THE PARETO PRINCIPLE CUSTOMIZED

You must have heard of the Paretto Principle (also known as the 80/20 law). Rubbish? That is right. I do not remember the exact words but I am darn SURE that I had made a similar comment when I was first discussing this principle with a live person (not a book). What is this principle anyway and what’s it doing here within a discourse of sales & marketing of capital equipment? The principle states that 80% of your input is responsible for 20% of your output and the balance 20% of your input brings about the other 80% of your output. And let me also tell you ..IT WORKS with approximations of-course.

If  taken into selling, the principle will state that 20% of your business comes from 80% of your customers and the balance 80% of your business comes from 20% of your customers. This is valid principle everywhere but when you are selling high value equipment, the South East Asian Market is just a little different.

• ·         10% of your customers can bring you 0-20% of your business revenue.
• ·         30% of your customers will bring you 80%-60% of your sales output.
• ·         60% of your customers will bring you 20% of your sales revenue.

This is one of the main differences that at any time you will always have a joker (or two jokers; God forbid). What does the joker do? The Joker is something you can never rely on until you get the Purchase Order. Nevertheless, why? You will ask. Is he a sadist? Does he get pleasure from seeing you as a victim of tensile and compressive forces? That’s not it friends? A Joker is someone to whom a business commitment means nothing. He is so whimsical that he can take an approach at 180 degree to the original at the last minute. For the joker, money counts,period.

I don't say that the joker can stop your orders. If you have been true to the marketing principles and if your offer is suitable, you can bring him around, but your target date is already gone. So, how do you defeat the joker in his own game? You don’t.  The only thing you do is to keep an allowance for him. Never underestimate the joker. He has got enough clout to stop all your orders. Be on good terms with him.

This is how you should think of devoting time when you are fixing up strategy. And, unfortunately in SE Asia, directors’ do not plan as a team. Unless you play as a team and so get them all-in (up to Dy. Manager level). Tell them the strategy. Ask for feedbacks. Do this and you will be shocked. You will realize that you have huge creativity with you.. The fact is that you have failed to tap it. How you tap it is the key here!

Finally, do not ever make heroes of your sub-ordinates or encourage them to be heroes. In Capital Equipment Marketing, heroes are losers . We once more quote an actual general Gen. Patton. Gen.Patton just before his victorious run is supposed to have said to his troops “Remember, no bastard ever won a war by dying for his country, he won it by making the other poor dumb bastard to die for his country”. There are no heroes in a marketing victory. Everyone has to contribute to it. If not, run for your life because you are about to be annihilated. What you are feeling is the eye of the hurricane!

Cheers then folks,

Till the next time

it's BILBO

IN A LIGHTER VEIN

.I remember that in this age of self-help books and articles, I had joked to a friend that a book called "BRAIN SURGERY-You Can Do It" would be a real find .Guess what I found, in a second hand book shop in Ranchi, a fat paperback with the name " The Brain-A User's Manual"..a picture of the cover given below.

From now on, we will include some sentences in this blog, border it off separately -give the space within a different color and call it ..In a lighter Vein. Your comments and suggestions are always welcome and appreciated

The Chutzpah of "Commercial Terms"

The Chutzpah of "Commercial Terms"

Ask any fresh engineer who wants to make it in Sales & Marketing, his or her 'opinion' on Commercial Terms. And the chances are there that he or she will look wary all of a sudden. A look which without saying anything conveys all the ridicule in the world on your chutzpah. When I first started working, my General Manager (a gentleman indeed) tried to explain it to me. He said "Ok-imagine you are in this restaurant and you want to have some fried chicken, the chicken is the technical part and the bill is the commercial part"! Do you understand? Well I didn't -I thought what's engineering has to do with a chicken tangri kebab. But I said "right sir.. I do" .Mr Ghosh looked skeptical but left it at that.

Today if he asks me I would say " Commercial Terms! It's the all in all of what I do" for a living. (But  unfortunately, it appears that he has gone to never never land-so my repartee will have to wait)

Have you ever come across the word "techno-commercial"? You must have. "Commercial terms" is the commercial part of your proposal, quotation, offer, Tender etc. which is equally important as the technical, if not more so. 

Let us suppose that you have talked in detail with the decision maker and both of you have come to a conclusion that you are going on for a sale. How do you proceed now? You submit a proposal. You start by stating in it the inputs from the customer. Then, you state the discussions i.e. a summary of the system which your customer wants to buy so that the input conditions match (you have already written down the inputs) . You state your price. Is that it? No friends, I'm sorry to say that that's not it.

Your proposal will as effective as a "one-eyed french speaking, laughing hyena" for selling, as there is plenty of information missing. The following are just a few areas of information missing.    

1.     Price basis : The prices that you mentioned are with included transportation costs?
2.     Delivery: You propose to deliver the material in what time period? Immediately.. in 1   month? After three months?
3.   Payment Terms: How do you want your customer to pay you. Do you want an advance? If so can you give a bank guarantee for that amount. How about the rest? Do you want the balance on a C.O.D basis or through Letter of Credit. Etc etc...
4.  What happens in case of delay i.e. You delay the material delivery or the customer delays to pay you.
5.    Validity : Say the customer calls you up or the customer’s purchase department. places the order after a year, can you accept it? Of course not but have you mentioned the validity  of your offer anywhere in your original proposal. Validity should be always mentioned. Some people think that a proposal should be like a telegram, but I always like to be clear in all aspects.

All these points regarding the sale and which you propose to your client to be applied against the sale are called Commercial Terms. Remember, you sell only when you get your money. Say you have sold three high priced machines (total price 10 million Euro) but all of them have inherent credit for a year. Then start hunting for a new job, as you'll get the pink slip, without fail.

Your commercial terms should be so thorough and you should know them like the back of your hand. With one reading, you should know what conditions govern the sale. Your success or failure depends upon commercial comprehension as well. COMMERCIAL TERMS should arouse in you the same interest as the technical system you are selling. If they do not, then either develop it or get the hell out selling, dude!

The commercial terms section is the area where you can use your experience and make your offer the most attractive. Here, there are no guidelines and how you do so depends from case to case and your experience. For high value capital equipment, commercial terms generally vary from client to client.

So we have more or less finished commercial terms, 

See you next time then friends

And till then,

Love

Bilbo