On this page you’ll find information about:
- The reasons why many companies are prone to setting unrealistic business goals
- The 4-step method companies can use to set viable business goals and measure success
- The impact that realistic goal setting can have on a company and the benefits to senior leaders
Recap: On the SMARTech Journey so far…
- The age of the marketplace, the level of customer awareness and the volume of competitors varies between geographic locations.
- Companies can drive down the cost of customer acquisition by identifying submarkets within the larger marketplace where the customers are most aligned with the company’s value proposition.
- Every company is concerned about its direct competitors but the competitors that truly impact revenue are the direct competitors within the space that is inhabited by the most desirable customers.
So far, our SMARTech Journey has been focusing on the macro factors—Life cycle of the Marketplace, Awareness Factors and Competitive Forces. It is now time to consider the elements affecting company success on the micro level where business logic is carried through.
The Challenge of Setting Realistic Business Goals
Тhe biggest point of frustration for internal stakeholders in Sales and Marketing is when the goals are unrealistic. The biggest point of frustration between service providers that support these departments is when business goals are unrealistic.
Why does it happen?
More often than not, desired business results are difficult or impossible to achieve because there is a disconnect between the people setting the business goals and the people executing on them. This is nobody’s fault, of course. The problem is that there is a lack of a framework to be able to communicate and evaluate if an objective is truly attainable.
The Internal Disconnect
There is often a disconnect between Executives, Marketing, Sales and Technology. The executive team is typically removed from Marketing goals such as being able to develop a marketplace and fill a sales pipeline with prospects. Marketing is typically removed from Sales goals such as being able to close deals and drive revenue. Technology is typically removed from Marketing and Sales needs such as unifying data and reporting.
The External Disconnect
There is often a disconnect between internal stakeholders and third-party service providers that facilitate marketing and sales goals. When outside vendors are not aligned with the company objectives, they might suggest or employ tactics that are not applicable in your specific case. Without the correct technology to measure vendor performance, your company will not know with certainty whether the tactics are effective from a business point of view or not.
So, before setting business goals or choosing any particular set of tactics to be carried out, a company needs to achieve a very delicate balance between the people, processes and technology involved in customer acquisition + retention.
What is the Solution?
There are three main business drivers that are pertinent to every business on a macro level:
- Gain market share
- Protect market share
- Slow degradation of market share
Now, let’s imagine for a moment that your company wants to gain market share.
The objective could be articulated like this:
“We want to grow our sales by 30%.”
But is this clear enough?
What does 30% mean? Is it a 30% increase across all product lines or are there specific product lines that your company wants to grow because they make the majority of your sales?
Most companies are unable to define with specificity where, why and how much they expect to, for example, grow their market share. This leads to unrealistic business goals and frustration across the organization.
The solution to unrealistic business goals is specificity.
Ideally, a company should be able to set business goals like so:
“We want to raise our revenue by 30% and we know that 3 of the 5 product lines that we have, that make up 85% of our revenue, are in a period of flat growth or no growth. That’s why, when we say that we want to raise our revenue by 30%, we’re expecting to see that growth in the other 2 product lines which have not grown to their full potential yet.”
The four-step goal setting process described below is what SMARTech Converged companies employ to clarify their objectives.
How to Set Realistic Business Goals
Step one: Create revenue stories
When working with a client, what I like to do is take the entire company revenue and break it down into revenue stories per service, per product, or per product line so I can understand how much each product or service contributes financially.
Step two: Benchmark with trending data
Once you create the revenue stories, you can calculate the baseline for each product, service or category. Then, you can analyze the trending data and determine if there is a decrease or an increase in performance.
Step three: Understand the reasons for success and the reasons for failure
Whenever your company is experiencing expansion or degradation in market share, it’s usually due to one or more of these factors:
- Marketplace. e.g. If your company is rapidly gaining market share, it can be because the marketplace is expanding. If it’s rapidly losing market share, it can be because the marketplace is stagnating or contracting.
