Does lean apply to sales?
Dear Gemba Coach,
Does lean apply to sales? We’re trying to introduce lean thinking throughout the company and have found very little on how to lean the sales department.
To be honest, I don’t know of much material around on lean in sales either. Still, salespeople are the first contact with customers and the sales department as a whole is the closest point to customers so they have a critical role in delivering customer satisfaction.
Sales is also in a key position to create muda (waste). Sales policies that encourage mura, unlevelness, such as monthly quotas or quarterly price promotions, are a frequent source of “created demand.” This is demand generated by the company’s own policies rather than by customer behavior that impacts the whole supply chain as the variation spreads and is amplified down the chain along with the associated waste.
Another form of waste is due to price and credibility erosion. The easiest way to conclude a sale is to (1) agree to whatever modifications the customer is asking for and (2) give away a price incentive. The impact down the line can be quite bad by creating:
- A dissatisfied customer when it turns out that the changes sold are not so easy to make and can impact quality and delivery.
- Price erosion created by rebates and discounts from the price lists, which also affects the value customers see in the product or service (if I got a 20% discount, could I have obtained more? Who else got what?) Human beings are far more sensitive to relative difference (we get very annoyed to find out someone got a better deal) than absolute value.
- Disruption in the design, production, and delivery chain when changes have a rolling impact on operations and suppliers.
Friends, Not Suckers
Worse, I was on the Gemba recently with a CEO who told me that during a customer visit he realized his salespeople focused the transaction exclusively on price, and missed opportunities to do a much better deal with customers who were interested in shorter lead-times, (which, having practiced lean for years, the company knew how to deliver) but no one ever mentioned the possibility. Not engaging sales people in a wider perspective of a lean company’s efforts and attitude towards clients can lead to huge missed opportunities.
The deeper issue is indeed to change sales’ attitude to customers. In lean, customers are not seen as suckers (one born every minute) that one can scam (fleece them for all they’re worth) and move on to the next one to reach the monthly quota. Customers are seen as long-term partners who will help us grow through repeat sales (after all, a repeat sale costs far less than a new customer sale). We need to convince customers that:
- We will help them make money.
- We will stand by them as they go through good and bad times.
- They’ll make far more money with us than with our competitors.
For instance, Toyota’s implicit promise is that:
- My car will be totally reliable, and cheaper to operate because it’s more energy efficient and will have a smaller maintenance budget.
- If I damage something, Toyota is fast in getting spare parts and fixing the damage and will be helpful with my special circumstance. If I need a different car, they can offer me what I’m looking for from their extensive lineup variety.
- When I want to sell the car, it has higher residual value than its competitors.
Delivering on these promises creates a solid basis of loyal customers who attract new customers by being advocates of the company.
Start with These 3 Activities
Most sales forces are historically focused on the new sale. Here we need to refocus attention on:
- Understanding how each customer expects to benefit from the product or service. How do they intend to use it (how do they habitually use it), and where do they see the benefit, rather than what we think is our product’s advantage.
- Be responsive to customers service needs and understand that as customers’ circumstances change, so can their expectations of what the product or service is supposed to do for them.
- Look for ways to show customers how they can better profit from the product or service without exclusively focusing on price. This requiresa deeper understanding of both how customers use our products and how we make them to find win-win opportunities in doing things customers value which are easy to do for us, but not for them.
Salespeople usually find it quite easy to post on their wall the transactional part of their jobs, such as where are we currently against sales objectives, and what is the current state of the pipeline. Indeed, this is a good place to start as few would dispute the legitimacy of visualizing the current state against budget.
The next step is to turn this first visual board into a customer-dedicated obeya room with information on:
- Customers’ current gripes: Sales people are asked to pick up customer complaints they hear during sales calls, place them on a board with their analysis of the cause, what countermeasure we can come up with and, when we do, whether this satisfied the customer – or not.
- Customers’ business or usage models: How do different customers benefit from our products, not in our terms, but in theirs? Where could offer customers more value?
- Sales calls technical problems: This includes problems encountered during calls, or issues arising from the rest of the company due to calls, how the sales team solves its own problems, and is responsive to the issues they create for their colleagues in engineering, production, or supply chain.
- Key changes in the product, production, and delivery processes: Sales often feels it is kept out of the loop of what else is happening in the company (other functions feel sales doesn’t care much), so make it a point of warning sales people of the changes that will affect them and their customers.
The second large topic to address is how to give sales people the tools to reward customer loyalty. From the lean perspective, we don’t want to sugar the deal to make the sale easier. We want to thank customers for their continuing patronage. Sales needs tools to work with, and you can build with them a program to recognize and recompense customers’ repeat sales.
In many cases, I’ve seen this dovetail in fascinating discussions about add-on sales opportunities and a number of things customers would like us to do that we simply … don’t. A simple starting point for this program is checking up on customers after the sale to hear them out rather than focusing narrowly on prospects.
Third, you can ask each sales person to build their own self-development plan for the next quarter or semester. They can choose a few topics where they’d like to deepen their knowledge of customers, the sales process itself, products or the production process, and offer their own ideas of how they’re going to learn more about these topics. Such individual plans are a good way to start having conversations with sales staff beyond the very narrow focus on the next sale, and to open their minds to a wider perspective of customers and the company.
I’m not sure if there is a set lean approach to sales, and if there is I’m unfortunately not aware of it. When in doubt, I guess the best thing to do is to go back to the essentials: (1) What additional value topics are we working on for customers right now? (2) What operational problem are we working on fixing right now? (3) How do these two activities reflect on our understanding of the muda we inadvertently create up and down the value stream by our tactical management decisions?
Asking yourself there three basic questions in unusual settings typically leads to very interesting ideas and deeper exploration of lean thinking in your company.