Wednesday, December 23, 2015

Santa on Selling

Photo:GM
Everyone knows Santa Claus-- red suit, long white beard, familiar belly laugh and long-time leader of all things North Pole.  For some strange reason, most don’t have a clue as to the early days of his career.   So let me break it to you, Santa got his start in sales.  A long time ago, hundreds of Christmases before occupying the big chair in the corner office up at the North Pole, Santa worked on the selling side of North Pole Distributing.

Like many hardworking sales types with hundreds of years under his belt, Santa leveraged all the lessons learned out in a territory to move up in his organization.  Playing a front and center role in a global distribution organization with customers around the globe, Mr. Claus puts those lessons to work almost every day. 

It’s difficult for a lowly industry consultant to get an audience with big time executives, but last week I leveraged over six decades worth of being on the “nice list” to grab a rare opportunity to speak with Santa in his North Pole office.  I wanted to impress, so rather than humdrum questions – the kind most people ask – I set out to do something different.  Skipping over the normal topics of reindeer care and feeding, keeping the Elves busy in the workshop and the naughty and nice list, I asked Santa about early lessons from way back in time.  Those old days when he was a rookie sales guy for The North Pole.  

Here are the highlights of our talk.  Whenever possible, I am using direct quotes from the Jolly Old Elf himself.





Santa on Targeting:
You know Frank, I share your views on targeting.  Years ago, we here at North Pole Distributing decided we couldn’t do everything.  You call it targeting, we call it the naughty and nice list.  There are just too many kids out there for us to deliver presents to everybody.  So, we started what the elves call the list.  We do our best to take care of the nice boys and girls and let the naughty ones get their presents somewhere else.  In the past couple hundred years, we’ve further refined our customer-base to exclude moms and dads.  You may have noticed that sometime back in the 70s we took you off the list because, well, you were getting too old. 

For some it doesn’t make sense, but the North Pole Distributing team is devoted to providing the best of service to a targeted group of customers.  They love us, we love them and it helps us do a better and more efficient job.

Santa on Customer Service:
The whole North Pole organization thrives on providing the
best customer service on the planet.  For as long as Ole’ Santa Claus has been sitting in this chair, I have stressed the importance of getting the right toys to the right girls and boys on Christmas Eve.  It’s our mission, vision and creed all rolled into one.  The Elves sometimes get sick of hearing me say it, but every time we break for chocolate and cookies, I feel compelled to bring up customer service as Numero Uno.  Every break in a reindeer game, Rudolf and his crew hear me retell the story.  On time delivery is only part of customer service.  There can be no disappointments.

Santa Says Under Promise and Over Deliver:
Remember the time you asked for an Electric Train way back
when Kennedy lived in the White House?  I can still recall.  You and your grandpa dropped by my shop and you looked old Santa in the eye and said, “Santa, I have been good.  I brush my teeth, do my homework and I am nice to my little brother.  Can I have an electric train?”  Remember what Santa said?  I told you, we’ll see if the elves can come up with something like that.  I learned that back when I was a seller.  I knew the elves were running behind on train sets and I knew your parents were planning on buying you one for your birthday on January 23rd.  Seems like I brought you a really cool sled that year, and since the snows were waist deep to a tall Elf, you had tons of fun.  That’s how the North Pole works; under promise, over deliver.

Santa on Tracking Customer Data and CRM Systems:
Up at the North Pole, customer data is king.  Or at least right after Santa Claus, it’s king.  We’ve been doing the naughty and nice list for eons now.  Back when we started the practice, it was all paper.  Lots of manual entries, teams of elves checking the list and then checking it twice.  In our business knowing who is naughty and who is nice is pretty darned important.

I started the practice back when I was handling the small Schleswig-Holstein territory in Germany.  I was struggling to remember all the kids and their behaviors and Mrs. Claus suggested writing a list.  In retrospect, she was questioning my memory way back then.  But, it was a good idea and I brought the whole thing to the North Pole.  Over the years we’ve fine-tuned it and a few years ago one of the elves in our computer department modernized the whole thing.  We never miss a naughty or a nice and we never need to check things twice.

My time was short, Santa and his Elves are pretty darn busy this time of year.
Just like back in the old days, my time with Santa just zipped by.  Our scheduled hour seemed like just a couple of minutes.  Along the way, he did point out a couple of times when I almost slipped onto the naughty list, mostly for fibbing.  But somehow I managed to stay in Santa’s good graces throughout all these years.  As the time was ending, I asked Santa if he had any final words for the good girls and boys across distributor-land.  Here are the Jolly One’s final words…

Enjoy your Holiday Season… Make Merry with your Friends and Family… Make plans for a Happy 2016…
Ho, Ho, Ho….


