Sunday, October 8, 2017

Part Two – Deep Dive on People – The Right Kind of Management

source: Linkedin
In our last post, we discussed people; hiring the right people, building a solid distributor-centric onboarding process and the advantages of retaining experienced workers. Today, let’s turn the tables a bit and look at coaching and managing the very life blood of distributors – the people.

Front-line managers make a difference
According to work done by the Gallup organization first detailed in First, Break all the Rules, employees join companies but quit because of bad managers. Realizing the management structure of many distributors appears flat on paper with everyone reporting to just a few people, many of
these front-line managers may not even have a managerial title. We might call them something like warehouse lead, inside sales supervisor, senior buyer, or perhaps they carry no real title but direct the work of others. To a lot of your workers, they are the “go to” person and reflect the day-to-day voice of the company. Oftentimes, they have no training.

What kind of training might be required for these front-line positions?
First and foremost, they should have a keen awareness that their words and actions reflect on the company. An off-the-cuff remark from them carries more weight than they imagine because other employees believe them to have an inside track on information. For example, the front-line guy may quip that business is down, and pay increases will be impossible. Even though the high-performing employee
overhearing the comment was destined for a promotion and a raise, the offhand mention opens the door for an untimely exit.

Front-line managers need to understand how to handle conflict. Emotional outbursts, bullying and relatively common employee disputes create havoc with morale. In the typical situation, job satisfaction drives downward, opening the doors to loss of productivity and potentially the loss of an experienced worker. In some catastrophic cases, an unhealthy or hostile work environment creates an expensive legal situation where the company shells out tens of thousands of dollars and tarnishes its reputation.

With proper coaching, the front-line manager assists in developing employee reviews. They understand when and how to add information to personnel records. Issues with tardiness, work-space cleanup and other matters are properly routed to high authorities along with properly documented updates on overall progress.

Managing the managers
A quick Google search reveals thousands of posts on providing better management of employees, but sadly there are darn few on managing the managers. I believe managers can be the hardest group to manage. Here’s why…

Distributor managers are ultra-busy. Very few are full time managers. Instead, they are involved with dozens of day-to-day activities. They face urgent issues tied to their groups – things like making sales, getting orders out the door and having important suppliers dropping by with new programs. The truth is many of these people see their “real job” as more important than developing people. Developing people, however, has a profound impact on the future and strategic success of the organization.

Reviewing a comment in our last post, exit interviews point to lack of meaningful reviews as a primary reason for employees leaving. Our workers need and want to know where they stand with the company. Further, they feel a strong need to understand management’s view of their potential with the company. At the same time, their managers often procrastinate or ignore the need for a formalized review.

When HR applies pressure on the managers, they often use their clout to push back. Some insist their team doesn’t really want reviews. Others make the case for their “own system” of ongoing informal assessments delivered as part of the normal work day. Either way, this is an example of an important management duty ignored.

Finally, top leadership sometimes sets a poor example. Distributor owners and Presidents rarely develop meaningful

reviews for their direct reports. Many of these “upper tier” employees feel perfectly comfortable without a formal evaluation. While the argument could be directed either for or against reviews at this level, I believe employees need to be evaluated. Further, one part of the review message might include this comment, “Your team needs to be reviewed.”

For discussion, we focused on reviews. However, the same argument could be made for job descriptions and enforcement of policy infractions. Not to dwell entirely on the negative side of employee issues, let’s think of some of the right things managers miss:
• Does the manager know the employee’s career goals?

• Has the manager ever talked about the potential for matching company needs with these goals?

• Is training generic and “one-size-fits-all” in the company or has it been tailored to best match the employees need for development?

• Has the manager provided the employee with a list of potential mentors who might provide low risk insight on career moves? (For situations where the employee has ultimate goals to move to another department in the company.)

• Has the manager ever provided recognition for work well done in a public manner?

• Does the manager nurture employees to the point they are recruited by other managers for other departments?

Some call these the soft skills of management, but experience dictates as long as compensation is in the right range, the people-centric skills are more important than money to most employees. However, there are a few hard skills every manager requires.

Every manager must have skills for the future
Distributors do well with product training. I am constantly amazed at how many product-centric technical details warehouse workers, accounting staff and other nonselling team members actually possess. As a group, however, we often stumble in other skills-based training topics. Sales training gets lots of ink, but today let’s focus on the managerial side of the equation.

Some management skills are general in nature. I believe everyone needs to be proficient in their use of the personal computer; and I’m not just talking about how to turn it on. Research shows that managers often struggle with simple tasks such how to organize files in their system for easy retrieval. Important documents are lost or temporarily misplaced, resulting in downtime while you search or recreate them. .

Email archives in our industry are often messy and hard to maneuver through. Billions of emails carry information that you sent and received throughout distributor land. Some of this is important stuff. Dealings with customers, suppliers and others within the organization rely on proper storage with the ability to find the information at a later date. You can’t do this with 11,000 items randomly hanging in your inbox.

