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APICS Magazine
November/December 2005, Volume 15, Number 10
Lean Culture
Applying Lean to Sales and Marketing
For the service industry, the time has come
By Ron Crabtree, CPIM, CIRM
Over the last year, I have been heavily involved in helping to apply lean ideas in
different service sectors, including health benefits administration; medical labs; and,
most recently, the marketing and sales arena. Although there are elements of six
sigma, theory of constraints, and other operations excellence methodologies involved
in each case, I continue to find that lean ideas work best for getting meaningful
change underway.
Time and again business people in the service sector question how they can apply
lean ideas in their situations. Lean can be applied in several ways, but one may be
less obvious. Nearly all service industries tend to share a common paineffectively
marketing and selling in a competitive marketplace.
A lean approach
If you are scratching your head thinking about lean and marketing, that's fine. As far
as I know, no one has really done much in this spaceuntil now. Lean gurus talk a
lot about the voice of the customer and only doing things for which customers want to
pay. In fact, the latest lean waste is "knowledge disconnection," credited to Toyota.
The nature of this waste is not knowing exactly what customers need; and,
consequently, wasting resources on things they don't want while failing to deliver on
the things they do want.
Real intimacy with customer needs is a key concept, and lean thinking has a role.
Lean gurus talk a lot about customer intimacy, but they really don't tell you how to
achieve it. After all, having a successful inside reality (being the fastest source, at a
fair price, with the best quality) is not alone enough to secure success. In fact, many
companies do all of these things well, but fail miserably in maximizing them and
getting high levels of profitability. Some of these companies actually go out of
business.
Sadly, most business people fail to understand and align their company's outside
perception with its great inside reality. Outside perception consists of all the things
your customers and prospective customers believe to be true about your company.
These perceptions are built over time and based on your written and verbal
communications with your prospects. Your outside perception can work for or against
you. For example, traditional car dealerships have earned a reputation for slick
dealing that puts buyers on the defensive. Many people dread going to a dealership
and fear being taken advantage of. However, if a dealership offers a "no haggling"
price, it provides the opportunity to appeal to prospective buyers in a new way,
thereby differentiating the dealership from the other competitors.
Misalignment is deadly, as illustrated by the auto dealership example. If we look no
different from all others, then the only basis for buying is price and quality. This tired
drum is not the solution to fixing the problem.
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What is the solution? For those with a background in lean and six sigma, think about
the approach as being like a kaizen in structure, but using a six sigma mindset to
identify key variables and collect enough data to improve the effectiveness of sales
and marketing.
Before effective marketing and sales efforts can start, it first is necessary to
understand why customers and potential customers buy what they buy. You can only
know why John Smith buys the products he does if you see the world through John
Smith's eyes. Your team must identify each customer constituency and rigorously
collect customer data. This data includes surveys; competitive analysis; and, in some
cases, a full-blown designed experiment (six sigma) effort to understand the factors
that count.
Secondly, you must understand where your customers are on the educational
continuum. For the continuum, imagine a population of prospects spread out. At the
far left are prospective customers who do not have a perceived need for what you
have to sell. Unless you have the ability to present the benefits of ownership in a
compelling way, any marketing or sales efforts expended on these people is a waste
of time and money.
As you move to the right, you begin finding prospects who are beginning to think
about the product or service you offer. These are the folks who are searching for
information. You must understand what it takes to get their reticular activator working,
or in simpler words; get their attention. Most advertising efforts use something, such
as animals, attractive people, or other things, to get your attention. For those in the
service business, this is not enough. You also must engage your potential customers'
minds with your marketing and sales efforts.
As you move even further right, you encounter potential buyers who are actively
searching for a solution, but they may not be ready to buy. The message to them
needs to be customized to include more facts and education about what makes your
company different from all the others.
Finally, at the far right of the educational continuum, there are customers who are
ready to make a buying decision. Everyone on the planet is already pounding these
potential customers with tailored messages in order to catch them while they are in
the buying mode. If you have not built your business case in advance, it is too late to
educate your prospects due to all the "noise" from your competitors.
Making lean work
One of our clients in the service sector is a large Taft-Hartley fund serving union
health insurance and retirement needs. This nonprofit entity, like its counterparts, has
the burden of maintaining benefit levels while containing costs. Also, employers and
unions have more options than ever before for their benefits provider solutions.
Virtually all of this client's customers have their insurance benefits negotiated as part
of their union contract. Because this company only serves unions in a fixed
geographical space, any money or effort spent marketing or selling to companies
outside this profile is wasted.
Groups that have just finished establishing their new three-to-five-year contract are
not likely to evaluate new insurance for some time, but they should not be ignored.
Prospects in this category are definitely on the educational continuum, and they need
specific information, including communications that are periodic and educational in
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nature and information that adds value and identifies your company as the go-to
source for information and trends.
Most companies and unions seriously consider their contracts 18 months to a year
before they expire. This is the time the fund needs more direct contacts, identifying
important resources and providing specific information about options in negotiating a
new contract. The company makes personal contacts in order to build relationships
and assure its prospects that it can support them in any way needed.
During the final stages of the buying cycle, the company's field representatives visit
the employers and unions to provide customized inputs to ensure that all options and
possibilities are fully explored. When the time finally comes for a proposal, it's more a
formality than a sales pitch, as there is full alignment already established that clearly
separates the company from its competitors.
In every case, our client carefully crafts its messages to directly address the primary
"hot buttons" of the buying constituency. This is where the rubber meets the road with
our lean team's efforts to understand their customers, which we described earlier in
this article. The process is a never-ending cycle of continuous communication and
improvement of the message. The summary tools include:
foundation training to provide new skills for the marketing and sales team
an in-depth business evaluation of the current state and desired future state,
which includes understanding the customer and the psychology of buying in this
market space
competitive intelligence related to competitors, benchmarking, understanding
the macro environment, and trends
developing compelling messages and information that aligns the inside reality
with the outside perception
implementation of the marketing and sales strategy that maximizes the
educational continuum state of current and future buyers
rigorous measurement of results and continuous process improvement.
Is it worth it?
You might be wondering what kind of payoff the subject company is seeing from its
lean marketing efforts. The targeted increase in top-line sales will generate between
$10 million and $20 million a year in profits that the company can reinvest to increase
customer care and reduce administrative costs born by customers. The cost to
implement the changes is a small fraction of this, promising a return on investment of
10 to 1 the first year and 20 or more to 1 thereafter.
Finding new ways to use lean, six sigma, and other best practices in business is
evolving. Challenging conventional wisdom (such as traditional thinking about
marketing and sales) is a learned skill that must be consciously adopted. Those
companies that are willing to do this will be the leaders of the future.

Ron Crabtree, CPIM, CIRM, is a director-at-large for the Greater Detroit Chapter of APICS and the founder of
MetaOps, a consulting business that aligns inside realities with outside perceptions . He is an active
speaker and instructs professional audiences on lean and many other best-in-class business process
improvement methodologies. He may be reached at (248) 568-6484 or rcrabtree@metaops.com.