Authors note:  Santa and I have enjoyed a special relationship through the years.  Based on the way they talked about things going on down at the Eagles Club, it seems my Grandpa was a close personal friend of Santa.  My own grandkids have noticed that I know Santa too.  Hopefully, you haven’t lost touch.  

Monday, December 21, 2015

What’s the story on your product lines?

Let’s start with two assumptions. First, your company sells solutions, not a hodge-podge pile of parts. Second, some of the products you sell fit together nicely to solve customer
issues. Some reasoning has been applied to the building of your product offering. As you set out to create solutions, you started assembling the right parts and pieces to address customer issues.

But I have a question. Are your customers connecting all the dots? Most of us assume our customers realize how all the stuff in those gigantic catalogs fit together. Experienced customers probably rely on you to carefully select just the right products for their particular applications and offer them up in a solution format. A few might bring you into the equation by sharing business concerns and problems before they have fully analyzed the whole situation.

Newer, and even some existing, customers are different. They may not fully understand your brand of solution selling. Some may not yet trust your suggestions. To these folks, it is important that you provide a story around your products and services.

What kind of a story? Let me give you a couple of examples.

Let’s say you are calling on a customer contact from a water treatment facility. Whenever showing off a new product, why not start off with details outlining a case study on how the products you are about to show make sense in the industry. How your Variable Frequency Drives are perfect for running pumps and how your flow products can be easily fed signal information to the aforementioned drives. Signals might be monitored remotely via SCADA products provided by another manufacturer and pull the data from the drives for easy monitoring. The product you sell are just “characters” in the full story of solving water treatment related problems.

Another example might apply to a safety distributor calling on a large end user facility where welding is a big part of the customer process. The story you weave outlines how an assortment of products from your line card all benefit workers in an environment filled with sharp objects, heat and hazardous gasses generated with welding. The “story” is we have more than just a collection of products, and we possess what you need to keep your work environment safe.

Your story has the power of connecting you with the customer; building rapport. When carefully constructed, the
process forces the seller to think more deeply into potential customer issues. Further, a well-told story places you in the position of being a specialist in the customer’s individual needs.

In the best of cases, distributors build a series of marketing materials matched against a half dozen customer types. One brochure showing a half dozen products focused against the backdrop of the customer environment goes a long way to illustrate precisely how much expertise the organization has developed in the customer’s domain.

But what if you don’t know much about the customer?
For some of the new folks reading this, you might find yourself scratching your head and thinking, “I don’t really know all that much about the operations of some of my customers.” Here is where research comes into play. The internet provides valuable insight into the issues faced by many industries. Going back to our example of water treatment, we discovered a wealth of information on our very first “Google search."  For instance, we found Treatment Plant Operator Magazine’s website and a quick review would provide dozens of applications to which you might match your product groups. While we are on the topic of trade publications, nothing creates a better story than an article which lists one of your products in action.

Combine stories with others on your team…
I believe it is a good use of time in a sales meeting to discuss the best “story” for various types of target accounts. What products work, which are viewed as likely solutions and how they interact with other product lines can become great fodder for future sales calls. And, in my opinion, this will produce greater results than mere product minutia.

Go forth and create a great story….

Thursday, December 3, 2015

Distributor Fight Club: Knife vs. Fingernail Clippers

Are your salespeople headed to a knife fight with fingernail clippers?

photo: jokeoverflow
I travel for a living.  Delta Airlines loves me.  Over the course of the last decade of travel, the fine folks at the TSA security checkpoints have managed to confiscate over a dozen of the fingernail clippers I inadvertently left in my computer bag.  Dangerous weapons?  Somehow, I have my doubts, but the point is to the TSA Security team they fall into the same category as a 17 inch Bowie knife.  Would I want to take on someone armed with a real knife, switchblade or anything thing else?  Heck, no!  This brings us to the question, are we sending our sales teams into a virtual knife fight armed with a measly manicure set?

Allow me to get real. Our salespeople go into negotiations with professional buyers on a daily basis, most without real negotiation training.  Further, many sellers and their managers don’t really believe negotiations play a role in their world.  But they do.  Allow me to present a couple of points. 
Have you ever called on a person with the CPP credential behind their name?  This stands for Certified Purchasing Professional.  In order to maintain the accreditation, the individual must meet the following minimum continuing education requirements as listed on their website:
“Reapplication must be made every five years in order to keep certifications valid. A minimum of 15 additional points is needed for an approved updated status. Also, anyone who has not taken and completed the self-running online courses "Business Ethics for Buyers and Sellers", "Essential Law for Buyers and Sellers", "Managing Inventory - Maintaining the Proper Level", "Math for Purchasing and Business" and "The Science and Art of Negotiation" will be required to do so.”

