Marketing Sales & Advertising - The Business Firm

In this episode, Steven Mario Cavallo discusses many aspects of how to grow your sales, how to do business development effectively and efficiently; and also brings you information about cultivating business using the LinkedIn platform – the world's biggest professional network.

Today we focus on the system that drives sales revenue, as this is usually the focus of most businesses' efforts. Note however, that an increase in sales does not necessarily result in increases in profits, as large volumes often require low margins.

Certain market conditions must already exist in order to make a meaningful number of sales:

• Market must be of a viable size and have buyers with the economic means to purchase
• Buyers in that market must have a need they want to fulfil with your product or service
• Buyers must be made aware that your type of product or service exists and how it benefits them

Certain conditions must be met by the firm in order to make a meaningful number of sales:

• Your business must have a reliable supply of the product, or the capacity to produce the service you sell
• You must have adequate distribution (either physical or virtual) through which to sell (either owned by you or supplied to the market via distributors)
• Most importantly, your product or service must fit the actual need the market has (i.e. it must effectively solve the problem, or cater to the needs of the buyers in that market).

CRITICAL: The buyer must perceive that your good or service provides them with more value than the monetary value they've forgone. In this way, a small component or ingredient that saves a business a million dollars a year (or makes them an extra million dollars a year) is WORTH a lot of money to the buyer, even if it costs a few cents to make. (e.g. infrared heater for commercial painting industry).

If your buyers perceive the value they get is less than the dollar price of your offering, then either your price is too high or you need to develop your product further (or create a new one that more directly fills their needs). Best practise is to conduct research that gives you a detailed understanding of what buyers actually want, and then go make it to that exact spec. That way, you have an offering that 'ticks all their boxes' and appears custom-made for them.

LEAD GENERATION

From a microeconomics perspective, you must know the meaningful market segments of your buyers

• Consumer
• Businesses
• Government
• Geographic
• Demographic (age, income, education)
• Size
• Cultural
• Industry classification (ANZSIC in Australia, NACE in Europe, UKSIC in Britain, NAICS in North America)

Understanding the problems from the perspective of each of your segments. Whether you sell to consumers or business, always be certain on how your product or service takes their specific pain away. Remember, each segment has different pains/needs/wants so alter what you tell each so they only hear what is relevant to them.

Choose appropriate promotional channels and methods

• Advertising
  • Trade magazines (companies that supply to specific trades)
  • Television and radio (broad based appeal, FMCG, lowest cost per impression)
  • Newspapers (ability to include more detail in an ad, cut-out coupons)
  • Online (interactive, control costs, able to target niche interests via Facebook ads)
• Promotion via independent distributors or satellite branches (push initiatives such as holidays for highest performing vendor)
• Networking events (represent your company where influencers are, promote to industry groups)
• You must have a soundly designed referral system that generates new customers automatically. There are certain attributes of such a system that are critical, so ensure you engage a firm that understands those principals. If set up correctly, it can be extremely powerful in growing your business as is evidenced in the referral programmes we have set up for clients.
• Public relations, publicity, events etc. (if your business has notoriety, new invention, provide commentary to current events of controversy)

Include an appropriate call to action

• Toll free number
• Visit a store or distributor
• Book a free consult
• Go to the website
• Click to initiate chat session
• Click to buy now (online)
• In app purchase

SALES MANAGEMENT

Sales force in the organisational structure

• Best integrated as part of the marketing function
• Sales Manager, Advertising Manager, PR Manager, Market Research Manager, Customer Service Manager all report to the Director of Marketing
• This ensures coherence and that all outward efforts are unified (e.g. nothing worse than a sales rep that is not aware of a current special when quizzed by a customer)
• Ensures as customer feedback comes back to organisation, it is properly assimilated into product development
• Most importantly, it gives the organisation a market orientation (i.e. everything is aligned with the needs of the market)

