Does Lean Help Sales?

To What Degree Does Implementing Lean Help to Sell Products?

In the majority of cases, being low cost and offering fast deliveries doesn't provide a company with enough product differentiation to positively affect the sale of its products, especially if the company is not a major player in the market place. It's the major companies that have the advantage of being able to offer the lowest prices and the fastest deliveries that smaller companies usually can't match. Smaller companies trying to compete with larger companies on price and delivery usually find that to be very difficult to do, unless they happen to be serving niche markets. Also, starting price wars with larger companies is usually considered to be an unwise strategy, so how can companies compete?

Michael Dell stated in his 1999 book, "Direct From Dell", "When you've only got single-digit market share - and you're competing with the big boys, - you either differentiate or die". Therein lies the text book solution for most companies - compete by differentiating products and services from those offered by competitors and not by trying to offer the lowest market prices or the fastest deliveries. However, do offer your lowest prices and fastest deliveries to the extent possible by all means, but recognize that they may only get you in the customer's front door and may not necessarily result in a sale. Product differentiation however usually results in product sales.

Product differentiation is a marketing process that reveals the differences between competitive products. Differentiation looks to make a product more attractive by contrasting its unique qualities with other competing products. Successful product differentiation creates a competitive advantage for the seller as customers view those products as being unique or superior. Continuously differentiating products, which is a logical company strategy for long-term growth, can result in the development of sustainable competitive advantages for a company. Product differentiation is what sells products in the vast majority of cases, not low prices and fast delivery. Large corporations also realize that being low cost and fast to market when competing with other large corporations doesn't provide enough differentiation by themselves to generate sales.

Also, understand the role lean activities play in sales efforts. While lean can and should be used to reduce costs and shorten deliveries, it's not necessarily the key determining factor on whether sales will actually occur. Lean is necessary for the benefits it can provide but is not sufficient by itself in most cases to result in sales. To understand why, review Professor Terry Hill's discussion on how customers make purchasing decisions
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Professor Hill of the London Business School indicated that customers make purchase decisions at two levels: a qualification level in which suppliers must first be qualified, on low prices and short lead times for example which are identified by Hill as order qualifiers, and at a winner level in which customers then select a wining supplier from the qualified ones using different selection criteria such as quality features, which Hill identifies as order winners.

Note that quality features don't refer strictly to defects. According to David Garvin in his 1988 book, "Managing Quality: The Strategic and Competitive Edge", product quality can be described in terms of seven features customers look for such as:

Performance -- primary operating characteristics
Reliability - probability of a malfunction or failure
Conformance - the degree established standards are met
Durability - a measure of product life
Serviceability - ease, speed, courtesy, and competence of repairs
Aesthetics - how a product looks, feels, sounds, smells, tastes...
Perceived Quality - a person's perception of quality

Sam,
Absolutely, lean helps sales! I don't have a comprehesive list, but here are a few examples:

First, I think it's funny you mention Dell's differentiation, but then discount cost and speed. PC's are a commodity, and have been for a long time. It was exactly cost and delivery speed that were Dell's differentiation. At a time when component cost mattered more, Dell allowed customers to custom-configure their PC's, and built and delivered them faster than competitors could. This is further confirmed by Dell's more recent decline in market share. This decline coincides with the prevalence of laptops computers over desktops, which Dell has contract-build in China, like everyone else.

Next, lean enables you to follow demand: you can't sell if you run out of stock. The example here that strikes me the most is the New Balance case study which is archived here at LEI. Not only do New Balance's US operations allow it to do niche marketing that other brands can't do, but they can also add volume to "commodity" shoes that prove to be hits. Whether you are supplementing volume like New Balance or simply able to easily scale your operations because they are simple and cellular, you can work your hit products better, and shift away from duds.