Remembering these are the minimum, the list of the other 28 course options includes 6 which are negotiation-centric, including one little tidbit which reads as follows:

“Body Language - Make Buying and Negotiating Easier and More Successful
Body Language, a new online course to help you deal with suppliers. This course will give you an insight on how to read the gestures, body positions, and movements that reveal what the other person is feeling and how he or she is reacting. It will help you determine if the person is telling the truth, if the person is sincere, or if the person is hiding their opinion and motives. Being able to properly access a salespersons body language is an important skill that every buyer and negotiator should know.”

For those still wondering, let me throw in another detail.  I
asked well-known negotiation trainer Tony Perzow of SPASigma, an organization dedicated to improving sales negotiation, to elaborate on the issue.  Tony said, “During the years of the Great Recession we saw a change in the mix of our classes.  As companies worked to reduce their costs, I saw classes full of purchasing and procurement guys.  These companies realized the easiest way to drive cost out of their system was to apply pressure to their suppliers.”  Putting ourselves back in the time, sellers were desperate to get sales; at almost any cost.  My experience with distributor sales organizations shows many companies are still trying to work some of these poorly negotiated deals back to profitability.


Our customers don’t believe negotiation is a bad word.  As a matter of fact, they have made good use of the process.  Our sellers were ill equipped to even begin playing the game.

It is time to even the playing field
For the past couple of decades, distributors have been focused on “Value Adds” as their differentiator.  Extra service, extra work, extra product and other free stuff became the lexicon of the field sales team.  In an environment like that, any thought of real give and take negotiation was pushed to the side.  Is it any wonder distributors struggle with margin squeeze? 

Distributors need to revisit the lost art of negotiation.  Finding the right deal for both buyer and seller is the game we have elected to play.  Further, negotiating allows distributors to push their margins forward.  With this in mind, allow me to share another valuable point from my conversation with Tony Perzow, it simultaneously has everything and nothing to do with negotiating. 

Mr. Perzow pointed to a philosophical difference between street names in North America and Europe.  Very generally speaking, European streets are named for artists,
philosophers, places and scenes (The famous Abbey Road with tons of Beatles references was named after a farm.)  American streets are named after persons of power.  A quick walk through River Height Consulting’s “headquarter city” of Davenport, Iowa illustrates the point.  Presidents Washington, Jefferson and Adams intersect with General Pershing and Grant with a diagonal named for Iowa Governor Samuel Kirkwood.  We love power and it spills over into the selling world. 


Salespeople want the power to negotiate the whole deal.  But, this power works against them.  Distributors who limit the negotiating power of their sales teams score better in profitability and margin.  Why?  Selling is an emotional sport and even experienced sales guys can find themselves in that “make a sale at all costs” mentality. 

Saying “I don’t have the power to commit to that price” slows the process.  It gives the seller time to develop strategies, time to understand all of the costs associated with the concessions, time to understand the value the distributor provides and time to think about what commitments the customer needs to make in return.

If you are a sales manager, ask yourself these questions:
  • Do your salespeople really need to make the deal instantly?
  • Have your sellers ever made a deal and later determined it wasn’t as good as they thought?  Did your company make less money than deserved?
  • What would have happened if the seller could have stepped back and evaluated it or sought management feedback?
  • Are your salespeople willing to give up a bit of ego for more money?

Let’s get some training…
I don’t believe it’s a matter of if distributor sellers (and purchasing teams, too) need training.  From my point of view the real question is: What is the best training and how soon can you get your folks into the course? 

After reviewing the work of SPASigma, I heartily recommend their work.  Why?  First, the fundamentals are sound.  Secondly, classes are geared towards distributor selling.  This is a major difference.  SPASigma’s parent company has experience with over 400 distributors.  They understand the selling engagement at distributors is different than that used selling insurance, real estate and other one-of kinds of interaction. 

Finally, allow me to add one last point.  The very thought of negotiating may be a turn off to some of your salespeople.  In interactions with very successful distributor sellers, I have seem pushback on the topic of negotiation, and almost every type of skills based training.  Expect to hear one or more of the following:

1.      Negotiating is for sleazy used car guys.  People hate car guys for this exact reason.  I will not bring myself to this level.

2.      I have worked hard to build a trust-based relationship with my customers.  Using cheap tricks to squeeze out a few more dollars will ruin everything I have worked hard to develop.

3.      Customers in my territory are upstanding honest people.  They tell it like it is.  They don’t lie to me and I don’t lie to them.  This negotiation hocus-pocus is unnecessary.

4.      I have been doing this for years.  I get paid on gross margin.   I know how to get the best deals.  If anything, I should be teaching the class on negotiating.

