRM, and perhaps that time has been extended by the recession. Fewer companies are willing to take on something that has little track record when the name of the game is revenue. It has to be able to show an ROI. Massive collaboration leads to unique intellectual property.

Sometimes I feel like we’re “Stuck in the Weeds” with social CRM. I know, there are plenty of examples of analyses that say what a wonderful job social media does in connecting everyone or improving the customer experience, but the discussion tends to stop there. If it went on — which, I admit, it sometimes does — it would talk about the wonderful reasons for caring to connect everyone, namely the opportunity for mass collaboration.

Even more important than figuring this out — I am sure you already did, I am just slow — is that for social CRM to be an important attribute leading us out of the recession, it has to be able to show an ROI, and I think this is how you do it. Massive collaboration leads to unique intellectual property. What could be better?

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Dan Robles, Director of The Ingenesist Project, a private think tank in Seattle, writes: “The quick answer is that ROI is indeterminable – get over it. ROI is a static measurement where financial decision makers look into the Crystal Ball to project a future economic outcome which is then be protracted back into the present to arrive at a value of an investment opportunity.  In case you have not noticed, this valuation method is largely bankrupt.

Fortunately, the true visionaries of the next economic paradigm are increasing in numbers and rapidly moving away from the ROI model into something far more valuable simply by asking the serious questions…… David Bullock and Jay Deragon from the ‘Social Media Connection Network’ are investigating the currency of social media where they astutely ask the tough questions, “What are people trading?” and “what is a Tweet worth?” While these may seem like simple questions, they have many an ROI expert stumped. The value of social media is counted in “options” – not ROI. 

ROI is a future projection brought to the present.  “Options” are collected in the present and projected to the future – there is a fundamental difference between the two that must not be overlooked.  People are doing something, they have a plan, they are cooking up a new trick and the ROI is indeterminable…

“Options” have value and obviously people are willing to pay for them with their time at a keyboard, therefore, they are willing to pay for them through any medium of exchange.  This is what people are doing on social media – collecting “options”. The Next Economic Paradigm will provide a means to cash in those “options”. Hold on to your chips, the social media game is far from over”.

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 “What’s the ROI of Social Media?” by Steve Woodruff writes: “I hear that question all the time, and it drives me crazy. What’s the ROI of your cell phone? What’s the ROI of using a computer? What’s the ROI of breathing?

At one point, it was legitimate to think about the ROI of, say, a cell phone. But no more. It’s simply an assumed part of doing business, and living. You might think about the return on a specific model or plan, but you don’t wonder any more if you should use a cell phone or a smartphone. It’s about as much a question mark as getting dressed in the morning.

That’s why it’s silly to ask, “What’s the ROI of Social Media?” Instead, we should ask, “what’s the potential ROI of this or that specific social media tactic or campaign?” Because you don’t measure the ROI of an assumed cost of doing business. You don’t ask for the ROI of a medium. You determine if that medium/channel/approach is going to be a viable and potentially profitable place to be. Then you create a strategy. Then you look at the harder metrics of ROI over time on a tactical level, while also seeking to measure “softer” and, when possible, harder $$ returns on the use of that medium over the long haul.

Social Media/Networked Communications are a fact of life. And, there are some things we do because we know that, in the long run, they make business better. What’s the ROI of honesty and transparency? Don’t look for some short-term dollar figure – look at the long-term reputation value. What’s the ROI of getting closer to your customers, of improving communications, of putting a human face on your business, of being part of the marketplace dialogue, of creating strategic serendipity? What’s the ROI of creating opportunities through people-connections? When something is the right thing to do, you do it, knowing that in the long-term, it’s good for business.

That’s why we should instantly dismiss the question, “What’s the ROI of Social Media?” It’s exactly the wrong question. Should companies be involved in networked communications? In every way that makes sense, yes – because it’s smart, it’s right, it’s where the people are. Now – what specific strategies are best, and what measurable tactics should be employed? That’s when we move into ROI territory. Then again, you can always take comfort in the return on doing nothing…”

Balanced Scorecard: Is it a Failure?