Finally, you haven't mentioned lean product design. As you say, there is more to differentiation than manufacturing can bring to the table. By following lean product design methods, you can shrink your product development cycle. This allows you two things: you are more "current" with customers: they see your latest product sooner. You also have more learning cycles than your competitors, so everything you might apply continuous improvement to has more iterations accomplished. This can be expressed as "refinement" for otherwise-commodity items, or result in early adopter benefits of certain features.

Sam I found your article an excellent overview to the question of how Lean impacting the sales of product. You overview covers most all the key discussions I have seen, including the Kano Model impact on product design. Recently I have been exploring a narrower but neglected aspect of this discussion on the impact of Lean on the sales experience of the customer. How process barriers, wastes, delays, in-capabilities impact the perceptions, thinking and feelings of the customer as they go through the retail experience. This is much more than Phantom Customer research or product display principles. This is looking at the customer experience as a flow and analyzing how it could be made more effective in generating a proper sales experience. I would appreciate your view on the subject and any connections to people doing similar work or with similar interests.

I've recently been reading about New Product Ethnography. Here's one explanation of what it is. Lean improvements start with understanding customers.

"When developing a new product or creating a brand strategy, it is important to learn as much as you can about your target consumer's thoughts, desires, and opinions. Typically, marketing professionals turn to traditional methods like focus groups, surveys and opportunistic interviews. However, as consumer goods companies seek to expand their reach in today's marketplace, ethnographies are becoming an integral component of an overall market research campaign. Unlike focus groups, which are product centered, ethnographies are individual interviews with consumers in which participants discuss many aspects of their lives. The benefit of ethnographies is that they allow marketers to see deeper into the lives of their consumers and see business opportunities that probably would not have been revealed in a focus group or survey." From the book, Creating Breakthrough Products: Innovation From Product Planning to Program Approval, by Cagan and Vogel.

Knowing customer needs, wants, desires, demands, requirements, and expectations should help in deciding what process improvements are needed to satisfy those customers.

Additional information on understanding customers can be found in numerous books on new product design and development.

Lean thinking is about continuously striving to precisely identify what you customer wants and needs, and delivering it perfectly.

Differentiation is really nothing more than doing a better job than anyone else in identifying and meeting the needs of a particular customer segment.

It might mean creating a category of product or service that fits a space no one else occupies - but that product or service succeeds only because it uniquely fills a need.

A "lean" delivery strategy keeps you competitive by keeping you focused on those customer needs, and giving you the ability to be superbly responsive to changes and emergent requirements.

I always thought that marketing was all about precisely identifying what customer wants and needs were, that product design and development was all about designing and developing those product wants and needs, and that manufacturing was all about producing those products perfectly. It appears your definition of lean thinking says that it's about doing these three activities effectively. Is that correct?

Lean is about everything you do to deliver value to your customer, from figuring out what they need, to creating it, to building it, to delivering it, to servicing it and all the support activities it takes to do those things.

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P. Cartagena,

Your statement that "Lean is about everything you do to deliver value to your customer" doesn't explicitely describe what lean is in my estimation. It's too ambiguous in. You can say however that lean means improvement in process efficiencies. For example, the Lean Enterprise Institute said the following about lean:

"The core idea of lean is to maximize customer value while minimizing waste. This means simply to create more value for customers with fewer resources."

That happensto be the basic definition of efficiency, more output with less input. Lean therefore means efficiency, more output with less input. A lean process is an efficient process for example. Consequently, lean is specifically about improving efficiencies and not about everything you do to deliver value to customers. It's about doing everything you do to deliver value to customers more efficiently.

I seek clear understanding of the terms people use in whatever discussions they might be having and on whatever topics. It's the prerequisite for any effective problem solving exercise, and that is to clearly define the problem.

It wasn't meant to.

Your response to Mark was keying into the idea that Lean crosses functional boundaries. I was simply reinforcing that concept.

I wish I had a "textbook style," explicit definition of Lean, but I don't. Maybe someday I'll figure one out. For now I'm sticking with "that thing Toyota's striving for."