5.      I sell solutions.  This is for commodity salespeople. 

I don’t believe any of these issues reflect the real world.  But perception is reality.   Some of your salespeople actually believe that negotiations are not part of their job.  Explore the situation with them.  Review previous instances of “deals” gone wrong.  Look for areas where just a bit of negotiation would have provided extra profits, better defined projects and real win-win opportunities for ever one involved.
I believe possession of negotiation skills at the seller level is…. well, not negotiable



Wednesday, November 25, 2015

Looking back at our blessings

Looking back at the nearly 200 articles posted to this blog, most were designed to provide insight,

suggestions and training for distributors and their supply partners. Our mission has been, and continues to be, creating a catalyst for better ideas within the distributor channel. But, for just a couple of minutes, allow me to take a look back in time.

We are celebrating out 10th Anniversary
River Heights Consulting was formed ten years ago on November 13, 2005. After many years of consideration and sleepless nights, I decided to take my gathered knowledge and skills to launch out on my own. It was my long-time dream to consult in the distribution world.

When I first launched, I had no clients, no prospects of clients and very little idea as to how to find new clients. For a couple of days, I felt like Jack from Jack and the Beanstalk, somewhere deep within my consciousness I heard voices say, “Jack, you traded the cow for these three magic beans? How stupid of you…” But I was blessed. A few days following my resignation, I received an unsolicited call from Phil Allen of Grace Engineered Products who wanted to be my very first client. I am happy to report Grace is still a client. Blessings continue to flow.

During the first couple of years, it was tough connecting with new clients. The good news was that it was fairly easy to find organizations where I could provide really strong value.  They wanted to hire me!  The trouble was, they wanted to hire me as an employee, not a consultant.

It seemed as though every baby-boomer with any level of success “put out a shingle” and called themselves a consultant. At least until somebody offered them a job. My wife encouraged me to stay the course. Again, I was blessed. At some of my most discouraging times, a new client would join the River Heights Consulting family. The family grew and now at the end of ten years, we are maintaining that momentum. With each new client, I have learned something.  I have learned about their business, how to be better at my own business, and how to help others overcome obstacles and prosper.


Over the past 10 years, River Heights Consulting has:
• Interviewed over 1,000 distributor executives (we quit counting at 800 about five years ago). Each one of these folks generously shared the issues facing their businesses. In many instances, they talked openly of their successes and the pitfalls they experienced along the way.

• Interacted with some of the top thinkers in the wholesale distribution. The folks who run distributor associations really do have a handle on the issues facing wholesalers. They shared, they bounced around ideas and they generously assisted with research.

• Written five and a half books. Why the half book? Well, there are a few that are near complete but need either some final editing or a bit more research required to move them from mildly interesting to worthy of the readers' time.

• Authored over 400 articles. This has put me in touch with some world-class editors. They helped me improve my writing skills. Don't forget, I am an engineer by trade, so writing was never a strength. These people were patient with me, offering amazing tutorials.  Plus, they taught me to not be afraid of putting some of my personality into the work.  "Frank speak" is a real thing around here.

Since many people want to know, here is a list of the work we have performed.
Executive coaching. In spite of claims made by others, I don’t believe any one course can provide the background needed to be a top-level distribution executive. We work one-on-one with great people to help them be even better. We play devil’s advocate and challenge their decisions. We ask dumb questions and demand smart answers. We help them refine ideas.

Sales training. We do training on target-based selling, Value-metric selling and solutions selling. We often ride along with salespeople to provide them with a bit of coaching as well.

Speaking. We have been honored with the opportunity to speak to groups all over the world.

Distributor Advisory Councils. This is one of my personal favorite tasks. River Heights Consulting has conducted dozens of these meetings and helped suppliers build a better relationship with the wholesale partners.

Rep. Council Meetings. Sales Agencies, AKA Rep firms, are part of the landscape. They provide real value to the channel. One rep recently pointed out a notable fact. According to Forbes Magazine the average tenure of a rep in their market is 22 years versus just over two years for a salesperson working directly for the manufacturer.

Strategic Planning. Without a plan, it’s hard to grow. We’ve had a lot of fun helping all kinds of organizations refine their vision for the future.

Customer Focus Groups. The voice of the customer is powerful. Understanding why people buy from you is as important as any fancy sales strategy.

I could go on and on with this list. I know I have skipped over some important stuff. I suspect in another ten years the list will be even bigger and better. So allow me to close with the most important point.

We have been blessed with literally thousands of friends, people who have helped us succeed. We have been blessed with a modicum of success.

But it’s not about Frank Hurtte or the team here at River Heights Consulting.
Instead the real secret is all of you.

