Friday, November 9, 2018

"Can Your Value-Add Beat Amazon?" Frank's Upcoming Webinar

  • How often do the services you provide cost you more than money than they bring in?
  • What determines why one customer access to free services while others are charged?
  • Do any of your slow pay customers receive free services?

Frank Hurtte answers these and other often controversial questions in the November 14th Webinar hosted by Industrial Supply Magazine and sponsored by Epicor.  Register here to join us!  This event runs from 12:00 pm-1:00 pm Central Time.


Friday, November 2, 2018

End of Year Planning Questions

Does customer attrition play a part in annual planning?
How many of our customers will go away?

In setting growth plans for the coming year, one should ask, “what percentage of my customers might go away?” Some will go out of business and they stop buying. Others might be folded into a larger organization. If that organization has a relationship with a competitor, your business could be switched to another supplier. Further, some aggressive competitor could make inroads into your account through hard work and/or better relationships, by way of a valuable new service or through jaw dropping price levels. This is hard to face, but it happens. The question is, how much would any of these affect your business?

To the best of my knowledge, the only industry to truly study this phenomenon is the HVAC/R industry. Three years ago, HARDI (Heating, Air Conditioning, and Refrigeration Distributors International) hired Mike Marks and Steve Deist of Indian River Consulting Group to do a study which resulted in meaningful numbers. These results, which shocked the industry, were published in a book titled Myths & Misperceptions: How markets are really made in HVACR. I recommend the book to everyone in the HVACR business and believe the points made apply to distributors in many other lines of trade. Here are a few highlights from their work:

The average small HVACR Contractor switches suppliers at a rate of four (4) percent per year with well over half of the attrition (2.5%) tied to distributor dissatisfaction. Larger, and more professional contractors switch at a rate of 11 percent per year with 7.8% of that tied to distributor dissatisfaction.

Another group, which lumps Commercial, Institutional and Industrial Accounts together, switches business at a rate of 29 percent per year. I believe this higher attrition rate may well be tied to the point that HVACR distributors tend to be geared to better serve contractors than other types of customers. Further, if the institutional portion of the mix is higher, we might assume some of those institutions are government-run organizations who base purchasing practices on price (low bid orders).

For our discussion, there are two points to consider:
1. Even the best of customers leave the fold at a rate of four (4) percent a year with the average nearing double that number.

2. If you are planning to grow your business by 10 percent next year, plan on 15 percent growth. Losing some of your existing customers is probably in the cards.

Retention is the opposite of attrition
Nobody starts off with a plan to lose customers, but things happen. The inside sales team gets stretched a little thin and service wains. The warehouse gets careless and the customer finds themselves facing a box with the wrong parts. Even salespeople, charged with keeping customers, forget to cover all the bases with their customers. Your top suppliers experience delivery issues and you take the brunt of the blame. The list goes on and on.

Done properly, end of year planning allows for contemplation, reflection and plans for correction. Planning allows for an objective view of the current situation and how retention might be improved going into the next year.

Have you reviewed the (hopefully short) list of customers who have stopped buying from you?

·         What happened? 
- Has anybody from management done an exit interview?
- How might the situation have been different? 
- What preventive measure could avoid the problem in the future?
- Are there trends?  Could it be that dealing with "Danny" is toxic to customer health?
- Are there policies or procedures impacting business? 

·         How long did it take for you to realize something was wrong?
-Who in your organization monitors customers for significant drops in business?

·         Not every ex-customer can have facial warts and a bad attitude?
- Did you listen to the customer’s comments without tossing out excuses?

·         Are there existing customers on the cusp of leaving?
- Are there early warning systems which might point to issues?
- How might management assist the team in determining ongoing customer satisfaction?

Two important thoughts for your end of year plan
First, customers are more likely to switch distributors because the incumbent distributor did something wrong than because they were “sold” on the new distributor. This runs contrary to the common “sales think.”

Second, distributor sales teams aren’t great about staying in contact with the other guy’s customer. After a short flurry of activity, which produces little or no results, they engage with existing customers and let the potential customers fall out of their mind. Most of us understand this is a mistake, but it is the reality of the situation.

Progressive distributors have established a plan for a continuing outreach to their competitors’ customers. Is this in your end-of-year plan?