Sales territories

• Ensure the basis by which you assign territories is based on the characteristics of the PEOPLE that comprise the market, i.e. the nature of the buyers. This may not have any correspondence to commonly accepted geographical regions, particularly within a single city.
• Territorial design is at optimum when all districts equal in both sales potential and the sales reps' workload.
• When sales potentials are equal, then it is easier to compare the sales performance of individual reps and it also improves the morale of your sales force.
• As population density shifts over time, you must adjust the territories to match or those you rely on to create your revenue will have disputes amongst themselves.
• Overlay all targets from the different segments onto a geographical area to fully understand the total sales potential of that area. Sales reps are very expensive so aim to minimise travel time wherever possible, and train each rep to be able to properly service different types of customers in the one area to avoid duplication of sales routes by multiple reps. This could drastically increase the number of sales per hour.
• Use computer aided tools that help solve the travelling salesman problem when in drawing the most efficient sales routes.
• Build incentives and rewards to encourage high sales performance in your staff and avoid disinterest.

Ensure you have the proper amount of sales supervision

• Enough to provide training and assistance
• Adequate enforcement that company policies are followed
• Monitoring of performance
• Provides relationship, encouragement, assurance and recognition for your people out on the road alone, facing rejection after rejection.
• Formal motivational drivers e.g. team goals, personal goals, enjoyable work culture, job security, belonging to a strong social structure (look forward to coming back to the workplace at the endo fo the day to see their work mates), respect, involvement in regular staff meeting to contribute and feel 'ownership' of the work at hand.
• Improves morale and leads to greater sales performance

SALES PROCESS

Let's visit some of the most crucial elements in personal selling as it pertains both the B2C and B2B. I will touch on areas you cannot afford to be weak in as mistakes here result will prevent any chance for sales growth, no matter how fabulous your product or service is.

Readiness of your sales staff

• Are they adequately trained?
  • Knowledge of each customer segment and its specific needs
  • Up to date with all current specials and has copies of all advertisements
  • Guidance of most appropriate offering matches each type of customer
  • Product knowledge
  • Organisational strengths and competitive advantages/disadvantages
  • Sales technique
  • FAQ (overcoming common objections, returns policy, pricing authority)
• Indoctrination and belief
• Sales aids
  • Scripts
  • Brochures
  • Financial simulations that prove the financial viability for customers to buy
  • Demonstration stock
  • Video
• Provide your sales staff and support team with good CRM and tracking systems so they are informed of the customer details, purchase history, delivery status, financial status and case notes of previous interactions with your organisation.
• Even the high-end versions of off-the-shelf software such as QuickBooks Pro or Reckon Premier or Xero can do this reasonably well, if the creation of your own custom database is not feasible.

Consultative Selling Approach

• Is indicative of a relationship-based approach to selling
• Salesperson focuses on the needs of the buyer (not on their own needs)
• The client has an issue or problem, which is discussed and understood by the salesperson
• The client is treated as an equal in this consultative process
• The salesperson then solves the client's problem as comprehensively as possible by suggesting the products or services that suit the needs of the client (only suggest things that are relevant)
• If the buyer understands the seller can remove their pain and the proposed product or service is perceived as more valuable than the asking price…only then can their be a sale.

The salesman that talks too much and doesn't actively listen to the customer cannot transfer to that customer a full appreciation of the incredible work done for them, by everyone in your business. The full value of your work can only be understood when the entire picture is revealed. No professional filmmaker would ever allow an incompetent projectionist to obscure two thirds of a cinematic masterpiece from the audience's view.

Group presentations

• Common when selling to businesses
• Presentations are often made to a panel of professional buyers, each of whom represent a different functional department within the organisation: e.g. operations, marketing, finance, engineering
• Ensure the presentation covers the needs (i.e. solves the problems/ticks to boxes) that are unique to each of these departments (i.e. has a specific part for each of the panel members)
• Make sure every person fully understands how you can solve their problem or satisfy their need
• Much more effective to answer questions throughout the presentation, rather than withholding them until the end
• Include quantitative and qualitative proof that will help the panel (or individual) arrive at a positive purchase decision (e.g. calculations using their real numbers to give reliable estimates of savings; or photographs and video or before/after results; and wherever possible, live demonstrations that involve the audience such as torture tests).