Thank you for your help and support since November 13th of 2005.  You have given me hope in the face of adversity and have kept me laughing with your distributor stories.  You have blessed me.

I hope to be a blessing to you and your company some day as well.  And with the next 10 years ahead, I thought I should share our new and improved logo:

As always, I would love to hear your thoughts!  Happy Thanksgiving!

Monday, November 16, 2015

Undisciplined Discounting Webcast

Do you have salespeople who seem to create their own pricing rules?  Are you missing out on margin by those who are afraid to miss out on the deal?  Strategic Pricing Associates is hosting webcast coming up on December 8th at 2:00pm Eastern to address such issues.  How to Stop Undisciplined Discounting and Track Sales Force Accountability features Sid Hendry of Gulf Controls and Dave Lienert of SPA.  It's only 60 minutes out of your day and will be well worth it!  Click HERE for more details and registration.


Thursday, November 12, 2015

Friend, Customer or Business Colleague?

The original CRM with notes scribbled
on the sides of business cards
Sales experts have extolled the virtues of building a personal relationship with customers since the invention of dirt. Arguing that sellers devote time and resources on activities not expressly focused on business, they encourage salespeople to learn about the customer’s family, hobbies, personal interests and more. Many years ago, Harvey MacKay developed the MacKay 66, which was used by many organizations to understand and log customer interests. But that was back in the “olden days” before the internet, Amazon.com, big data, global competition and all the rest.

The question really becomes this… In the age of big information does customer friendship matter?

Let’s think about three points:
1. Most of us think of ourselves as (or aspire to be) “solution” providers. Why? Because solution sellers are able to command a little higher gross margin than “parts sellers."

2. There is a certain risk to every real solution we provide. What happens if what we suggest doesn’t work?

3. When risk is involved, customers buy from the person/company they trust.





Trust is the key issue in establishing a relationship. Most of us know lots of people. We know their name. They know ours. But that doesn’t mean we trust them. So let’s look at the things that build trust.

If we know the person listens to what we tell them, we trust them more. And, it’s not just about attentively listening comments about the sale. Instead, we are judged by how much we pay attention to personal details as well.

Without sounding hokey, it can be said people grow to trust those who care on a personal level. This means their kids, hobbies, pets, etc. It also means their opinions on products, processes and plant politics. We need to listen and demonstrate that we care about more than just making a sale. Salespeople must understand, customers fear that sellers will oversell their solutions. Customers fear the risk of endorsing your ideas. Alleviating the perception of risk is the name of the game.

This brings us to the point of trust. Customers favor those they trust. Building a solid relationship, professionally and personally, builds trust. In spite of all you might imagine, trust is not something which is organizational. Trust is a personal thing. If an organization is noted for being the employer of trustworthy people, some of the trust level rubs off on that organization.

Stretching this point of trust, most of our customer contacts are likely to say, “I do business with Company XYZ because I have a salesperson that I trust, even though the company’s president might seem questionable.” For sales leaders, think about this: A distrusted salesperson reflects poorly onto your company even if you are the most trusted individual on the planet.

Going back to the title of this piece, should our customers be friends, customers or business colleagues? I believe that friendship is justifiable in that it drives trust. And trust drives customers to do more to help us reach the status of business colleague.

I know there are skeptics out there, so let’s look at a half dozen ways friendship might help you win more business.
Customer contacts who are also friends:

1. Provide you with insider information which helps you position for future sales.

2. Introduce you to others within their company who might be interested in your products.

3. Help you understand the strengths and weaknesses of your competitors.

4. Steer you away from politics which could impact your efforts in a negative manner.

5. Carry you with them to new jobs as they migrate to new jobs or as they are promoted within their current organization.

6. Educate you on new technologies being explored by their employer.

Notice how none of these include price, buying practices or other tactical actions required to get an order. However, it is often common for customers to pay more when they feel less risk is associated with the purchase. And, when pricing is tight, it’s not uncommon for friends to give you guidance around what an acceptable price might include.

And while not essential it is important to not that working with friends is richly rewarding. Working with friends is fun; fun for them and fun for you. When you have fun at work, it shows. Customers embrace your enthusiasm.

Finally, for those who are wondering… Working with friends often manifests itself on your commission check.


BTW – I recommend the MacKay 66.

Friday, November 6, 2015

Sales Professional—Really?

Let’s start out with the premise you are actively engaged in selling.  Your card may carry a slightly different title.  It seems like nobody has a card with the title “Sales Professional.”  Instead, you could be listed as any one of the following:
  • Sales Engineer
  • Field Engineer
  • Account Manager
  • Account Executive
  • Product Specialist
  • Customer Service Resource
  • Branch Manager
  • Inside Sales
  • Channel Manager
  • Customer Omnibus Person
  • Business Development





But somewhere in the details of your job description, you are measured on your ability to grow the number of purchases made by customers under your direction. 
This makes you a Sales Professional.