Do you have an end-of-year plan?
We are offering a special deal for distributors who are looking to build a better plan.
We are offering our end of year planning book for half price. Just send along a crisp new twenty dollar bill with your business card stapled to it and we will send you your own copy. Since you are breaking some obscure law by stapling legal currency, we will send you our quick plan for helping you make more Gross Margin in 2019.

Send business card and money to:
River Heights Consulting
226 Hillcrest Avenue
Davenport, IA 52803

What if you already own the book?
We don’t want to keep you out of the loop on great deals. Send us a picture of you holding the book and we will send you a copy of our quick plan for more Gross Margin in 2019, just because Frank’s a nice guy.

Want some help with end of year planning?
Frank is offering end of year plan coaching at a special discount rate. Schedule an hour with Frank on any Saturday morning between now and Christmas for only $100.

**No one named Danny was hurt in the writing of this article.**

Friday, October 26, 2018

End of Year Planning with Bonus

Few practices drive more value to your business than year-
end planning, yet many distributors fail to put the proper effort into their plans. There are a thousand reasons/excuses ranging everywhere from the perennial, “We’re too busy driving business to spend time planning” to “Planning just doesn’t apply to our business.” A few don’t build strong end-of-year plans because they simply don’t have a workable model to use in their efforts.

End of Year Planning is Important
Once a year, it’s a good thing to pause and consider how things have changed in the past and the impact of those changes in the future. Like the proverbial frog in boiling
water, slow and steady environmental changes are difficult to comprehend in “real time.” A subtle shift here, a little bump in the economy there, add a dash of personnel changes and before you realize it, your business is performing like a 1984 Renault Alliance (the crappiest car ever owned by anyone in our office).

In reality, many distributors do a bit of year end planning for their manufacturers. Most of us have done the quick fill-in-the-blank forms to appease our supply partners. Most of the time, these are done on the fly with little thought and certainly without ongoing review. While this exercise probably does have a modicum of value, the results certainly do not take a holistic view of the entire distributor business.

Planning pulls the entire distributor team together, explores some of the interaction between people, products and projected profits. Further, planning serves as a communications tool within the distributor and with suppliers.

Planning calls for the evaluation of suppliers. Wouldn’t it be nice to understand vendors whose policies impact your business negatively and create a plan for removing friction from the supply chain? How about marketing opportunities? Distributors who create real synergy between their supplier’s marketing team and their own generate more sales, which is the purpose of our existence.

For those looking for a place to start…. “We’ve gotcha Covered”
River Heights Consulting has the Distributor’s Annual Planning Workbook. This provides the user with a comprehensive guide for annual planning. It is designed for use by distributors selling into the manufacturing sector. These include the following categories: Automation, Electrical, Fluid Power, Industrial, Power Transmission, Safety, Pipe Valve and Fittings, and related lines of trade.
Based on years of hands on industry experience and the observation of industry best practices as a consultant, we have designed a working model for annual planning and development. There are sections on sales forecasting, developing inside sales strategies, marketing plans, vendor relations and accounting.

This isn’t heady academic stuff
This is designed for distributors by a real world distributor guy. Everything in the book is straight talk and common sense. No fancy research breakdowns, no flowery word – just action plans you can easily modify to match your business.

The best thing yet.
We are offering the book for half price. Just send along a crisp new twenty dollar bill with your business card stapled to it and we will send you your own copy. And since you are breaking some obscure law by stapling legal currency, we will send you our quick plan for helping you make more Gross Margin in 2019.

Send business card and money to:
River Heights Consulting
226 Hillcrest Avenue

Davenport, IA 52803

What if you already own the book?
We don’t want to keep you out of the loop on great deals. Send us a picture of you holding the book and we will send you a copy of our quick plan for more Gross Margin in 2019, just because Frank’s a nice guy.

Want some help with end of year planning?
Frank is offering end of year plan coaching at a special discount rate. Schedule an hour with Frank on any Saturday morning between now and Christmas for only $100.


Wednesday, October 10, 2018

The Human Search Engine, Google Numbers and things to think about before throwing big bucks down a cyber rat hole

Make no mistake, customers are thinking and behaving differently today than just a couple years ago. When I was a rookie sales guy, the primary source of product information for my customers was their favorite salesperson. Introducing customers to new products, providing catalogs for additional product data searches and demonstrations of new features (and benefits) of existing products was job one. Early on, I discovered the salesperson who provided the best and most valuable information held a position of grace and favor.

