Decision Making – Meaning and Important Concepts

Every organization needs to make decisions at one point or other as part of managerial process. Decisions are made in the best interest of the organization. For that matter, decisions made by the organization are to lighten the way forward. Be it strategic, business activities or HR matters, processes of making decisions is complex, involves professionals of different genre. While small organization involves all levels of managers, complex organizations largely depend on a team of professionals specially trained to make all sorts of decisions. But remember, such a body alone cannot come out with final decisions. Here, the point is, decision making process is cumulative and consultative process. The process, on the whole, bears its pros and cons and would by and large emanate results and consequences in the organizations’ overall growth and prospects. Decisions are taken to support organizational growth. The whole fabric of management, i.e. its day to day operation is rightly built on managerial decisions. Top notch companies, as evidenced by their functions, effective communication tools are utilized in addition to normal consultation process to make decisions that would have large scale implications on the company’s prospects.

Discussions and consultations are two main tools that support and eventually bring out decisions. For instance to take a decision on how to embark on new business activity suggested by strategic management team must have developed through series of consultative process, which is now available with implementation team. Here we see the cumulative effect of decision taken at one point by a different body of affairs. Decision taken by strategic managers is to push new and innovative business line or initiative. At this point the decision taken by such team becomes consultative point for discussion for implementation professionals. There is lot to debate, research and finalize. Is the new proposal viable ? Is it innovative enough ? Can there be growth stimulant in the strategies proposed ? Handle-ful of such questions evolved from the decision taken by strategic group has reflective influence on the next level of managerial consultations and meetings. Let us accept, at this point of discussion, that proposals submitted by business development team would largely depend on another set of deliberations in the board room.

Thus, the final decision to roll out a product or service is through cumulative interim decisions taken by various internal and external parties. And also the final decision is reflective and founded on researches and consultations. Whole process is a chain affair where one decision taken at one point and at one level shall have far reaching implications in the way an organization moves forward.

As a matter of fact, capable of taking critical decisions is one of the many attributes that every manager should have, be it top level or middle or entry level. By nature a human being during his existence and by virtue of his instinct makes decisions for his survival, as social psychologists put it. By and large, managers are polished individuals to take decisions to affect others, ie the organization’s existence and growth thus is annotative with human endeavor to live and succeed. Success succeeds on the decisions taken, be it by an individual or an organization.

Modern Theories of Motivation

We all are familiar with the classical theories of motivation, but they all are not empirically supported. As far as contemporary theories of motivation are concerned, all are well supported with evidences. Some of the contemporary / modern theories of motivation are explained below:

• ERG Theory

ERG Theory of Motivation

To bring Maslow’s need hierarchy theory of motivation in synchronization with empirical research, Clayton Alderfer redefined it in his own terms. His rework is called as ERG theory of motivation. He recategorized Maslow’s hierarchy of needs into three simpler and broader classes of needs: Existence needs- These include need for basic material necessities. In short, it includes an individual’s physiological and physical safety needs. Relatedness needs- These include the aspiration individual’s have for maintaining significant interpersonal relationships (be it with family, peers or superiors), getting public fame and recognition. Maslow’s social needs and external component of esteem needs fall under this class of need. Growth needs- These include need for self-development and personal growth and advancement. Maslow’s self-actualization needs and intrinsic component of esteem needs fall under this category of need.

The significance of the three classes of needs may vary for each individual.

Difference between Maslow Need Hierarchy Theory and Alderfer’s ERG Theory

	ERG Theory states that at a given point of time, more than one need may be operational.
	ERG Theory also shows that if the fulfillment of a higher-level need is subdued, there is an increase in desire for satisfying a lower-level need.
	According to Maslow, an individual remains at a particular need level until that need is satisfied. While according to ERG theory, if a higher- level need aggravates, an individual may revert to increase the satisfaction of a lower- level need. This is called frustration- regression aspect of ERG theory. For instance- when growth need aggravates, then an individual might be motivated to accomplish the relatedness need and if there are issues in accomplishing relatedness needs, then he might be motivated by the existence needs. Thus, frustration/aggravation can result in regression to a lower-level need.
	While Maslow’s need hierarchy theory is rigid as it assumes that the needs follow a specific and orderly hierarchy and unless a lower-level need is satisfied, an individual cannot proceed to the higher-level need; ERG Theory of motivation is very flexible as he perceived the needs as a range/variety rather than perceiving them as a hierarchy. According to Alderfer, an individual can work on growth needs even if his existence or relatedness needs remain unsatisfied. Thus, he gives explanation to the issue of “starving artist” who can struggle for growth even if he is hungry.