The Balanced Scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals.

The first Balanced Scorecard was created by Art Schneiderman (an independent consultant on the management of processes) in 1987 at Analog Devices, a semi-conductor company. Art Schniederman participated in an unrelated research study in 1990 led by Dr. Robert S. Kaplan in conjunction with US Management Consultancy Nolan-Norton, and during this study described his work on Balanced Scorecard.

Subsequently, Kaplan and David P. Norton included anonymous details of this use of Balanced Scorecard in their 1992 article on Balanced Scorecard. Kaplan & Norton’s article wasn’t the only paper on the topic published in early 1992. But the 1992 Kaplan & Norton paper was a popular success, and was quickly followed by a second in 1993. In 1996, they published the book The Balanced Scorecard. These articles and the first book spread knowledge of the concept of Balanced Scorecard widely, but perhaps wrongly have led to Kaplan & Norton being seen as the creators of the Balanced Scorecard concept.

While the “Balanced Scorecard” concept and terminology was coined by Art Schneiderman, the roots of performance management as an activity run deep in management literature and practice. Management historians such as Alfred Chandler suggest the origins of performance management can be seen in the emergence of the complex organization – most notably during the 19th Century in the USA.

More recent influences may include the pioneering work of General Electric on performance measurement reporting in the 1950’s and the work of French process engineers (who created the tableau de bord – literally, a “dashboard” of performance measures) in the early part of the 20th century. The tool also draws strongly on the ideas of the ‘resource based view of the firm’ proposed by Edith Penrose (Edith Elura Tilton Penrose was an American-born British economist whose best known work is The Theory of the Growth of the Firm, which describes the ways which firms grow and how fast they do).

Kaplan & Norton’s first book, The Balanced Scorecard, remains their most popular. The book reflects earliest incarnations of Balanced Scorecard – effectively restating the concept as described in the 2nd Harvard Business Review article. Their second book, The Strategy Focused Organization, echoed work by others (particularly in Scandinavia) on the value of visually documenting the links between measures by proposing the “Strategic Linkage Model” or strategy map. Since,  Balanced Scorecard books have become more common – in early 2010 Amazon was listing several hundred titles in English which had Balanced Scorecard in the title.

After his implementation at Analog Devices, Art Schneiderman, in 1999,  wrote the article “Why Balanced Scorecards Fail” where he discusses some of the issues with this deployment, since then there have been improvements in newer generations. The Balanced Scorecard has always attracted criticism from a variety of sources. Most has come from the academic community, who dislike the empirical nature of the framework: Kaplan & Norton notoriously failed to include any citation of prior art in their initial papers on the topic.

Some of this criticism focuses on technical flaws in the methods and design of the original Balanced Scorecard proposed by Kaplan & Norton, and has over time driven the evolution of the device through its various ‘generations’. Other academics have simply focused on the lack of citation support. But a general weakness of this type of criticism is that it typically uses the 1st Generation Balanced Scorecard as its object: many of the flaws identified are addressed in other works published since the original Kaplan & Norton works in the early 1990s.

Another criticism, usually from pundits and consultants, is that the Balanced Scorecard does not provide a bottom line score or a unified view with clear recommendations: it is simply a list of metrics. These critics usually include in their criticism suggestions about how the ‘unanswered’ question postulated could be answered. Typically however, the unanswered question relates to things outside the scope of Balanced Scorecard itself (such as developing strategies).

It’s clear that Balanced Scorecard implementation is a difficult and frustrating ‘journey’ and requires dedicated top-level management support, a dedicated team of change agents, strategic alignment, implementation of improvement initiatives as projects, cultural change management, and a combination of top-down and bottom-up development.