#ASKGUDMUNDUR: The world's 
first human search engine.
Once I worked my way into the favored spot, I became the trusted “human search engine” used to find solutions and new products. Here’s how it went. The customer described their problem, I took notes, drew pictures and scurried off to research a list of possible solutions. A week or two later, I returned with a few catalog data sheets, a dozen or so pictures and we refined the “search” and the process was repeated.

Today, our friends at Google provide the same service only quicker and better. The customer determines their problem and they can search the globe for potential solutions in a matter of milliseconds. If they don’t like the information served up, they simply refine their search. Instead of a few catalog sheets, they can review information, read feedback from other customers and find detailed video clips of the potential trouble spots of the application.

Are salespeople still needed? You bet. But salespeople are now needed in a different capacity, meaning less frequently and no longer tied to product centric solutions.

Google Search Numbers tell the Story
Source: Google
While much of this information has been rattling around in my mind for the past few years, only recently did I come to the realization of the depth and breadth of the situation. Recently, I had the opportunity to sit with an expert on Google and the back-side resources available. Using the data provided via Google Ads, formerly known as AdWords, the advertising component of Google, we did a search for automation related words searched by Google users; our customers. Entering some of the most commonly used terms by automation professionals, buzz words like PLC, VFD, Servo Drive, Proximity Sensor and a dozen more, we discovered there were 12,000+ searches per day: just in the State of Ohio!

That’s a whole lot of searching going on every day (in one state). Google doesn’t take weekends, holidays or vacation time, so the numbers on a business day are probably higher. Thinking more, it seems like way more product information than could possibly be provided by every sales guy living there in a day; even if they were driving company helicopters.

There is a Selling Information Gap
Let’s do a little analysis and toss out a few numbers. Based on my knowledge of the market, I would conservatively (over) estimate, there are 400 salespeople working in automation in Ohio. The typical salesperson averages three calls per day (another over estimate). Doing the math, there are 1,200 opportunities for a “real-live salesperson” to provide information to customers.

This means less than 10 percent of the information provided to customers comes via the traditional method. The other 90 percent is handled via Google searches over the internet.

What are our Customers doing Online?
Since we are all grown-up sales types here, let’s toss out a few ideas as to what these folks in Ohio (or any other state) might be doing.
1. Collecting automation product pictures - While there are people who collect pictures of well-designed cars, beautiful boats and cutting edge aircraft as a hobby, we can mostly rule out the collection of shiny automation eye candy.

2. Researching our industry as a potential career path - It is conceivable there may be a few youngsters looking at automation as a potential target of their life’s work. Robotics (which wasn’t one of the search words used) draws a lot of attention, so there may have been a few teens involved in things like the FIRST Robotics Competition. Robots are cool, but one can only wonder about VFDs.

3. Some Purchasing Agent searching for bargain basement prices – Yeah, it happens. Their search for low prices to use against value providing suppliers is never ending.

4. Existing customers searching for installation procedures – A lot of manufacturer’s have discontinued the practice of putting installation and data sheets in the box with their products. So a few people may be double checking their installation procedures.

5. Existing customers researching new products – These people buy from your company on a regular basis and often turn to salespeople for product information, but they are busy. Distributor websites typically do not carry good product information. Instead, the websites include links to major suppliers and once on the supplier’s site, a whole new set of searches must be completed. The customer sees this as a waste of time so they “Google” the information on their own. This by-passes the distributor completely.

6. Potential customers researching products – The story is pretty much the same as in the description above, except you don’t know these people. What’s worse, they don’t know you.

What happens next?
The “what happens next” part seems to be the million-dollar question. Reviewing the list, one might surmise distributors benefiting from numbers 4-6 on the list above. For example, in number four (4) above, an existing customer searching for installation data may discover the need for a mounting bracket and, since the cost is minimal, simply place the order. Pushing the envelope further, in number five (5) an existing customer researching a new product will no doubt be exposed to other suppliers. What happens if they see and like something you don’t carry? Not a happy ending.

Potential customers discovering you as a supplier is a topic unto itself. While I sincerely doubt the average knowledge-based, solution focused distributor will double their size in the next five years based on this kind of business, new customers are hard to find. Distributors constantly complain their salespeople aren’t prospecting enough (or prospecting at all). But, new customers are important.

E-commerce is more than just throwing catalog numbers into a web-store
In E-commerce, content is king. To be successful, a distributor needs more than just content. Quality is key! A catalog number with a 25 character description, in down home, Iowa vernacular, “ain’t gonna cut it.” Sadly, the first attempts at distributor webstores where just that – catalog numbers with highly abbreviated descriptions. For the most part, manufacturers are not in a position to help much.

Quality content comes with a price. We have had conversations with distributors in this narrow segment (Automation) who have already invested a half-million bucks on content. A few report spending even more. The cost issue alone puts it outside the realm of most organizations. Further, the cost is never ending. Each year our supply partners introduce new products, creating the need for new content. The same holds true for revisions to existing products. So the investment in content requires continual re-investment.

There’s even more to the picture. Ralph Waldo Emerson reportedly said, “Build a better mousetrap and the world will beat a path to your door.” Ralph was a poet: however, not a business man. You might build the coolest content on the planet but customers have to find you. Further, the site has to compare with the global giants (Amazon, Grainger and others) in speed, ease of use and general customer experience to be credible.

A new model is emerging
While this isn’t a commercial for a particular company, I would like to use a client of mine as an example. KYKLO is a global company based in Thailand. Their business model is a subscription service that gets distributors high quality content, SEO optimization and a world class webstore. Distributors who sign up with them pay a flat fee and their customized cloud-based webstore integrates with both the distributor’s website and ERP system.

Why I like the model
• The cost of content and maintaining the content is spread over the whole of KYKLO’s subscriber base. This lowers the cost for each participating distributor.

• The subscription price means it’s not a sunk cost. Invest 250,000 dollars on a specially designed website and you are stuck with the cost regardless of what new innovation takes place on the web. Innovation is a never ending thing.

• The temptation to not maintain your website during times of economic downturn is removed. Remember earlier comments on the need for constant maintenance? I believe you need better technologies during recessions. Further, distributors have the tendency to think of internet based expenses as a one-time deal. There are dozens, perhaps hundreds, of five year old distributor websites. These websites were outstanding when new. Fast forward to today-- they are beyond obsolete.

• KYKLO must develop and refine their service each year or the distributor can simply pull the plug and move to something else. Further, the CEO of the company readily admits, they will face competition in the future. Competition is good for users of services like these.

In my mind, for automation distributors, this is the single best opportunity for distributors in the automation and electrical space. I suspect similar models will develop in the fluid power, power transmission, industrial supplies and other lines of trade. Perhaps it will be KYKLO pushing in a lateral direction or maybe it will be some other group of young entrepreneurs. But, today in automation KYKLO is the leader.

Check out Frank's latest book Plan on Breaking Through: Customer-based Strategic Planning for Accounts on Amazon.


Friday, March 16, 2018

The Problem with Year-over-Year Growth Compensation for Distributors

Viewed from outer space the Earth looks smoother than a
billiard ball. What’s more according to the experts at Discovery Magazine, the looks are not deceiving. Lumps on billiard balls (diameter 2.25 inches) can be no more than 0.005 inches in height. Applying this theory to our little outpost in the universe the maximum “bump” cannot exceed 17 miles in size. With Mount Everest at 5.5 miles high and the Marianas Trench (the deepest spot in the ocean) at nearly 7 miles deep, Earth is actually twice as smooth as that slick black 8-ball we sometimes shoot for the corner pocket.

What has this to do with year-over-year growth plans? Plenty.  Allow me to explain.

Everyone likes strong dynamic growth. Setting and achieving aggressive goals is a thing of beauty. Applying this philosophy, manufacturers sometimes decide to build incentives into their channel plans. Here’s how it generally works. It’s a pay for performance thing. Grow your business by 20 percent and you receive enhanced gross margin, an end of year rebate or some combination of the two.
On paper the whole thing makes sense. The supplier has done a great deal of market research, product deployment and plans to grow their business by this number, so why not simply push the goal down to their channel. This is where the breakdown occurs.

Remember our comment about the earth being smoother than a billiard ball? From a macro standpoint the statement is true, but try to explain this to the guy standing at the foot of Mount Everest. From that local vantage point, it doesn’t make sense.

Returning to the topic of channel growth and motivation, the supplier has developed a plan designed to move the channel forward, encourage investment (in inventory, people, training demos), drive aggressive activities, and perhaps even displace a competitor who shares “shelf space” at the distributor. When facing this type of situation, the best distributors respond and in the early stages the program works. They are rewarded and further increase their efforts. Everyone wins. Eventually, however, the time plan breaks down. Let’s look at a few reasons why this happens.

