Archive for Theory-of-Constraints
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:
The Marketing Funnel
Posted by: | CommentsThis is a simplified version of how a hourglass would look. As you can see the natural progression of the flow (know, like, trust… flow to the right), the enablers or information to move the process forward is provided above each step. Taking a group of current customers, you can identify this in your current process. If this seems difficult, make a certain group that you can segment and document the process. Many companies will find huge gaps in their processes which are supported by other departments such as sales or service or maybe by repetitive marketing.
A quick primer for anyone that has not followed my blog or listen to me talk about marketing for over five minutes is that I adhere to the Duct Tape Marketing definition of marketing: Getting someone, who has a need, to know, like and trust you. Now, when you have a marketing system in place this expands to – getting someone, who has a need, to know, like, trust, try, buy and refer you.
One purpose of the hourglass is to provide clarity to an individual or organizations marketing process. This gives you the ability to walk a prospect through the process, understanding where they are at in the process. Typically, I have a customer add the activities that he uses in each stage of the hourglass. Don’t look at this as just a simple exercise for a small organization. I use this in larger organizations by just repeating this process for each sales channel they may have. The secret to this is that you really forces you to layout your marketing process and is really the beginning of development of your marketing process.
The purpose in creating your hourglass is to achieve better cooperation of the multiple phases. Each interlinking phase depends upon the other links. In each of them you will have different capabilities, normal variation and a changing workload making it practically impossible to balance. Using the TOC(Theory of Constraints) we will find one phase of the hourglass more limited than another. Since we have determined that the whole hourglass is dependent upon the cooperation of all phase, the weakest link determines the strength of the chain.