Mentally compartmentalizing an organization into sales, marketing, R&D, operations and distribution is exactly the same as separating manufacturing into disconnected, independent functions like stamping, machining, plating, painting, assembly, etc.

Lean teaches us to think in terms of value flow to the customer, whether it's material through a factory or the combined information and material flow through the whole company.

Lean applies as much to the individual operator at a workstation as it does to a group of operators in a cell, a group of cells in a factory, a group of factories in a supply chain and the collection of functions (sales, marketing, R&D, operations, distribution, etc, etc) in the entire value stream to the customer.

You could say that's the result, but you'd be leaving out Lean's underlying principles and motivations.

"Everything" means just that, everything, which includes efficiency, effectiveness, quality, creativity, innovation, safety, sustainability, etc, etc.

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I absolutely agree that Lean can help sales. I think the above comments are very accurate and would like to add to them.

Most Sales applications are nothing more than a hypothesis to begin with. PDCA witch I believe is the essence of Lean is a sound methodlology to use in the sales and marketing process. When people first use Lean or present Lean to sales and marketing they have a tendendcy to do it on a project to project basis and as a way to remove waste from the process. I discourage that. I believe they should look at it from the view point of knowledge building and learning cycles with the emphasis on Kaizen or PDCA.

Start with understanding value from the viewpoint of the customer, mirror the cusotmer decision making process with small PDCA cycles by your sales and marketing team. Targeting what your Customer Values at each stage of the cycle will increase your ability to deliver quicker, more accurately and with better value than your competitor. It is a moving target and the principles of Lean and PDCA facilitates the journey to Customer Value

I believe that your definition of Lean as mearly meaning efficiency is too limited. Lean is about delivering more customer Value by increasing organizational capability and capacity, efficiently and effectively. This is accomplished through the utilization of systematic methods that increase Flow (Eliminating Waste, increases Flow). Eliminating Waste is a means to the end result and not the end result.

A couple of quotes I found in Leading the Lean Enterprise Transformation:

"the cost of turning an existing customer into a repeat customer is one sixth the cost of aquiring a new customer" - Paul Bender (conclusion in the book, quality improvement is the lowest cost sales and marketing effort you can undertake)

"Higher Relative Quality = Higher ROI - At Any Market Share Level!" On a study called the PIMS Principles, that showed even low market share companies can generate 20% ROI if they have superior quality, and high market share companies can generate 38% ROI with superior quality. (conclusion in the book, superior quality will generate the best returns.)

P. C

As usual, I appreciate your comments and your willingness to take the time to explain your position.

Sam Tomas

Sam:

In general implementing Lean will not help you sell more products. Unless your current customers buy more product because of the reasons mentioned above.

However, try applying Lean principles to your sales process and see what happens...........

Hi,

From my point of view is clear that lean can help you.

First of all lean is full oriented to customers so it can help companies to identify what key skills of products are apreciated for them and what not.

It makes to cut direct costs of the product and maximize added value.

On the other hand, through lean you can detect waste through the sales process, from the order of the customer to the dispatching process in order to improve customer service.

Let's start out acknowledging that there is no canonical definition for "lean."
The INTENTION of the LEI (whose founders coined and popularized the term) is clearly to have "lean" and "Toyota Production System" synonymous.

"Toyota Production System," in turn, describes an approach to management which was developed internally at Toyota Motor Company, evolving from concepts developed much earlier by members of the Toyoda family and some prominent figures (like Taiichi Ohno) who worked there.

"Toyota Production System" ALSO is used to describe the SPECIFIC application of this management system in Toyota's context, so this can be a little confusing. The key is to grasp that Toyota's application (the visible tools, results, policies, etc) are always in a state of flux as they strive to reach a clearly defined, but unattainable, state of perfection.

