Friday, September 8, 2017

Hurricanes and Helping Distributors

First Houston and the Gulf shores and now Florida is set to go under. Natural disasters are tough on distributors and even harder on our customers. I know from firsthand experience. I thought this might be a good time for distributors to share their knowledge of natural disasters and would like to invite everyone who has lived through one of these events to share their experience and provide tips and support. 

Without going into massive details, Iowa has had more than its share of flooding. I went through the great Des Moines flood of 1993, which put much of the downtown underwater and flooded countless industrial facilities. We went without running water for 29 days which meant no drinking water, no workable toilets and put the nearest shower at an army base nearly 20 miles away. For a week or so, every business deemed unnecessary for infrastructure rebuilding was ordered closed. Electrical distributors were viewed as important. We were told “not to close."

At that point in my career I was an electrical/automation distributor, so these thoughts come from that perspective. Conversations with distributors in other fields point to similar situations.

Expect a massive surge of business
From the electrical perspective, flooding creates a massive surge of business, but not immediately. From my experience, business will start as a trickle and reach a zenith about four weeks after the waters have subsided. The end of this rush of business happens around four or five months later. It generally falls off slowly, but by that time most customers are through their emergency situations.

Predicting what people will need is tricky. In the electrical world the first hit will be for the materials needed to create temporary services and other work arounds which allow construction and other trades to get into the job and do their
work. We asked a couple of our major suppliers to consign inventory of items to our location; many took us up on the offer. For instance, we had a semi-trailer full of transformers stationed outside of our warehouse which we used once our normal inventory was depleted. The same went for flexible conduit, breakers and load centers.

Some of the items you just can’t stock enough of are the following:

• Contact cleaner – Getting the mud and debris out of everything consumes mass quantities of this stuff. You can’t have enough as it will go out the door by the case. We discovered a few companies sell it in bulk in 5 gallon buckets. We sold a couple pallet loads in a week.

• Industrial fans – Everyplace is wet and once the water goes away it gets pretty steamy inside the buildings and electrical rooms. They will sell faster if already assembled.

• Portable Ground Fault connectors (GFCI) – Think about it, wet conditions and temporary connections make for a shock hazard deluxe. In normal conditions some workers will skip using the GFCI precaution, but when they are working in a half inch of water, they are quick to be safety conscious.

• Circuit Breakers - Every variety will fly out the door. In industrial settings, expect people to bring in older model breakers. Some of these are readily available while others require some digging. While I don’t normally advocate for gray-market stuff, we did help a few customers find “surplus” used breakers to get older parts of their plant running.

• Anything electronic – PLC’s, Drives and other equipment are often damaged even if the water level doesn’t reach them. A little bit of humidity plays havoc on printed circuit boards. We did a lot of spare part exchanges and for smaller units we recommended taking them out of service.

• Electric motors – Most agree it’s not cost effective to rewind anything under 50 horsepower. Smaller size motors will fly off the shelf in the fourth week.

Take care of existing customers first
If you have stock, they will come. Some, maybe even many, of the folks coming are not regular customers. While running contrary to the beliefs of many salespeople, all sales are not created equal. I believe it makes great sense to not sell the last part on your shelf to a complete stranger, especially if the product is in short supply. This is tough to monitor but the word needs to go out to your team.

Continuing with the premise of taking care of existing customers, you will encounter massive demand for products which are long lead time and often hard to get from the manufacturer. We discovered that it made sense to assign one person to the location for the expediting of “odd-ball” and long lead time items. Following this practice will speed the process and eliminate duplication of effort with your team. Trust me, after the first two weeks, your team will be busy.

Network with friends in other parts of the country
You probably have distributor friends outside of the storm damaged area. The first week or so after the storm many of them will no doubt give you a call to make sure you are ok. Be sure to take the time to ask them about the potential for selling you some of their inventory should your needs be more immediate than the supplier factories can accommodate.

On the topic of friends, in preparation for this piece we spoke to Mark Tomalonis the President of WarehouseTWO. His organization can help you find other distributors willing to sell a portion of their inventory. We asked him to give us a short overview of his company:
WarehouseTWO is an online “inventory-sharing” service available to manufacturers and their networks of authorized distributors. This is the tool most commonly used by fluid power, fluid conveyance and hose/fitting distributors in North America.

Access to inventory data is restricted to the brands your company can buy directly from the manufacturer. Hundreds of branded inventory-sharing communities are available. This service is free for those who wish only to browse. While there is a nominal monthly subscription fee to upload one’s inventories for sale to other distributors, there is no charge for the buying distributor.

