When sales and marketing goals go wild

In his Harvard Business School working paper, Max Bazerman argues that:

The harmful side effects of goal setting are far more serious and systematic than prior work has acknowledged.

Goal setting harms organizations in systematic and predictable ways.  The use of goal setting can degrade employee performance, shift focus away from important but non-specified goals, harm interpersonal relationships, corrode organizational culture, and motivate risky and unethical behaviors.

In many situations, the damaging effects of goal setting outweigh its benefits.”

Sales and Marketing goals, in particular, often produce similar harmful side effects as evidenced by the following cases:

The first case describes a retail practice of “walking the [empty-handed] customer” out of the store to facilitate meeting a “market basket” goal:

“With the ever-present risk of bringing down a store’s Market Basket average, several employees said, upper management instructs store management that staffers who think they won’t be able sell $200 worth of add-ons should tell the customer the computer is not in stock

“It’s called ‘walking the customer,’ because we let them leave the store empty-handed.” said Ms. Shah, who works in a Staples store in Fountain Valley, Calif.”

The second case outlines how sales goals [quotas] can actually reduce profits by producing certain counter-productive gaming behaviors:

“While [sales] commissions may spur effort in unequivocal ways, the quota [...] can sometimes result in agents gaming the system. “Those who have already made the quota in a current compensation cycle may have an incentive to postpone additional sales,” says Nair. “Alternatively, those who perceive they have no chance of making the quota in the current cycle have a perverse incentive to postpone their effort to the next cycle.”

In any case, managers should systematically anticipate, discover and counter-measure the harmful side effects of goal setting.

For a third such case, see also: When Persistence Backfires

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The Umpqua Bank Local Spotlight

I found this The Umpqua Bank Local Spotlight concept very inspiring.  Please note particularly:

“To support businesses in our community, we sell their goods in select Umpqua stores and pass on all the proceeds. There is no cost to the business, and they don’t even have to be an Umpqua customer. Watch the short film above to see how Local Spotlight helped Northwest Wools.”

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The BBVA Innovation Center

Frank Piller directed my attention to this fascinating Case Study of Open Innovation at BBVA.  Please note particularly:

“We work with our own employees, as well as clients, universities and business schools, and third party developers,” he says. “This collaboration helps us to understand first-hand what is changing, what our customers expect from us and how to respond to their needs.”

The approach can be seen in action through last year’s Innova Big Data Challenge which attracted developer talent from across the world to compete for EUR90,000 in prize money by using BBVA transaction data to create new services, applications and insight into consumer demands.

“The result was amazing,” says Gallego. “The Challenge generated 144 high quality apps from 19 different countries, showing us new ways of working we hadn´t thought of before. In fact, some of the winners of Innova Challenge have been hired by the BBVA Big Data team because of the skills and merits displayed during the contest.”

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Does exceeding a customer promise pay off?

I found this research on the pay off of exceeding a customer promise very insightful.  Please note particularly:

“The bottom line, Epley says, is that exceeding a promise may not be worth the effort you put in. “Invest efforts into keeping promises, not in exceeding them,” he says. And this advice also holds true for businesses, which should prioritize resources to make sure they do not break promises, rather than trying to go above and beyond.

To test this idea further, Epley and Gneezy asked participants in a follow-up study to imagine they had bought concert tickets for row 10 and then either received worse tickets than promised (row 11, 13, or 15), better tickets than promised (row 9, 7, or 5), or exactly what was promised. Participants were more negative about receiving worse tickets but were no more positive – nor more likely to recommend the company – when they received better tickets than promised.”

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Is the naked product the solution?

I found this note by Marion Debruyne on disintegrated solutions very thought provoking.  Please note particularly:

“Many companies try to differentiate their offer by always adding on new features and functionality. And when they can’t differentiate with their products anymore, they add on services. All this under the code-name “customer solutions”. But this so-called “solution” can be a far cry from what customers really wanted. Adopting a customer’s perspective actually can mean stripping an offer from unwanted bells and whistles. Instead of adding on to our offering, the real solution that customers require is that we get rid of unwanted elements.”

See this Spirit Airlines story as one disintegrated solution case in point:

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There’s no better inventor than a frustrated consumer

I found this NYT story on Yellowberry very inspiring.  Please note particularly:

“Ms. Grassell, now 18, is not merely interested in joining the ranks of teenage entrepreneurs. She is bent on changing the bra industry and starting a social movement among her customer base. “There shouldn’t be so much of a hurry to grow up so fast,” she said.

Her mission began after a shopping expedition last spring with her younger sister, Mary Margaret, then 13, at a mall near their home in Jackson Hole, Wyo. “The minute I walked into the dressing room, I was like, ‘Oh my God, you can’t wear that,’ ” Ms. Grassell said she told her sister, who was in the market for her first bra. The options looked uncomfortable and risqué.”

“There’s no better inventor than a frustrated consumer,” Ms. Blakely said. “You can be a frustrated consumer at any age and see an opportunity to make something better and fill a void.”

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Can companies succeed by being the UnIncumbent in their markets?

The T-Mobile UnCarrier strategy is producing remarkable results.  Please note particularly:

“The Seattle wireless carrier on Thursday announced that it signed up 1.3 million postpaid customers in the first quarter. That’s more new customers than AT&T, Sprint and Verizon combined to attract during the same period.”

“T-Mobile has stopped requiring customers to sign service contracts, launched free wireless plans for tablet owners and rolled out a program that allows customers to upgrade their devices every few months rather than the industry norm of every two years. T-Mobile’s rivals have mimicked many of these strategies.”

“A year ago I promised that we would bring change to what I called this arrogant U.S. wireless industry,” Legere said in a statement. “We are delivering on that promise and our results reflect the growing customer revolution that we’ve ignited.”

“However, T-Mobile was not able to turn a profit. The carrier said it suffered a loss of $151 million in the three-month period ended March 31, compared with a $107-million profit for the same period a year ago.”

Can companies succeed by being the UnIncumbent in their markets?

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