Finally, I can’t conceive of any manager not being proficient at building and manipulating a spreadsheet. Analytics provides a powerful tool. Enterprise resource planning systems seldom easily serve up much of the data required to make better decisions. The ability to project and measure this information is critical for the future.

Putting a wrap on management
Training will pay a critical role in the future of distribution. As an industry, wholesalers have mostly relied on a slow growth mentality for developing people. The demographics of many distributors points to a major loss of talent over the next decade. As baby boomers exit the workforce, the next generation will need rapid acceleration to keep up. Training will become a mandatory skillset of progressive distributors. Next installment, we’ll benchmark a few points tied to training.

Wednesday, October 4, 2017

Deep Dive – It’s Time to Think About People

We will be posting a lot about people over the next couple of
weeks.  Why?  Without people distributors basically become an empty warehouse, a collection of well-used computers and an assortment of worn out office furniture.  Speaking with an assortment of folks (from inside and outside the industry) looking to purchase distribution businesses, the conversation typically revolves around three major points – profitability, solid customer relationships and stability of people.  Take away the latter two and the distributor is valued somewhere near zero.  Further, it might be argued, without the people there are no solid customer relationships.  So talking about people is doubly important.

Our brand of wholesale distribution is one of the most people-intensive business models in existence. Sure, we have warehouses, inventory, customer credit, computers and company fleets of cars, trucks and lord knows what else, but people are the driving force of our model. For every dollar of gross margin generated, about 58 cents goes toward paying our people. To put it into perspective, this is four-and-one-half times our occupancy expenses and three times our other operating costs. It’s a growing concern.

News pundits point to lower unemployment numbers, nearing those of pre-recession days. These numbers don’t tell the full story. I believe the pool of high-quality talent required to impact our business has been fully absorbed. It’s the law of supply and demand. Since midway through the year, salary
demands by new recruits have been on the rise. This is especially true for high-skill and technically qualified folks. For example, the starting wage for new engineers straight out of college (University of Iowa) has reached $60,000. 

The business model doesn’t allow a lot of leeway for raising the cost of employees. We can’t afford to raise our percentage spent on people above the 60 percent point and remain in business. There is little we can do about the escalation of salaries, benefits or health insurance. Productivity gains are no longer just nice to have, they are a necessity to survival.

Let’s explore some of the best practices used by others to build productivity within your organization. 

Experienced people tend to be more productive
Research into hundreds of distributor organizations points to evidence that experienced people are more productive. They know the systems, short cuts and processes required to adequately carry out their jobs. In addition, experienced folks often have a deep industry background including customer contacts and those behind the scenes whom you can call upon in a pinch to resolve issues. 

Retaining experienced hands is critical to productivity with the following caveat; they must possess the right work ethic and professional skills and be in the right position. Hiring errors left to simmer within the organization don’t improve productivity. For the sake of discussion, we’ll assume the last big recession gave you the opportunity to purge them from your organization. Hopefully, other poorly performing employees are on solid improvement plans or on their way out the door. 

Whether they mention it or not, assume your team is under
scrutiny from headhunters. Other companies, armed with a handful of dollars, are probing your defenses. Fortunately, money isn’t the massive driver many of us believe it to be. Assuming your pay scales are reasonably sound and have kept up with the industry norms, the real drivers fall into issues of job satisfaction, proper tools for the job, room for growth and a feeling of appreciation.

Reviews are more important than you think
After conducting exit interviews with more than 100 employees, I am shocked to find the majority indicate they have not had an adequate review of their performance for years. Their managers point to ongoing informal conversations with the employee, but those leaving don’t see it that way. What’s missing?  A plan for the employee to grow within the company. A formal recognition of success with customers. A show of appreciation for years of service. Their managers use the excuse that putting together a proper review is time consuming and difficult, yet they overlook the issues of finding and training a new replacement. 

A few old-school distributor owners have even commented that reviews just open the door to higher employee salaries because after a good review, employees expect a raise. In today’s environment, I suspect a new hire with similar skills might demand greater compensation than the existing employee; not to mention associated costs of lost productivity. 

Hiring errors are expensive
The only thing worse than losing a solidly qualified employee is hiring the wrong person.  While most agree with the statement, the hiring process at many distributors is still abysmal.  Let me give you some examples:

  • Informal interviewing techniques used without a plan.  Exactly what are you looking for in the interview?  Distributors walk into the conference room with no plan and no idea of what they want to explore with the candidate.  Aside from a verbal walkthrough of resume details, a good interview looks for signs of work habits, communication style and willingness to be part of a team. 
  • Personality profiling is not performed.  Personality profiles are not perfect, but they do alert the interview team to potential areas to explore.  In reviewing hundreds of these profiles we have discovered a number of red flags which, once explored, saved our clients from disastrous new hires. 
  • Reference checks are done in a haphazard manner.  Some see this as tedious work.  When potential employees come from large companies, you get the standard “they worked here from 2011 to 2015 and that’s all I can tell you” answer.  Taking time to find mutual friends and/or customer contacts takes a little effort, so the process often goes by the wayside. 
  • Background checks are often amateurish.  I know of a distributor who hired a truck driver with two prior DWI convictions.  How did this happen?  Further, one company asked me to assist them in their background check.  Their search came up with a clean record, my paid search revealed two felony thefts in another part of the country.  Strangely, the potential employee forgot to mention he lived in North Carolina for two years.

Extending this hiring error discussion, best practices indicate new hires be reviewed at the 30, 60, 90 and 180-day mark.  An employee showing the wrong signs in these early days needs to be corrected. If no improvement is shown, he or she should be terminated before becoming a detriment to your organization.  

Onboarding process
Getting a new employee off on the right foot can speed the time from profit drag to profit generation.  An onboarding process is critical during this “need for speed.”  Distributors are terrible in their effort here.  If you don’t have an onboarding process, you need to read this article from Industrial Supply Magazine.

That’s not all
There are a number of other “people points” we need to discuss.  Next week, we will post part two of this where we discuss applying management and coaching points to the process.

Friday, September 8, 2017

Hurricanes and Helping Distributors

First Houston and the Gulf shores and now Florida is set to go under. Natural disasters are tough on distributors and even harder on our customers. I know from firsthand experience. I thought this might be a good time for distributors to share their knowledge of natural disasters and would like to invite everyone who has lived through one of these events to share their experience and provide tips and support. 

Without going into massive details, Iowa has had more than its share of flooding. I went through the great Des Moines flood of 1993, which put much of the downtown underwater and flooded countless industrial facilities. We went without running water for 29 days which meant no drinking water, no workable toilets and put the nearest shower at an army base nearly 20 miles away. For a week or so, every business deemed unnecessary for infrastructure rebuilding was ordered closed. Electrical distributors were viewed as important. We were told “not to close."

At that point in my career I was an electrical/automation distributor, so these thoughts come from that perspective. Conversations with distributors in other fields point to similar situations.

Expect a massive surge of business
From the electrical perspective, flooding creates a massive surge of business, but not immediately. From my experience, business will start as a trickle and reach a zenith about four weeks after the waters have subsided. The end of this rush of business happens around four or five months later. It generally falls off slowly, but by that time most customers are through their emergency situations.

Predicting what people will need is tricky. In the electrical world the first hit will be for the materials needed to create temporary services and other work arounds which allow construction and other trades to get into the job and do their
work. We asked a couple of our major suppliers to consign inventory of items to our location; many took us up on the offer. For instance, we had a semi-trailer full of transformers stationed outside of our warehouse which we used once our normal inventory was depleted. The same went for flexible conduit, breakers and load centers.

Some of the items you just can’t stock enough of are the following:

• Contact cleaner – Getting the mud and debris out of everything consumes mass quantities of this stuff. You can’t have enough as it will go out the door by the case. We discovered a few companies sell it in bulk in 5 gallon buckets. We sold a couple pallet loads in a week.

• Industrial fans – Everyplace is wet and once the water goes away it gets pretty steamy inside the buildings and electrical rooms. They will sell faster if already assembled.

• Portable Ground Fault connectors (GFCI) – Think about it, wet conditions and temporary connections make for a shock hazard deluxe. In normal conditions some workers will skip using the GFCI precaution, but when they are working in a half inch of water, they are quick to be safety conscious.

• Circuit Breakers - Every variety will fly out the door. In industrial settings, expect people to bring in older model breakers. Some of these are readily available while others require some digging. While I don’t normally advocate for gray-market stuff, we did help a few customers find “surplus” used breakers to get older parts of their plant running.

• Anything electronic – PLC’s, Drives and other equipment are often damaged even if the water level doesn’t reach them. A little bit of humidity plays havoc on printed circuit boards. We did a lot of spare part exchanges and for smaller units we recommended taking them out of service.

• Electric motors – Most agree it’s not cost effective to rewind anything under 50 horsepower. Smaller size motors will fly off the shelf in the fourth week.

Take care of existing customers first
If you have stock, they will come. Some, maybe even many, of the folks coming are not regular customers. While running contrary to the beliefs of many salespeople, all sales are not created equal. I believe it makes great sense to not sell the last part on your shelf to a complete stranger, especially if the product is in short supply. This is tough to monitor but the word needs to go out to your team.

Continuing with the premise of taking care of existing customers, you will encounter massive demand for products which are long lead time and often hard to get from the manufacturer. We discovered that it made sense to assign one person to the location for the expediting of “odd-ball” and long lead time items. Following this practice will speed the process and eliminate duplication of effort with your team. Trust me, after the first two weeks, your team will be busy.

Network with friends in other parts of the country
You probably have distributor friends outside of the storm damaged area. The first week or so after the storm many of them will no doubt give you a call to make sure you are ok. Be sure to take the time to ask them about the potential for selling you some of their inventory should your needs be more immediate than the supplier factories can accommodate.

On the topic of friends, in preparation for this piece we spoke to Mark Tomalonis the President of WarehouseTWO. His organization can help you find other distributors willing to sell a portion of their inventory. We asked him to give us a short overview of his company:
WarehouseTWO is an online “inventory-sharing” service available to manufacturers and their networks of authorized distributors. This is the tool most commonly used by fluid power, fluid conveyance and hose/fitting distributors in North America.

Access to inventory data is restricted to the brands your company can buy directly from the manufacturer. Hundreds of branded inventory-sharing communities are available. This service is free for those who wish only to browse. While there is a nominal monthly subscription fee to upload one’s inventories for sale to other distributors, there is no charge for the buying distributor.

Mark has offered to streamline your use of the service. For temporary access to its “inventory-sharing” system, send an email to and mention “Request for Temporary Access” in your email subject line. For more information visit

A call to action
The Distributor Channel has grown, we have pushed over the 100,000 reader level. I am asking our readers to post any information or distributor-centric tips for operating post-hurricane or flood. You can post them here as a comment, or send us an email. We will see that the information gets to the right people.

On a personal note: I spent the first part of my childhood in a small town just across the bridge from Galveston, Texas. My family went through Hurricanes Debra and Carla. I was just a kid, but I still remember watching mighty trees topple and roofs blow off neighbors houses and skid through the vacant field behind our house. I remember poisonous snakes attempting to crawl up the porch and into our house. We were fortunate to have sustained minimal damage because we were on “higher ground."  In 2002, I was the President of AHTD when Hurricane (later reclassified) Isidore hit our meeting in New Orleans. Thank God the dikes held and the results looked nothing like Katrina disaster.

If River Heights Consulting can help anyone recently hit by the latest round of hurricanes, we are here.

Friday, September 1, 2017

R&D: Distributor Style

Based on a research published on, the average company in North America spends an average of five percent of revenue on Research & Development (R&D.)  Further study points out that more innovative companies are spending closer to 20 percent (Google spends 16.6 percent, Amazon was 27.7 percent and pharma companies go into the high 20s.)  While these companies are pushing for new and groundbreaking products, it makes sense that every company would want to invest a little in their future.  Should distribution be any different?

Many believe that R&D involves white-smocked scientists
Disclaimer: Frank was not
in Back to the Future
working in some secret skunkworks laboratory deep underground.  Arguably, distributors sell the products developed in this kind of product/technology-based research setting.  Research & Development involves more than just products.  Some research should also be focused on the customer.  Things like future direction, service needs, future buying habits and shifts within their process all come to mind.    Sadly, most distributors tend to skip over this important point.

Distributors like to brag about their customer intimacy.  Based on decades of back and forth discussions concerning Point of Sale (POS) data, many value their customer relationships above all else, even to the point of withholding POS data from their top supply partners.  In many cases, we distributors have intense familiarity with our regular customer contacts.  But questions about true customer understanding continue to come to the surface.  Let’s explore a few of these.

A few years ago, I received an emergency call from one of my clients.  One of his top customers had given a 30-day notice that all purchases would be channeled to a competitor based on the ability to participate in a “commodity supply contract.”  This teary-eyed distributor’s most important contact delivered the message, indicating the decision came from well above him and was irreversible.  Later, research specified the customer had been contemplating the move for nearly a year, but had not been mentioned during any of the weekly sales visits to maintenance, engineering or purchasing.  However, everyone in management knew it was coming as a process for driving down transaction costs.  

I had to ask, with the distributor bragging about customer intimacy, how was such a move missed?  Pushing further, wouldn’t this have been something worthy of exploration by R&D?  But this isn’t the only topic distributors should be thinking about.   Today, distributors need to understand how the following might impact their customer relationships:
Internet-based purchasing
Location and training of new employees
Changes in the way customers prefer to be contacted
Value of services provided
Importance of local inventory
Customer processes which might be automated in the future
Shifts in customer operations, i.e., outsourcing, expansion and other needs

Customer Surveys – R&D tool for distributors
Why not gather, review and benchmark information from your customers?  After assisting with dozens of customer-focused surveys, we have yet to see one that didn’t provide some valuable insights about overall and specific customer direction.  Reviewing the questionnaire details, it’s common for distributor managers and salespeople alike to have some eureka moments.  Many of these discoveries lead to instant process improvement while others become part of a strategic initiative to position for the future.

Let’s talk about best practices for customer surveys.
Surveys need to be well thought out and worded properly.  Customers willing to provide the gift of feedback should not be required to wade through poorly worded questions or information that doesn’t apply to their position in the company.

Surveys should require less than 10 minutes to complete.  Let’s face it, customers are bombarded with requests for their time.  A survey that runs longer than a few minutes rarely produces measurable results because the customer simply gives up part way through the effort.

Benchmarking is important.  We recommend distributors conduct a survey of their very best and most established customers first.  This creates a standard allowing for further comparison of some of the “lesser known” customers.   We can discover differences in perception, potential unmet needs and a wide variety of information.

Forward looking surveys provide the best information.  While getting a snapshot of the past is important, the real meat comes by way of the customer’s vision of the future.

Understanding how you measure up against competitors is a critical piece of the survey.  Unfortunately, many distributors dwell on the local competition versus the non-traditional competitors; i.e. Amazon, of the future.  

We recommend using a third party for conducting the survey.

While this may sound self-serving coming from an organization conducting surveys for clients, there are good reasons for insulating the customer from your organization:

Customers are more likely to share the good, bad and the UGLY with an outside party.  Being nice folks, they are hesitant to tell you if they think your service stinks.

A third party can do post-survey interviews to clarify points made during the initial survey.  Since the third party is not tied to your organization, they can engage in conversations without preconceived notions of the customer.  A third party can ask what someone within the organization might consider to be a “dumb question” without offending the customer.

The outside surveying organization gives the impression that your company is both scientific in their process and serious about gathering their customer’s thoughts.  

Is it time to make an investment?
Most of the time, investment equates to sales pitch, but not here.  I believe understanding customers is so important that I want you to do something, anything, to better understand your customers.   If not an outside survey, then via your own survey mechanism; companies like SurveyMonkey allow short, limited reach surveys for free.

The important thing is to begin the process of asking:
  • What do I want to know about my customers?  
  • What is our company’s R&D?  
  • Would I invest in a company that spends zero dollars on R&D?

This IS an advertisement
If you are a manufacturer, when was the last time you reached out to your distributors?  Our survey results always help companies build better relationships!  Let us know how we can help your organization!

Friday, August 25, 2017

An End of Year Exercise that Drives Sales

Here’s the challenge, with just over four months till year end, everyone is looking for a plan to eke out a few more sales dollars. I firmly believe there’s still time to make a difference. Further, if done correctly, the plan can impact the future as well.

One of the most tried and true methods for creating quick success comes via targeting. This process comes from the extensive research we have carried out in the preparation for a book on targeting at distributors. The beauty of the effort arises from three important points:
1) Current customers are the focus of your efforts, eliminating the need for time consuming prospecting, cold calls and the endless phone tag associated with it.
2) It can be combined with normal daily activities to drive the sale of new products.
3) Success comes quickly and is easily measured.

How to get started
Distributors are often noted for a few of their flagship product lines. Typically, these top five to ten product lines represent over 60 percent of your business. Your customers have been conditioned to automatically think about your organization for the products and technologies provided by these brands. The best targets come from the next tier of products, many of which even your best customers don’t realize you sell.

Identify one of these second level products with a relatively broad usage and determine which of your top 30 accounts are not presently purchasing it from you. For most distributor salespeople, this represents around 20 accounts to choose from.

Thinking about accounts
Of the accounts not buying from you, which five to ten have the best chance of success? Consider the following:
Applications within the account. Do they have the perfect place for this product? How could it make a difference in their business? Why is it better than what’s currently being used?
Knowledge of the people. Who at the account would be the ideal decision maker for your product? If you don’t know precisely, do you have the contacts required to find the right person with minimal effort.
The competitive situation. The competitive landscape makes a difference. If you enjoy a strong position, or maybe even have a supply contract with the customer, competition shouldn’t be an issue. If you are not the dominant supplier, does their main distributor actively sell the product? We have discovered some of these products are purchased “mail order” with almost no customer service.

Selecting just five opportunities
That’s right. Of those twenty accounts, I want you to discard all but the best five; think of it as stacking the deck in your favor. Keep the aces and toss the twos. We’re ignoring the hard ones and going after what Iowans call the “low hanging fruit.” While I would never want you to ignore a customer who has millions in potential for this product, for this exercise I would like for you to pick the easiest and fastest sale. We are applying the criteria from our thinking about account selection to purposefully load ourselves up for an easy win.

Measuring success
Sales are a measure of success, normally we go for the big numbers. This time, however, we want to measure our success in getting a reasonable order. For most products, we are talking about $500 dollars in purchases by the end of the year. In the case of a longer sales cycle situation, for instance an OEM, we may consider a concrete commitment for later purchase. Staying with the OEM example, let’s assume you can get your product specified on their next redesign of an existing machine or on the prints for a coming machine. This counts as a sale, too. You just won’t see the P.O. for several months.

The finish line
The point of all of this is to add sales in before January 1st, 2018. Your success will be incremental business which is laid over the top of existing business. I also have ulterior motives. Allow me to explain the value of this process.

My ulterior motive: The Power of Targeting
Back when I was a young sales guy, things were different – much different. Working for one of the leading manufacturers of electrical products, I saw new products introduced at the snail’s pace of five or six per year. The plan for all of these was the same, show them to everyone. It was a features and benefits world where we basically worked our way down the customer list. Customers seemed to appreciate the technology update whether they had a real live application or not.

Let me illustrate how the “real live application” thing worked. After a couple of years, I had a Eureka moment: Customers rarely remembered products unless then had an immediate need; a real live application. I looked to further assess this theory by tracking activity. Customers were shown a product and then reintroduced to it as a new product nine months later. After testing the theory at least 50 times, only one customer called me on it. He only remembered because just before our visit, he had reviewed a file of product brochures left during previous calls.

Today the situation is different. New products fly out of the design departments at unprecedented rates. Customer time is scarce. Just listening to a product demonstration to stay up on the technology is a luxury of the past. Customers report the internet is their primary and preferred initial product research vehicle. While they don’t have time for “old school” salespeople, they do have time for problem solvers and those ready to make solid recommendations.

I believe following this targeting method places the professional salesperson into the problem solving and expert recommendation category. Here is why:
• Targeting involves use of your in-depth knowledge of the issues faced by accounts you already know well (see my comments on the top 30 above.) You already know some of their problems.
• Targeting involves your ability to tie (perhaps lesser known) products to their specific applications. Rather than coming in with a five-pound catalog, you are selecting specific products for their needs.
• Targeting matches the person responsible for the customer issue with your solution to that problem. You aren’t wasting their time or yours.
• Sometimes you can suggest a solution to a problem the customer doesn’t even realize they have, or at least until you point it out. This demonstrates your true interest in and knowledge of the customer.

Now visualize the future
You’ve become good at this product targeting process. You think of every new product in terms of targeting the right application and the correct customer need. You are viewed differently than other salespeople. You expand your business by targeting dozens, maybe even hundreds of products per year.

My challenge to you
I challenge you to give this process a trial run. It has been time tested and proven in dozens of distributor territories. It works. Give this a try, share your beginning thoughts with us and River Heights Consulting will provide you with some pointers along the way.

**If you are a sales manager looking to accept this challenge and explore the options with your team, we would be happy to share the details of an award driven program.  Click HERE to receive more information.**

Monday, August 14, 2017

Why is Customer Relationship Management Important?

Customer Relationship Management (CRM) and the various
software systems designed to assist in its implementation have been hot topics historically across distributor-land.  The truth is, many companies made the purchase, launched their efforts with the greatest intentions and then stumbled on the execution of such systems.

Lack of performance has many root causes.  Some of the early CRM packages lacked important features, such as the ability to sync data with Outlook (which is commonly used by salespeople to manage calendars, contacts and daily activities.)  Other times, the distributor failed to understand how CRM systems interacted with their business, making the whole thing an exercise in dead-end data entry.  A few times, technical issues like the ability to quickly enter and access data from remote locations, made the process unmanageable.  In my opinion, however, will power could be characterized as the biggest driver of less than stellar results. 

Since most technical issues are solved, most distributors are rethinking and relaunching the CRM effort and now we are squarely facing the “will power” part of the question.  For some reason, salespeople fear and loathe CRM systems.

Below I have characterized the major reasons:

1) Time, Time, Time – CRM takes time.  I work hard.  I already put in extra hours and CRM is just another device which sucks away from my personal (and off hours) time.

2) What’s in it for me? – I can see why management wants the information, but see little value for me as a salesperson.

3) Others can mess with my accounts – If information is available for the team, there is an opportunity for someone else in our organization to inadvertently open some terrible commercial can of worms.

4) The Big Brother Syndrome – CRM allows management to look over my shoulder and I don’t need that distraction in my life.

5) Job security – Tied to the Big Brother thing, many salespeople view their unique knowledge and relationships with customers as their personal bit of job security.  Some even have the fantasy of taking their customers to some new employer who will pay them handsomely for delivering their territory to some other grateful employer.   Experience dictates this strategy rarely works.  Further, in many states, the strategy is covered by “trade secret” laws.  

There are compelling reasons to fully engage with CRM
Research and anecdotal reports from dozens of sellers who believe in CRM have demonstrated that it is a prevailing tool for salespeople if they invest the time and effort to apply the concept properly. Some of these are so powerful, they offset some of the fears and contradict all but a couple of the concerns outlined above.

Let’s review those positive results from a seller’s perspective.

Better contact management – Let’s talk about customer contacts. The average distributor salesperson encounters hundreds of buying influences. Keeping track of your main contact at the top 20 accounts is pretty easy. Pushing further, my guess is a person can even handle the next level contacts which puts us near 50 contacts. This is only 10-20 percent of the total and maintaining a relationship with the other 80 percent is critically important.

What about the rest-- the ones who get lost in the shuffle? First, the project managers who are only actively involved with you when they are engaged in work which uses your products and services. Safety managers, production managers, training managers who influence their company’s purchases are out there somewhere too. Most importantly, the financial influencers of your customers are in your system and these are the people who can veto a purchase order headed your way.