Implications of the ERG Theory

Managers must understand that an employee has various needs that must be satisfied at the same time. According to the ERG theory, if the manager concentrates solely on one need at a time, this will not effectively motivate the employee. Also, the frustration- regression aspect of ERG Theory has an added effect on workplace motivation. For instance- if an employee is not provided with growth and advancement opportunities in an organization, he might revert to the relatedness need such as socializing needs and to meet those socializing needs, if the environment or circumstances do not permit, he might revert to the need for money to fulfill those socializing needs. The sooner the manager realizes and discovers this, the more immediate steps they will take to fulfill those needs which are frustrated until such time that the employee can again pursue growth.

• McClelland’s Theory of Needs

David McClelland and his associates proposed McClelland’s theory of Needs / Achievement Motivation Theory. This theory states that human behaviour is affected by three needs – Need for Power, Achievement and Affiliation. Need for achievement is the urge to excel, to accomplish in relation to a set of standards, to struggle to achieve success. Need for power is the desire to influence other individual’s behaviour as per your wish. In other words, it is the desire to have control over others and to be influential. Need for affiliationis a need for open and sociable interpersonal relationships. In other words, it is a desire for relationship based on co-operation and mutual understanding. The individuals with high achievement needs are highly motivated by competing and challenging work. They look for promotional opportunities in job. They have a strong urge for feedback on their achievement. Such individuals try to get satisfaction in performing things better. High achievement is directly related to high performance. Individuals who are better and above average performers are highly motivated. They assume responsibility for solving the problems at work. McClelland called such individuals as gamblers as they set challenging targets

for themselves and they take deliberate risk to achieve those set targets. Such individuals look for innovative ways of performing job. They perceive achievement of goals as a reward, and value it more than a financial reward.

The individuals who are motivated by power have a strong urge to be influential and controlling. They want that their views and ideas should dominate and thus, they want to lead. Such individuals are motivated by the need for reputation and self-esteem. Individuals with greater power and authority will perform better than those possessing less power. Generally, managers with high need for power turn out to be more efficient and successful managers. They are more determined and loyal to the organization they work for. Need for power should not always be taken negatively. It can be viewed as the need to have a positive effect on the organization and to support the organization in achieving it’s goals.

The individuals who are motivated by affiliation have an urge for a friendly and supportive environment. Such individuals are effective performers in a team. These people want to be liked by others. The manager’s ability to make decisions is hampered if they have a high affiliation need as they prefer to be accepted and liked by others, and this weakens their objectivity. Individuals having high affiliation needs prefer working in an environment providing greater personal interaction. Such people have a need to be on the good books of all. They generally cannot be good leaders.

• Goal Setting Theory

In 1960’s, Edwin Locke put forward the Goal-setting theory of motivation. This theory states that goal setting is essentially linked to task performance. It states that specific and challenging goals along with appropriate feedback contribute to higher and better task performance. In simple words, goals indicate and give direction to an employee about what needs to be done and how much efforts are required to be put in. The important features of goal-setting theory are as follows:

	The willingness to work towards attainment of goal is main source of job motivation. Clear, particular and difficult goals are greater motivating factors than easy, general and vague goals.
	Specific and clear goals lead to greater output and better performance. Unambiguous, measurable and clear goals accompanied by a deadline for completion avoids misunderstanding.
	Goals should be realistic and challenging. This gives an individual a feeling of pride and triumph when he attains them, and sets him up for attainment of next goal. The more challenging the goal, the greater is the reward generally and the more is the passion for achieving it.
	Better and appropriate feedback of results directs the employee behaviour and contributes to higher performance than absence of feedback. Feedback is a means of gaining reputation, making clarifications and regulating goal difficulties. It helps employees to work with more involvement and leads to greater job satisfaction.
	Employees’ participation in goal is not always desirable.
	Participation of setting goal, however, makes goal more acceptable and leads to more involvement.
	Goal setting theory has certain eventualities such as: Self-efficiency- Self-efficiency is the individual’s self-confidence and faith that he has potential of performing the task. Higher the level of self-efficiency, greater will be the efforts put in by the individual when they face challenging tasks. While, lower the level of self-efficiency, less will be the efforts put in by the individual or he might even quit while meeting challenges. Goal commitment- Goal setting theory assumes that the individual is committed to the goal and will not leave the goal. The goal commitment is dependent on the following factors: Goals are made open, known and broadcasted. Goals should be set-self by individual rather than designated. Individual’s set goals should be consistent with the organizational goals and vision.