But is it a failure? In the blog, “The Glue” by Jeff Bunting, he writes; “I’ve seen statistics thrown around that between 50 and 78 percent of “Balanced Scorecard” efforts “fail.” Gartner’s latest research reports the number at about 50%, but when you look at the survey targets and numbers, it would be hard to put a lot of faith in that number. I do know — from seeing hundreds of implementations over the last decade and coming in to “clean up” problems — that it’s true that many do fail”

“So without strong numbers on how many of these efforts fail or what failure even means, I’ll go out on a limb and say the primary reason that virtually all such efforts fail: timid, unfocused, or unengaged executives. Usually you can even trace it to a single executive who — if things were different — could not only prevent scorecard failure, but could actually use scorecard to drive true breakthrough improvement. Usually, that executive is at the top of the organization.”

Is Your Organization Dysfunctional?

A company executive’s quote: “If you want more problems; hire more people”.  But, keep in mind that it’s your people who do the work and must do it while; putting up with poor leadership, often having to tolerate idiots for bosses, often being under paid and under appreciated and in spite of all of this they are expected to perform miracles day in and day out. So the real question: “Is most of your organization dysfunction top-down or bottom-up?

“The hallmark of a dysfunctional organization is a gap between reality and rhetoric,” says Ben Dattner, a New York Organizational Psychologist. When resources are not used effectively or fairly, when plans are heavy on talk but weak on action or when barriers to communication cripple performance, you’re dealing with a dysfunctional organization.

Once diagnosed, the corrosive effects of such problems can be corrected. But make no mistake: It’s neither easy nor immediate. You need to be tough-minded about identifying the source, particularly because it often starts at the top, where the power resides. “The discrepancy between what leaders say they want and what they really want often causes company dysfunction. You can’t ask employees to do anything you’re not willing to do yourself. “

“When you see a pattern of blaming and people trying to protect themselves and their particular turf, something is wrong,” says Russ Moserowitz of Franchise Insights, Bedminster, N.J.

The remedy is to put your trust in the people you hire and give every employee sincere responsibility. Hands-on, my-way-or-the-highway entrepreneurs won’t find this easy. But that’s how the business gets better. Fast-growing organizations are often so intensely focused on moving to the next level that no one is actually in charge. That’s how dysfunction creeps in and takes hold.

Harry Williams, Management Consultant, in Mountain View, Calif., tells about a 5-year-old software company that hired him to create a new Product Management Department. The business had released several successful products and grown to 300 employees with 10 departments, each headed by a different executive. Every one of the managers reported directly to the CEO, so no one had to talk to anyone else about his department’s work.

When Williams asked each executive what the new department would do, he got 10 different answers. It turned out that the company didn’t need a new division at all. What it needed was someone to coordinate the company agenda and get the managers to share information.  The idea for a Product Management Department was how the executives expressed need for better coordination. “The Product Development Department didn’t take direction,” Williams says.

That meant the group simply created products and released them without checking with any other department. So sales didn’t know about the features of the new products, or when to sell them. Support and consulting were also in the dark. They couldn’t help customers implement products or fix any problems. And so it went.

“Each department flew off on its own, trying to do what was right.” Priorities were constantly shifting. Decisions were continually made and unmade. “The CEO assumed the executives had the authority to make product decisions and it wasn’t her job to tell them what to do,” Williams says. While everyone had the very best of intentions, chaos reigned.

“Company leaders must set the mission and the agenda. A hands-off policy can only go so far.”

Organizational dysfunction may be funny when you’re watching a TV show, such as “The Office,” but its serious business when you’re trying to cope with it every day. The good news is that it doesn’t have to bring you down. Nobody says dealing with dysfunction is easy, but here are a few suggestions from the experts.

Start looking at your office as though it were any dysfunctional organization from movies or TV. “Sit back as an observer and watch,” suggests Donna Flagg, Principal of Learning and Productivity Specialist The Krysalis Group. “Do not participate, because things that makes dysfunctional behavior thrive is participation of dysfunctional people. If you separate yourself, you remain on the ‘functional’ side of the line.”

One way to stay functional is to avoid returning fire—no matter how under siege you feel. This allows you to control the people trying to control you, says Joel Epstein, author of ‘The Little Book on Big Ego’ and CEO of Friction Factor. “Most ‘ego monsters’ want you to fight with them,” adds Epstein. “It makes them happy.” The solution? Throw the game and lose on purpose. “Let the ego monster think they’ve won,” he advises.

