Thursday, September 19, 2013

The Time Bandit Strikes Again

Hey Buddy, you just stole an hour of my life:
The Worst Sales Meeting in Years

If only the real Bandit came with this shirt.
Courtesy of Zazzle.com

Hey Buddy, you just stole an hour of my life. It’s not that I don’t have a few to spare, I plan to be around for a few more years, but… they say that time is money and you just called me to throw a handful of twenties down the drain.

What’s got me hot? I just sat through the worst sales meeting of my life.
Here’s the scoop:

I was working with a distributor client and wanted to get a flavor for their company culture. I decided to sit in one of their sales meetings.

I like to do this because I’m a product junkie. I enjoy learning about new stuff and the markets served by the product. I especially enjoy hearing how the products are targeted to customer groups/segments.

As is typically the case with distributor sales meetings, the day was divided into one-hour segments with new suppliers being given the opportunity to introduce their company and generate sales through a very progressive (and technically savvy) distributor.

Twenty-some salespeople took their places in the conference room. As the introduction was made by one of the company’s sales managers, laptops were closed, cell phones set to vibrate, and all attention was focused front and center.

The speaker was a regional sales guy from what looked to be a pretty cool company. And, the first two minutes were pretty typical: Name, rank, serial number, location and a quick story about how he first discovered the distributor. Not fantastic, but not bad either. Then things took a turn- down the twisted path of tedium.

This guy’s quick introduction of his company droned on and on. Leading our group on a mind-numbing tour of manufacturing philosophy minutia, the presentation seemed bogged down in stuff with absolutely no sales value.

After over twenty minutes, we were still getting play-by-plays of the last “Kaizen” event. Finally, the Sales Manager suggested switching to a product overview topic. In spite of “losing his audience” earlier, the salespeople put down their text messaging and refocused. Perhaps something good was about to happen.

No such luck.

The next ten minutes were devoted to generic conversations on products focused on the auto industry. Unfortunately, the nearest auto plant fell 450 miles outside the territory. Again, the Sales Manager made a noble attempt to salvage the remaining half hour.

A quick glance around the room was revealing. Emails were being written, iPads were upgraded and the company’s top producing salesman was playing a quick round of Solitaire. Ouch. At least he had a diversion. I had to be on my best behavior, which was difficult, as it was a painful experience. I could almost feel
my life dripping by one painful minute after another.

Here’s my biggest anguish: the group. Twenty-two Sales Engineers were frittering away an hour of otherwise productive time. Using even conservative estimates, it was four grand swirling down the drain. If we apply my gross margin per call calculator, the time was worth well into the triple digits.

The whole exhausting, expensive ordeal could have been avoided. There were two ways to avoid this train wreck.

What could the distributor have done?
Distributor Managers must put a value on their salespeople’s time. I estimated this hour long fiasco was worth about $4,000 in burdened labor, not counting lost opportunities. Would anyone spend $4,000 on a product sight unseen, no description, no label, no guarantees? I would guess not. But it happens in distribution all the time.

What would have happened if the distributor would have asked to review the presentation ahead of time? What if the distributor would have shared theses eight requirements?
1. No more than five minutes of the presentation should be devoted to company history and philosophies. We know your company is cool and unique, but how can we work together to make money for both of our organizations?

2. Talk about industries important to our territory. We’re impressed that you are the standard of excellence in the Bosnian Bull Whip industry, but there hasn’t been a bull whip manufacturer around here for 100 years. If the supplier doesn’t know the industries critical to your business, brief them ahead of time.

3. We want to learn how to sell your product; the best applications. The right person to talk to the product about, the competitive strategy and why your product is better are all great topics.

4. Are there any sales aids available online or otherwise? These are good things to know and will help our salespeople get instant leverage.

5. Who can we call in the case of commercial situations like delivery and pricing issues? A printed handout works wonderfully

6. Are there other distributors serving our territory? If so, how can we avoid distributor-to-distributor channel conflict? Most distributors are used to sharing some of their lines with other distributors. Let’s get this out in the open early to avoid misunderstandings and wasted time down the road.

7. What is the best way to set up joint calls? Sometimes a manufacturer – distributor joint call does wonders to move a sale forward.

8. The most important point. Adult education experts indicate training has a short half-life. The best time for our sales people to begin the selling process for your products comes during the week or so immediately following your presentation. If you don’t bring a supply of brochures, samples, demos and other materials required to start the process, we both lose. Don’t do the sales training then send the materials later. Hand them out immediately following the presentation.

9. Bonus. Distributors and manufacturers who invest in setting target accounts for their products, services and solutions are 47% more effective in meeting their financial goals. Hang around after the sales meeting and invest the time required to assist every salesperson in establishing their best 4-6 targets for your product. You will be glad you did.