Advantages of Goal Setting Theory

• Goal setting theory is a technique used to raise incentives for employees to complete work quickly and effectively.
• Goal setting leads to better performance by increasing motivation and efforts, but also through increasing and improving the feedback quality.

Limitations of Goal Setting Theory

• At times, the organizational goals are in conflict with the managerial goals. Goal conflict has a detrimental effect on the performance if it motivates incompatible action drift.
• Very difficult and complex goals stimulate riskier behaviour.
• If the employee lacks skills and competencies to perform actions essential for goal, then the goal-setting can fail and lead to undermining of performance.
• There is no evidence to prove that goal-setting improves job satisfaction.

• Reinforcement Theory

Reinforcement theory of motivation was proposed by BF Skinner and his associates. It states that individual’s behaviour is a function of its consequences. It is based on “law of effect”, i.e, individual’s behaviour with positive consequences tends to be repeated, but individual’s behaviour with negative consequences tends not to be repeated. Reinforcement theory of motivation overlooks the internal state of individual, i.e., the inner feelings and drives of individuals are ignored by Skinner. This theory focuses totally on what happens to an individual when he takes some action. Thus, according to Skinner, the external environment of the organization must be designed effectively and positively so as to motivate the employee. This theory is a strong tool for analyzing controlling mechanism for individual’s behaviour. However, it does not focus on the causes of individual’s behaviour.

The managers use the following methods for controlling the behaviour of the employees:

	Positive Reinforcement- This implies giving a positive response when an individual shows positive and required behaviour. For example – Immediately praising an employee for coming early for job. This will increase probability of outstanding behaviour occurring again. Reward is a positive reinforce, but not necessarily. If and only if the employees’ behaviour improves, reward can said to be a positive reinforcer. Positive reinforcement stimulates occurrence of a behaviour. It must be noted that more spontaneous is the giving of reward, the greater reinforcement value it has.
	Negative Reinforcement- This implies rewarding an employee by removing negative / undesirable consequences. Both positive and negative reinforcement can be used for increasing desirable / required behaviour.
	Punishment- It implies removing positive consequences so as to lower the probability of repeating undesirable behaviour in future. In other words, punishment means applying undesirable consequence for showing undesirable behaviour. For instance – Suspending an employee for breaking the organizational rules. Punishment can be equalized by positive reinforcement from alternative source.
	Extinction- It implies absence of reinforcements. In other words, extinction implies lowering the probability of undesired behaviour by removing reward for that kind of behaviour. For instance – if an employee no longer receives praise and admiration for his good work, he may feel that his behaviour is generating no fruitful consequence. Extinction may unintentionally lower desirable behaviour.

Implications of Reinforcement Theory

Reinforcement theory explains in detail how an individual learns behaviour. Managers who are making attempt to motivate the employees must ensure that they do not reward all employees simultaneously. They must tell the employees what they are not doing correct. They must tell the employees how they can achieve positive reinforcement.

• Equity Theory of Motivation

The core of the equity theory is the principle of balance or equity. As per this motivation theory, an individual’s motivation level is correlated to his perception of equity, fairness and justice practiced by the management. Higher is individual’s perception of fairness, greater is the motivation level and vice versa. While evaluating fairness, employee compares the job input (in terms of contribution) to outcome (in terms of compensation) and also compares the same with that of another peer of equal cadre/category. D/I ratio (output-input ratio) is used to make such a comparison.

EQUITY THEORY
Ratio Comparison	Perception
O/I a < O/I b	Under-rewarded (Equity Tension)
O/I a = O/I b	Equity
O/I a > O/I b	Over-rewarded (Equity Tension)

Negative Tension state: Equity is perceived when this ratio is equal. While if this ratio is unequal, it leads to “equity tension”. J.Stacy Adams called this a negative tension state which motivates him to do something right to relieve this tension. A comparison has been made between 2 workers A and B to understand this point.

Referents: The four comparisons an employee can make have been termed as “referents” according to Goodman. The referent chosen is a significant variable in equity theory. These referents are as follows:

	Self-inside: An employee’s experience in a different position inside his present organization.
	Self-outside: An employee’s experience in a situation outside the present organization.
	Other-inside: Another employee or group of employees inside the employee’s present organization.
	Other-outside: Another employee or employees outside the employee’s present organization.