Mark has offered to streamline your use of the service. For temporary access to its “inventory-sharing” system, send an email to info@warehousetwo.com and mention “Request for Temporary Access” in your email subject line. For more information visit https://www.warehousetwo.com.

A call to action
The Distributor Channel has grown, we have pushed over the 100,000 reader level. I am asking our readers to post any information or distributor-centric tips for operating post-hurricane or flood. You can post them here as a comment, or send us an email. We will see that the information gets to the right people.

On a personal note: I spent the first part of my childhood in a small town just across the bridge from Galveston, Texas. My family went through Hurricanes Debra and Carla. I was just a kid, but I still remember watching mighty trees topple and roofs blow off neighbors houses and skid through the vacant field behind our house. I remember poisonous snakes attempting to crawl up the porch and into our house. We were fortunate to have sustained minimal damage because we were on “higher ground."  In 2002, I was the President of AHTD when Hurricane (later reclassified) Isidore hit our meeting in New Orleans. Thank God the dikes held and the results looked nothing like Katrina disaster.

If River Heights Consulting can help anyone recently hit by the latest round of hurricanes, we are here.

Friday, September 1, 2017

R&D: Distributor Style

Based on a research published on strategyand.com, the average company in North America spends an average of five percent of revenue on Research & Development (R&D.)  Further study points out that more innovative companies are spending closer to 20 percent (Google spends 16.6 percent, Amazon was 27.7 percent and pharma companies go into the high 20s.)  While these companies are pushing for new and groundbreaking products, it makes sense that every company would want to invest a little in their future.  Should distribution be any different?

Many believe that R&D involves white-smocked scientists
Disclaimer: Frank was not
in Back to the Future
working in some secret skunkworks laboratory deep underground.  Arguably, distributors sell the products developed in this kind of product/technology-based research setting.  Research & Development involves more than just products.  Some research should also be focused on the customer.  Things like future direction, service needs, future buying habits and shifts within their process all come to mind.    Sadly, most distributors tend to skip over this important point.


Distributors like to brag about their customer intimacy.  Based on decades of back and forth discussions concerning Point of Sale (POS) data, many value their customer relationships above all else, even to the point of withholding POS data from their top supply partners.  In many cases, we distributors have intense familiarity with our regular customer contacts.  But questions about true customer understanding continue to come to the surface.  Let’s explore a few of these.




A few years ago, I received an emergency call from one of my clients.  One of his top customers had given a 30-day notice that all purchases would be channeled to a competitor based on the ability to participate in a “commodity supply contract.”  This teary-eyed distributor’s most important contact delivered the message, indicating the decision came from well above him and was irreversible.  Later, research specified the customer had been contemplating the move for nearly a year, but had not been mentioned during any of the weekly sales visits to maintenance, engineering or purchasing.  However, everyone in management knew it was coming as a process for driving down transaction costs.  

I had to ask, with the distributor bragging about customer intimacy, how was such a move missed?  Pushing further, wouldn’t this have been something worthy of exploration by R&D?  But this isn’t the only topic distributors should be thinking about.   Today, distributors need to understand how the following might impact their customer relationships:
Internet-based purchasing
Location and training of new employees
Changes in the way customers prefer to be contacted
Value of services provided
Importance of local inventory
Customer processes which might be automated in the future
Shifts in customer operations, i.e., outsourcing, expansion and other needs

Customer Surveys – R&D tool for distributors
Why not gather, review and benchmark information from your customers?  After assisting with dozens of customer-focused surveys, we have yet to see one that didn’t provide some valuable insights about overall and specific customer direction.  Reviewing the questionnaire details, it’s common for distributor managers and salespeople alike to have some eureka moments.  Many of these discoveries lead to instant process improvement while others become part of a strategic initiative to position for the future.


Let’s talk about best practices for customer surveys.
Surveys need to be well thought out and worded properly.  Customers willing to provide the gift of feedback should not be required to wade through poorly worded questions or information that doesn’t apply to their position in the company.

Surveys should require less than 10 minutes to complete.  Let’s face it, customers are bombarded with requests for their time.  A survey that runs longer than a few minutes rarely produces measurable results because the customer simply gives up part way through the effort.

Benchmarking is important.  We recommend distributors conduct a survey of their very best and most established customers first.  This creates a standard allowing for further comparison of some of the “lesser known” customers.   We can discover differences in perception, potential unmet needs and a wide variety of information.

