The second path, the one relating to the individual performance of a salesperson, as trivial as it may seem, makes us aware of the fact that "we are dealing with human beings." Sales people have different skills, motivations, ambitions, and learning curves. Not all care for the same things. Some parts of the execution process may be more natural to a particular person; some clients may be more suitable for a specific type of personality. If we want to dominate the complexity of the elements of the process and the interactions involved in closing a business deal, the management and guiding of the individuals in the sales force becomes a key element.

The paradigm shift comes when we clarify the conflict between dealing with the sales force in the traditional way, to "show them their low performance and to put pressure on them," and dealing with them "on specific parts of the sales process." The tendency is to think that because they are salespeople, they must know what they are doing is completely wrong. Just think about how most sales managers are conditioned to deal with their sales force. Isn't it true that the salespeople know their results? Personally, we believe that good salespeople want to sell, whether or not they have commissions. When they do have commissions, no one would argue that not selling brings a lot of pressure without the managers doing it.

Assuming the main generic disruptions to the sales flow are removed (the first type), a significant jump in performance can be achieved by treating the sales team as "professional sports athletes." Make them improve their bad shots and use more of the good ones.

Managing the sales force with a "system" allows us to identify the steps individual salespeople fail to execute well, and to devote time together with them to understand why it happens. In this aspect, the logical thinking tools of TOC have played a major role. For example, many challenges a salesperson has, and probably every deviation from a process a salesperson makes, can be analyzed, together with him or her, by using the conflict analysis tool presented earlier in this chapter (the "Cloud").

In the past year, we have learned that applying the POOGI to the sales flow enables one to focus on the generic disruptions, the ones that affect the performance of the entire sales force, while dealing with individual performance gaps. It is the "system" view-the one focusing on flow-that enables such a powerful lever.

References

Goldratt, E. M. 2008. The Goldratt Webcast Program on Project Management. Roelofarendsveen, The Netherlands: Goldratt Marketing Group.

Goldratt, E. M. 2008. "Standing on the shoulders of giants," White Paper presented at TOCICO International Conference, Las Vegas, NV.

Goldratt, E. M. 2009. "Standing on the shoulders of giants," The Manufacturer. June. http://www.themanufacturer.com/uk/content/9280/Standing_on_the_shoulders_of_giants. (accessed February 4, 2010).

Goldratt, E. M. 2008. Strategy & Tactics Tree for Make-to-Order Companies. These can be found in the S&T Library embedded in HARMONY (S&T Expert System) downloadable from www.goldrattresearchlabs.com.

Ohno, T. 1988. Toyota Production System. New York: Productivity Press.

About the Authors

Mauricio Herman is presently CEO of a company that offers integrated product solutions from designs done to customer requirements, to packaging and display in retail stores. He has worked in various departments across his company, learning operations from the bottom up. Mr. Herman has completed the "Jonah" course in Theory of Constraints and has followed TOC concepts in areas of his business including Sales and Finance. He has coauthored a leading article on the application of TOC to the Sales Process, which formed the basis for this chapter.

Rami Goldratt is the CEO of Goldratt Consulting-the front edge TOC consulting firm, funded and chaired by Dr. Eli Goldratt.

Rami is recognized worldwide as a leading figure of the TOC Body of Knowledge. After serving as Goldratt Consulting head of development, Rami was appointed CEO. He was the CEO of SFSCo (Solutions for Sales Co.), the specialized supplier of Sales and Marketing experts for Viable Vision projects-a holistic solution based on TOC implemented with companies worldwide. He received his MA in philosophy from Tel Aviv University, Israel.

CHAPTER 22.

Mafia Offers: Dealing With a Market Constraint

Dr. Lisa Lang *

Spend just two hours reading this chapter and if you don't get at least one good idea for your business, contact me and I will give you a refund!1 -Dr. Lisa *

That's a Mafia Offer2 and it's real. The purpose of this chapter is to introduce you to the Mafia Offer-the Theory of Constraints (TOC) marketing solution. The chapter progresses from the discovery of what a Mafia Offer is, to the guidelines for creating an offer, to how to present an offer, and ends with how the reader can create their own Mafia Offer.

The best way to read this chapter is in order. Each section builds on the subsequent sections, so that when you reach the summary you will have a very good understanding of what we in TOC call the "Mafia Offer."

Introduction: What Is a Mafia Offer?

A Mafia Offer sounds like something out of a movie, not something that could seriously help you make more money in your business by increasing and controlling your sales.

