The Case of the Sales Director’s Bonus

Susan was frustrated.
She had inherited a bad NPD project. As new Director of Speciality Products Marketing, she wanted to stop it.
She must do so without upsetting relations with a major customer of commodity products.
– Project suggested by development manager at the major European customer
– Her firm’s European Sales Director demanded initiation of the project.
– Project consumed $3m of her R&D budget with no end in sight.

Problem
No customer research was done before starting the project. One of the major customer’s development managers said Susan’s project would produce a new intermediate. His concept was to add this intermediate to one of his firm’s products. He believed the final product met a need in the European building products industry.

Susan’s Solution

Engage a B2B customer research provider. Purpose: Discover what the European customer’s customers really wanted. On recommendation of a colleague, Susan engaged me to do the work.

First: Susan needed to navigate through political issues.
– The European firm accounts for a major part of the US firm’s revenue
– Most of this revenue comes from commodity products sales
Sales Director’s bonus depends on continuing commodity products’ revenue

Second: Susan must set guardrails on the service provider’s work

Guardrails the Sales Director agreed with:
1. Study will be blind; in an interview the respondent does not know who commissioned the study
2. Name of the European customer is not disclosed to service provider

In a meeting with Susan’s NPD team, we agreed on:
– The content of the Opening Script for elicitation conversations with prospective customers.
– Other concept issues to elicit from the prospect.

Customer Research Provider’s Work

My work followed the method of the Rule of 30 system

Made 30 elicitation conversations with prospects in the European building products industry. They were from a random sample of 225 knowledgable individuals in the industry. ( Rule of 30 work is always done as a blind study.)

Prospects saw no reason to replace their existing component with a new one developed from the concept.

“It’s expensive to qualify a product change in this industry. We must meet several relevant building codes and standards.”
      Business Mgr. at major building products firm

“Your client’s concept doesn’t offer any improvement over our current component.”
      R&D Mgr. at major building products firm

All prospects would be laggards in adopting a component based on the concept

Near the end of the 21st elicitation conversation, the prospect said something very helpful to me.

“By-the-way, your client’s concept sounds like one that Jon from the xyz firm pitched to us a few years ago. We told him it wasn’t interesting to us.”
      Business Mgr. at major building products firm

Conversations with individuals at xyz firm

The Opening Script was used in elicitation conversation with two individuals at xyz firm.

“Your client’s concept sounds like an idea one of our development managers.has been pushing. We’ve told him we will not develop his idea. It has no market.”
      Busness Development Director, xyz firm
Director implied the development manager was protected by nepotism.

“Your client’s concept is what I’ve been hoping we could develop for our customers.”
Jon, Development Manager, xyz firm

Customer Research Provider’s Report

Executive Summary

  • Discovered that, in the building products industry, interest in the concept is nonexistent.
  • Discovered that your European Sales Director’s customer is the xyz firm
  • Business Development Director of xyz firm said they see no market for the concept
  • Data from the 30 elicitation conversations was analyzed using the Central Limit Theorem. We forecast, with 95% certainty, the average customer would not adopt the new component.

Outcome

  1. Susan and the European Sales Director met with xyz firm’s Research & Innovation Director and the Business Development Director
    – They shared key quantitive and qualitative data from the Report with the Directors.
    – The Directors agreed that development work on the concept should stop.
  2. Susan’s used her R&D budget for competitive, incremental upgrades on three valuable specialty products
  3. European Sales Director received his year-end bonus for sales of commodity products