Archive for Marketing
Exploiting and Subordinating your Marketing Constraint
Posted by: | CommentsA continuation of my blog posts of Using the Theory of Constraints with your Marketing. We are concentrating optimizing the Throughput of your marketing utilizing the Five Steps of Continuous Improvement, Steps 2 and 3.
Step 2. Exploit the system’s constraint
This simply means; Getting the most out of the weakest link or phase. This is a great time to use the Lean tool of Kaizen. Getting rid of all waste associated with the systems constraint is the first step I would take. One of the things that TOC and Lean both encourage is to observe the process with people very familiar with it. They may tell you that this always happens or maybe an obvious statements such as we don’t have enough people. Looking at the waste you will readily identify some crucial changes.
Put a cost to the constraint. If this is your weakest link, improvement in this area will maximize the entire process. Understanding the cost of the constraint is imperative in moving forward. Once you have a cost assigned to the constraint, you start looking at improvement slightly differently. Observe how things move through a constraint. Hiring that one extra person, holding additional events, dedicating a phone line or a live operator could make significant differences. Using an tip from Rapid Product Development, you may want to parallel this process. This allows simultaneous actions versus many of the different types of time constraints detailed in or list of definitions.
Step 3. Subordinate everything else to the above decision.
Increase output through the constraint(phase) increase output for the entire system. I sometime use the analogy when a salesman senses an order. He puts everything else on hold and dedicates all his resources to getting that order. It is also very similar to the Lean method of Kanban. Kanban is a method of only releasing parts as needed through the process. A card must be given to the preceding event before that phase can start.
Interesting thought may be as you manage marketing campaigns or events that you only release calls, direct mail based on responses from your prospects. A proactive drip management program may solicit certain key actions before additional material is released automatically.
In manufacturing, I have seen a quality station placed in front of the constraint before allowing parts to move through the process. In marketing, you may add a qualifying step so the constraint or process only receives a more qualified prospect.
The next post will be steps 3 and 4.
Related Blog Posts:
Using the Theory of Constraints in Marketing
Identifying your Marketing Constraint
Identify your Marketing Constraint
Posted by: | CommentsAs I mention in a previous post: Every System, typically has relatively few constraints. However, to operate at maximum efficiency, the limiting constraint must be identified. Five Steps of Continuous Improvement help identify and improve the constraint. How do I correlate a Marketing Funnel with the Theory of Constraints? TOC uses the weakest link, a chain as a visual in working with throughput.
Below, I have outlined my basic understanding of the Theory of Constraints from my readings and experience. If you would like to dive deeper into this subject start with the AGI-Goldratt Institute website and there is whole slew of books, trained consultants(Jonas) available throughout the country. I believe the Theory of Constraints principles are a requisite for continuous improvement.
Before starting with the 5-steps, there are two prerequisites:
1.Identify the Goal of the System /Organization
2.Establish a way to measure the progress
The most common goal is to make money and that should be our overall purpose. It sometimes can be overlooked in increasing sales, client retention and many other factors. Many will argue but increase sales can hide many problems. The companies that fail the quickest in a recession are the ones that were living on growth without really generating income.
There are several ways to measure progress with the most common being Throughput, Operating Expenses and ROI. Going into too much detail about how to use the ratios is beyond the scope of this blog. The important thing to remember is that TOC methodology values Throughput and it as the best means to fuel growth. TOC then looks at Inventory(Prospects) second and operating expenses third. So our concentration will be optimizing the Throughput of the Marketing Funnel utilizing the Five Steps of Continuous Improvement :
Step 1. Identify the system’s constraint.
Step 2. Exploit the system’s constraint.
Step 3. Subordinate everything else to the above decision.
Step 4. Elevate the system’s constraint.
Step 5. If a constraint is broken (that is, relieved or improved), go back to Step 1. However, don’t allow inertia to become a constraint.
Starting at the beginning:
Step 1. Identify the system’s constraint.
The system’s constraint is the phase or part of the phase that resource which limits the output of the entire system. Start following your actions and you may find out that your bottleneck is not just getting more prospects in the door. If you can monitor actual numbers, you may be amazed at what is happening to your prospects(inventory). This is where we need to identify the constraint , where is your constraint?
The easiest way in a manufacturing analysis is to walk around and see where the work is piled up. It is not that much different in a marketing process. Walk around and see if there is a pile of sale presentations waiting to go out. You may find people waiting on financing to be approved. Maybe, inconsistent delivery of Newsletters and so forth.
If you have done a good job of building your marketing hourglass, you may be surprised on how easy it is to find. You may be so lucky to be able to eliminate parts of a step, not the entire step. Start internally, as you gain internal control you will also gain the respect of your customers and vendors. This may help you significantly when you ask them to assist you in late improvement needs.
Our Next blog will continue with step 2 and 3.
Related Blog Posts:
Setting up your Marketing HourGlass
Posted by: | CommentsAnother way of using the hourglass is to determine the number of prospects(inventory)
that you need in each part of your hourglass. This is tremendous opportunity to really understand what is taking place in your process and will enable you to determine what is and what is not working. Where is your bottleneck or if you have ever read The Goal, where is your Herbie?
In your process do you understand your conversion rates? Are you converting 50% of your prospects from the Try phase to the Buy phase? You may not know each of these, but if you know several of them, you will have the ability to interpolate some of the others. The ability to create this chart will allow you to significantly increase your sales result. Have you ever considered where your constraints were in your marketing? Many people spend the majority of the time, money and even skill in developing new leads. They may be just piling prospects(inventory) in front of a constraint. Going through this exercise may significantly increase your awareness on what is your limiting factor.
An obvious example, is we alll know that a referral is our best form of creating business. Duct Tape Marketing emphasizes referrals and in fact, John Jantsch, author of DTM, next book is based on building a Referral Marketing System. I mention this, because, I believe your marketing is incomplete without a formal Referral Marketing system in place and by the way, I offer such a package. Seldom do I see the true cost of what it means to gain a referral. I think the chart below, demonstrates quite vividly what it means in the overall marketing flow. If you get a repeat buyer or a referral, you would drop them into one of the phases above. Notice, how it significantly it could change your marketing efforts. Consider the dollars and time you spend in the top of the hourglass. How productive would your efforts be in using the same amount of time and effort in the bottom of the hourglass?
We realize that referral efforts are probably short changed in most marketing practices. But that may or may not be your limiting factor. Every System typically has relatively few constraints. However, to operate at maximum efficiency, the limiting constraint must be identified. The Five Steps of Continuous Improvement from the Theory of Constraints methodology help identify and improve the constraint. That is the next stage and next blog.
Related Blog Posts:
