Wednesday, May 28, 2014

Product Training, Sales Training, Price Training?

It just dawned on me; the way distributors view training is skewed. After observing hundreds of confabs carrying the “Distributor Sales Meeting” moniker, I would characterize the content as product-centric community bulletin boards with an occasional dash of something else. Here’s my unscientific rundown of content:

49% New Product Introductions
Everything you ever wanted to know about some new product. Often these are conducted by Supply-Partner field sales teams with little grasp of the local customer mix, competitive landscape or the sales team’s technical abilities. Only rarely is customer application information discussed.

20% Existing Product Re-Launches
We started selling this product a year ago. After limited success, we decided some of the sales team didn’t pay enough attention to the product minutia shared last time. So here we are back with more information, only this time the sales guys ask a little better questions.

15% Delivery/Logistics Issues
Time is devoted to issues with long lead times, factory recalls and seasonal stock outages. These meetings are good because often they provide “work-a-rounds” to keep customer’s plants running and minimize damage.

10% Company Policy, Quotas, Performance
Everybody needs to understand the new benefits program and vacation policy. Meetings to discuss Quotas and annual performance are equally important and may be the only thing we’ve talked about that deserves to be part of a “sales meeting.”

5% Sales Training
Once every great blue moon, someone talks about how to better sell the company and products. Generally these come in half day bursts every 18 months or so. The rest of the time, there is no discussion of the company’s intrinsic value, no talk of presenting to customer management and no words on developing better questions.

1% Pricing
A rookie may receive misguided price training while shadowing a rock star salesperson on the road; however, this type of training barely makes list. If it comes up at all in a sales meeting, it generally follows a distributor association meeting where somebody does the “Power of One” presentation.

Why do I believe this is totally skewed?
First, we live in the age of information. Twenty years ago, distributor salespeople were viewed as important sources of customer information. Things have changed. Customers have access to massive quantities of product information. Raw product data presented by a salesman is almost viewed as a nuisance. What is valued is application support, tips on product interconnection compatibility and troubleshooting support.

Customers do value training; however, most distributors charge product specialists and application engineers with this task. On a side note, I believe salespeople can gain important understanding of customer issues by accompanying their customers to training and asking customer-focused questions about what is being discussed. But, this is not something for the sales meeting.

What should be covered in a sales meeting?
One major point is why a customer would benefit from the use of your product. This benefit question must be tied to value drivers. Labor savings, lower cost maintenance, better energy usage, increases in uptime, and improved operational efficiency must be studied in detail. Whenever possible, it makes sense to tie these to monetary values. For example, our product saves the customer $105 dollars during the installation procedure.

Distributors also add value via the services they provide. Just in time delivery, emergency back-up stock, parts kitting and application support join valuable yet mundane tasks such as locating and serving as a source for some obscure manufacturer.

A real sales meeting would stress the importance of the value the distributor provides to each and every customer. A real sales meeting would cover the questions needed to bring out customer-centric information which would allow for better solutions.

But what about Price Training?
Would it make sense that some distributor solutions are scarcer than others? With this in mind, the
distributor is entitled to charge more. The problem is, most distributor salespeople don’t fully understand the cost of handling the products. This could be part of price training.

A few of the products we sell are truly commodity-like. When commodities are sold, quantity and types of logistics required impact the price. Would it make sense to talk about precisely what makes a “quantity order?” Is it 10 pieces, 10 cartons or 10 pallet loads? Are the people in customer service aware of the price breakdowns? Are they measured by the way they adhere to management’s directive?

The sales team must continually review (and occasionally improve on) the following topics:
1. How was the system price derived?
2. What are the natural customer segments and how do they impact price?
3. What product types deserve a higher margin? And why?
4. How do we handle pricing exceptions?
5. How are market prices impacted by competitors?
6. The importance of understanding customer-based negotiations?

Based on my experience, very few distributor sales managers can answer questions arising from a discussion of this list. And, price training is not a place to stumble around in your response.
Here’s why:
Customers are trained (perhaps conditioned) to question our price. Many use price as an excuse for not doing business with us when the root cause is actually something else. It’s easier to say, “Your price is too high,” than it is to outline the truth, “We decided to go with your competitor because they out service you on routine stuff.”

The message is confused. Training is difficult. At the same time, it is an extremely important topic.

In distribution, a gross margin increase of just a couple of points stands to increase bottom line profitability by 50, 60, maybe even 100%. To achieve the same results by way of sale growth requires a near doubling of company size and that kind of growth can take years. Successfully impacting pricing can happen in a few months.

Price Training starts with a Pricing Process.
Developing a real pricing process is central to price training. The Strategic Pricing Associates (SPA) process uses scientific computer analysis of data pulled from your own past sales. Further, the process has detailed documentation designed to enable multi-layer training for literally everyone within the distributor organization (Sales, Customer Service, Purchasing, etc.) Finally, the SPA process has metrics developed to coach, help and manage the sales team into the future.

Strategic Pricing Associates has assisted over 350 distributors through the implementation of their process. Most SPA clients see results in 90 days. The results pay dividends. The typical SPA client sees a gross margin increase of two full points.

A final thought
Strategic Pricing Associates hosts several Pricing Strategy Seminars. These are a gathering of clients already using the SPA system, Industry Experts and companies considering a pricing process.  The seminars are thought provoking and powerful.  I have had the honor of speaking at a handful of these events and will be doing so again in Chicago on June 6th.

If you find that your company has not had price training since the days of the Carter Administration, I encourage you to attend. What’s more, attendance is free.  Click here for more information.


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