- People. e.g. Your company’s success or failure could be due to the skills and expertise of the people within the organization.
- Process. e.g. If your customer base is growing, it could be because your process or product is superior within a specific segment of the marketplace. If you’re losing customers, it could be because the product or process is below their expectations.
- Technology. e.g. If you have the right technology in place to measure business results, your company is positioned for success. The inability to measure, on the other hand, is a significant pitfall.
These factors are crucial to be able to know because they will help you see clearly your potential for future success and future failure.
Step four: Evaluate opportunities
At this point in the goal setting process, it will be clear where your company is investing and it will also be clear what returns it’s reaping for the investments. You can then overlay last year’s marketing spend and last year’s sales focus in terms of efforts and dollars and see how that corresponds to products or categories that are growing.
Example: Setting Realistic Goals (the SMARTech Way)
Consider the following situation: Your analysis shows a degradation in revenue performance on a certain channel, or a certain category, or a certain product line while the dollars invested in marketing, people or sales enablement stay the same. This product line makes up 85% of your company’s overall sales. There are 3 more product lines.
What is the culprit?
This degradation could be due to a stagnant or contracting marketplace. To determine whether it’s a marketplace problem, a people problem, a process problem or a technology problem, you can benchmark the marketplace against internet search trends and other market research data.
For the purposes of this example, let’s imagine that you discovered the marketplace is contracting. The marketing spend is the same, the sales focus is the same and sales for this product line are going down year over year. Research has confirmed it’s a marketplace problem.
What is the solution?
By understanding with specificity why your sales are diminishing, you can throttle down the resources in that space and invest in other channels or other product lines that have the potential to make up for the loss of market share. This will not be a subjective decision because it will be grounded in data and research.
Going through this process, you eliminate reasons for failure and you are able to see the root cause of a problem and you are able to see the reasons for your company’s success. Based on this information, business leaders can decide where it makes most sense to direct the marketing and sales efforts.
The Results of SMARTech Goal Setting
The CFO perspective
Being able to evaluate performance per product, product line or category and being able to make investment decisions based on this evaluation is going to empower CFOs. They will have certainty that they are not throwing good money after bad products. They will be able to invest or divest based on performance and they will be able to analyze trending data in the future.
The CEO perspective
The CEO is going to be able to communicate more effectively with external shareholders and the board because they will be able to lay out the reasoning behind specific sales or marketing decisions that were made. He or she will be able to back up this information with data and relay it in a manner that is easily understood and makes business sense.
The business perspective
Assessing performance across all of the products and services that your company offers, year over year, has numerous benefits. It helps:
- Establish growth trends or downward trends
- Overlay relative investment against the increase or decrease in market share to show if the investment is declining for internal or external reasons
- Evaluate the market segments by juxtaposing actual sales numbers and marketing performance with search volumes and search patterns
- Identify the early warning signs of marketplace contraction or stagnation and avoid wasting resources
- Focus on the niches that are most attracted to the specific product lines
understand how large is a market subset and what is the relative cost to entry to that space
- Determine future growth potential by understanding how many sales the company has in a specific marketplace and how many sales resources can be brought from other market segments that are not performing as well
- Discover whether increasing marketing spend will enable the company to buy market share or not
SMARTech Convergence + Realistic Business Goals
Through SMARTech Convergence, your company overcomes the biggest hurdles in goal setting—internal and external disconnect, and it achieves complete alignment before setting goals and executing on tactics.
In a SMARTech Converged company, internal stakeholders in Marketing, Sales and Technology Departments are operating in concert with the overarching business goals; third-party service providers are able to better execute against what it is they have to achieve from a business perspective. The company is able to better measure vendor performance because the necessary Technology is in place.
Next: How To Align Your UVP
To achieve growth, a company needs to attract a larger number of its most desirable customers with a highly-relevant value proposition. The next step on your SMARTech Journey is aligning your company’s UVP with customer needs.