Thursday, October 30, 2014

Strategic Account Planning Part 8

Follow the Money

In an earlier edition, we talked about understanding the opportunity presented by an account. Let’s push this thought further. Way back in the late 70s, there was a movie called All the President’s Men that popularized the catch-phrase, “follow the money.” And while the movie put a negative stench on the phrase, for sales types, it comes with a great connotation; almost like a new car smell. So with this thought, hop in and join me as we… follow the money.

The truth is most sales people follow technology, applications, customer needs and pursue friendly contacts. Salespeople rarely follow the funds. I can’t help but wonder if a lot of guys actually feel like their work is cheapened by the exchanging of money. Just think back about how many times you have heard a salesperson lament:
“The proposal was perfect. The product was everything the customer wanted. We were the best supplier on the planet. But, the customer didn’t have any funding.”

Think about this for a moment. Selling time, pre-sale research, product specialists, engineering resources and a ton of money spins down the proverbial drain. And, it all could have been avoided by asking a couple of well selected questions/phrases.
Here are six easy examples:
1. How does your company justify projects like this one?
2. Does the whole thing go through a process or committee?
3. What kind of budget do you have for something like this? I want to make sure you get the best deal for your money and understanding the budget helps me focus our work.
4. What are the financial issue driving this decision? I want to better understand how the need for improvements are discovered.
5. What kind of payback are you looking for to make this project work?
6. Who holds the purse strings for a project like this in your company?

In an earlier article on the whole topic of Strategic Planning for Accounts, we spoke about the need to understand the value you provide to the customer. Following the money is partially a financial play. You focus your attention away from the “stuff” in your catalog and onto the workings of the customer.

An aside from Frank:
This is for those of you who were forced to study Shakespeare as a teenager. Ms. Miller, my 8th grade English teacher, called these a soliloquy. I don’t write many but here goes…
I know your products are spectacularly interesting; they probably have the latest “double-dip-thong” technical wizardry. My guess is your company has a really creative Vision Statement and a trip through your warehouse is like a visit to the top secret NASA Space Lab. But, all of this is only mildly amusing to your customer contact. If the contact happens to be a financial guy (Plant Manager, VP of Operations, Production Manager or somebody else), your product selling scoop bores them to tears. They only want to talk about their company and money. Period! Now back to the article already in progress….

Understanding where the money comes from is important to your credibility but it gives you some old fashion selling advantages as well.

Anticipating the money
We have discovered salespeople who know where the money comes from are able to anticipate its arrival. Knowing about a potential project early is a powerful advantage. The salesperson who knows about the coming “money” can build credibility with people they may have missed in normal calls to the customer. They can research new product advantages. Gain new insights to drive the proposal forward and jockey for better competitive position.

Distributors with non-exclusive supplier lists can use the extra time to lock in on special pricing agreements, strengthen relationships with the supplier and leverage the suppliers for competitive advantage.

Signing off for now…
There are a half dozen other advantages to following the money. Many of these involve nuances in managing your business; things like inventory and staffing. But from a purely selfish selling standpoint, imagine the time advantage of knowing the difference between funded spending and a pie in the sky chase down a rabbit hole. Time is the world’s first unrenewable commodity. There will be times when something has to be pushed aside. Why not put off the unfunded sale?

Monday, October 20, 2014

Strategic Account Planning Part 7

How to Think About Opportunities

At the mere mention of the word opportunity, most sales guys’ nostrils flare, blood pressures spike and pupils dilate. Perhaps left over from some prehistoric caveman fight or flight gene, they seem to check their cognitive skills at the door and wildly rush ahead. Make no mistake, I like aggressive sellers. But, it’s important to take just a moment to fully understand the full story at an account before investing time, effort and company resources.

The full story comes at the crossroads of three very important variables:

1. Real dollars/gross margin potential
2. Estimated time to achieve business success
3. Level of effort involved with getting the business

Dollar/Gross Margin Potential
Many experienced salespeople miss the dollar/gross margin potential of their accounts for number of good reasons. Often, it’s hard to get accurate estimates of the potential in the early stages. This is one of the reasons why we believe that a certain amount of information gathering is important early in the stages of our work in the strategic plan. Generally speaking, as time goes by, the salesperson’s understanding of the precise opportunity involved should improve. Furthermore, most salespeople tend to be wrong in most of their estimates regarding accounts. This has to do with lack of training and oftentimes the level of thought put in to actually forecasting and thinking of the opportunity. I believe that this is an important skill for salespeople in the future. In many instances, we have recommended that sales managers constantly/continually work with their teams to develop forecasting skills. This, of course, plays well into the team’s ability to measure future potential not only in critical/key accounts (where a strategic plan is developed,) but in all accounts under their charge.

A number of ways to gather information around the real customer potential exist. As I like “good examples of bad examples," one of the worst methodologies is via contact with purchasing groups. Our experience dictates purchasing groups are trained to overestimate their purchases in order to improve their negotiating positions for lower unit prices. Some of your customers may have developed a level of partnership where accurate purchasing information is provided, I believe it is wise to approach the information with a degree of skepticism.

One of the best ways to check buying potential is via contrast and comparison against other similar accounts with verified data. This might be a customer of similar size in a similar business. Or, the estimates might come through ratios and similar breakdowns derived from complementary product. It is not uncommon to see rules of thumb which give an overall better understanding of potential.

Let’s think about this rule of thumb idea. Imagine we were selling office supplies. In a time when most companies are using electronic formatting and digital printing, a relationship between paper sold and toner used certainly exists. Similarly, we find relationships between classes of automation devices such as programmable controllers (automation computers) and field sensors (devices to measure variables which are connected to the programmable controller.)

Establishing a best estimate on a product by product basis gives you understanding, not only of your market share within the customer, but also provides a picture of products the customer is not buying from your organization. For many years, I have suggested our clients use a FOCUS (Fraction of Catalog USed) analysis to contrast product groups sold to the customer against one another using the types of relationships explained above.

Timeline to Success
Let’s break away from the money discussion and move on to another important factor; the length of time required to reach personal growth goals. While it might feel good to say that someday we are going to turn this account in to a million dollar deal, some day does not really allow us to do much towards establishing a real strategic plan. Therefore, if we are like many salespeople, judged by our ability to reach certain growth goals in a timely manner, establishing a timeline is important.

Breaking down our progress at specific accounts into easy to manage and measure steps is both strategically and tactically important. In a previous installment of this series, we talked about the importance of gathering customer particular data. This includes information regarding the customer’s own business model, plans for growth, and operation parameters within the business. Certainly, one of our milestone goals might be to complete the gathering of a subset of this information.

Because a portion of the overall strategy at each strategic account is to increase our importance and therefore attract more business, removal and replacement of small competitors might be a reasonable timeline goal. To redefine our goal we might state the plan calls for a tactic of eliminating short line suppliers selling only one or two SKUs to the account. It might single out companies selling via the internet.

Keep in mind the customer’s cost for administering and dealing with a small supplier is quite high; especially in an MRO environment. If you know an approximate cost of managing a purchase order at your customer, this data could be used to justify paying a little more for the same product purchased from you.

Another timeline goal might be the insertion of your company in to the internal processes of the customer. These include activities such as inventory and crib management, parts kitting, building sub-assemblies, or anything else that puts you in a place where you directly mesh with the customer. Instances where your team actually replaces or enhances the customer’s staff strengthens your position and moves you closer to your longer term strategic goal.

Bringing the strength of other member of your own team to the account might also be one of your time-centric milestones. If your company is one of the many using product managers, specialists, or other support people, why not add dates for their introduction and interaction with the customer. Any activity which creates a new connection between your company’s management team and the customer’s top brass is extremely valuable. Hence, date specific milestones should most definitely include connection of your management team.

Remember, this information must be managed with timelines and dates. What we’re looking for is something which allows us to say something like, “By December of next year, we will have accomplished steps one, two and three. Step four will happen by March first.” Each specific and measurable activity moves us closer to the strategically dominant position at the customer.

How Much Effort Will be Required?
One of the questions I like to ask salespeople is how easy or difficult will it be to get this work accomplished? Let’s just think about it for a moment. Some accounts require massive hand holding, others require lots of technical resources and still more are slow to adopt change.

An example which springs to mind is the difference between OEMs and End User Accounts. Many companies select the OEM sector in order to maximize the revenue in early stages without clogging administrative flow with small one piece orders. By focusing their efforts on the early stages of their growth, they build volume without need for extensive infrastructure.

The difference in account types is not just centered on the OEM/End User example. Some organizations have discovered customer segments which best match their own internal organization. It’s definitely worth exploring. Ask yourself, does our company think about different types of customers and the stress and strain put on our organization in the form of shipping, warehousing, logistical, and other value-add types of labor requirements? Why have these targets been established? Generally, going outside of the boundaries of your company’s sweet spot means extra work.

Further, some accounts are noted for poor or at least unmatched business behaviors. It might be safe to say that if your customer is operating with an unstable financial condition, there could be extra work generated in clearing orders through your credit department and/or collecting payment for your efforts.

On a similar note, if a customer has a known propensity for being very price driven, you may discover that it’s really not worth your efforts to constantly be spending time tracking down prices and doing the additional value engineering.