For Manufacturers and Sales Reps
A long time ago, we wrote an article on how to get the best bang from your time in front of distributor sales people. We’ve sold dozens of copies on lulu.com but if you shoot us an email, it’s your FREE. How’s that for a deal?

Wednesday, September 11, 2013

Dinosaurs Face a New Reality


Check out the feature in Industrial Supply Magazine to see if your ways are becoming extinct!




If you've read the book, we'd love your feedback!  Feel free to email your thoughts.  Be sure to leave your name and city if you would like your review posted.

Saturday, September 7, 2013

Grow your Margin by Two Points - An opportunity to attend SPA's Pricing Strategy Seminar - For Free





Imagine the impact of two additional points of additional margin to your business.  Since I got into the business back in the 70s, distributors have talked about adding just a single point.  They held rah-rah employee meetings, made posters embarrassed with things like “The Power of One” and listened intently as experts extolled the virtues of Matrix Pricing.  Nothing sustainable happened; they were largely unsuccessful.    

Over the past couple of years, I have had the opportunity to study the margin results enjoyed by the clients of Strategic Pricing Associates.  Being an engineer by training (and a bit of a computer geek), it was their scientific computer analysis of invoiced pricing that originally drew me to their company.  However, after learning more and interviewing dozens of their clients for my own research in sales process, I would say I am struck with their process.

It’s a combination of analytics, documentation, metrics and coaching; precisely what I believe goes into a great process.   Here’s a quick breakdown:

Analytics
Computer-based scientific analytics give distributors a better view of their situation than is humanly possible.  The typical distributor has millions of pricing permutations – think 2,000 customers x 1,000 SKUs equals 2,000,000 unique pricing situations.  It’s not humanly possible to manage this kind of data even using a really good spreadsheet.

Documentation
The SPA plan segments both customers and products.  It spells out a plan for pricing agreements which have been abandoned or abused.  It lays down documentation via reliable system prices that take the burden of decision off of inside sales people. 

Metrics
SPA refers to these metrics as Ratios of Attainment.  They provide the tools to measure how much of your business is selling at management set prices versus discounting.  These numbers are available by customer, territory, branch and product lines.  Remembering, that which is measured improves, the very act of setting measures drives results on its own accord.

Coaching
Not only does SPA’s process provide solid data for coaching their client’s employees, using experience garnered from over 350 distributor implementations SPA provides management level coaching to drive the greatest results.

Why am I sharing this?  SPA will be holding a FREE Strategy Seminar in Chicago on September 19th.  I have taken part in a half dozen of these sessions and I feel they provide value.  I will be speaking to the group and taking part in some of the panel discussions. 

If you would like to register or learn more, I suggest you click here of contact Sheri Morford at 216-455-1544.  These things fill up fast.  

Tuesday, September 3, 2013

Saying NO to Recycling



Recycling down in the Purchasing Department

Say no to recycling old ideas.
Recycle, reuse, save the planet. I hate to see anything good or reusable tossed into the garbage heap. What’s more, everybody seems to be embracing the recycle concept. I love it. But, lately there seems to be a different kind of recycling coming out of the Purchasing Departments of major companies.

It seems as though they believe the time is right for recycling an old plan to drive our prices downwards. First rolled out back in the early 1990s, this plan starts off with a nicely worded statement, “You are a fabulous partner and we value the relationship our companies have built over the years. Because we both invested so heavily in making all this work, we want to help you grow your business with us.” Sounds pretty good so far, but then things take a nasty turn.

The purchasing guy is likely to word it something like this. “We are asking all of our good partners to help us be more competitive in the market. And to do this we need for you to accommodate us by helping to drive down our costs.”

If you are a knowledge-based distributor, you’ve already spent countless hours and company money driving down their costs. But the purchasing guy seated across the five thousand dollar conference table from you isn’t thinking about cost. He’s thinking about price. And, since you’ve most likely not done a great job of cataloging all the assistance you have provided over the years (90% of the distributors I talk to don’t), you struggle to come up with an answer.





You can begin to back-pedal or you can stop, stand your ground and offer to showcase the value your organization has provided over the years. Knowledge-based distributors leave a wake of real customer value wherever they go. It’s imperative you are prepared with some real examples.

Real is the key word. Here is a quick list of stuff that won’t work.

Knowledgeable Salespeople
Do you think any company really sends someone out who says "Hi, I don't know anything?"
Credit
Who doesn't offer credit of some kind, or at least take Credit Cards?
Inside Support
Another one that's hard to measure. Nobody says, "We pick up our inside people down at the wino bar."