How do we track our interactions with these folks? If you review your records, are there people with whom you have not interacted for 6 months? A year? Maybe longer? Salespeople fully intend to review their lists monthly, but schedules and other activities often distract from the task; so it goes undone.

A good CRM package will allow you to review your contacts and scan for activities (often automatically logging email exchanges.) Imagine being served up a weekly list of folks you haven’t talked to for a while. It’s hard to argue with this power.

Team selling empowered – Forgetting the personal computer, fax machine, cell phone and smart devices for a moment, the biggest single change in our industry over the past three decades has been distribution’s adoption of team selling approaches. Good CRM practices enhance the value of the team. What’s more, they help the salesperson sell more and ultimately make more money. Let me explain.

Inside salespeople are constantly dealing with your customers. Mostly, the same individuals call in orders, ask a
few questions or get price/delivery information, but occasionally they get questions which could lead to bigger opportunities. They communicate with new people and some of those customer contacts with whom you don’t often interact. If the inside salesperson has access to your customer list via CRM, they can add new names and identify those peripheral contacts not in your regular call routine. Pushing this concept further, with the proper flagging, the salesperson is then quickly allowed to ring up that seldom contacted individual to determine if immediate attention is required; thinking especially toward project managers or financial guys.

Similarly, specialists and technical support people are able to identify and enter the names of technical people at the customer, many of whom are hidden deep in the bowels of the customer organization. These are the kind of contacts who can give you the inside scoop on what’s happening at your customer from a technology point of view.

Marketing is growing in importance - Just a handful of years ago, the marketing groups at most distributors were basically event coordinators and the keepers of the company golf balls and other trinkets. Today, they are developing plans for generating leads, building interest in new customers and reinforcing the company brand. Much of this requires accurate customer contact information, including the current email address.
Herein lies three major issues:
1) trust and cooperation with marketing (will they send the right information to each customer contact or just irritate them with spam?)
2) can sales provide accurate email addresses?
3) does the company maintain the proper segmentation of customers?

As River Heights Consulting wraps up several major
distributor/customer satisfaction surveys, the “bounce” rate for email address stands in the 30-40 percent range. Here’s what we found: email addresses which were spelled incorrectly, email addresses which were obsolete because the customer changed their name and “url” (for example the “”,) inactive accounts and customer contacts who have been dead since 2009.
It is the salesperson’s responsibility to make sure the emails are accurate and proper. This is part of good CRM practice. Further, it proves, at least to me, that the seller has not been regularly touching some of these contacts; at least by email.

Supplier engagement – While this one might be viewed as more of a benefit for management, there is nothing more powerful than demonstrating just how hard you are working to help a supplier develop their business and grow market share. I have heard countless tales of suppliers complaining about selling activities only to “eat their words” when somebody showed them the number of selling events made on their behalf.

With Special Pricing Agreements (SPAs) growing at exponential levels and giving distributor sellers a near exclusive deal with suppliers, I believe CRM data can make a difference in the win-loss column for salespeople. By sharing sales activity with various key suppliers, I believe seller position themselves for a pricing advantage should intra-channel competitive rivals (other distributors selling the same supplier’s product) rear their ugly head.

Further, sharing similar reports monthly can help harness the power of the supplier’s selling resources, be they individual calls, demos, samples, access to factory engineers or marketing goodies. Imagine a meeting where the distributor and supplier’s salespeople sit down as co-equals, dividing the work and assigning one another focused tasks. The exercise might also include populating the CRM with new contacts and future opportunities discovered by the supplier’s team.

Opportunity tracking – Last month we wrote about opportunity tracking (read it HERE.) In that post, we assumed you were somehow tracking opportunities. However, based on emails and calls over the past few weeks, it turns out a good number of people aren’t tracking opportunities. That’s some “bad juju”, so allow me to review why tracking opportunities as part of your CRM practice is better than a collection of good-luck charms and rabbit’s feet.

Like customer contacts, a seller should discover hundreds of opportunities every year; some large, others small, and varying in time to fruition. The big opportunities coming in the near term are easy to remember, so too might be smaller and immediate potential orders. The ones that make the difference are those coming in six months, a year or perhaps even a couple of years. This phenomenon is pretty evident. Generally, most distributors do poorly with long sales cycle selling. However, a few (typically those distributors selling OEM parts where design and development is part of the product offering) excel in a world where 18-24 month selling is the norm.

The question is: how do they do it? They carefully track each and every opportunity constantly positioning themselves for the final decision. Unfortunately, without a process for tracking each and every opportunity, most distributors fail. They certainly fail when they go up against a competitor with a longer range view. Again, let me urge you to read the opportunity post.

Wrapping all this up…
Forgetting management and the organizational value, we’ve explored five of the advantages of CRM from the seller’s perspective. We could have listed 20 or maybe more, but time and attention spans are in short supply.

