General Findings
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Posted in Stress · March 26th, 2010 · Comments (4)
For many manufacturers around the world, marketing/sales are considered more of an art than a science. Companies resist applying hard measures because it is difficult to measure cause & effect—how can you isolate one specific marketing or sales initiative and attribute business success to it?
Frank Lynn & Associates, a global channel consulting firm based in the Chicago area has developed a more formula based approach to the problem of measuring an effective go-to-market strategy. The PPH formula (product-presence-hit rate) is a diagnostic tool to first identify the limiting factors to market strategy effectiveness, then implement discrete changes to improve it and measure the results. Market Strategy
What is the PPH Formula, and how does it provide a measure of strategy effectiveness?
PPH is a formula that breaks market share into measurable components of product/service coverage, sales presence, and hit rate. Factored together, these three variables equate to market share (PxPxH=MS). By breaking your market share into these components, the limiting factors to strategy effectiveness can be quickly identified. And since it is a mathematical formula, the model provides a basis to measure the cost/benefit to any actions the marketer may take to try to boost strategy effectiveness.
A closer look…Multi-channel distribution
What is Product/Service Coverage?
Product/service coverage is a measure of the degree to which your product/service offering is considered a viable alternative to the customer. Assessing product/service coverage begins with understanding what the end user is buying – - including physical product and the service/support provided around it. Product/service coverage determines whether your offering is viable from a form/fit/function perspective.
This assessment includes a review of product line gaps, especially if missing products are being purchased in conjunction with your product offering.
It should also include a look at price points. Consider the “good/better/best” product positioning. Customers focused on a “best” offering will rarely consider a “good” product a viable alternative, and vice versa.
What is Sales Presence?
Sales presence is a measure of how often the customer considers your offering at the time of making a purchase. Sales presence has several contributing factors;
• Geography; i.e. do you have appropriate sales/channel presence in the location where brand/source decisions are made?
• Account; if present in the geography, does your sales organization and/or channel partner have a relationship with the account. Within the account, do you have access to the key decision makers/influencers?
• Decision presence; even if you have generated revenue with this account in the past, are you involved in the current purchase decision? Or is the account awarding business for which you are not allowed to compete?
What is the Hit Rate?
The hit rate measures how often the sale is won. It is a reflection of how well your product/service offering and support align to the decision variables used by your target customer. It is a result of several factors considered part of the traditional marketing mix including: brand preference, price preference, ease to do business with, product/service bundle, technical support, product availability and the manufacturer’s and channel partner’s reputation.
How does the PPH Formula yield actionable guidance for the marketer?
The PPH formula provides granularity to strategy measurement. And it is this granularity that allows strategy changes that yield rapid results. The granularity is provided at an organizational level—product management can gain insights from the product/service coverage analysis, sales management can gain direction from the sales presence variable, and the marketing organization generates guidance to its resource allocation from the hit rate assessment. Executive management also gains insight into where to place its bets based on the cost/benefit trade-offs associated with changes in any of the market share components.
By allowing the effectiveness assessment on a territory and/or market segment basis, the effort allows for a change in your marketing approach away from the traditional one-size-fits-all-markets strategy to an approach that employs individual strategies that are highly focused on targeted segments. channel workshops
For a discussion about the PPH formula contact Karl Edmunds, Vice President of Frank Lynn & Associates at kedmunds@franklynn.com For more information go to: http://franklynn.com
Tags: Business, Distribution, management, Pricing Strategy, Sales
Posted in Business · March 16th, 2010 · Comments (0)