Market share increases
As market share increases, gaining new growth becomes increasingly difficult. The distributor has targeted and attacked all of their existing accounts. New applications are found, competitive products converted and the cost of acquiring more business becomes increasingly expensive.

In the best of cases, the manufacturer and the distributor work together to find and open new customers. This involves lead programs, additional prospecting, new levels of missionary work and lots of expensive stuff for both the manufacturer/supplier and distributor. New customers are found. New gains are made, but ultimately the territory microcosm has a breakdown.

Large customers hit a dry spell
For some distributor territories the world revolves around a single super user or very large OEM. For instance, most of us in the Midwest have heard the stories of how the entire Peoria, Illinois market follows the shirttails of Caterpillar.
When heavy equipment sales slip into a global slump, sales of everything drop off significantly in the market. No matter how hot the automotive business is, regardless of the shape of the Semi-con industry and in spite of good times in the food processing world, growth in Peoria falls somewhere between super-tough and impossible.

Similarly, for some distributors OEM sales are the brass ring at the end of the rainbow. These accounts use mass quantities of specific product groups and their usage of that subset of the distributors business often eclipses the purchases of the next four or five customers on the list.  OEM business can be cyclical; however, and during the down it becomes exceedingly difficult to maintain the growth rates for products used in large quantities by that OEM. Replacing the loss business is like explaining to the guy at the bottom of the Marianas Trench the Earth is smoother than a billiard ball. It just doesn’t look that way from his deep perspective.

The local economy fails of your product
Never mind recessions or even the Great Recession. Sometimes the local economy fails for your product. Here’s are a couple of examples. Houston was hit with a massive
hurricane last year. The flooding and water damage, while good for the construction industry, put a halt to the sale of lawn irrigation products. The dry spell created by the very wet spell, lasted for 3-6 months. Distributors selling those products struggled to keep their sales flat for the year, much less drive growth.

Sticking with the tales of Mother Nature, allow me to talk about the Twin Cities of Minnesota during the summer of 2016. The weather only approached 80 degrees twice during the entire summer. It was great for outdoor activities, but anyone in the heating and air-conditioner business will tell the same story. Sales of air-conditioners went swirling down the drain. Any distributor tied to growth that year, failed in a big way.

These downturns are good times to maintain selling pressure.  In my experience, distributor growth programs which breakdown during these times of localized turmoil actually work against the manufacturer. Having ramped up efforts funded with the extra margin, distributors find themselves challenged during the down times. Profitability can be deeply impacted.

To the manufacturer, who definitely sees the impact of major recessions, the local issues look like the Earth from the rear view mirror of Elon Musk’s late model used car in outer space; as smooth as a billiard ball; profits intact. According to unbiased benchmarking provided by a number of distributor associations, the profit margin (not gross margin) for the typical distributor stands somewhere between two and three percent. Because profits are closely tied to gross margin, a drop of just a few points in gross margin (and other incentives) moves the distributor into shaky ground profit-wise. Struggling to keep profits flowing, the distributor either divests themselves of people (70 percent of the distributor budget) or refocuses sales efforts onto higher gross margin lines.

These localized downturns are precisely the right time to take the opposite approach and ramp up sales activities. Why? The distributor has unused resources and, based on gross margin, advantages will continue to push out into the uncharted territory of new customers and new applications. This effort pushes market share. When things change on the local scene, business will ramp to new and greater heights.

If not growth based programs, what?
Like my thoughts on commission as a model for sales compensation, the only thing good about them is they are easy to manage. Again mirroring commission, growth based plans outwardly appear to tie the needs of both parties together; manufacturers need growth and distributors need enhanced profitability. The similarities continue. A mediocre seller in an expanding market receives a fatter commission check regardless of his skills, drive or activities. Conversely, a highly skilled and motivated guy in the wrong territory receives a skinny commission report. Understanding the entire situation requires extra management attention and thus commissions continue.

Each of these quick suggestions involve more effort and expert subjectivity than a vanilla growth plan. However, I believe they will push behavior, open the door for communications and enhance the manufacturer’s overall position. We will call them action-based programs:

1. Creating and reporting on targeted customers and opportunities.
Companies working together to “tag team” specific customers drive results. These require follow-up and effort on both sides, but research indicates organizations who target are 47 percent more effective in reaching their goals.