In many ways, what we want to look for is opportunities for which we have a large chance of success with a minimum of extra effort.
Thinking about the balance of effort, time and potential
On first glance, the thought of strategically identifying the properties of an account based on these three categories is daunting. However, failure to recognize their interaction can send a salesperson’s efforts whirling down the drain.

In many instances, the really huge potential available at an account might outweigh the lower scores in the time and effort categories. The truth is most sales guys are charged with a portfolio of accounts. Some possess lower potential but are otherwise easy to convert; the legendary “low hanging fruit” of sales. Others offer massive gains but require a great deal of time to convert or fall out of your organizations sweet spot.

There is no magic bullet one size fits all approach. Suffice it to say, nothing outweighs good judgment. Build a team, bring your company’s leadership team or other experienced sellers into the discussion.

But remember, skipping this step because it is difficult will only hamper your progress.

Friday, October 10, 2014

Strategic Account Planning Part 6

Sometimes, it’s not just what you know, but who you know

...and how you treat them.

I’m sure you’ve heard the saying, “Sometimes, it’s not what you know, but who you know that counts.” Perhaps you’ve been on the wrong end of this old axiom. You did your homework, researched the products, built a killer presentation and followed up with amazing vigor; only to lose an opportunity to someone who already had a relationship with the customer’s top guy. These things happen and sometimes there is really nothing you can do about it. As salespeople, we can either shrug our shoulders and go on about our day, or do something about the situation.

Most salespeople focus on the technical users of their products. For automation sellers, it’s the engineering department. Industrial supply salespeople hit on maintenance. Janitorial and paper product distributor sales folks go to the head of facilities. I could elaborate on the list to nauseating length, but the point is, most frontline sellers focus on a narrow group of contacts at their customer. Strategically, this is a mistake.

Let’s fast forward, your efforts at an account are successful. Your company starts landing some meaningful orders. You find yourself harvesting some big dollars from the account. All of your contacts appreciate the service you provide. Somebody, somewhere is writing some big checks to your organization. Doesn’t it seem strange that you don’t know them?

But then something happens.

A new supplier does an end around and goes straight to the money guys, by-passing all the product knowledge, expert services and other goodies you provide, they deliver a compelling pitch on how they can save your customer money. Suddenly, you’re on the defensive.

Wait, you don’t believe this can happen? Let me reference you to Chapter 5 of The Challenger Sale, where authors Dixon and Adamson go step by step through the selling model W.W. Grainger unleashed on the Industrial sector. Basically, Grainger did an end around and created a new model for MRO purchasing which sent many incumbent salespeople scurrying to save their hard earned business.

Here’s my point, it is impossible to have a solid strategic plan at your account without covering the financial side of the customer.

Every account has a person who is compensated by bottom line profitability. It could be the profitability of the company, a single plant or (as is sometimes the case) a single production line or product category; but somewhere there is a person responsible for money. For the sake of our argument, let’s call this group of people Top Management. Ignoring this potential relationship with the upper level folks borders somewhere between stupidity and travesty in the making.

Here are three things to ponder on dealing with this type of customer contact:

• They are extremely busy. Be prepared to impress with the few minutes they give you.

• Financial folks really don’t understand your product. And, they don’t really care for a tutorial. Instead, they want to understand the financial impact of the ideas, solutions and services you bring to their organizations.

• Most of these people complain their technical people don’t truly understand all of the financial ramifications of their actions. So if you’ve been counting on others to share your high end value story, it probably is not working.

We need to establish a relationship with management. There are a number of strategies for setting up meetings with this type of person. We won’t go into all of them, but here are a couple of my favorites.

Set up an introductory interview
Note the word interview, as opposed to a sales call. In this meeting we quickly introduce ourselves as a supplier of critical goods and services to their organization. Then, launch into a few well selected questions on market conditions affecting their company, difficulty finding technically qualified new people, issues impacting their bottom line and their view of the future. That’s it. No selling, no elaborate product demos, no elaborate mission statement presentations.  

Set up customer satisfaction review

In this instance, you essentially thank the management guy for previous business. Let them know you are working to assist in getting the most bang for their buck and ask for feedback on how the whole thing might have worked better. Again, no selling.

But this is not a "one and done" process.

After these first meetings, find an excuse to arrange a similar type of meeting every few months. Being respectful of their time, these meetings should be short and sweet, with lots of opportunity for the customer’s top brass to give you their feedback. If possible, introduce your organizations leadership to the customer’s high ranking management.

We believe this management level dialog should be an ongoing part of your strategic plan. We’ve shortened the process for the sake of brevity.