As a professional, you have the intrinsic responsibility to perform better than someone who is a selling amateur.

With this fact in mind, we must ask the question: “What are you doing to improve your professional skills?"

We ask this question often and the answers are shocking.  Most salespeople immediately refer to product-based training and their propensity to study catalogs.  But when we refocus the question back on to the actual art and science of selling, they stammer.

A few reach way back to a day-long session they attended years ago.  Some will even argue that their selling is entirely derived from their product skills and insist their customers don’t respond to “cheap” selling tactics.

Allow me to point out our kind of selling is different from the approaches used by those hawking aluminum siding, cell phones or water beds.  This alleviates the need for sleaze
ball old school techniques once touted by self-proclaimed selling gurus.  Things like the “four wall close” and the “yes, yes, yes close” taught during the 1970s no longer work in our business; assuming they ever did.  But there are best practices worth exploring.

Well-developed questions identified ahead of a sales call pay dividends.  Assembling account data (things like products produced, processes employed, cost drivers and known production issues) is even more important today than ever.  Understanding the competition and their perceived importance to the customer is critical.  Targeting of customers is a later day must do.  We could go on for hours but suffice it to say, there are important skills to improve.

The question for sellers becomes “where do you get information on improving?”  I believe it rarely comes via our own intellect.  One need only look to other professions employing smart people for proof of this concept.

Doctors are required to read medical journals and attend conferences for their chosen field of medicine.  My friend is a high end commercial Real Estate Appraiser who must attend hours of continuing education each year.  Certified Financial Planners, college professors, lawyers and many other “professionals” participate in ongoing training.

I believe ongoing sales skill training “trumps” a day-long event.  Whether good or bad, the nature of today’s world has conditioned most of us to learn in shorter duration events, a few minutes (maybe an hour) of new thoughts loaded into our mind does more to allow us to ponder and implement new ideas.

Never before has there been such a plethora of information available to those in our profession.  Amazon offers up thousands of books aimed specifically at our industry.  (I personally recommend Dave Kahle’s How to Excel in Distributor Sales to anyone who will listen.)  There are tons of distributor specific selling ideas available in distributor trade publications.  And, lest I forget to include a totally self-serving plug, this blog and others like it have massive content.

Don’t like to read?  There are plenty of videos on YouTube and podcasts to keep you busy.  Why not use some of your windshield time to “load your mind” with great ideas?

Now back the question I always ask… “What are you doing to improve your professional skills?”
 
And a question for our readers…

Do you feel you would benefit if this information was available in podcast format?

Drop us a line with your opinion!

Monday, November 2, 2015

Eliminate the Middle Man and Save

Out on a lonely street of the seldom used two-lane highway between Dubuque, Iowa and Madison, Wisconsin, there once stood a ragged and paint-worn billboard with these words emblazoned in three foot letters: “Eliminate the Middle Man and Save!”

While the sign has likely fallen and the once flourishing cheese factory is gone, the legend lives on in the hearts of untrained purchasing professionals everywhere. It’s one of their dozens of negotiation tools and they’re not afraid to use it on the unsuspecting manufacturer’s sales executive.

Allow me to set the stage for the typical play of this tool…
The purchasing guy’s company uses your product and has for a considerable amount of time. One day, you get a call from the purchasing department. The buyer asks for a meeting but specifically requests you come without your distributor. During the meeting, this procurement guy describes how his company likes your product and wants to strengthen and expand their business relationship with you. (The bait…?)

All sounds good so far, but then comes the well-rehearsed message: the distributor shouldn’t be part of the equation.






There are a predictable list of reasons:
• The distributor is good but doesn’t really add value to this piece of the business
• The customer wants to build a closer relationship with your company for technical reasons and the distributor only gets in their way.
• The customer is evaluating their supply chain and their “consultant” told them distributors are an unnecessary step.
• The customer has identified new business for which you are qualified but doesn’t see how it could possibly work through a distributor.

A defining moment in channel policy.
Very few manufacturing organizations with distributor channels proactively explore the proper response to such a scenario. Like most things associated with the negotiating process, salespeople come to the table unprepared and unaware a negotiation is in progress. On the other hand, purchasing teams actively train in the art of the negotiation. Most are rewarded by their ability to knock down prices without impacting quality. Stripping out the distributor margin while insisting the manufacturer continue to provide all of the services formerly handled by channel partners is a frequently used ploy.