2. Providing detailed reports of sales calls and other activities at selected accounts.
Not only does this help put a metric on the work done on the manufacturer’s behalf, it allows the local sales team to proactively assist in account conversation and in providing the right backup support.

3. Moving competitive products to non-stock status.
I am not fond of manufacturers using their clout to “cart blanche” forbid distributors from selling competitive products. There are times when having a competitive line keeps the doors open for future conversions. I might be on shaky ground when I say this, but I believe transparency might be important so both manufacturer and distributor understand the situation.

4. Providing timely and meaningful follow-up reports on leads provided.
Leads are important to distributors and expensive for manufacturers. Most don’t realize the real cost of a lead, which often reaches the $150 level. When they turn into business, everyone wins.  Over the years; however, many folks have missed the opportunity by not getting the leads into the right hands and not following up with the prospective customer fast enough. Distributors need to provide feedback as to the quality so the manufacturer can measure the payback of their process for generating leads.

5. Number of accounts for the manufacturer’s productGrowing the user base is important. Each time the distributor sells a supplier’s product to a new customer, they are creating an annuity for the future. In this metric, it’s not about dollars sold but number of customers buying. Grow the customer list and eventually the dollars will flow.

The list provided above is in no way a complete list. Think of it as a starter point. Much depends on the product, market served and other points tied to the relationship. No matter how you slice and dice things, in my mind, growth-based programs need to be revisited.

As always, I am open to questions, discussion and occasionally good old fashioned disagreement.  Drop me a line with your thoughts.

Monday, March 5, 2018

Shingles: Best Left on the Roof

This post may seem a bit astray from my usual musings, but with so many down with a multitude of illnesses this season, I felt I should take a moment to share how my New Year has gone so far.  It ain't pretty.

A few hundred of my closest Facebook friends already know this, but Mr. Distributor Expert Extraordinaire had the shingles. Yep, without warning, without prior notice, that little bit of chicken pox virus that has been in my system since the summer between first and second grade has decided now would be a great time to come back to life. Allow me to give you a four minute play by play of the disease in action.

Let it be known, I like memorable birthdays. I have referenced this before, but old Frank’s birthday falls squarely over the top of National Pie Day. Typically, I skip past the birthday cake, ice cream and candles to have a gigantic slice of pie to celebrate. This year, I skipped the pie; perhaps missing the curative powers of a flaky crust and raisin filling. Shingles took advantage.

Aerial view of LeClaire, IA
Celebrating the day with a friend and neighbor, whose birthday I have celebrated for my entire life, I enjoyed a great night out in scenic LeClaire, Iowa (home of American Pickers) starting at the brewery and walking our party down the road with food, fun, conversation and a selection of grown-up beverages. It was a great night. The next morning was a different story.

I hate to disappoint those who were thinking hangover, but it was a little pain above my right eye. Assuming the pain was tied to winter related dry sinus I applied lots of “ocean spray” and continued by day. The next day, however, I noticed a painful bump under my right eyelid. It felt like a seriously ingrown hair follicle and the pain was persistent. The following day, I had a routine insurance related appointment with my new friend and Nurse Practitioner in our local neighborhood clinic.

Looking over the sore spot and seeing other bumps rising across the nerve path across my forehead, Beverly told me it was more than infection. I had the dreaded shingles. A number of thoughts crossed my mind. Holy cow, how sick would I be? More importantly, how much pain would accompany the disease? Armed with a supply of anti-viral drugs and a healthy dose of prednisone, I braced myself for the worst. What you are about to read is a detail of that journey.

On day two, my forehead began to break out in earnest. A number of liquid filled bumps followed the outline of the nerve that traces from above my right eye across my face to the hairline. The path was clearly visible and the bumps seemed to be growing before my very eyes.

The pain associated with the bumps was tolerable, except when attempting to sleep. As you know with any illness, sleep is imperative. That night as I laid in bed, I could feel the pulsing of my heart through each one of these spots. It was more like a dull throb with occasional flare-ups that were quite painful. I made every effort as humanly possible to not scratch or rub the bumps. During waking hours this was through sheer force of will. At night, it was impossible to control in my sleep.