Dr. Goldratt first introduced the concept of a Mafia Offer in his book It's Not Luck (Goldratt, 1994, 133). Later, he defined a Mafia Offer as "an offer they can't refuse" (Goldratt, 2008, 67). But in writing, he more frequently refers to it as an unrefusable offer (URO; Goldratt, 1999, 120) and more recently he (and Goldratt Consulting) emphasizes the need to establish, capitalize, and sustain a decisive competitive edge (Herman and Goldratt, 2008).3 Copyright 2010 by Dr. Lisa Lang.

For this chapter, I will use the term Mafia Offer and have defined it as follows: An offer so good that your customers can't refuse it and your competition can't or won't offer the same. In addition, I will refer to the operational improvements required for a Mafia Offer as the decisive competitive edge, operational advantage, or competitive advantage.

A Mafia Offer is simply the offer you make to your market-your prospects and customers-to make them desire your products or services and something that your competition cannot quickly match. And, of course, the offer you make is a combination of your products, services, and how you deliver them. Moreover, for your offer-the solution you're selling-to be unrefusable, you are most likely offering something of equal or greater value than the price you are charging.

Many people confuse a Mafia Offer with a unique selling proposition (USP), customer value proposition (CVP), or a sustainable competitive advantage (SCA).

At first blush, it would seem that a Mafia Offer is similar to these other terms; however, when most people are talking about these alternatives they are actually quite different from what TOC experts mean by a Mafia Offer.

USPs, CVPs, and SCAs take what you already do and state it succinctly and with more specificity aimed at one or a few of their customers' problems or gaps in current market offerings. These alternatives can be Mafia Offers, but most of the time they are not. Furthermore, an SCA is, in my view, an operational or technological (although these are not typically sustainable) advantage and not an offer per se.

Most companies offer solutions that solve their customers' various problems or symptoms. With a Mafia Offer, we are addressing our customers' core problem as it relates to doing business with our industry.

A Mafia Offer typically requires that you do something different (make operational improvements to establish a decisive competitive edge) to address your prospect's core problem. These operational improvements allow you to actually deliver something unrefusable to your customers and something that your competition can't or won't do because they are not willing to or don't know how to make the same improvements. In other words, you have to establish an operational advantage.

In this way, a Mafia Offer is a sustainable market offer built on this advantage. Mafia Offers are not a positioning or a tag line and "can only be created by satisfying a significant need of the market to the extent that no other significant competitor can" (Herman and Goldratt, 2008).4 A Mafia Offer is where we start if you have a market constraint.

Do You Have a Market Constraint?

Let's do a quick check. How would you answer this question? If I could increase your sales tomorrow by 20 percent, could you handle the increase while: being 100 percent on time, to your very first commitment; without going into firefighting mode;5 and still maintain a competitive lead-time?

If the only way that you could handle the increase is to increase your lead times, work overtime, or miss due dates, then you have an internal operational constraint. You don't have a market constraint. On the other hand, if you can answer yes and you could take a 20 percent increase in sales and not have any negative effects, then you do have a market or sales process constraint.

To determine if the issue is a market constraint or a sales process constraint, we need to determine how you would answer another question-why should I buy from you?

Imagine that you just walked into a hot prospect's office and the prospect said, you're the third vendor I'm interviewing today so let's cut to the chase and just tell me-why should I buy from you? Why should I choose you over the others?"

Before you continue reading, please write down the reasons your customers and prospects should buy from you. Make a list.

I've asked this question around the world and have collected many answers along the way (Smith, 2006, 100).6 However, there are themes that tend to repeat. Most people answer the question with something like this: We have outstanding quality and it's better than the competition.

We have a great reputation.

We get good results for our customers.

We have very knowledgeable, great employees with low turnover.

We're very responsive.

We're very innovative, helping our customers to ...

You can trust us.

Some version of that is what most people write on their list. The list might vary slightly depending on your industry. However, it typically does not vary much between you and your competitors. And that's really the point.

If you're saying the same things as your competition, then you're not really providing any compelling reasons. Therefore, you sound the same as your competitors.

Moreover, what do you typically do if you have heard something before? Do you sit up and listen closely, hanging on every word? Well, if you are like me, you tune out. They might as well be saying blah, blah, blah ... because that is what you are hearing.

Therefore, if I'm a buyer and you and your competitors are saying some version of the same thing, then I might as well choose who to purchase from based on price. In addition, even if you are truly different or better than your competition in some way, it doesn't really matter if your prospect doesn't get it. A cute little tag line7 is not likely to change my mind or help me to get it.

As long as you sound the same as your competitors, we must assume that your constraint is a market constraint. In other words, if you have not convinced your prospects that what you provide is of greater value relative to the price you are charging and of greater value than the competition, then why would they buy from you?

Only after you have a good offer, a Mafia Offer, and you are delivering it correctly and your sales are still not increasing, can we determine that you might have a sales process constraint.8 Therefore, we need to start by creating a Mafia Offer. A good Mafia Offer delivered correctly is the solution to a market constraint.