Concentrating on your job performance while others are engaged in less-productive activities can be an effective way of coping and advancing, says Heather Millen, a Boston-based Marketing Administrator. “Act how you think a professional should act, no matter how enticing it is to come to their level,” she says. “I once had a boss who thought things could only be done his way. But by sticking by what I thought was right rather than giving into his every whim, the working relationship grew stronger, and we each had greater respect for the other.”

If you’re in a position to close yourself off from the insanity and negativity, do it, advises Erik Myers, a Database Administrator. “I wear headphones all day every day so that I don’t have to listen to the insipid ramblings of my coworkers and how much they ‘love their fat-free salad dressing’ and ‘have you heard about this new diet where if you eat really spicy foods you can eat all you want, because it goes through your system faster and the heat actually burns calories anyway?’” he says.

Sometimes it helps to find what career coach Marty Nemko calls “an island of sanity amid the maelstrom.” “Find one or two people in the organization that you like and can commiserate with, or even laugh at the others’ antics,” Nemko says. “Decide among you whether you want it to simply be a steam-letting-off group or want to look for smart ways to improve things, if only in pockets. And keep your group under the radar—no need for everyone to see you as a clearly identified cabal.”

Studying, but not obsessing over, colleagues’ dysfunctional tendencies can give you an edge, Flagg says. Common patterns are discrepancies between what people say and do and inconsistencies in behavior. Sure, this familiarity may breed contempt, but it also yields competitive advantage for you as well as a coping mechanism. “You can not only anticipate problems headed your way, but you can also use the insight to navigate the terrain in a positive and effective way,” Flagg explains.

In the end, the best outcome may be to move on. “It’s really the only thing that actually works”; notes organizational expert Billie Blair, author of ‘All the Moving Parts’ and President/CEO of Leading and Learning. “Our research of these situations has shown that it’s always the good and talented people that the organization loses when there is dysfunction, because they can go other places: Those who cannot simply stay and manage to endure.”

Getting Off the Dead Horse: Selling Equivalent…

Do you really mean that a salesperson should walk-away from a sale and actually turn down business?

Yes, in certain situations, that’s exactly what the salesperson should do. If the customer is unwilling or unable to make a reasonable commitment to move the sales process forward, then salesperson must be willing to say “This isn’t working” and consider the possibility of walking away from this sale opportunity, as a last resort. If you are not willing to turn down business when things go sour, you’re going to be doing the equivalent of riding a dead horse.

Legend has it that the Dakota Indian wisdom says that when you find yourself riding a dead horse, you should dismount — but some salespeople often adopt less sensible strategies. Some of these strategies (along with their translated equivalents) are to:

  • Buy a bigger whip (flogging the sale until it surrenders)
  • Run a training session to increase the salesperson’s  riding ability (selling skills)
  • Harness several dead horses together for increased speed (several No-Win customers must be better than one)
  • Declare that “no horse is too dead to beat” (or that “no sale is so far gone that positive thinking can’t rescue it”)
  • Provide additional budget to increase the horse’s performance ( by throwing good resources after bad at an unresponsive customer)

The whimsy aside, you get the basic point. Your goal as a selling professional should be not just any and all sales, but good sales. By definition, good sales are Win-Win sales.

The starting goal for any sales engagement should always be to seek a Win-Win sale. This is usually possible, but there are those unusual cases when a walk-away from the sale becomes the only practical outcome. It’s only when the customer is either unwilling or unable to make minimum acceptable commitments toward moving the sale to close, then that necessitates the walk-away outcome.

In the chorus of Kenny Roger’s famous song, “The Gambler,” the old gambler urges the young man to, “know when to walk away, know when to run.”  Packing up and walking away from a deal that is going nowhere is one of the hardest things to do in sales. Even some of the best salespeople continue to work on accounts that, from any observer’s point of view, were a complete waste of time, only to regret the energy, time, emotion, and resources they poured into it once the deal was lost.