An employee might compare himself with his peer within the present job in the current organization or with his friend/peer working in some other organization or with the past jobs held by him with others. An employee’s choice of the referent will be influenced by the appeal of the referent and the employee’s knowledge about the referent.

Moderating Variables: The gender, salary, education and the experience level are moderating variables. Individuals with greater and higher education are more informed. Thus, they are likely to compare themselves with the outsiders. Males and females prefer same sex comparison. It has been observed that females are paid typically less than males in comparable jobs and have less salary expectations than male for the same work. Thus, a women employee that uses another women employee as a referent tends to lead to a lower comparative standard. Employees with greater experience know their organization very well and compare themselves with their own colleagues, while employees with less experience rely on their personal experiences and knowledge for making comparisons.

Choices: The employees who perceive inequity and are under negative tension can make the following choices:

	Change in input (e.g. Don’t overexert)
	Change their outcome (Produce quantity output and increasing earning by sacrificing quality when piece rate incentive system exist)
	Choose a different referent
	Quit the job
	Change self perception (For instance – I know that I’ve performed better and harder than everyone else.)
	Change perception of others (For instance – Jack’s job is not as desirable as I earlier thought it was.)

Assumptions of the Equity Theory

• The theory demonstrates that the individuals are concerned both with their own rewards and also with what others get in their comparison.
• Employees expect a fair and equitable return for their contribution to their jobs.
• Employees decide what their equitable return should be after comparing their inputs and outcomes with those of their colleagues.
• Employees who perceive themselves as being in an inequitable scenario will attempt to reduce the inequity either by distorting inputs and/or outcomes psychologically, by directly altering inputs and/or outputs, or by quitting the organization.

• Expectancy Theory of Motivation

  he expectancy theory was proposed by Victor Vroom of Yale School of Management in 1964. Vroom stresses and focuses on outcomes, and not on needs unlike Maslow and Herzberg. The theory states that the intensity of a tendency to perform in a particular manner is dependent on the intensity of an expectation that the performance will be followed by a definite outcome and on the appeal of the outcome to the individual. The Expectancy theory states that employee’s motivation is an outcome of how much an individual wants a reward (Valence), the assessment that the likelihood that the effort will lead to expected performance (Expectancy) and the belief that the performance will lead to reward (Instrumentality). In short,Valence is the significance associated by an individual about the expected outcome. It is an expected and not the actual satisfaction that an employee expects to receive after achieving the goals. Expectancy is the faith that better efforts will result in better performance. Expectancy is influenced by factors such as possession of appropriate skills for performing the job, availability of right resources, availability of crucial information and getting the required support for completing the job.

  Instrumentality is the faith that if you perform well, then a valid outcome will be there. Instrumentality is affected by factors such as believe in the people who decide who receives what outcome, the simplicity of the process deciding who gets what outcome, and clarity of relationship between performance and outcomes. Thus, the expectancy theory concentrates on the following three relationships:

  • Effort-performance relationship: What is the likelihood that the individual’s effort be recognized in his performance appraisal?
  • Performance-reward relationship: It talks about the extent to which the employee believes that getting a good performance appraisal leads to organizational rewards.
  • Rewards-personal goals relationship: It is all about the attractiveness or appeal of the potential reward to the individual.

  Vroom was of view that employees consciously decide whether to perform or not at the job. This decision solely depended on the employee’s motivation level which in turn depends on three factors of expectancy, valence and instrumentality.

  Advantages of the Expectancy Theory

  • It is based on self-interest individual who want to achieve maximum satisfaction and who wants to minimize dissatisfaction.
  • This theory stresses upon the expectations and perception; what is real and actual is immaterial.
  • It emphasizes on rewards or pay-offs.
  • It focuses on psychological extravagance where final objective of individual is to attain maximum pleasure and least pain.

  Limitations of the Expectancy Theory

  • The expectancy theory seems to be idealistic because quite a few individuals perceive high degree correlation between performance and rewards.
  • The application of this theory is limited as reward is not directly correlated with performance in many organizations. It is related to other parameters also such as position, effort, responsibility, education, etc.

  Implications of the Expectancy Theory

  	The managers can correlate the preferred outcomes to the aimed performance levels.
  	The managers must ensure that the employees can achieve the aimed performance levels.
  	The deserving employees must be rewarded for their exceptional performance.
  	The reward system must be fair and just in an organization.
  	Organizations must design interesting, dynamic and challenging jobs.
  	The employee’s motivation level should be continually assessed through various techniques such as questionnaire, personal interviews, etc.