If you sell to resellers, clearly communicate how your product or service is commercially advantageous to them:

• The resale-ability of your product and how easy it is for them to sell
• Opportunity for greater sales volumes, more gross profit on resale and is cheaper for them to acquire, has lower transport costs, can be delivered more quickly, proximity means they need to warehouse as much etc.
• Emphasise that you provide superb training support, marketing support, easy ordering, easy returns for returned items, favourable credit terms and another other benefits.

Responding to objections and problems

• Common types of objections
  • Related to the customer's situation or attitude (e.g. loyalty to a current supplier)
  • Related to your product or service (e.g. price, missing features)
  • Related to your company or the salesperson (e.g. company reputation, rep is too young)
• Receiving objections
  • Anticipate and prepare (be ready for the common concerns)
    • Your sales staff must never avoid objections
    • Analyse their background and cause (to understand them)
    • Prepare sheets for your sales force detailing common objections in each segment, with the appropriate responses
  • Be positive and confident, but never cocky. Your salespeople's goal is to provide genuine help, not win an argument
  • Your staff should deal with each objection as when it is raised or the buyer will not hear any more of what the salesperson says because their mind will be stuck on the unresolved issue and so block any chance of a sale
• Objections to Price (3: you're too expensive, it's outside my budget, it's not worth the money)
  • Price and value
    • It is your sales team's responsibility to ensure the buyer has a full opportunity to examine value rather than the initial price.
    • Very few buyers can buy solely on price (this is possibly only with commodities)
    • Make this your sale team's mantra: "Value of the total benefit of owning a product/service compared to the total cost of owning it"
    • The total cost of ownership includes the initial price, plus the cost in money, time & inconvenience of operation, service maintenance or repairs, over its useful life.
    • The total benefit of ownership includes both tangible benefits (works correctly, is reliable, durable etc.) and intangible benefits (reputation, vendor support, services, prestige, peace of mind, improved self-image etc.).
    • Ensure your sales force has the ability to properly demonstrate the lifecycle costing comparisons using real-life figures over different time periods that provide the total cost of ownership is less with your product, despite the higher initial price. It is essential you provide them the tools to do this easily and accurately (e.g. a spread sheet or online calculator).
    • I have done this very successfully a number of times where I sold large-ticket equipment to businesses that were hundred of thousands of dollars more expensive than a competitor's offering. In every case, the product was genuinely better for their operations and I was able to provide them unequivocal mathematic evidence of this, using their actual input variables and to project the resultant savings they would enjoy over the next months and years. What initially looked to them like an overpriced offer ended up becoming a purchase they simply could not do without. Every sale I presided over went through.

Building relationships with key customers

• Your sales staff should be investing in customers at a genuine level and show interest in the personal lives of the buyers they come to know (e.g. remembering birthday, enquiring about kids' progress etc.)
• Good account management
  • Integration of sales into the marketing function (keeps sales staff more up to date with market trends, gives buyers a greater sense that your organisation is a market leader)
  • Develop a documented account management plan that includes all customers (don't allow a haphazard approach to customer care as it will alienate customers and cause sales atrophy)
  • Reduce entry friction wherever possible and build maximum exit barriers for customer growth and retention.

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In this episode, Steven Mario Cavallo discusses luxury retailing, upmarket brands and selling high end goods and services.

What are luxury goods or services? (to answer this question , we need to look at the definition of some terms used in economics)

In economics, inferior goods are items that exhibit a negative elasticity of demand; that is, an increase in income will lead to a decrease in demand for that good, so consequently those buyers then shift to more desirable goods. Examples of inferior goods include: cabbage, cheap car brands like Hyundai, generic label FMCGs, some financial goods such as pawn-broker loans and many of the items found in discount stores or category killers.

A luxury good is a good for which demand increases more than proportionally as income rises, and is a contrast to a "necessity good", for which demand increases proportionally less than income. Luxury goods are said to have high-income elasticity of demand: as people become wealthier, they will buy more and more of the luxury good. This also means, however, that should there be a decline in income its. demand will drop. If the elasticity of demand is greater than 1.0, it is a luxury good. Price elasticity of this nature represents a wonderful commercial advantage in good economic times…(story…e.g. of ladies fashion boutique on King William Road during 1991 Australian recession).