On day three, the virus spread to my right eye; or at least the eyelid. In a matter of hours my eye went from nearly normal to swollen beyond belief. I looked like Rocky after his fight
That's right, kid...look away.
It's far too hideous for real pictures
with the big Russian dude in Rocky IV; eye puffed out well beyond the socket. The pain was fierce, but the worst part was not being able to open my eye. Reading, watching TV and just going through the motions of daily life brought on headaches. It was decided that I should visit the eye doctor. It was eye opening.

During my visit with my eye doctor, I was told two important points. First, shingles in the eye is serious mojo and can lead to vision loss and several other complications. Second, at that point it looked like I was going to be spared the “in the eye” torment. After a couple of repeat visits, I still don’t have a complete bill of health. There was a tiny amount of stuff in my eye, but it still looks like I dodged the bullet.

Over the following weeks (it has been three as I write this), the bumps have crusted over and are nearly invisible. The eye swelling is ninety percent gone. It appears as though I am through with this bout with the disease. But, I still get plenty of questions. Here are a few examples.

Are you contagious? The answer is only to people who have not had the chicken pox or the chicken pox vaccine. Further, shingles is not as contagious as chicken pox. However, there is a risk to those listed above if they come into contact with the still oozing bumps. Once the bumps have crusted over (day 5 for me), there is no chance of contagion.

You look ok, are you? The short answer is “sort of” because in times of illness, sometimes you feel like your life will forever be stalled at the stage you’re in. I feel better, of course, but not 100%. Unfortunately, others experience nerve pain for months up to a year afterwards.

Why does it seem like so many people are getting shingles? This is again tied to the vaccination. Since the 90s, most children are given a chicken pox vaccination. Most adults don’t come in contact with the virus as much as in the “good old days”. Back then, every contact with a child sporting the virus gave our immune system a little natural “booster shot.” We don’t get it anymore making shingles more prevalent.

Finally, a public service announcement. Get the vaccination. Even if the doctor says you are too young. Insist. You don’t want to be like me. Just saying.  Bring on the hate mail...


Sunday, February 25, 2018

150,000 Reasons Why You Need an On-boarding Program

Research by industry consultant Brent Grover indicates the typical distributor invests over $150,000 before a salesperson generates profit for the company. Here’s an attention grabber, that new guy out there struggling to figure things out is burning through dollars like a forest fire.

A couple of months ago, I hosted a meeting of new distributor salespeople. Their common link; they all had fewer than 18 months experience in the outside role. We asked which of them had any training when they hit the road. Unfortunately, most were introduced to their new job the same way as their bosses: “Here’s the key to the company car, there’s your territory, go forth and sell.” Despite high costs and financial mounting financial pressures, most distributors start new salespeople off without a well thought out onboarding process.

One of the critical points of bringing on any new salesperson comes in setting process expectations. They start their career without truly understanding some of the fundamentals of how you expect to do business in the future. I believe that process is critical to efficient organization. Nothing elaborate, however; every good distributor does need at least a few process points. Let’s explore.

Establish Expectations
First, lay out some financial guidelines. What makes a salesperson successful in your organization? When a salesperson starts off with an expansion territory, they need to know growing their business is job one. But, how much growth equates to success? If a successful salesperson should be handling $2 Million and their new territory generates $500,000, doubling the territory in three years is good, but not necessarily a win for the company.

Lay out growth plans for the territory including the types of accounts, the products you believe are ripe for growing and how the growth will impact their income. Make certain they understand growth greater than the organization is expected and doesn’t necessarily translate into massive profits for the company.

While I don’t believe in micromanagement, expectations should be set on working hours, number of calls made, appointments and timeliness of communication. As strange as this may seem, I continually hear stories of sales managers discovering that their new salesperson has the habit of not starting the day until 9:00 because they like to drop their spouse off at work each morning or sit in line for fancy coffee. Why not nip the issue in the bud by laying out expectations the first day?

Joint calls are an important selling tool as well as an opportunity for the new salesperson to gain valuable on the job product sales training. Many distributors allow new salespeople to go untrained in how to use this resource. I believe expectations should be established around when to use outside resources. Metrics and instructions can easily be defined for joint calls with specialists, key supply partner reps and distributor management.
For example:

• How many calls are expected per month?
• Who is responsible for setting up the call?
• What follow-up might look like?
• How will the calls will be tracked and measured?

