Managing a Marketing and Sales Transformation

Authors: Joel Claret, Pierre Mauger, and Eric V. Roegner

The marketing environment is unprecedentedly changing and becoming more complex. The result is a need to reorganize brand portfolios, rethink spending approaches, generate more fine-grained customer insights, overhaul pricing and segment management, and restructure sales, service, and channel strategies. Each change is a challenge in its own right, and some companies are tackling more than one: GE, for example, has been trying simultaneously to improve the way it approaches innovation, brand management, and customer care. This level of change represents a commercial transformation—that is, a transformation of the company's broad-based marketing and sales elements.

It's difficult to carry off change of this magnitude at a brisk pace: deeply ingrained habits keep employees from embracing new techniques, skill-building efforts break down, and leaders lose focus. To counteract these problems, companies have developed a variety of change-management approaches, particularly in operations, where techniques such as Six Sigma and Total Quality Management (TQM) have flourished. Making change stick typically requires both planning and action—centering change on a powerful aspiration, establishing systems and processes that reinforce the goals of change, modifying mind-sets by creating a sense of shared purpose among employees, conducting targeted skill-building efforts, and creating role models for employees.¹ While such change-management practices are useful, they are difficult to apply to marketing and sales. One reason is that these organizations—encompassing brand managers, market researchers, and segment and channel managers, to name just a few—are more diverse and complex than the shop floors where many improvement programs take place. Figuring out how to keep disparate parts of the organization working together is a key challenge of change. Second, the rationale for transforming a marketing organization is often to jump-start growth. That requires creativity, not just strong execution, so the change effort is more difficult and the related decision making more complex. Finally, the responses of competitors and customers to marketing changes are difficult to predict, so it is hard to eliminate variability (a goal of many operations change efforts); maintaining flexibility is essential; and the establishment of goals and metrics is complicated.

In our experience, five critical ingredients of transformation are key to overcoming these issues (Exhibit 1):

1. Leadership, aspirations, conviction, and clarity of purpose: committed leadership that can bring together disparate parts of an organization to achieve an ambitious and clearly articulated aspiration
2. New ways of working: a combination of improved processes and tools that help make sense of complex information, redefined pivotal roles, and performance management that drives the transformation forward; together, these serve as the foundation of a commercial operating system that, when fully developed, improves consistency, coordination, insight, and decision making
3. Capability building: on-the-job apprenticeship and high-caliber coaching designed to upgrade critical skills while delivering results
4. Changes in mind-sets and behavior: necessary steps such as removing cultural barriers to change and developing a tailored set of interventions to shape behavior
5. Transformation design: an approach that delineates the scope of the journey of change and the support needed to meet its objectives

You can read the rest of this article and others at http://www.mckinseyquarterly.com

Grant

How Retailers Can Make the Best of a Slowdown

Moving quickly to improve performance can help retailers to recover faster.

Ashish A. Kotecha, Josh Leibowitz, and Ian MacKenzie

September 2008

Downturns are tough on retailers. Recent McKinsey research indicates that during the last two recessions (1990–91 and 2000–01), growth slowed for nearly every retail subsector in the United States. Ninety-three percent of the retailers surveyed that existed during both downturns experienced slowing revenue growth in one of them, and 59 percent endured it in both.¹

Unfortunately for retailers, their position on the front lines of consumer spending doesn’t translate into a rapid turnaround when the general economy experiences a subsequent uptick. The average retail subsector growth rate during the first year of recovery following the 1990–91 and 2000–01 downturns was 0.3 percent. And 12 of 15 retail sectors lagged behind even that rate of growth during one or both upturns.²

These downturn dynamics—declining sales followed by a sluggish recovery period—mean retailers should move quickly to minimize performance deterioration. The challenge, of course, is that retailers have a large number of options to sort through, ranging from cutting costs by shutting stores or restructuring support functions, to increasing revenue by refreshing stores or overhauling promotions. Many make the mistake of focusing on what is easy or known to them and fail to tackle more challenging goals that might improve their competitive positioning during the inevitable upturn.

In our experience, some basic rules of thumb are invaluable for helping retailers rapidly sort through their options and set priorities for action—in particular, determining whether to take an offensive or defensive approach. Combining a tough self-assessment with a hard-nosed scan of the environment can help retailers decide on the relative importance of reducing costs, increasing investments, creating financial flexibility, and seeking near-term revenue growth (exhibit).

Retailers should start by taking a rigorous look at the health of their balance sheets, management teams, and overall operating performance. Companies with reasonable cash reserves and ready access to credit lines, for instance, have options—such as investing in stores, people, or acquisitions—that weaker competitors simply lack.

At the same time, retailers need to be realistic about the potential of their businesses. Do they operate store formats or play in a subsector with strong growth prospects? To what extent is the market already saturated, and where does the retailer stand versus competitors? Recent growth rates, market penetration figures, and a serious review of the strengths and weaknesses of competitors are all important factors to consider.

Companies with good financial strength in markets with significant growth potential should lift investment to gain strategic advantage over competitors. Big bets, such as doubling down on new stores or remodeling old ones, are one possibility. Equally important are smaller bets, such as recruiting talent from weaker players or investing in more precise local market execution. For example, when one specialty retailer began suffering from declining foot traffic in its stores, the company built an analytic tool to help merchants and members of the central marketing organization more effectively use data from customer-relationship-management (CRM) and transaction databases. This allowed the retailer to better predict local demand and decide which items should receive how much space in its advertising circular. Comparable store sales have risen between two and four percent in test markets employing the new promotion-effectiveness tool.

Retailers with good financial health in mature industries can also go on the offensive, taking actions to quickly grow revenue by driving traffic into stores through more compelling offers and ensuring that staff is ready on the floor for the assisted sale. For example, a North American soft goods retailer has reversed declining sales, improved customer satisfaction, and increased the frequency and average size of transactions by focusing on eliminating out-of-stocks, raising the effectiveness of front-line salespeople, and making small store-layout changes that help customers find the goods they want.

Companies with weaker financial health will need to focus more aggressively on reducing costs. Our recent experience suggests that weak performers have major opportunities to rationalize inventory stock keeping units (SKUs)—freeing up working capital—and to renegotiate terms on direct sourcing. These companies can also increase shop-floor efficiency, an area where they frequently lag. By applying lean operations techniques to redeploy labor, they can shorten the time staff spend on noncustomer-facing tasks and increase the time spent helping customers. The focus should be on getting more from existing sales resources, not just on cutting labor hours. Indeed, the key driver of economics is sales—not just cost as a percentage of sales.

More broadly, retailers should bear in mind that the least effective thing to do during a downturn is to simply “hunker down” and “weather the storm.” Though there’s no escaping some pain, moving quickly to improve performance can reduce the odds of a deep dip in sales and position retailers to participate fully in the inevitable upturn.

Original Article: http://www.mckinseyquarterly.com/Retail_Consumer_Good/Strategy_Analysis How_retailers_can_make_the_best_of_a_slowdown_2188