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,, 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.