We have a multitude of communications options available. Expectations should be set based on the mode of communication used with customers and vendors.
Response times could resemble the following:

• Customer Phone Calls – 4 hours
• Customer Emails – 1 business day
• Inside Support Staff Calls – 2 hours
• Key Supply Partner Calls – 4 hours
• Vendor Calls – 1 business day
• Management Emails – returned on the requested day or an explanation provided immediately

How do you capture customer data? If you are a distributor using a customer relationship management (CRM) program, the new guy should understand the information required and the timeframe for data entry. This includes new customer contacts with accurate names and titles, product interests, calls, etc. For example, contacts from all customers will be added to the CRM record within 2 working days of the meeting. Failure to set measurable guidelines creates sloppy habits which are difficult to change.

Sales managers and their new charges are often frustrated by attempts to monitor their ongoing progress. When an opportunity tracking system is laid out, coaching and mentoring occurs with greater efficiently and regularity. Lay out rules for opportunity tracking. This includes the size and type of uncovered potential and how it is to be recorded. An case might be look like this: anyone who uses over $5,000 of our equipment is recorded into the CRM system along with competitive information, technical issues and the decision maker’s name. This information should also carry an expected time of entry.

Quotations are another stumbling block of many distributor organizations. A savvy sales manager takes the time to define which quotations are handled by the new salesperson, which are handled by inside sales, and which are developed by specialists. Further, setting follow up expectations within your company is important. Our experience indicates that failure to follow up on large quotations often results in missed opportunities. Set a time and responsibility for these quotations.

Establish the Right Behaviors
It’s amazing how many salespeople go into calls without defining a purpose. Early in the customer/salesperson relationship the purpose is sometimes hard to define, but still the call should be more than simply shaking hands.

When salespeople know what questions they should ask before the sales call, they gather more information, listen better and accelerate the relationship. Insist the new salesperson establish a list of customer questions. These might range from the market the customer serves to the companies the customer sees as competition to product preferences to the type of training they need for employees. The answers to these questions need to be recorded and stored away somewhere besides the sales salesperson’s ironclad memory.

Our next point involves the need to remember the answers to ground breaking questions. Salespeople need to take notes during customer visits. For years, I recommended the use of a composition book with pages which are not easily detached. This meant the salesperson always stored customer data in the same place. Today, notes might be taken electronically via phone, tablet, laptop, etc. Insist on a well-defined method for categorizing, storing and maintaining the notes.
When new salespeople hit the street, there is often a tendency to use price as a door opener. While the strategy may produce temporary gains, I believe these gains create long term pains. Margin erosion has become an epidemic issue with wholesalers across the country. Any new salesperson should be given pricing direction. Regardless of whether they have industry experience or not, your business model probably requires a different type of gross margin strategy.

Minimum gross margin deviation ought to be spelled out before the salesperson shakes the hand of their first customer. If you have a pricing process like David Bauders’ Strategic Pricing Associates, spend time briefing the new salesperson on how and why the process works. Furthermore, measure the salesperson’s adherence to that pricing strategy from day one.

When Special Pricing Agreements (SPAs) are required, new salespeople should understand your company’s position on the proper use of an SPA to capture and lock in important customer opportunities. And, if (for some reason) you do not have a plan for how these agreements are registered within your own organization, this should be established immediately; for the whole sales team’s benefit.

The Right Tools
Ok, we’ve walked our way through setting expectations, establishing work habits and this brings us to equipping new team member with the right tools. Most of us have given thought to the right phone, laptop, tablet and company car. But the tool box needs to hold more than just the physical tools. Let’s go a bit further and talk about ERP system tools.

Every new salesperson needs to understand the purchases made by their accounts. Ideally, this should include more than just a top line sales number and gross margin percentage. I suggest reports outlining products purchases broken down by customer. If the product can be segmented by technology groups, it’s all the better. Sales managers must invest the time to instruct salespeople in the reports available and how to interpret the reports. This should be part of a monthly coaching session to ensure the data is correct and there are no issues with account groupings.

The salesperson should know where and how to get this data in the future. Bouncing back to our first message, set expectations as to how often you anticipate this type of information to be reviewed at the salesperson level. Strangely, even experienced salespeople from other companies within the industry have no realization as to the importance of understanding where their sales come from.

With this final word, I challenge you to sit down with your newest successful salesperson, the one who is showing real promise, and ask what they wish they knew two years ago. Maybe they could whittle your investment down to $100 grand.

Published in Industrial Supply Magazine several years ago, but still pertinent today.