The salesperson is unprepared.
We have already noted few manufacturer sales people realize they are being “played."  This is an issue. Exacerbating the issue, many manufacturers fail to insure their sales teams understand the cost of the transactions handled by the distribution team. For example, when the distributor is removed, orders must be placed, shipping and billing questions handled, expedites responded too and warranty issues explored by staff back at the manufacturer; typically these are more expensive than the distributor alternative. Further, issues like distance, lack of ongoing relationships and inability to quickly drop by the customer to “handle the issue” impact cost and service levels.

Most manufacturers have failed to build a decision matrix for precisely what makes for good direct business and what qualities this business should possess. Instead, untrained salespeople are forced to make subjective decisions with big bottom line impacts.

How to handle this negotiation tactic.
First, allow me to provide some fair balance to this message. I believe some business might need to be done manufacturer direct. Examples include: private label opportunities, business where the manufacturer develops a special product to the customer’s specification and business falling outside of the channels normal market segment (electrical tape sold to hockey teams for wrapping sticks might be an example). And sometimes, opportunities become so large and so price driven that distributors are not part of the equation.

The rest of the time distributors are an important part of the business model. You wouldn’t remove the distributor from the sale any more than you would say, “this is business where we don’t pay the sales team.” The channel is part of the sales team.

So how do we respond to the negotiation push for direct business? Here are a few steps that make sense from my standpoint:

1. Visit with the customer to hear the whole story. Don’t limit your conversation to (only) the purchasing department. Instead insist on talking to the engineering and production teams. Ask pointed questions about their ongoing needs.

2. Push back against price. If the customer starts off with
assumptions that your distributor is making 20, 30 or 40 percent gross margin, and the purchasing guy talks asks for that margin as a price reduction, ask where they got the numbers. Most customers over estimate the distributor margin.

3. Indicate there will not be a major price reduction driven by the direct business. Point to the services provided by the distributor which may be more expensive coming from the manufacturer directly. Point blank ask the buyer if they would want to go direct if the price remained the same.

4. If pricing becomes a bigger point, ask if the customer is willing to make some kinds of concessions in return for the price reduction. More business, blanket orders, elimination of services and/or reduction of warranties all could be tied to reduced price.

5. Offer to bring the distributor into the negotiation. Perhaps the distributor can provide added services or streamline the services they provide to help match the price cost needs.

6. Keep the distributor involved in the process from the very start.

Channel Distrust and Disruption.
Hitting on point number six from above, it is critical to keep the distributor involved in the process from the beginning. Experience dictates, the distributor probably has a better handle on the local relationship than the manufacturer’s sales team. The distributor may know people within the customer who can provided details on the reason for the negotiation; things like pressure from corporate, a loss of a major customer, a new procurement executive making a name for themselves or some mistake the distributor made in the recent past.

If the situation does call for a price increase, look to the distributor before giving away gross margin. Over three decades of work with distributors indicates most are willing to drop their gross margin percentage if presented with facts. And, most are emotional about doing so without some say in the process.

Finally, if the situation does call for a move to direct business, the distributor needs to be compensated for the following:

• Finding and nurturing the business if they originally brought it the manufacturer and developed a strategy for getting the business off the ground.

• Any work they are required to perform should your system break down. Stocking, handling warranty issues, working through customer technical questions all cost money. If you take the business direct, expect to pay for the service requests passed to the distributor.

Eliminating the Middle-man is not a savings.
Distribution is a business model. It does not exist because it’s as American as Mom’s apple pie and the freckle-faced girl next door. It exists because distributors can handle customer relationships more efficiently and effectively than a manufacturer can do directly; at least in most cases.

Manufacturers need to invest in training their sales teams on the distributor model. If your team does not understand the financial drivers of distribution, buy a Profit Report from one of the distributor associations and spend some time understanding it.

Friday, October 23, 2015

An Open Letter to New Salespeople

An Open Letter to New Salespeople
Maybe the word "slimy" comes to mind.

Last week I had the opportunity to interact directly with a young person thinking about a career in distributor sales.  They were put off by the image of being a “salesperson,” but because of the experience of one of their friends, they were taking a fresh look at the industry.

Their questions revolved around a handful of unknowns. 
·      Is sales a position that taints your ability to do something else later in life?
·      Do customers see salespeople as valuable or as sleaze-ball characters to be avoided?
·      What is this commission thing all about?
·      Do I need to be a natural born salesperson?
·      How hard is the job?  It seems like a lot of people “used to be salespeople but quit. 





For the benefit of everyone just starting or considering a distributor sales opportunity, allow me to answer these questions.

Does Selling have a future?
The answer is unequivocally yes.  A quick look around the executives of both distributors and their manufacturing partners points to a large percentage with selling in their resume.  Selling provides an opportunity to understand customer needs.  And without a product which fills some need or solves some problem, there can be no customers.  And without customers there can be no business.