Forward looking surveys provide the best information.  While getting a snapshot of the past is important, the real meat comes by way of the customer’s vision of the future.

Understanding how you measure up against competitors is a critical piece of the survey.  Unfortunately, many distributors dwell on the local competition versus the non-traditional competitors; i.e. Amazon, of the future.  

We recommend using a third party for conducting the survey.

While this may sound self-serving coming from an organization conducting surveys for clients, there are good reasons for insulating the customer from your organization:
 

Customers are more likely to share the good, bad and the UGLY with an outside party.  Being nice folks, they are hesitant to tell you if they think your service stinks.

A third party can do post-survey interviews to clarify points made during the initial survey.  Since the third party is not tied to your organization, they can engage in conversations without preconceived notions of the customer.  A third party can ask what someone within the organization might consider to be a “dumb question” without offending the customer.

The outside surveying organization gives the impression that your company is both scientific in their process and serious about gathering their customer’s thoughts.  

Is it time to make an investment?
Most of the time, investment equates to sales pitch, but not here.  I believe understanding customers is so important that I want you to do something, anything, to better understand your customers.   If not an outside survey, then via your own survey mechanism; companies like SurveyMonkey allow short, limited reach surveys for free.

The important thing is to begin the process of asking:
  • What do I want to know about my customers?  
  • What is our company’s R&D?  
  • Would I invest in a company that spends zero dollars on R&D?

This IS an advertisement
If you are a manufacturer, when was the last time you reached out to your distributors?  Our survey results always help companies build better relationships!  Let us know how we can help your organization!

Friday, August 25, 2017

An End of Year Exercise that Drives Sales

Here’s the challenge, with just over four months till year end, everyone is looking for a plan to eke out a few more sales dollars. I firmly believe there’s still time to make a difference. Further, if done correctly, the plan can impact the future as well.

One of the most tried and true methods for creating quick success comes via targeting. This process comes from the extensive research we have carried out in the preparation for a book on targeting at distributors. The beauty of the effort arises from three important points:
1) Current customers are the focus of your efforts, eliminating the need for time consuming prospecting, cold calls and the endless phone tag associated with it.
2) It can be combined with normal daily activities to drive the sale of new products.
3) Success comes quickly and is easily measured.

How to get started
Distributors are often noted for a few of their flagship product lines. Typically, these top five to ten product lines represent over 60 percent of your business. Your customers have been conditioned to automatically think about your organization for the products and technologies provided by these brands. The best targets come from the next tier of products, many of which even your best customers don’t realize you sell.





Identify one of these second level products with a relatively broad usage and determine which of your top 30 accounts are not presently purchasing it from you. For most distributor salespeople, this represents around 20 accounts to choose from.


Thinking about accounts
Of the accounts not buying from you, which five to ten have the best chance of success? Consider the following:
Applications within the account. Do they have the perfect place for this product? How could it make a difference in their business? Why is it better than what’s currently being used?
Knowledge of the people. Who at the account would be the ideal decision maker for your product? If you don’t know precisely, do you have the contacts required to find the right person with minimal effort.
The competitive situation. The competitive landscape makes a difference. If you enjoy a strong position, or maybe even have a supply contract with the customer, competition shouldn’t be an issue. If you are not the dominant supplier, does their main distributor actively sell the product? We have discovered some of these products are purchased “mail order” with almost no customer service.

Selecting just five opportunities
That’s right. Of those twenty accounts, I want you to discard all but the best five; think of it as stacking the deck in your favor. Keep the aces and toss the twos. We’re ignoring the hard ones and going after what Iowans call the “low hanging fruit.” While I would never want you to ignore a customer who has millions in potential for this product, for this exercise I would like for you to pick the easiest and fastest sale. We are applying the criteria from our thinking about account selection to purposefully load ourselves up for an easy win.

Measuring success
Sales are a measure of success, normally we go for the big numbers. This time, however, we want to measure our success in getting a reasonable order. For most products, we are talking about $500 dollars in purchases by the end of the year. In the case of a longer sales cycle situation, for instance an OEM, we may consider a concrete commitment for later purchase. Staying with the OEM example, let’s assume you can get your product specified on their next redesign of an existing machine or on the prints for a coming machine. This counts as a sale, too. You just won’t see the P.O. for several months.