Advantages of Planning

1. Planning facilitates management by objectives.

   1. Planning begins with determination of objectives.
   2. It highlights the purposes for which various activities are to be undertaken.
   3. In fact, it makes objectives more clear and specific.
   4. Planning helps in focusing the attention of employees on the objectives or goals of enterprise.
   5. Without planning an organization has no guide.
   6. Planning compels manager to prepare a Blue-print of the courses of action to be followed for accomplishment of objectives.
   7. Therefore, planning brings order and rationality into the organization.

    

    

2. Planning minimizes uncertainties.

   1. Business is full of uncertainties.
   2. There are risks of various types due to uncertainties.
   3. Planning helps in reducing uncertainties of future as it involves anticipation of future events.
   4. Although future cannot be predicted with cent percent accuracy but planning helps management to anticipate future and prepare for risks by necessary provisions to meet unexpected turn of events.
   5. Therefore with the help of planning, uncertainties can be forecasted which helps in preparing standbys as a result, uncertainties are minimized to a great extent.

    

    

3. Planning facilitates co-ordination.

   1. Planning revolves around organizational goals.
   2. All activities are directed towards common goals.
   3. There is an integrated effort throughout the enterprise in various departments and groups.
   4. It avoids duplication of efforts. In other words, it leads to better co-ordination.
   5. It helps in finding out problems of work performance and aims at rectifying the same.

    

    

4. Planning improves employee’s moral.

   1. Planning creates an atmosphere of order and discipline in organization.
   2. Employees know in advance what is expected of them and therefore conformity can be achieved easily.
   3. This encourages employees to show their best and also earn reward for the same.
   4. Planning creates a healthy attitude towards work environment which helps in boosting employees moral and efficiency.

    

    

5. Planning helps in achieving economies.

   1. Effective planning secures economy since it leads to orderly allocation ofresources to various operations.
   2. It also facilitates optimum utilization of resources which brings economy in operations.
   3. It also avoids wastage of resources by selecting most appropriate use that will contribute to the objective of enterprise. For example, raw materials can be purchased in bulk and transportation cost can be minimized. At the same time it ensures regular supply for the production department, that is, overall efficiency.

    

    

6. Planning facilitates controlling.

   1. Planning facilitates existence of certain planned goals and standard of performance.
   2. It provides basis of controlling.
   3. We cannot think of an effective system of controlling without existence of well thought out plans.
   4. Planning provides pre-determined goals against which actual performance is compared.
   5. In fact, planning and controlling are the two sides of a same coin. If planning is root, controlling is the fruit.

    

    

7. Planning provides competitive edge.

   1. Planning provides competitive edge to the enterprise over the others which do not have effective planning. This is because of the fact that planning may involve changing in work methods, quality, quantity designs, extension of work, redefining of goals, etc.
   2. With the help of forecasting not only the enterprise secures its future but at the same time it is able to estimate the future motives of it’s competitor which helps in facing future challenges.
   3. Therefore, planning leads to best utilization of possible resources, improves quality of production and thus the competitive strength of the enterprise is improved.

    

    

8. Planning encourages innovations.

   1. In the process of planning, managers have the opportunities of suggesting ways and means of improving performance.
   2. Planning is basically a decision making function which involves creative thinking and imagination that ultimately leads to innovation of methods and operations for growth and prosperity of the enterprise.

Planning Function of Management

Planning means looking ahead and chalking out future courses of action to be followed. It is a preparatory step. It is a systematic activity which determines when, how and who is going to perform a specific job. Planning is a detailed programme regarding future courses of action. It is rightly said “Well plan is half done”. Therefore planning takes into consideration available & prospective human and physical resources of the organization so as to get effective co-ordination, contribution & perfect adjustment. It is the basic management function which includes formulation of one or more detailed plans to achieve optimum balance of needs or demands with the available resources. According to Urwick, “Planning is a mental predisposition to do things in orderly way, to think before acting and to act in the light of facts rather than guesses”. Planning is deciding best alternative among others to perform different managerial functions in order to achieve predetermined goals.

According to Koontz & O’Donell, “Planning is deciding in advance what to do, how to do and who is to do it. Planning bridges the gap between where we are to, where we want to go. It makes possible things to occur which would not otherwise occur”.

