Imagine that your product was so unique and popular that it practically marketed itself, many people were excited about its features and performance, and orders were pouring in.
Such is the case for Tesla, an electric vehicle manufacturer.
But now imagine that you can’t manufacture your product quickly enough to meet demand—not even quickly enough to meet your promises to customers, who put down $1,000 deposits over a year ago. Some are so fed up they are canceling their orders and requesting refunds.
That’s Tesla’s story too.
In March 2016, Tesla started taking reservations for their new Model 3 sedan. Within a week, they had over 325,000 reservations, even though the car wouldn’t be available until the following year.
Producing a high volume of cars is no small feat, and as a relatively new manufacturer without much experience (but lots of hubris), Tesla ran into all kinds of production problems. Their goal was to produce 1500 cars in the third quarter of 2017, but they only managed to make 260!
Tesla CEO Elon Musk had bragged about sophisticated Tesla robots being able to put the cars together, but his automated assembly line didn’t work. (Musk eventually admitted, “Excessive automation at Tesla was a mistake. To be precise, my mistake.”)
Desperate to get more cars out to impatient customers faster, in 2018 Tesla hastily erected a huge 137,250-square-foot “tent” in their parking lot. Inside the temporary structure was a second assembly line where people, not robots, did much of the work.
One analyst, unimpressed with the cobbled-together assembly line, sputtered, “Words fail me. It’s insanity.” However, the new assembly line helped Tesla reach its goal of making 5,000 cars a week in the second quarter of 2018.
Are you sure it’s a marketing problem?
Last month’s Marketing 101 article (“I Don’t Have Money for Marketing!”) addressed marketing’s role in nursing a struggling business back to health. But those tactics only work if the root problem is a marketing issue. What if, as in the example of Tesla, marketing is not the root issue?
Every business exists to solve a problem, but there are 1001 other problems to be solved internally as part of delivering that solution to customers.
This article points out some common business issues that can hurt or limit sales as their effects trickle out to impact customers or prospects. We’ll look at potential problem areas in three business systems: operations, finance, and management. Symptoms of the problem may show up in marketing, but they will persist until you diagnose and treat the real disease.
Operations problems
Long lead times. Patience probably has always been in short supply, and it seems even more so in today’s connected world.
In many situations, having items in stock or on short lead times is critical. A farm equipment manufacturer reported how a farmer called three dealerships until he found one with the piece of equipment he needed in stock. The dealer was two hours away, but the farmer made the trip the same day because it was raining. He couldn’t afford to wait for the local dealer to get it in and waste one hour of a sunny day.
Quality issues. Have you ever bought an item, only to have it break or malfunction soon afterward? Whether you sell a product or service, it can be difficult to balance creating the right quality at the right price. Understand what level of quality is important to your target market. Make sure the quality you are building is something your customer cares about.
Poor communication and customer care. “Customer service shouldn’t just be a department, it should be the entire company” (Zappos CEO Tony Hsieh). While that is true, the people in your company who relate directly to customers have a very special (and important) job.
Do your customers feel like they are in good hands when they relate to you? Do your reps speak respectfully with a clear voice and a cheerful tone? Do your salespeople listen more than they talk? Are you responsive to every customer’s request? Do you have a system to keep customers up to date with schedule changes that affect them?
Order fulfillment inaccuracies. Probably all of us have a story to tell about receiving the wrong item and needing to call the company. Whether it is sending the wrong item, the wrong quantity, or shipping to the wrong address, order fulfillment problems are a double hit: 1) they cost you money to correct and 2) they give customers a reason to shop elsewhere.
Shipping problems. Businesses today serve customers around the country, sometimes even around the world. From a large item that ships on a pallet to a fragile item that ships in a small box, your products need to get from here to there in good shape and at a good price.
Finance problems
Invoicing problems. Paperwork can be a burden to a small business, but getting your invoices out is one job you can enjoy. Customers appreciate prompt invoices correlating with the work done (and value delivered). Make your invoices clear and user-friendly.
Cash flow and inventory issues. In his book Customer Pillars, Curt Clinkinbeard says, “One of the reasons growth can eat up cash, particularly when the business is building rapidly, is increased inventory.”
Clinkinbeard quotes a business owner as saying, “I nearly grew my company right out of business. We had a line that was flourishing, and I started ramping inventory levels up to keep up with demand . . . The problem was the inventory actually required a cash investment—and we didn’t have the cash. We became so cash-poor we almost went out of business. I never would have guessed that success could lead to
such a significant problem.”
Seasonal cycles can make it difficult to manage cash flow and inventory levels, and you can get caught in an unexpected crunch if you are lax in this area.
Time and capacity management. When someone asks you how things are going, one of your go-to responses is probably something like, “I’ve been busy.” And as a business owner, you want all your employees and equipment busy too, running at full efficiency.
However, for long-term sustainability, running your business (or yourself, for that matter) at 98-110% capacity should not be the norm. Instead, create an appropriate amount of open capacity so that when additional sales come in, you can handle them without a glitch.
Financial reporting. For many business owners, making something, or making things happen is a lot easier than understanding all the numbers of a Profit and Loss Statement or a Balance Sheet. Understanding the financial health of your business and being able to spot emerging trends is important.
Management problems
Business leaders are involved in all of the previous issues we’ve looked at, but here are three areas directly connected to leading the business.
Direction and delegation. Micromanaging your people can work for a while, but eventually, it will limit your growth and effectiveness. Clarify roles, policies, and systems, and delegate so your people can deliver success consistently.
Planning. Busy business leaders may put off planning for the future, but taking time now to look ahead will pay off later. Begin preparing for growth and planning for increased capacity so you can take it when it comes.
Employee hiring and training. Ray Dalio writes in his book Principles, “Don’t hire people just to fit the first job they will do; hire people you want to share your life with.”
Dalio goes on to say, “Both the people you work with and the company itself will evolve in ways you can’t anticipate. So hire the kind of people you want to share a long-term mission with. You will always have uses for great people.”
Hire with a long view. Train employees so you can handle growth when it comes.
Dealing with an employee that isn’t a good fit for the job is a challenge, but the first challenge is to be willing to recognize the problem. A retail store was struggling with “marketing,” spending thousands of dollars on advertising that ate up their profits. Those dollars were largely wasted because the salesman was not effective. As a result, people who saw the ads and came to the store would leave without making a
purchase.
A tough year in the industry became a crisis for the business, but not because of marketing or even sales per se. Rather, the root cause was lack of leadership—management was unwilling to make the tough decision to let the salesman go. When they finally replaced him with a moderately skilled salesman, the situation turned around.
Conclusion
No matter what industry you are in, try imagining your business as a machine, with people, materials, and systems all a part. Many interconnected and moving parts help move you forward.Paragraph
If you are a business leader, it is your job is to keep your machine running smoothly. Hopefully this article has helped you troubleshoot problems that might be hurting your sales, so your machine can run smoothly and efficiently again. Remember to look beneath the surface and diagnose the root issue rather than treating only the symptoms.