Deals lost and time wasted on prospects who were not the decision makers, were already under long-term contracts, were just shopping for price to keep their current vendor honest, or who were not in the buying window. Each working day salespeople across the globe are surprised to find out, after investing blood, sweat, and tears, and of course promises to the boss, that the account they have been working on won’t close. And to make things worse, many of these salespeople were completely blind to all of the clues that were blinking like neon signs saying; “this prospect will not close, move on!”

On the other hand there are the Sales Professionals who have a keen sense of the viability of a deal. Using solid questioning strategies, a simple mental checklist, and intuition they quickly extract themselves from the sales process once they believe working with their prospect or customer is unprofitable or a waste of time.

This rare ability serves them well because it allows them to focus their most valuable resource – time – on accounts that have a high probability of closing. Even though sometimes they may be wrong and pull away from a prospect too quickly, it is better that they move on than take a chance and waste massive amounts of time on a prospect that could potentially never close.

So how do these Sales Professionals know when to walk away and sometimes run? What methodology do they use?

According to Jeb Blount, the Sales Guy; the top salespeople train themselves how and when to walk away from low probability deals. The first step is becoming familiar with the concept of probability. This is what the old gambler is trying to teach the young man on the train. Imagine if you walked into a casino and over every table there was neon sign that gave you the probability that you would win if you played that particular game. Some of the tables flashed 20%, some 50%, and still others 80%. Where would you place your bets?

If you were smart you would walk away from the 20% tables and play the 80% tables. This is how the best sales professionals look at their pipeline. Instead of viewing all of their prospects as equal, they look for neon signs that indicate the probability a deal will close. And they only spend their scarce resources only on high-probability deals. They gauge the probability of each prospect using a variety of indicators to act as that neon sign. They uncover these indicators through advanced and patient questioning of the buyer, influencers, and themselves.

Using the answers to these questions and other indicators, top performing Sales Pros gauge the probability that a particular deal will close. And what sets these high-performers apart is their steadfast discipline to walk away from anything that falls below their probability comfort level.

Blount continues; one of the common attributes of these top producers is when asked why they have such high closing rates they almost all say, “because I only call on prospects who are going to buy.” In other words, they only spend their time with high-probability prospects. You see, these top performers clearly understand the value of time. Time is the great equalizer.

Every salesperson is given the exact same 24 hours each day – no more and no less. The difference between the top performers and everyone else is how they use that time. Top performers know that the real secret to improving their closing percentage is the self-discipline to ask hard questions of, and about, each prospect. In doing so they work less, earn more and close more deals.

Selling: Golden Silence for Better Communication…

Keeping one’s mouth shut is a great virtue, as in don’t tell anyone else about it—silence is golden. Although this precise phrase was first recorded only in 1848, it is part of a much older proverb, “Speech is silver and silence is golden.”

However, in the book “New Conceptual Selling” by the Miller Heiman Company they’ve developed a different definition. They write ‘Golden Silence’ is simply a pause for approximately three or four seconds at two different points in a sales-customer questioning process; after the salesperson ask a question, and after the customer responds. The first three-to-four-seconds pause is called ‘Golden Silence I’; the second pause is called ‘Golden Silence II’. Introducing these two pauses into the salesperson’s sales-call questioning process will significantly improve the quality and the quantity of the information the salesperson receives.

It’s “Golden” because it encourages the customer to talk, to think, to share their perspective on the question. It’s “Golden” because it could produce responses that amplify on the original comments, and vastly improves the chances for making a Win-Win sale.

According to studies done by educational researchers a number of years ago, the most effective teachers’ almost invariable employ an instructional style of communication with the following characteristics:

  • The teacher and student participate in a mutual dialogue, rather than one person being the “sender” and the other the “receiver”.
  • There are longer and more numerous pauses between questions and answers than you typically see in less effective teaching styles.