Steps in Planning Function

Planning function of management involves following steps:-

1. 
   

   Establishment of objectives

   1. Planning requires a systematic approach.
   2. Planning starts with the setting of goals and objectives to be achieved.
   3. Objectives provide a rationale for undertaking various activities as well as indicate direction of efforts.
   4. Moreover objectives focus the attention of managers on the end results to be achieved.
   5. As a matter of fact, objectives provide nucleus to the planning process. Therefore, objectives should be stated in a clear, precise and unambiguous language. Otherwise the activities undertaken are bound to be ineffective.
   6. As far as possible, objectives should be stated in quantitative terms. For example, Number of men working, wages given, units produced, etc. But such an objective cannot be stated in quantitative terms like performance of quality control manager, effectiveness of personnel manager.
   7. Such goals should be specified in qualitative terms.
   8. Hence objectives should be practical, acceptable, workable and achievable.

2. Establishment of Planning Premises

1. Planning premises are the assumptions about the lively shape of events in future.
2. They serve as a basis of planning.
3. Establishment of planning premises is concerned with determining where one tends to deviate from the actual plans and causes of such deviations.
4. It is to find out what obstacles are there in the way of business during the course of operations.
5. Establishment of planning premises is concerned to take such steps that avoids these obstacles to a great extent.
6. Planning premises may be internal or external. Internal includes capital investment policy, management labour relations, philosophy of management, etc. Whereas external includes socio- economic, political and economical changes.
7. Internal premises are controllable whereas external are non- controllable.

Choice of alternative course of action

1. When forecast are available and premises are established, a number of alternative course of actions have to be considered.
2. For this purpose, each and every alternative will be evaluated by weighing its pros and cons in the light of resources available and requirements of the organization.
3. The merits, demerits as well as the consequences of each alternative must be examined before the choice is being made.
4. After objective and scientific evaluation, the best alternative is chosen.
5. The planners should take help of various quantitative techniques to judge the stability of an alternative.

Formulation of derivative plans

1. Derivative plans are the sub plans or secondary plans which help in the achievement of main plan.
2. Secondary plans will flow from the basic plan. These are meant to support and expediate the achievement of basic plans.
3. These detail plans include policies, procedures, rules, programmes, budgets, schedules, etc. For example, if profit maximization is the main aim of the enterprise, derivative plans will include sales maximization, production maximization, and cost minimization.
4. Derivative plans indicate time schedule and sequence of accomplishing various tasks.

Securing Co-operation

1. After the plans have been determined, it is necessary rather advisable to take subordinates or those who have to implement these plans into confidence.
2. The purposes behind taking them into confidence are :-
   1. Subordinates may feel motivated since they are involved in decision making process.
   2. The organization may be able to get valuable suggestions and improvement in formulation as well as implementation of plans.
   3. Also the employees will be more interested in the execution of these plans.

Follow up/Appraisal of plans

1. After choosing a particular course of action, it is put into action.
2. After the selected plan is implemented, it is important to appraise its effectiveness.
3. This is done on the basis of feedback or information received from departments or persons concerned.
4. This enables the management to correct deviations or modify the plan.
5. This step establishes a link between planning and controlling function.
6. The follow up must go side by side the implementation of plans so that in the light of observations made, future plans can be made more realistic.

Challenge the Status Quo! Take on a Dominant Market Player [Slide Show]

We all learned on the playground in elementary school that it’s never a good idea to take on the big kid. That first physics lesson we learned—that larger objects push harder than smaller ones—reinforced that notion in our rapidly developing, dodgeball-obsessed minds.

But was that really an accurate lesson? After all, ordinary-sized David defeated giant-sized Goliath with nothing more than a pebble and a slingshot. So why can’t you? The answer is, You can! But to effectively beat the giant in your industry, you’ll need to focus on these five things.

1. Establish your brand

As a startup, establishing your brand is the first and most important step in building a business. Coming in as a new player, you will encounter uncertainty about your brand from potential consumers who are unfamiliar with your name, products, quality, differentiation, etc. But you can use that to your advantage.

Humans have an innate curiosity and desire to explore. If you disagree, watch a young child be entertained for hours upon hours by ordinary objects, such as kitchen utensils or cell phones. Even though your target market has most likely grown out of playing with common objects for hours, that curiosity remains.

How can human curiosity benefit your brand? Draw on that human trait by positioning your business as something new and unique. Don’t give up all of your information up front; catch your targets’ interest and make them wonder. Their curiosity will take over and subconsciously motivate them to seek, search, and investigate, which will ultimately drive traffic to your website. Then, it’s your job to get them to stay.