Look forward to the details additional items in our upcoming book on strategic plans for accounts.

Friday, October 3, 2014

Strategic Account Planning Part 5

What value do you bring to the customer?

Several months ago, I had the opportunity to “ride along” with what my client described as “one of our promising new sales guys.”  Because I wanted to just get a snapshot of the quality and quantity of this guy’s work, I didn’t do much to brief him on our objectives for the day.  Instead, I emailed him, "I just want to ride along and observe your work."  A few days later he texted coordinates of a greasy spoon where we would slosh down a cup of coffee and brace ourselves for the day.

After a handshake and a few social niceties, we dove into the day ahead.  I was pleased.  He had real live appointments at three accounts and plans to drop by another couple if time allowed.  Demos and literature were well thought out and carefully stored in the back seat of his meticulously clean company car.  He had invested in timely topics to explore with the various people scheduled to see us.  I could easily see why this guy impressed the boss.

During our 30 minute drive to the first appointment, we talked about his company; locations, people, size, products on their line card and lots of sundry details.  These folks were on the move.  About midway into our drive, I asked, “What kind of value to you deliver to the customer?”  The answer was both typical and scarey; something to the effect of, “We have the best service in the whole area.”  And, in spite of a couple of unfocused pushes, the best I could get was “better outside sales”, “great customer service” and a “willingness to listen.”

This is an all too common response.  And it’s epidemic in our industry.  For knowledge-based distributors it could be a fatal flaw.

What should have the sales guy responded?  A detailed list of services (which translate into value) provided to customers would have been a nice start.  Here are a dozen examples:

Policy of stocking emergency inventory to assist customers during emergency and downtime situations.
After hours access to inventory and staff in emergency situations.
Ongoing customer training sessions including one-on-one training for new engineers, maintenance personnel and others.
Ability to handle blanket orders and provide summary billing which drives down the customer’s administrative costs.
Inventory services to assist customers with managing consumable parts.
Willingness to join customer in tri-lateral negotiations to improve costs on high volume purchases.
Salespeople with technical backgrounds capable of assisting in the selection of the best product for the customer’s application.
Highly trained Product Specialists who assist with product concepts and layouts.
Troubleshooting assistance with technical products.
In-house value add group with capabilities to provide complete sub-assemblies ready for installation.
Engineers and Specialists who work with customers to “value engineer” existing designs in search new technology and/or products with better fit with the goal of driving down unit costs.
Willingness to source hard to find parts which drive up administrative costs at the customer.

Is this a complete list?  I doubt it.  Most distributors we work with can come up with 20-50 more things they do to provide value to their customers.  The point is you have something to sell above and beyond the products shipping from your warehouse.  And, a good strategic plan pulls from the list.  Why?  Because not all of your services match up with every customer, but you need to have a very solid grip on what’s available before you can proceed with your plan.

On to the plan…
Way back in the 1970s, Feature/Benefit selling was the rage.  You detailed your product one feature at a time; matching corresponding customer benefits to each feature.  Average performers simply reiterated each feature/benefit set in every customer presentation.  It sounded like the drone of a skipping record.  Great salespeople, on the other hand, worked to only stress the features and benefits of importance to the customer they were speaking to at the time. 

The same thought process must be used when matching your company’s value to each account.  Additionally, care must be taken to closely match values presented to the right person at the account.  For instance, in example 5 above we noted the distributor had the ability to assist the customer in managing consumables.  No doubt, the customer contact charged with the task of inventory may see this service as a potential threat to his job security.  At the same time, a facilities manager concerned with driving performance at that same account may see this as very valuable and as the key to reassigning the inventory guy to something more productive. 

Thinking more deeply...  In most instances, it pays to bring your values to the customer in an order which is well thought out.  Some values are expensive.  Others may actually be less well defined (a nice way of saying "worse") than an incumbent competitor.  This dovetails back to the power of a strategic plan for each major account. 

Where might you easily demonstrate your ability to provide value?  Once that value has been demonstrated, how can you expand into other areas of increasing importance?  Are there competitors which could easily be displaced and their business rolled into your cart?

A final couple of thoughts…
It’s never enough to just provide value.  Get feedback from your customers.  Customer emails detailing how you helped solve a problem open other doors to sales.  Ask the customer if they will send an email you can share with a supplier or your boss.  And even if the customer hesitates to send you some documentation, create your own log of actions, values provided and other milestones at the account.

Never try to introduce multiple values at the same time.  While they do make for a great capabilities presentation, too many choices confuse the customer.  Instead, work to understand the customer’s own priorities.  Gather the kind of data we spoke about in Part 3 of this series.  Ask additional questions and introduce your value; one step at a time.