I can already hear some of you disagreeing with me so here’s a challenge. Shoot holes in my theory. Send me an email, make a comment or call me up and give me a piece of your mind. If you don’t like CRM systems because of one of the five reasons outlined in the first three paragraphs, just post the number and I will understand.

Those of you who believe in CRM practices, send us a quick note on what convinced you to embrace the practice.  The Grand Prize will be, yep you guessed it, post card from Iowa.

Sunday, July 30, 2017

Competitors – We know they’re out there but what do we need to know about them?

Last week we covered the topic of managing opportunities. I made this comment:
“Strangely, many “experts” advise sellers to ignore the competition. I believe the competition plays a major role in planning your strategy and understanding your situation.”

Some of you took note of this comment and requested more information.

It’s impossible to ignore the competition. Like the forces of market supply, recessions, economic recovery and upticks in energy prices, competitors influence your business environment. Extending further, competition varies from market to market and even territories within the market. While not paying attention to competition sounds high minded, noble and customer-centric, it won’t help you make more money.

Competition is specific and local
Except for Amazon, your competition is manifested in the form of a specific person or team of people. They need not live in your community, but they are assigned to one of your accounts, which makes them local to you. Again, with the exception of Amazon, these folks have names, faces and personal idiosyncrasies. Yet, when I talk to distributor salespeople about their competition, I commonly hear the name of a brand sold by several distributors in the market.

The brand or technologies provided by the distributor have bearing on the sale in instances where:

• The customer has standardized on a specific brand of product. For example, in the automation market there are four or five high market share brands that work diligently to establish customer specifications. If you are a distributor who doesn’t represent these products, you may as well be out of the race before it starts.

• The customer has a national contract with a specific supplier-manufacturer which is served by the combination of the supplier and distributor sales team.

• Your company’s line card lacks the technology desired by the customer. For instance, the customer has a strong preference for Wi-Fi enabled widgets and none of your current suppliers offer a Wi-Fi widget.

The real competition typically comes from another distributor. Even with national chains the behavior of the competitor is probably localized. Our experience points to differences in market strengths, strategies and selling behavior across territories of even smaller distributors with one location. The nationals, in spite of what is broadcast, are just as diverse in their methodology. As a side note, I personally believe this difference in service and approach to the market demonstrates the weak level of process employed in distributor sales groups, but that’s another article.

Competition is personal
It pays to know the competitive distributor salespeople calling on your accounts. They have names. You might even recognize them as the guys you sometimes see in the engineering department. If you know who they are and have access to the guest register, you can find out if they are talking to people you don’t know. Additionally, if you observe and ask a few well thought out questions, you might identify who their allies are within your customer.

Here is a short list of helpful things to discover about these people we call competitors:

• Do they have the habit of leading with price? I know a guy who everyone in his market calls “five percent Pete.” If you are dealing head to head with him, you’ve got to figure out a way to get the customer off the purchase price and onto the long term cost of ownership.

• Do they understand their products or rely on others to provide technical support?

• Do they provide good support on the mundane stuff, like handling paperwork, returns and other bits of business which can irritate customers?

• Where else do they call? Could this competitor have discovered a sleeper account in your territory?

Before we jump from this subject to the next, allow me to throw out a final thought on competitors. Salespeople relocate, change jobs, retire and sadly sometimes they die. Each of these are disruptive events at their accounts. Further, as a group, distributors do a poor job of transitioning when a salesperson goes away. I can think of at least a dozen times that sharp salespeople made significant gains based on competitive retirements alone.

Sometimes competitive behavior is company driven…
Often companies encourage specific behaviors with accounts. Once you understand how they operate it’s easy to take advantage of their habits. For a moment let’s pick on an automation sensor manufacturer who decided going to market direct was a great idea. Instead of seasoned distributor sellers they have an ever churning cadre of freshly graduated engineers. These new “kids” are pressured to quote and close a certain number of orders every month. Sadly the business world doesn’t always work that way. If this rookie direct force quotes something on the 12th of the month and hasn’t received an order by the 25th, they call the customer and start deeply discounting the price. If the customer refuses to issue a purchase order by month end, the discounting goes away.

This phenomenon isn’t limited to manufacturer’s trying their hand at direct sales. There are distributors who are notorious for offering up consigned inventory even if the customer doesn’t want it. Some distributors excel at packaging products from several different manufacturers and only offer pricing bundles. Then there are distributors who use a top down sales process; skipping over the “worker bees” and focusing attention and a financially bent sales pitch on C-level management types.

Parting thoughts on competitors
Looking back at these examples, we can position our efforts to minimize competitive impact and maximize your own advantage. Many times, the actions of competitors are predictable. If you give up the advantage of understanding and counteracting the competitors best moves, you will certainly be less effective than you could have been.

Finally, share your best competitor story and win the River Heights Consulting Grand Prize – A post card from Iowa.