The prestige-value of some superior goods is so high that a price decline would lower demand; in which case they are referred to as Veblen goods. Examples of Veblem goods are ultra-luxury items such as Rolls Royce cars, iconic wines such as Penfold Grange Hermitage, handmade jewellery from Italy, exclusive perfumes from France and Rolex watches from Switzerland. The ultra high price of these items (which is known to all) is used by purchasers as a status symbol. These goods are at odds with the Law of Demand in that if their price were to be lowered then they would experience a decrease in demand.

In any given market, regardless of the good or service, there exist buyers willing and able to spend significantly more than the average market price per purchase occasion. Therefore, almost all markets have a luxury segment. known industries include: automobiles (BMW, Mercedes, Ferrari, Maserati, Jaguar); yachts (SunReef), wines (Penfold Grange Hermitage, Chateau Margaux) bottled water (Perrier), coffee (Illy), foods (Tre Marie panettone), watches (Rolex, Breitling), clothes (Giorgio Armani, Gianni Versace, Zegna), jewellery (Bvlgari, Cartier), electronics (Apple) and high fidelity audio (Bang and Olufsen, Bose, Denon, VAF). While the number of units sold in the luxury segment is relatively small, the profitability per unit is very high. Providing the rest of the range provides economies of scale to cover fixed distribution costs, it makes sense for many businesses to develop a luxury offering to capture spend from the affluent buyer. In many cases however, if a mass manufacturer is perceived as unappealing, then it is better to launch the luxury product under a new brand: for example, when Toyota wanted to sell cars at the higher end of the automotive market, they badged their cars as Lexus, rather than Toyotas.

There are three main macroeconomic drivers that fuel the growth of luxury brands:

• Globalisation
  • International tourism
  • Web-based, instant, borderless communications spreading brand awareness around the world
  • The expansion of distribution systems around the world of luxury brands
  • Integration of world views, product ideas and culture (socio-political standardisation)
  • Growing middle class (and new millionaires) in the former third world
  • Leads to conspicuous consumption (to show off wealth)
• Consolidation
  • The merger and acquisition of many smaller companies into much larger ones. For instance, LVMH acquired Heng Long´s leather business in Singapore in October 2011
  • The players in the luxury market are merging and cooperating in order to gain greater control over raw materials supply, in order to produce exclusive goods and lower their total manufacturing costs.
  • The ownership of brands across many categories
  • Independent businesses closing and being replaced by franchises of famous brands
• Diversification
  • Existing mainstream brands create a luxury entrant in a new market (e.g. Toyota creating the Lexus brand)
  • Alliances with a complementary company (Mobil and BMW)
  • Trademark and brand licensing (you don't own the brand, just 'loan' it) e.g. Apple allows third-party manufacturers to create products that work with their hardware. The licensees win because they build a business, and the licensor of the luxury brand (Apple) forms an entire accessories industry around their core product, at no cost to them; and collect licensing fees in the process

Some statistics on luxury brand retailing. Largest markets:

• Italy
• France
• Germany
• Switzerland
• S.
• K.
• Japan
• Spain
• Brazil
• China
• Russia
• Australia

According to EuroMonitor International, the largest luxury brands in 2016 are: Giorgio Armani, Prada, Gucci, Tod's, Dolce & Gabbana, LVMH, Moët, Hennessy, Louis Vuitton. The global market for luxury brands is expected to grow at an average world rate of 3.5% to reach almost USD 400 billion by 2020. Most of this growth will occur in developing countries (Asia, Africa) due to improved standards of living. The Chinese market for luxury goods is expected to be some 900 billion Euros in the next few years. This is enormous incentive for the large luxury brands from Europe and America to create distribution there. However, it is important that advertising in countries outside the brands' home country is done carefully and with regard for the differences in culture.

Let us look at the business of luxury retailing through the lens of the marketing mix as we touch on a few of the most important aspects that pertain to management.