Now let’s talk about some of the good stuff; stuff you can sink your teeth into. All of these are areas an MRO purchasing manager would be foolish to ignore. All produce measurable dollars. Most of these are things you normally do, or could do with little or no extra cost to you.


Maximize Warranties
Each year our customers buy thousands of dollars of products that are covered by warranty, or could be covered by warranties. How does this happen? Busy maintenance people throw questionable parts and products away. The customer hasn’t studied the warranty policy. Or, the customer doesn't know how to determine the warranty. Here are some examples:
• Hand tools -- Many of these have a lifetime warranty
• Proximity switches – Lifetime warranties are the norm
• Electrical products -- 18 months (12 months in customer / 6 months grace period)
• Electronic lighting ballasts -- often covered under warranty

Each time a warranty is used a savings is generated. Compile a warranty list and use it to record the values of product replaced or repaired for under warranty. To begin the process, I suggest that you create a spreadsheet with companies and their respective warranty time for your personal reference.

Repair vs. Replace
Many items are routinely replaced that could just as easily be repaired. Electronic devices come to mind, but the list can include some other products where a skilled person could easily make an evaluation and determine the proper action.
• Extension cords -- are they repairable? (Also see above warranty info)
• Electronic cords of all kinds
• Solenoid valves -- moving parts can be replaced
• Electrical motor starters – contacts and coils are easily replaced

Position yourself to serve as the watchdog for repairable items. Log the value. How much can you eliminate from the “waste stream”? Each of these items represents not only a measurable savings in the repair vs. replace equation but often represent savings in landfill charges. Printed circuit boards and other electronic devices often require special handling in their handling and disposal.


Proper Inventory Levels
Is the plant keeping excess inventory in their crib? This is true in many instances. For example, does the plant have a stock of twenty 30 Amp Fuses? If so, in the case of an emergency how long would it take for an emergency delivery to be made? In many cases the plant is only minutes away from a large supply kept on your own shelf.

When evaluating inventory it is important to note multiple types of savings. I have listed some of these for you to discuss with your customer. Be sure to take credit for all of these savings.

• Cost of inventory - this is the product
• Cost of carrying the inventory - this is the interest charge
• Cost of shrinkage, inventory control, etc. - this is real stuff and can't be left out
• Cost of insurance - what happens if there's a fire?
• Cost of shelving/material handling - these cost money
• Cost of floor space in the plant - especially if the plant is running out of space

Again logging the total savings is the key to claiming this activity as a “real live and completely legit” savings.

Energy Related
The whole world has been struggling with the rapidly rising cost of energy. There are a number of things that you can do to make sure that the proper savings are realized. Here is a short list.
• Energy Efficient Lighting Walk-through
• Energy Efficient Motor Survey
• Energy saving fans re-circulates the heat
• Automatic Door Closers

With gas now pushing four dollars a gallon everyone is thinking energy. Provide recommendations, and more importantly, keep records of how much energy was saved, the cost of kilo-watt hour and the cost of any steam, diesel, or heavy oil saved.

Standardization
Is the customer using the right product? Or, are they using a "Cadillac Line" when a "Chevy" will do? Can we show the customer where there is little if any difference between two manufacturer's products? Another aspect of standardization is the trilateral negotiations we can guide the plant through to gain price or other concessions. Some ideas:
• NEMA vs. IEC designed electrical devices
• Fiberglass vs. Stainless Steel Enclosures
• Sensors

Most companies calculate annual savings. To do this, you need the annual number of parts used each year and the saving in per item. Log the difference.

What were you doing on January 23rd, 2013?
Log the savings you provide! You provide the greatest service in the universe. You have a team of savings specialists who comb the land looking for ways to save your customers money. You even understand the importance of measuring your service in most universal metric of human endeavor, money. But I ask again – what were you doing on January 23, 2013? If you don’t keep a detailed journal, chances are you don’t know. By the same token, if you don’t keep a detailed log of savings provided, you won’t remember. The log can be simple and easy. A MS Excel worksheet with a single spreadsheet for each customer will work. A full feature software package is available from several companies to assist in measuring and logging your value.

In Closing
Provide service. Measure the benefits of your service in dollars. Record value-add events for later reference. And, next time you hear the statement “I am being told by our corporate people that I have to cut costs by 5%.” You’ll be ready to Sell!

A note from Frank…
Much of this information came from work we did with an Electrical Distributor selling into the MRO world. Trust me; there are similar values created in your own organization. If you are struggling to identify your own, shoot me an email. I will help you get started.



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Don't forget to pick up Frank's latest book on Amazon.com