The application of this educational research to selling has revealed some startling statistics. This is what was found to be typical:

  • In many sales encounters, sellers who are questioning can deliver five or more questions every minute.
  • After asking a question, sellers often wait only about one second before either rephrasing the question, asking another question, answering the question themselves, or making some other comment.
  • After receiving a reply to a question, many salespeople tend to wait less than one second before commenting and moving on to anther point.

These finding suggest that in probably the majority of selling situations, salespeople inhibit the positive flow of information by trying to move things forward much too rapidly. How much real thought can the salesperson expect from a customer to give to them if the salesperson gives only one second to answer it? How much thought can a salesperson give to the customer’s response if they spend less than one second analyzing the customer’s answer before moving on? Very little.  As a result, the typical, rapid-fire questioning style is a very ineffective means of communication.

When the salesperson practices ‘Golden Silence I’ by giving the customer a moment to think about what the salesperson asked them, the information is much more likely to be solid information than if the salesperson give them half as much time to respond.  When the salesperson practices ‘Golden Silence II’ by waiting after the customer speaks, the salesperson has a much better chance of understanding what they have been told, than if they spent half the time. Furthermore, during the second pause the customer will often reflect and then provide additional information. The result of using ‘Golden Silence I and II’ together is more leisurely, more thoughtful, and ultimately far more productive flow of information.

This is not to say that the salesperson should carry a stopwatch into the selling encounters, and that the salesperson should follow this technique slavishly to the exact second, or that the salesperson should use it in every question-answer exchange on every sales call. Each selling encounter has its own rhythm and pace, and the salesperson needs to adjust to that reality in each engagement.  But as a model to aim for; ‘Golden Silence’ is quite simply; invaluable for better communication…

Strategy: What is it?

The concept of strategy has been borrowed from the military and adapted for use in business.  A review of what noted writers about business strategy have to say suggests that adopting the concept was easy because the adaptation required has been modest.  In business, as in the military, strategy bridges the gap between policy and tactics.  Together, strategy and tactics bridge the gap between ends and means.  

Strategy is a term that comes from the Greek strategia, meaning “generalship.” In the military, strategy often refers to maneuvering troops into position before the enemy is actually engaged. In this sense, strategy refers to the deployment of troops. Once the enemy has been engaged, attention shifts to tactics. Here, the employment of troops is central. Substitute “resources” for troops and the transfer of the concept to the business world begins to take form.

Strategy According to B. H. Liddell Hart

In his book, Strategy, Liddell Hart examines wars and battles from the time of the ancient Greeks through World War II. Liddell Hart arrives at this short definition of strategy: “the art of distributing and applying military means to fulfill the ends of policy.” Deleting the word “military” from Liddell Hart’s definition makes it easy to export the concept of strategy to the business world. That brings us to one of the people considered by many to be the father of strategic planning in the business world: George Steiner.

Strategy According to George Steiner

George Steiner, a professor of management and one of the founders of The California Management Review, is generally considered a key figure in the origins and development of strategic planning. His book, Strategic Planning, is close to being a bible on the subject. Yet, Steiner does not bother to define strategy except in the notes at the end of his book. There, he notes that strategy entered the management literature as a way of referring to what one did to counter a competitor’s actual or predicted moves. Steiner also points out in his notes that there is very little agreement as to the meaning of strategy in the business world. Some of the definitions in use to which Steiner pointed include the following:

  • Strategy is that which top management does that is of great importance to the organization.
  • Strategy refers to basic directional decisions, that is, to purposes and missions.
  • Strategy consists of the important actions necessary to realize these directions.
  • Strategy answers the question: What should the organization be doing?
  • Strategy answers the question: What are the ends we seek and how should we achieve them?

Strategy According to Henry Mintzberg

Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning, points out that people use “strategy” in several different ways, the most common being these four:

  • Strategy is a plan, a “how,” a means of getting from here to there.
  • Strategy is a pattern in actions over time; for example, a company that regularly markets very expensive products is using a “high end” strategy.
  • Strategy is position; that is, it reflects decisions to offer particular products or services in particular markets.
  • Strategy is perspective, that is, vision and direction.