Product

Refers to the physical good or all the features of the service offering. What you can do:

• Product mix
  • WIDTH: the breadth of different products that a firm sells to their customers
  • focus solely and sell only one type of product to specialise in (Rolex only makes watches)
  • offer numerous types of products for diverse markets (Versace makes clothes, hotels, jewellery)
  • DEPTH: the number of varieties at each width (for example, a luxury watchmaker would have a depth of two if it sold two types of watches (round face and square face) and each were available in two colours.
• Product Line Stretching
  • Often used to add a 'high end' product to an existing range (e.g. aged balsamic vinegar from Modena, priced well above normal)
• Quality
  • Features (luxury items must surpass customer expectations: e.g. the Novotel overlooking Darling Harbour in Sydney lacks nothing (room, food, view, transport, etc.) but at the same time, must avoid gimmicky extras: e.g. cup holders in a Ferrari)
  • Engineering & design (blueprint for how good it will be) e.g. (BMWs drive better than Fords for a reason!)
  • Built production & conformity to design specs (how well it is manufactured)
  • Materials (only the finest wool is used in a Zegna suit)
  • Stringent quality control in manufacture/service delivery (zero tolerance of errors)
  • Strive for impeccable customer satisfaction
• Try to extend the product lifecycle for timeless pieces (Steinway grand pianos)
• Maintain model heritage over time (e.g. Rolex still make Perpetual Oyster; Alfa Romeo still make Giulietta)
• Aim for 'shock and awe' that your offering can not be meaningfully compared to any other

Augmented Product

• Warranties
• Packaging
• Software
• Delivery
• Training
• Certificates or documentation (e.g. Salvador Dali lithography from Peggy Guggenheim Museum in Venice came with a framed certificate of authenticity
• Induction or ceremony (e.g. service offerings come with tours etc.)
• Service entitlements (e.g. prestige car insurance policies come with a 'replace with new' feature)
• Loyalty privileges (club membership etc.)
• Service (talk about this a little later)
• Ambiance (talk about this a little later)

Price

Always set high to reflect the value of the brand and the reality of the cost structure of producing and retailing luxury goods. Remember the effect of lowering price on Veblen goods' elasticity? By its very nature, luxury retailing could only ever use a market skimming price strategy anyway. To not do so, is to no longer be a luxury brand.

Discounts should never be used as they reduce the 'reference price' in the consumer market

Place

Distribution should remain limited and very tightly controlled. Luxury brands must resist the temptation to dramatically increase the number of physical stores they supply, as the increase in short term sales can seriously jeopardise the profitability of the brand long term.

Be careful with the type of distribution channel – pick the most highly regarded channel in your category. For example, luxury cosmetics should only ever be sold through high-end chemists, beauty salons and premium department stores like David Jones. Choose socioeconomic locations carefully.

Document your luxury brand's high standards and train your distributors, then police their upholding those standards. Where necessary, eliminate distributors that do not uphold the brand's standards. Wherever appropriate, require your distributors to stock only your product. (May not always be possible: e.g. a pen retailer could not feasibly stock only Mont Blanc pens; but a Mercedes Benz dealer would never be allowed to also stock BMWs; and Gucci franchisees only stock Gucci products).

Promotion

Obviously, must convey luxury, exclusivity, prestige, a feeling of 'being special' across all parts of the promotional mix; both in terms of strategy and execution.

Only use appropriate media vehicles: e.g. choose glossy national magazines as opposed to a neighbourhood newspaper. Always use the highest possible stock on printed materials (e.g. thick paper). Ensure the highest possible production values: e.g. videos must be professionally made in high definition/cinematic effect; website must be stunning; and graphic design must be world class. Anything less cheapens the brand. If you do any sales promotions in order to achieve short term sales boosts, these must NEVER result in a discount in the retail price. Use cobranding partnerships or service add ons instead to increase the perceived value. Websites must be function pristine, be responsive, of impeccable taste and integrated with the corporate brand

Physical Evidence

It goes without saying that the quality of all physical evidence that is associated with luxury brands must be extremely high and must convey all the prestige and the unique character of the brand. If you are selling a luxury service such as such as an opera performance or executive coaching, then you must work extra hard at developing exquisite physical evidence to provide the cues your customers need in order to make an assessment of the quality of your brand, in particular if you sell a high credence service they can't easily assess the quality of, such as chemical engineering, medical advice, marketing consulting, computer networks maintenance etc. But for all luxury businesses, even those selling physical goods; physical evidence provides material proof that reduces purchase apprehension and the confidence that the luxury item indeed offers the value it promises.