Developing a Mafia Offer

To develop a Mafia Offer, there are three things that we need to consider.

1. Your Capabilities, Both What They Are and What They Could Be, Compared to Your Competition.

Your capabilities are how you deliver your product or service. For example, what's your lead time? Your due date performance? Your quality? Your answers to these questions are your capabilities. Typically, when we first start working with a company, their capabilities are similar to those of their competitors. If they were much better or much worse, they would know.

If you're quoting a 6-week lead time, typically your competition is also quoting a 6-week lead time. Your prospects make sure that you know if someone is quoting a better deal. So typically, everyone in a niche quotes similar capabilities to ensure they don't lose opportunities. Moreover, of course they would quote better if they could actually deliver better.

To determine what your capabilities could be, we rely on experience with the TOC logistical solutions. To give you an idea of possible results, see Fig. 22-1. From Fig. 22-1, if you were quoting a 6-week lead time, we can expect a 70 percent reduction or a lead time of less than 2 weeks after applying the TOC solutions to your operations.9 This gives us an idea of the decisive competitive edge that we can establish and capitalize on in our offer.10 FIGURE 22-1 Typical results with Theory of Constraints. (Source: Mabin and Balderstone, 2000.) 2. Your Industry-How You and Your Competitors Sell Whatever You Sell.

The second thing we look at to develop your Mafia Offer is how your industry sells whatever it is that you sell. A whole slew of questions will fit for your industry. Here are some examples that may or may not apply to you: Is it industry practice to use a price/quantity curve? How do you and your competitors' typically charge? By the hour? By the day? By the project? Time and materials? Flat rate? Who pays for shipping? Paid at the start? Paid at the end? Progress payments?

The key is to understand how your industry interacts, in the selling and delivering of your products/services, with your typical prospects and customers.

3. Your Specific Customers and How They are Impacted by Typical Capabilities and How Your Industry Sells.

Since your customers are the only judge of your Mafia Offer, we also need to understand how your current capabilities and those of your competitors affect the companies in your target market, and how they are affected by the way you all sell to them.

It is in these interactions and interfaces that we may be causing negative effects for our customers and prospects. Understanding these negative effects leads us to uncover our customer's core problem relative to doing business with our industry.

The easiest way to understand what a Mafia Offer is, what makes it good, and how to create one is to go through an example. Most likely, this example won't apply to you because an offer is specific to a company and its particular customers. Nevertheless, you can gain by understanding how to apply the three considerations to a specific situation.

Custom Label Printer-An Example

Let's consider a custom label printer. The labels this printer makes for one customer can't be sold to anyone else. However, the same customer may reorder a label for a number of years. Moreover, this label company's customers buy 100+ different labels for their various products. Many of their customers are regional-sized food and beverage companies. They produce food products in multiple flavors and put them in a variety of packaging, causing them to need 100+ different labels.

The analysis started by evaluating the internal capabilities of this printer and those of their competitors. We found that this printer and their competitors generally quoted a 2-week lead time. We also learned that the due date performance was about 90 percent for this type of custom label printer.

Determining operational performance of the label company was straightforward. The only thing you need to watch out for is how they calculate due-date performance (DDP). Some companies will change the due date commitment if they call the customer and get permission to be late. If they get this permission and meet the new date, they consider this to be on time. So we ask them to calculate their DDP on "first date given."

To determine if this label company's performance was typical for their competitors as well, we simply talked to the salespeople. If a company's performance is much better or much worse than the competition, their salespeople will have heard about it. If you don't have salespeople, then whoever the chief salesperson is (like the company owner) is the one to ask. In this case, the salespeople indicated that the 2-week lead time and the 90 percent DDP was neither praised nor a problem.

From our experience of working with printers in the past, we expected to get the time through the shop down to just a few days and to improve DDP to 99+ percent. A quick tour through the shop verified that this should be possible. On the tour, we noticed a large amount of work-in-progress (WIP). We also noticed one of the printing press operators going through the pile of jobs in house and asked what he was looking for. He said that he was trying to determine the best way to "gang the jobs" to make the best use of his current setup.

With this information and knowing that the actual touch time of a job was measured in minutes, we were confident that the cycle time through the shop should go from the 2 weeks or more now to just a few days. We anticipated that we should be able to improve this shop to 99+ percent DDP and the time it takes an order to flow through the shop should be dramatically reduced. Our estimate was two to three days.11 Next, we turned our attention to the industry and how the industry sells custom labels. Now, if you've ever bought anything printed you know that the lower the price per piece that you want, then the more you will need to buy. If you only want one or a few pieces, then your price per piece will be very high. The printing industry uses a price per quantity curve like the one shown in Fig. 22-2.