Top to Bottom:
When It Comes to a Healthy Bottom Line, It's the Top Line That Counts
By Mark W. Sheffert and Katherine Vessells
March 2000
Remember Goofus and Gallant, those flaxen-haired cartoon brothers who have
cavorted across the pages of Highlights for Children for the past forty years?
Gallant is the All-American Boy. Because he does everything "right"---good manners,
good judgment, thorough preparation, attention to details in school and at home---good
fortune flows his way. His brother Goofus, on the other hand, is a mess: always saying
the wrong thing, never combing his hair, always stumbling over his own two feet.
Gallant is, well, gallant. Goofus is rude and boorish. He never considers the
consequences he will eventually have to face as a result of his poor behavior and
thoughtless actions. Sadly, Goofus consistently fails to focus on the fundamentals.
Guess which boy emerges the winner, month after month? Duh, as teenagers
would say.
Sometimes, the business world can bear alarming similarities to a comic strip.
Sometimes, the solutions to business problems are right in front of our faces, only we
can’t see them because we are so stuck in our own, bull-headed ways. We are
overlooking the fundamentals.
Take revenues, for instance. Too many entrepreneurs---diligent students of
margin-maximizing mantras---forget that, without a top line, there would be no bottom
line. Too few entrepreneurs---geniuses at creativity, spontaneity and the sheer thrill of
developing their idea---stop long enough to consider the fact that it’s easy to come up
with creative products and throw them at the market. The challenge is the ability to
identify and communicate the inherent drama in a company’s products or services.
In short, management must be able to address the Four Big Questions:
Who and where is our market? Break down your audiences into distinct niche
markets as clearly and specifically as possible. For example, if you sell products
to other businesses, describe the industry, revenue level, location and other
important items. If you sell a product or service to consumers, describe their
average household income level, age, sex, location, and marital status. If you
target several markets, rank them in priority order. If you haven’t done so before,
take the time to conduct some market research. Find out about the physical
characteristics (demographics) and psychological characteristics (psychographics)
of your target markets. Trade associations and industry publications are a good
place to start for this type of information.
What market needs do our products or services address? No matter what your
product or service is, remember to always sell ideas that appeal to what grabs
each customer. Look for the hot buttons. Ask for a lot of feedback from current
customers on what you’re doing right and what you could improve upon.
What is it that that distinguishes our company’s products or services from the
competition? Conduct due diligence on the others in your market niches. What
do you know about the benefits and features of their products? How well do you
know their pricing strategies? Are they selling into the same location as you are?
Do they have better promotion strategies?
How can we focus our marketing efforts around these compelling characteristics?
Now that you are more informed about your market(s), the needs of your
customers and the competition, you are ready to plan some specific actions
around your competitive advantages. Write out a specific marketing plan with
strategies, key messages, tactics, responsibilities, and timelines.
Let’s say you own a service-based company. A simple, three-pronged approach
can drive revenues very effectively, particularly in the early stages:
- Identify and qualify prospects through advance research;
- Establish networking activities to generate referrals; and
- Increase awareness through promotion, such as advertising, event sponsorship
or other traditional means.
Stop right here, however, if you expect to sustain your initial forays into the
market with minimal effort. Au contraire, you must commit yourself and your staff to
investing the required time and energy to examine exactly how you will identify and
qualify prospects; how long the expected selling cycle will run; what is required to close
a deal; and what steps the company will take to follow up on all referrals.
In our experience, the highest likelihood of closing a piece of business in the
service industries occurs when
- You personally know the prospect;
- A past service, correctly performed, yields a referral from a satisfied customer;
- Daily networking, prospecting and selling habits are branded into the brains of
every company employee, particularly the senior management team.
We call this last concept the "power of the grapevine". For example, let us
share this story about one of our acquaintances, who is the president of a service-based
company. She had asked her sister to keep an eye out for opportunities for her company.
By and by, the sister picked up a hint from one of her colleagues that a certain large
company in Wisconsin was seeking someone to help create new products. The sister
made a telephone introduction, which led to an hour-long conversation between our
acquaintance and the manufacturing company’s president.
Alas, the company decided not to hire an outside consultant after all. She was
disappointed, but a month later, a Milwaukee ad agency approached her on behalf of
another, larger Wisconsin manufacturer. The president of this company had specified to
the agency that it was to engage our acquaintance’s company exclusively.
How did this happen? The president of the first company is the best friend of the
president of the company that eventually hired our acquaintance. President Number
One was so impressed with her approach over the telephone that, unbeknownst to her,
he had recommended her company to President Number Two!
***********
Companies that make and sell things must also focus on the fundamentals, but they
face their own set of revenue-creating challenges. Developing a franchise directly with
consumers, for example, requires an intense effort to build market share, create new
channels of distribution and establish sustainable pricing. Let’s go back to the idea of
identifying the inherent drama in a product. Consumer products companies, even more
than others, must be able to write a succinct statement describing exactly what they have
to offer.
Here are some examples: "Our canned black-eyed peas are more flavorful than
any others because they are vacuum-packed at the precise, fleeting moment of absolute
freshness;" or, "Ours is the only riding boot on the market that is ventilated for proper
comfort."
What separates good from mediocre revenue-building practices is a company’s
ability to create a product that meets an existing need or void in a given market in a
unique way, and to focus all marketing and selling efforts around those special
characteristics.
In addition, the establishment of sustainable pricing is key to the ongoing success
of any consumer product. When products are new on the market, management often
fails to impose limits on production expenses. If companies manufacture products that
eventually prove too costly to sustain at initial prices, they find themselves unable to
afford additional R & D, for example, as the product matures. Instead, management
must focus on how to continue to deliver a product at lower costs, if it expects to sustain
market share.
Another factor, particularly for a manufacturing company, is timing, and swift
action at the optimal moment. Ideas are hard to own if you’re slow to bring them to
market.
Enter the establishment of new distribution channels. Think about the internet;
as savvy Ventures readers would know, any company that has not developed a Web presence
on the Internet today is missing out on huge opportunities for market exposure and
revenue generation. But how many entrepreneurs do you know who persist in allowing
their heads to remain stuck in the sand of the last millenium?
***********
Let’s strive to emulate Gallant in our business efforts, instead of Goofus. Let’s
pay attention to the fundamentals, to the obvious---the little things. Let’s put one foot in
front of the other and remember that if we fail to concentrate on top-line growth, we’ll
be whistling in the dark before you can say "Boo!"
That’s all for now, folks. Next month in this space, we’ll examine the business
philosophy and marketing tactics of Highlights’ Tommy Timbertoes. (Just kidding.)
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