Keep in mind that interactions with other customers will have a large impact on buyers of your luxury brand. (protect clients from non-clients)

Physical environment in which brand is bought or consumed

• Ambience (luxury health spa versus a grotty gym)
• Spatial layout (plus impact on service consumption) e.g. Apple stores
• Corporate branding (signs, symbols, artefacts) Ermenegildo Zegna store have identical
• Building itself & design & elevation & view
• Interiors
• Packaging (last chance pitch & differentiator) i.e. could do entire episode on packaging!
• Paperwork (invoices, tickets, programmes)
• Furnishings
• Signage (high quality, professionally installed, perfect finish, integrated with brand)
• Uniforms, dress code
• Business cards

The two biggest determinants of your organisations ability to deliver high levels of customer service quality (which is critical to luxury brands) are two marketing mix variables of People and Processes. In fact, the most widely used measure of customer service that is used in management practise is in the SERVQUAL model, which tracks: reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding the customer and tangibles. Of all of these, only the last relates directly to the physical product. All the others are functions of the People and the Process variables as they impact the strongest on customer satisfaction.

People

Begin with a proper understanding of whom the customer expects to deal with when interacting with a representative of your brand. The brand promise comes to life in the people that represent it. Buyers buy from people that they like and they can relate to, so the attitude, skills and appearance of all staff needs to be first class – even those that you don't control (e.g. couriers etc.).

The best product, engineering, promotion (ads, pr), physical environment etc. can be ruined in a moment when the attitude or the competence or even the personality of the person selling it is not up to speed. This applies to all commerce, but especially so in luxury retail.

• How you want your people to be, must first be modelled by leadership
• Develop clear expectations
• Create appropriate SOPs, training programmes, help manuals, supervisory systems (for belonging & recognition), rewards etc.
• Recruitment
  • Policies that preclude amateur intake of staff (forced professional recruiters)
  • Job descriptions that filter applicants
• Training and development
  • Frontline management
  • Learning organisation (allow for sales staff feedback loops > product development)
• Rewards and incentives
• Monitoring performance is very important (particularly in luxury services e.g. the output of a poorly performing car worker can be kept from customers by way of quality control inspections, but a bad facial delivered by rude beautician for which the client paid big dollars for, cannot.
• Your employees must be the most passionate disciples of your brand with full belief and enthusiasm

Process

Processes include direct activities and indirect activities. Direct activities add value at the customer interface as the consumer experiences the service. Many processes are supported by indirect activities, often known as back office activities, which support the service before, during and after it has been consumed. Your operations management is fused into the experience your customers will have of your luxury brand, in particular in service settings where the client becomes a co-producer in that service delivery (e.g. a singing teacher can't deliver good customer satisfaction unless the buyer (the student) also puts in effort in 'producing' the service outcome of learning).

By periodically redesigning your retail workflow and operations processes, you can get closer and better at surpassing your client's expectations.

In retailing of luxury products, having the correct processes are fundamental in delivering incredible customer satisfaction (beyond just the quality of the good). Beginning with purchasing , maintaining inventory levels, warehousing, internal shipping, scheduled cleaning of stores, accurate stock taking, electronic payment options, waiting periods, filling out forms, accounting software that displays correct price for region, effective reorder point triggering to prevent outages, how you handle queuing.

We are joined by Davide Bonanni in the Presidential Lounge. He is a luxury brand consultant from Italy.

In this episode, Steven Mario Cavallo discusses business growth.