How are salespeople seen?
The distribution industry is not a “one and done” selling process.  Salespeople develop ongoing relationships with their customers.  The very best sellers are seen as skilled problem solvers.  Often they act as an important extension of the customer’s own staff.  The attitude of the customer is often reflective of the seller’s attitude.  When a sales guy arrives prepared and armed with well thought out products/services tailored for his customer, customers respond in kind.

The commission thing…
Everyone has heard of some family acquaintance who worked on commission and went broke.  This is rarely the case in distribution.  The nature of customer buying habits and market dynamics indicates 99 percent of all selling territories produce revenue in good times and bad times.  From the worst recession to the best of times, a territory might fluctuate by 30 percent.  The secret is to live within your means, bank the upward swings and prepare for downward shifts if the economy should fall into recession.  Further, as you build customer relationships, develop your problem solving skills and increase your efficiency, the whole thing moves in the upward direction.

Natural born salesperson?
There might be such a person.  Most of the folks who claim to be “naturals” don’t stand up to the scrutiny of their description.  Looking back on experience with hundreds of experienced sellers I might have met two “naturals."  The rest have perfected their skills over time and some of the best salespeople start off conversations with, “I am not really a salesperson, I just really like to help my customers and they appreciate my efforts by directing business my way.”

How hard is the job?
I believe selling is the hardest easy job on the planet.  Here’s why I make that statement.  I like meeting interesting people.  I like seeing manufacturing facilities.  I like time spent solving problems.  If I were to wake up and discover I won a Billion Dollar lottery, I would still want to meet new people, see innovative manufacturing plants and devote time to solving problems.  All of these things are so incredibly interesting, it’s hardly like work. 

All of this brings me to a set of core beliefs I have about distributor sales.  This is the short list.

I believe….
1.   The actions of successful salespeople mostly appear different when on the outside looking in.  The projection of their personalities often overshadows the mundane stuff that makes them successful.  Keeping good records, organizing schedules and studying customers are rarely visible to anyone outside their immediate family.

2.   You don’t have to be wonderfully organized to be successful, but if you’re not, expect to work extra hours and occasionally feel stupid because you wasted hours “trying to find” something important which could have been easy to locate if you had just kept up with your notes and filing.

3.   Sales work is mostly solitary and independent of others; you might be attracted to the freedom.  But, many people working independently overestimate the number of hours they actually work.  Further, the ability to intermix personal and professional hours creates an environment where wasted time is often counted as “working hours.”

4.   Most successful sellers work more than 40 hours a week.  The really successful ones often don’t count hours of planning, preparing and learning about their products as real work time.  Working closely with these folks for over three decades, I have discovered many of them count this as “happy time” getting ready for the big game.

5.   There are no “natural born” salespeople in our industry.  Those of you who have the gift of gab, and most would say I do, may actually be at a natural disadvantage in going to the top of the sales heap (read The Challenger Sale.)  Top salespeople often tactfully challenge their customers.  Sometimes they make unpopular recommendations but work hard to provide strong justification to their recommendations.

6.   A few salespeople fall into lucky territories.  They aren’t required to learn the important activities necessary for their own success.  I see them as older, forty and fifty-somethings who have somehow been forced to change jobs…and they struggle.  If you get off to an early start because you inherited a great territory, don’t be complacent in learning important skills.

7.   The keystones of selling success are tied to product knowledge, application skills and customer knowledge.  You cannot really add value to your customers if you don’t know your products and services.  But that’s not the end of the equation.  You must know how your products might be used; including short comings and potential pitfalls.  Finally, if you don’t know your individual and specific customers including their problems, challenges and opportunities, you can never really be much more than a human search engine.  Back in the old days, human search engines were valuable.  Google took away that value.

8.   Salespeople are honest and honor their commitments.  Simple as this sounds, it goes against the human nature of some to say, “I don’t know."  Others state they will be back next Tuesday with an answer and don’t show up until Thursday.  Customers notice.  In addition, many sellers don’t really listen to their customers.  Taking notes focuses your attention.  Referring back to notes a week later to clarify a point adds to the salesperson’s credibility.

9.   Good salespeople demonstrate that lightning strikes twice (or even three times.)  And, typically when they move it is to more freedom, better money and other personal/lifestyle rewards.  It is not unusual to find this kind of person at the top of the sales heap in multiple companies.

Finally….

I believe in the distributor model.  Regardless of all the hype about Amazon taking over the world, I believe the future holds a place for sellers who bring value to their customers.  In the future, we may refer to the group as something else; perhaps solution provider will be the term of choice.  Regardless of title, the opportunities will abound. 

And, feel free to contact me if you have a career question; helping you be successful turns my crank…..