So, how do you keep the market share you’ve gained?

2. Build trust

Customers will not give you their money if they do not trust you. As a new company, you’ll have a hard time building trust via past buying experiences, because your target market has likely never before bought from you. So the next best way to build immediate trust is to identify with your customers on a personal level. Be transparent. As a small business, you actually have the advantage; you aren’t viewed as a faceless corporate monster. Use that advantage to develop closeness with your customers, and you can bet that they will multiply.

3. Do something different

Whatever you do, don’t try to enter a market dominated by a major player by using the exact same business model as the Goliath. Customers’ brand loyalty to the “big kid” will quickly destroy your business. But finding a way to improve or diversify the market will create an avenue for you to compete.

For example, my company created a new pay-per-click (PPC) billing model that was completely unique in the automotive industry. Having a unique offering allowed us to quickly develop strong relationships with suppliers and create the critical mass necessary to start driving traffic (pun intended) to Netcars.com, our website.

But what if being different doesn’t work? Another benefit you have as a small, upcoming competitor is flexibility. Exxon Mobil might not be able to change its business model overnight, but Mom and Pop’s Convenience Store can. So listen to customer feedback, integrate it, and adapt.

4. Dive in

We’ve all been in a situation where it was necessary to “test the water.” When I go to the pool, I dip my toe in first to see how cold the water is. But that’s not going to work in a market dominated by a major player.

When you dip your toe into a big pool, you hardly create ripples. On the other hand, doing a cannonball into the pool would create major waves all around you.

When taking on a major player, then, your goal is to disrupt the market—to do a cannonball into the market. So, make your entrance a massive push. Market like hell. Prepare for growth. Staff early. Get the right people on board, and then figure out where they fit into your business as the ripples grow.

After all, you get only one shot to launch.

5. Be patient

Penetrating a concentrated market isn’t a game of Jenga. (In that game, pulling out one block could cause an entire tower to topple.) Instead, making an impact on the market is more of a marathon, not a sprint. Cheesy analogies aside, don’t expect to bring down the competition overnight.

Keep your brand consistent and unique, continue to innovate, and challenge the status quo. Time will bring results.

* * *

You’ll still have to find your own pebble, but I hope this information will be the slingshot you need to take on the Goliath that your company faces. Happy hunting!

Get ‘Em While They’re Hot: Six Ways to Maximize Lead Conversion

In today’s competitive business landscape, your company is undoubtedly spending significant dollars to generate leads. In fact, you’re likely branching out to newer technologies and channels—such as mobile, text messaging, social media, and Web videos—to bring in more leads.

Though you’re increasing your inbound leads, what happens once you get them? Do your lead-response efforts take advantage of your lead flow? Could your lead-conversion rates use a boost? Without successful conversion, leads are essentially useless.

Here are six steps that’ll immediately increase your lead-conversion rates.

1. Focus on speed to lead

According to a Kellogg study, the odds of reaching a lead increases 100% if the lead is called within five minutes rather than 30 minutes. The study also found that the odds of qualifying and converting a lead increases 21 times if the lead is called within five minutes vs. 30. Calling leads immediately—before your competition—turns rapid response time into a competitive advantage.

2. Convert leads to conversations—then to sales

Don’t get caught up measuring how many leads you’re getting. The question is, How many are you talking to? Converting more leads starts with more conversations. Don’t rely on email to initiate contact with a hot lead. Instantly calling incoming prospects means that you can spend more time closing sales—and less time pursuing cold leads.

3. Don’t rely on CRM systems

Customer relationship management (CRM) systems can stand in the way of immediately reaching your leads by phone. A LeadQual study found that only 40% of leads receive a response via telephone within 24 hours. In the several hours or full business day it may take your CRM system to route incoming lead information to you, your competition may have already contacted and closed the sale.

4. Connect first using lead-response management services

The LeadQual study found that speed is the single largest driver of conversion and being the first business to contact a lead increases conversion 238%. Lead-response management services are designed to connect you with incoming leads by calling you immediately and giving you relevant information about the lead. Such services prompt you to be instantly connected with a prospect, offering the opportunity to begin a sales conversation. Clients of one lead-response management service have experienced lead-conversion-rate increases of up to 300% after using the service.