Growth is a broad concept that encompasses many aspects. Growth can refer to an increase in revenue, an increase in distribution, and increase in market share, an increase in a brand's salience and an increase in products or services. Each of these can increase or decrease independent of the other. Furthermore, profitability moves independent to each of these also.

Growth Strategies

If the company is new, then it has the advantage of being able to start with a clean slate. It is assumed it has no heavy investments that encumber it from freely choosing any market opportunity. In this case, the word is its oyster and it ought to adopt the marketing approach to business strategy. If the company is already established, then it can pursue growth a number of possible ways (via distribution & innovation):

• Sell its existing products to more customers (i.e. find new customers in existing market with existing products); greater market share
• Sell more of its existing products to its existing customers (i.e. get each of your current customers to buy more – increase share of wallet); greater market penetration
• Sell your existing products in a new market (i.e. same products, new customers, different market)
• Develop a new product to sell to existing customers (i.e. existing market, existing customers, but new product); e.g. Apple creates new a case for its iPhone that does something that third party cases can't
• Develop new products to sell to new customers in new markets (akin to a start up business with a clean slate) and represents true diversification. E.g. when Apple invented the iPhone it sold to a much larger market than expensive Macs sell to.

Innovation and Entrepreneurship

Innovation requires a long-term commitment to invest in a culture where people are encouraged to do research and experimentation. A corporate environment that is conducive to creativity and allows new ideas to develop is essential.

• Commitment by top management
• Commitment of money specifically budgeted.
• Commitment of time scheduled for innovation.
• Acceptance of risk.
• Tolerance of dead ends and some mistakes.
• Availability of help and support for those doing innovation.
• Reward for those who put effort into ideas and experiments
• Never allow people to feel like there is no use sharing their ideas or there is animosity toward them
• Flatter organisational structures help promote the communication of innovations
• Actively garner suggestions and involvement in the innovation process by all staff, right down to the least senior person.
• (story of lights turned off at robotic car factory…nobody ever asked him before!)
• the idea of internal entrepreneurship and ownership of projects.

Mentality and Attitude

This is about the organisational culture of the individuals within a company. It is those people that comprise the living system within an otherwise inanimate structure. This is strongly linked with the leadership and the attitudinal behaviours and the mental stance those leaders convey to their people. If small mindedness, short sightedness, ego, self-preservation, lack of ambition and avoidance of acknowledging the 'elephant in the room' are inherent in an organisation's leadership, then there could barely be any hope or reason for innovation to sprout forth from the most creative and entrepreneurial thinking people in that organisation.

What is required is a strong example of a leader(s) directing all their people into forward motion and that the natural expectation is that all are encouraged and expected to contribute to the evolution of the business and that the only acceptable belief is that 'we will…somehow'. In an environment where everyone belongs to a team mentality, where both wins and worthwhile losses are celebrated, assuming sound recruiting delivered a group of good people that want to create good works; then a fertile basis exists for significant innovation. organisation that enjoy such a rich human asset with a fervent mentality is able to make the most use of advanced thinking methods such as lateral thinking (by Dr Edward DeBono) and 10x thinking, the incredible higher-order thinking skill developed by Dr Michael Hewitt-Gleeson and famously used to build billion dollar companies like Google, General Electric and the Commonwealth Bank. I was lucky enough to have breakfast with Dr Michael Hewitt-Gleeson a few days ago and to record an amazing interview with him. You will hear that interview in this episode. Michael founded the internationally acclaimed School of Thinking in Melbourne and his 10x Thinking has been instrumental in producing prodigious innovation and metacognition in many of the world's foremost leaders from companies such as IBM, Fujitsu, Coca Cola, the ABC, Vodafone, Saatchi and Saatchi, the University of New York and the Australian Department of Defence; including Jack Welsh and Larry Page.

Leadership Psychology and Change Management

Of course, almost all organisations do not already possess the ideal organisational culture or perhaps its leadership strength can be further developed so to eclipse the market potential of its competitors. It is normal then for companies to fortify their capacity with some form of group dynamic audit to pinpoint exactly where your organisation is weak and where it is strong, in respect to its ability to disrupt its market with game-changing innovation. I strongly recommend every listener to visit the website gamechanging.com as this is one of the world's best resources to empower you to invent the next iPhone!