Mintzberg argues that strategy emerges over time as intentions collide with and accommodate a changing reality. Thus, one might start with a perspective and conclude that it calls for a certain position, which is to be achieved by way of a carefully crafted plan, with the eventual outcome and strategy reflected in a pattern evident in decisions and actions over time. This pattern in decisions and actions defines what Mintzberg called “realized” or emergent strategy.

Mintzberg’s typology has support in the earlier writings of others concerned with strategy in the business world, most notably, Kenneth Andrews, a Harvard Business School professor and for many years editor of the Harvard Business Review.

Strategy According to Kenneth Andrews

Kenneth Andrews presents this lengthy definition of strategy in his book, The Concept of Corporate Strategy: “Corporate strategy is the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities.”

Andrews also draws a distinction between “corporate strategy,” which determines the businesses in which a company will compete, and “business strategy,” which defines the basis of competition for a given business. Thus, he also anticipated “position” as a form of strategy. Strategy as the basis for competition brings us to another Harvard Business School professor, Michael Porter, the undisputed guru of competitive strategy.

Strategy According to Michael Porter

In a 1996 Harvard Business Review article and in an earlier book, Porter argues that competitive strategy is “about being different.” He adds, “It means deliberately choosing a different set of activities to deliver a unique mix of value.” In short, Porter argues that strategy is about competitive position, about differentiating yourself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors. In his earlier book, Porter defines competitive strategy as “a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there.” Thus, Porter seems to embrace strategy as both plan and position. (It should be noted that Porter writes about competitive strategy, not about strategy in general.)

Strategy According to Kepner-Tregoe

In Top Management Strategy, Benjamin Tregoe and John Zimmerman, of Kepner-Tregoe, Inc., define strategy as “the framework which guides those choices that determine the nature and direction of an organization.” Ultimately, this boils down to selecting products (or services) to offer and the markets in which to offer them. Tregoe and Zimmerman urge executives to base these decisions on a single “driving force” of the business. Although there are nine possible driving forces, only one can serve as the basis for strategy for a given business. The nine possibilities are:  Products offered, Market needs, Technology, Production capability, Method of sale, Method of distribution, Natural resources, Size/growth, Return/profit.

Strategy According to Michel Robert

Michel Robert takes a similar view of strategy in, Strategy Pure & Simple, where he argues that the real issues are “strategic management” and “thinking strategically.” For Robert, this boils down to decisions pertaining to four factors: Products and services, Customers, Market segments, Geographic areas.

Like Tregoe and Zimmerman, Robert claims that decisions about which products and services to offer, the customers to be served, the market segments in which to operate, and the geographic areas of operations should be made on the basis of a single “driving force.” Again, like Tregoe and Zimmerman, Robert claims that several possible driving forces exist but only one can be the basis for strategy. The 10 driving forces cited by Robert are: Product-service, User-customer, Market type, Production capacity-capability, Technology, Sales-marketing method, Distribution method, Natural resources, Size/growth, Return/profit.

Strategy According to Treacy and Wiersema

The notion of restricting the basis on which strategy might be formulated has been carried one step farther by Michael Treacy and Fred Wiersema, authors of The Discipline of Market Leaders. In the Harvard Business Review article that presaged their book, Treacy and Wiersema assert that companies achieve leadership positions by narrowing, not broadening their business focus. Treacy and Wiersema identify three “value-disciplines” that can serve as the basis for strategy: operational excellence, customer intimacy, and product leadership. As with driving forces, only one of these value disciplines can serve as the basis for strategy. Treacy and Wiersema’s three value disciplines are: Operational Excellence, Customer Intimacy, Product Leadership.

Each of the three value disciplines suggests different requirements. Operational Excellence implies world-class marketing, manufacturing, and distribution processes. Customer Intimacy suggests staying close to the customer and entails long-term relationships. Product Leadership clearly hinges on market-focused R&D as well as organizational nimbleness and agility.

What Is Strategy?