5. Be available—anywhere, anytime

Not there? No problem. As a busy marketer, you’re often away from your desk. According to a Leads360 study, weekend and after-hour leads are extremely valuable, but they are often neglected. Similarly, a LeadQual report found that enormous opportunity exists for after-hour and weekend calling when many companies aren’t staffed for rapid response. In the age of mobility, there’s no excuse to miss an incoming lead. Lead-response management services enable marketers and sales reps to receive detailed lead information by phone—and to make immediate phone contact with the lead, regardless of the rep’s location.

6. Be systematically persistent

You already know that persistence is key to sales success. But consistently following up with leads is easier said than done. A Leads360 report found that 35% of leads are reached on the first call and up to 72% are reached with the second call—but 48% of leads never get a second call. Accordingly, some lead-response management services offer systematic reattempt capabilities that automatically call reps with lead information, offering one-touch connection with leads for instant phone conversations on the second and subsequent attempts. As a result, no lead goes to waste, and more connections are made.

* * *

You’re competing hard to generate new inquiries and prospects, but that’s not where the battle ends. You are, in essence, wasting marketing dollars if you don’t apply the same amount of effort to lead response and conversion that you do to lead generation.

Make the most of your hard-fought incoming leads by putting in place systems that’ll immediately connect you with leads by phone, help you close more sales, and ultimately, maximize your lead conversion rates.

Five Strategies for Speaking to B2B Buyers’ Pain Points

Effective B2B lead generation, lead qualification, and lead nurturing programs are built on a rock-solid messaging platform—your offer.

The most important aspect of a great offer is a deep understanding of what motivates potential buyers. When you fully understand their pain points and needs and can align them with a clear offer and comprehensive benefits, the sales nurturing process will leapfrog ahead.

Here are five strategies that build stronger, more powerful offers that will help your sales team close more deals.

1. Base your offer on the three conditions of need

Let’s look at what motivates buyers to buy:

• Fear of a loss occurring in the current situation
• Perceived risk that the situation is deteriorating
• An opportunity to improve the future situation

 

The first of those three is the easiest to sell to. I always tell salespeople to continue to ask questions until they reach the first or second condition; selling to the third condition is selling into wishful thinking and therefore very difficult.

Many “no decision” outcomes in sales involve selling to someone who is always interested in learning how to improve, but has no immediate motivation to do so.

2. Incorporate ultimate benefits

The “So-What Exercise” in sales training focuses on layering benefits for as long as possible until you reach one or more of the following ultimate benefits:

• Saving money
• Saving time
• Improving a product or service
• Saving lives

Benefits are, ultimately, why anyone buys anything for his or her company. Though you cannot simply say, “Buy from ABC Company and save money,” the reason anyone buys from ABC Company is to save money (or because one or more of the other ultimate benefits).

The key to using ultimate benefits, though, lies in linking differentiators to the most significant ultimate benefit so that the reader sees why buying from your company will provide a benefit and why your company is different.

3. Take advantage of the reasons people buy

The other side of offer development has to do with WIIFM (what’s in it for me?). People buy things for their companies for business reasons, but also for personal reasons, such as these:

• It’s their job
• Recognition
• Security
• Compensation
• Self-actualization

When marketing and selling to a buyer, you should understand not only why she might buy on behalf of the company but also what might motivate her to buy for personal reasons.

4. Put your offer to the “same page” test internally

Is everyone at your company on the same page with your offer? A simple but effective way to test your company’s messaging is to ask every possible stakeholder to answer the following questions:

• Who is My Company?
• Who is My Company’s target audience?
• What problem does My Company solve?
• What is My Company’s category?
• What benefits do our products or services provide the market?
• What is the competitive landscape?
• How is My Company different?
• What is the objective of this offer?
• What is the scope (money and time investment)?
• What is the timing?
• What is the budget?

Once that test is complete, compare the answers, and identify discrepancies. The most senior executive in the company should deal with tie-breaker issues.

Be bold, and hold the team accountable for the decisions they make about the answers.

5. Take your offer to market… then listen

Now that you have enhanced and focused your offer, it’s time to take it to the market.

How much should your sales representatives talk about your product or solution? As little as possible. Effective salespeople know that good prospects sell themselves as they talk about their particular business challenges, opportunities on the horizon, and emerging issues.

Asking the right questions and then listening carefully to direct further discussion uncovers pain points that are most likely to motivate purchase. Training, constant coaching, applying a proven process, and maintaining a thorough knowledge of your offer are crucial to developing trust and purchase interest.