What about real-world managerial practises? Here are some of the strategic actions and instruments that will help your business grow.

Market Intelligence

Actively seek information that gives you clues as to what the market wants as this is where the commercial opportunities lay.

• Constantly listen to the stories and complaints of your frontline sales staff as they have the closest feedback on what buyers want.
• Survey every customer wherever possible to gain free intelligence on how to improve.
• Invest in formal market research to collect both qualitative and quantitative data
• Test ideas by doing small releases of prototypes to assess viability of innovations

New Product Development Of Physical Goods And Intangible Services.

The core product: the need or want that the customer satisfies by making the purchase. The customer isn't buying a drill bit; they are buying a hole in the wall. Charles Revlon said it best, "in our factory we make cosmetics; in our shop we sell hope".

The tangible product: this is the core benefit transformed into something that buyers can buy; consisting of features, styling quality, branding and packaging etc. A European holidays operator that takes young people from English-speaking countries on organised coach tours satisfies those buyers' needs for excitement, adventure, culture, convenience, security and the hope of romance.

Marketing Engineering

Quantitative marketing analysis uses mathematical models to help determine the potential of a market by analysing how your proposed new product or service will likely perform commercially in that market, by considering your inputs (e.g. product design, advertising, sales effort) as they compete in the present environmental conditions and competitor actions; to predict likely market outputs you can observe such as sales levels, brand awareness and customer preferences. The practise of running such simulations helps in the product development process as it provides useful research to evaluate whether your plans for growth will satisfy your business objectives, or whether more development is necessary, or indeed if the idea ought to be abandoned. Using this form of marketing intelligence before committing significant monies to manufacturing, advertising or the building of distributors; not only saves enormous amounts of money, but informs the development of a much better product that more closely corresponds to buyers' needs and as such, dramatically increases the commercial success of the new product or service.

Market Response At The Level Of The Market Place.

These focus on aggregate response and track market-wide qualities such as brand sales or market share. One very common equation used to predict the response to advertising and selling effort is the ADBUG Model as it produces an S shaped curve that simultaneously adjusts for three common phenomena inherent in markets: output is zero when input is zero; diminishing returns; and output is limited to saturation point.

Market Response At The Level Of The Individual Buyer.

Markets are comprised of individuals and we can analyse the response behaviours of those individuals. The information can be used directly to describe specific segments, or it can be aggregated to represent the market as a whole. Examples of sources of this information is scanner data from supermarkets (used to track individuals within a database) and direct marketing purchases from individuals that responds to online or traditional mail campaigns. The statistical methods used to capture individual responses return information about purchase probability. Purchase probability at the individual level is equivalent to market share at the market level. Mathematical models that measure purchase probability feature a denominator that represents all the competing brands in a market that the buyer is willing to consider at each purchase decision. This is not all the brands in the market, just those in the buyer's consideration set.

Forecasting Sales of New Products

Once the best possible product is developed and a thorough understanding of the costs of producing that product or service is reached, then a company next needs as accurate a forecast of sales as can be determined. Any attainment of short-term profits and long-term planning rests on the ability of that new offering to realise sales revenue. One of the best tools marketing science to predict the sales of new products is the Bass Model and this is the equation taught in some of the best Universities of the world within the Bachelor marketing degree. It was the superb work of Professor Frank Bass in the area of product and innovation diffusion that lead to the differential equation called the Bass Diffusion Model that mathematically predicts with a high degree of accuracy the sales of a new product or service in a population. It works just as well for large businesses (i.e. Microsoft famously used this formula when accurately forecasting sales of Windows XP over the previous generation of Windows) and it works just as well for small businesses.

Interview with Dr Michael Hewitt-Gleeson cofounder with Edward DeBono (Six Thinking Hats) and the father of 10x thinking (mentor and teacher of Jack Walsh of General Electric and Larry Page of Google and Alphabet). Michael shares insights on how to become a game changing enterprise and industry leader at a global scale.

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