What, then, is strategy? Is it a plan? Does it refer to how we will obtain the ends we seek? Is it a position taken? Just as military forces might take the high ground prior to engaging the enemy; might a business take the position of low-cost provider? Or does strategy refer to perspective, to the view one takes of matters, and to the purposes, directions, decisions and actions stemming from this view? Lastly, does strategy refer to a pattern in our decisions and actions? For example, does repeatedly copying a competitor’s new product offerings signal a “me too” strategy? Just what is strategy?

Strategy is all these—it is perspective, position, plan, and pattern. Strategy is the bridge between policy or high-order goals on the one hand and tactics or concrete actions on the other. Strategy and tactics together straddle the gap between ends and means. In short, strategy is a term that refers to a complex web of thoughts, ideas, insights, experiences, goals, expertise, memories, perceptions, and expectations that provides general guidance for specific actions in pursuit of particular ends. Strategy is at once the course we chart, the journey we imagine and, at the same time, it is the course we steer, the trip we actually make. Even when we are embarking on a voyage of discovery, with no particular destination in mind, the voyage has a purpose, an outcome, an end to be kept in view.

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Note: Acknowledgement that much of the aforementioned information, analyses, commentary, and conclusions are taken from other publications and authors.

Learning or Forgetting: Whats more important?

One of the key issues facing business isn’t learning, it’s forgetting; according to some experts. Organizational “learning” (i.e., executive management programs, selling techniques and processes, technical skills, and team building, etc.) is one of the hottest management topics, but some say that “forgetting” (i.e., the old traditional ways of doing things) is far more important.

The enabler for constructive change, whether in business or persona is an ‘eraser’: “You can’t live without an eraser”. Some words of wisdom:

“The problem is never how to get new, innovative thoughts into your mind, but how to get old (traditional) ones out.” – Dee Hock

“The greatest difficulty in the world is not for people to accept new ideas, but to make them forget about old (traditional) ideas”. –John Maynard Keynes

The old (traditional) image of the salesperson was as a mere glad-hander, someone whose only skill is “knowing how to talk to folks”. Think of the phases that come to mind when you think of a salesperson and selling. “A good salesperson is born not made”; “Selling is 90% luck”; “A real salesperson can sell ice to an Eskimos”.

Underlying all these adages is the view that it’s personality not understanding; temperament not training; magic not skill; make the top salespersons what they are. For many people in sales, Horatio Alger’s old “luck and pluck” is still the talisman to which we attribute the salesperson success.

In business-to-business selling, the traditional method or old way involves two false assumptions. It assumes, first, that all potential buyers can use your product or service, and second, that if you only “show and tell” the customer about it, they’ll appreciate the “obvious” benefits and rush to buy from you. These assumptions violate a central principle of business interaction: People buy for their own reasons, not yours. Traditional, product-focused selling ignores that fact.

On the other hand, Strategic Selling acknowledges this fact as central, and puts the burden for making the sale on both buyer and seller (it’s a joint-venture). It’s up to both the buyer and seller to move the process forward by mutually encouraging positive information flow. There’s no assumption suggesting that the customer already has a need for the seller’s product or service. On the contrary, the entire interactive process is geared to determine, up front, whether or not there really is a need.

Thus, Strategic Selling follows the natural order of decision-making and involves three distinct but interrelated thinking processes beginning with “cognitive thinking” which is understanding the customer’s concept/need, then “divergent thinking” regarding the available options to satisfy the need, and finally “convergent thinking” which is the selection of the best solution. This concept was developed by J.P. Guilford through his extensive clinical research and documented in his book ‘The Nature of Human Intelligence’.

The immediate benefit of this approach is an alignment between the salesperson and the customer’s decision-making process and gives the salesperson greater control and more flexibility by facilitating the customer’s natural way of thinking and decision-making.  And, in the longer-term, by establishing this constructive dialogue with the customer it enables the concept of No-Sell selling and a Win-Win outcome.

Win-Win means a highly valued and effective solution for the customer, and a long-term, profitable, and reference-able account for the salesperson.