Back to "Lean."
Even though the LEI's INTENTION (according to pretty much everything they have ever written, published, said) is that TPS and "lean" are essentially the same thing, in PRACTICE, some people interpret an incomplete description as "lean" representing some subset of a complete management system.

If, however, we accept that "lean" is INTENDED to represent the process that a company such as Toyota uses to lead and manage the company, then the question follows:

If you think "lean" doesn't include something, what, exactly, has Toyota left out of managing their company?

Sales?
Marketing?
Quality?
Environmental?
Safety?

All of these things are there ,and in general, are things that Toyota does pretty well.
So, I have to include that everything Toyota does as a company is, by definition, included in TPS, and by extension in "lean."

If we think otherwise, it is due to poor understanding, rather than an incomplete system.

Mark, my original question on whether Lean helps sales referenced back to the Kano model and to the works of Professor Terry Hill which both emphasized that a product's selling price is not always a significant factor in determining sales of the product since there are many product features that customers look for that override the costs. In other words, low cost alone does not always guarantee a sale.

So from a product cost point of view, how significant is it to be lean to reduce costs?

Sam Tomas

Customers decide how much they're willing to pay for a product. And they decide whether to pay for yours or somebody else's.

The difference between what they pay and what it costs you to make it pays for everything you do, all of your production costs, all of your payroll, all of your overhead, all of your shareholders' dividends, all of your marketing, all of your R&D, everything.

When lean reduces your production costs you have that much more money to spend on everything else.

Practicing lean product development will utilize those available funds to efficiently and effectively deliver new and better products in the shortest time for your customers to choose over your competitors'.

Practicing lean in marketing and sales will give a broader, deeper and more up to date understanding of your customers' needs while delivering them better service.

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I agree. In fact is incorrect to believe that Lean are only tools, we need to see the whole picture in a systematic way.

There is a more direct approach to the issue of how implementing Lean can help sell products. You have already acknowledged that everything in the company must be designed to create value for customers.

So, take the next step and ask yourself "What explicit, concrete value does sales and marketing create for your customers?"

If you have not carried a bag (a sales quota) and fought the battles salespeople fight, you might have difficulty answering this question.

However, there is a great deal to learn from drilling into this. Further, success in doing it has profound implications for the business, such as

- hard data around what customers want
- ways of learning what is working and not working in the field (with salespeople)
- explicit, concrete ways of improving sales and marketing productivity

Applying Lean to the part of the business that produces customers (as opposed to products) has huge potential for improvement.

Michael Webb

Michael, I don't disagree with what you say. However, everything you suggest that a company has to do is also being done by the copany's competitors. So how does implementing Lean help to sell products when competitors are also implementng Lean in their companies?

The basic answer is to differentiate producs to satisfy customers differently from the way competitors are differentiating their products.

Sam Tomas

Hi Sam,

I agree with you - the best thing seems to be: differentiate, but make sure it can't be copied (easily). Develop your brand! Apple seems to do that nicely.

Besides that, although every one is doing the same, doesn't mean everyone is at the same level, and not all the business goes to the lean champion. Every car manufacturer applies lean, Toyota leads the pack, but is not the only one...

Jeroen

Does lean help sales?

In a previous company I moved order-to-delivery from an average 58 days to 2 and saw a 30% increase in sales - all in less than 5 months.

In my current company, I know that if we could take product from concept-to-delivery from the industry norm of 18 months to 12 months we could have all the business we wanted and at a price we name.

Summary: if you consider lead time reduction to be lean, then it is a huge help to sales.

I work in manufacturing, not sales.

However, we do bring in customers and show them where their money is going (or not going in the case of lean). They see that there money is not wasted. We work in the most efficient way possible and the customer sees this.

Your lean practices can be a PR campaign for your company. As tours come by they realize that things are done in a manner to save money, thier money. It is not being wasted on process, motion, pretty paint jobs in the executive bathrooms.

When people know that their money is spent on the product and not waste, they are interested in what you have to offer.

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