The finish line
The point of all of this is to add sales in before January 1st, 2018. Your success will be incremental business which is laid over the top of existing business. I also have ulterior motives. Allow me to explain the value of this process.

My ulterior motive: The Power of Targeting
Back when I was a young sales guy, things were different – much different. Working for one of the leading manufacturers of electrical products, I saw new products introduced at the snail’s pace of five or six per year. The plan for all of these was the same, show them to everyone. It was a features and benefits world where we basically worked our way down the customer list. Customers seemed to appreciate the technology update whether they had a real live application or not.

Let me illustrate how the “real live application” thing worked. After a couple of years, I had a Eureka moment: Customers rarely remembered products unless then had an immediate need; a real live application. I looked to further assess this theory by tracking activity. Customers were shown a product and then reintroduced to it as a new product nine months later. After testing the theory at least 50 times, only one customer called me on it. He only remembered because just before our visit, he had reviewed a file of product brochures left during previous calls.

Today the situation is different. New products fly out of the design departments at unprecedented rates. Customer time is scarce. Just listening to a product demonstration to stay up on the technology is a luxury of the past. Customers report the internet is their primary and preferred initial product research vehicle. While they don’t have time for “old school” salespeople, they do have time for problem solvers and those ready to make solid recommendations.

I believe following this targeting method places the professional salesperson into the problem solving and expert recommendation category. Here is why:
• Targeting involves use of your in-depth knowledge of the issues faced by accounts you already know well (see my comments on the top 30 above.) You already know some of their problems.
• Targeting involves your ability to tie (perhaps lesser known) products to their specific applications. Rather than coming in with a five-pound catalog, you are selecting specific products for their needs.
• Targeting matches the person responsible for the customer issue with your solution to that problem. You aren’t wasting their time or yours.
• Sometimes you can suggest a solution to a problem the customer doesn’t even realize they have, or at least until you point it out. This demonstrates your true interest in and knowledge of the customer.

Now visualize the future
You’ve become good at this product targeting process. You think of every new product in terms of targeting the right application and the correct customer need. You are viewed differently than other salespeople. You expand your business by targeting dozens, maybe even hundreds of products per year.

My challenge to you
I challenge you to give this process a trial run. It has been time tested and proven in dozens of distributor territories. It works. Give this a try, share your beginning thoughts with us and River Heights Consulting will provide you with some pointers along the way.


**If you are a sales manager looking to accept this challenge and explore the options with your team, we would be happy to share the details of an award driven program.  Click HERE to receive more information.**

Monday, August 14, 2017

Why is Customer Relationship Management Important?

Customer Relationship Management (CRM) and the various
software systems designed to assist in its implementation have been hot topics historically across distributor-land.  The truth is, many companies made the purchase, launched their efforts with the greatest intentions and then stumbled on the execution of such systems.

Lack of performance has many root causes.  Some of the early CRM packages lacked important features, such as the ability to sync data with Outlook (which is commonly used by salespeople to manage calendars, contacts and daily activities.)  Other times, the distributor failed to understand how CRM systems interacted with their business, making the whole thing an exercise in dead-end data entry.  A few times, technical issues like the ability to quickly enter and access data from remote locations, made the process unmanageable.  In my opinion, however, will power could be characterized as the biggest driver of less than stellar results. 

Since most technical issues are solved, most distributors are rethinking and relaunching the CRM effort and now we are squarely facing the “will power” part of the question.  For some reason, salespeople fear and loathe CRM systems.

Below I have characterized the major reasons:

1) Time, Time, Time – CRM takes time.  I work hard.  I already put in extra hours and CRM is just another device which sucks away from my personal (and off hours) time.





2) What’s in it for me? – I can see why management wants the information, but see little value for me as a salesperson.

3) Others can mess with my accounts – If information is available for the team, there is an opportunity for someone else in our organization to inadvertently open some terrible commercial can of worms.
  

4) The Big Brother Syndrome – CRM allows management to look over my shoulder and I don’t need that distraction in my life.

5) Job security – Tied to the Big Brother thing, many salespeople view their unique knowledge and relationships with customers as their personal bit of job security.  Some even have the fantasy of taking their customers to some new employer who will pay them handsomely for delivering their territory to some other grateful employer.   Experience dictates this strategy rarely works.  Further, in many states, the strategy is covered by “trade secret” laws.  

There are compelling reasons to fully engage with CRM
Research and anecdotal reports from dozens of sellers who believe in CRM have demonstrated that it is a prevailing tool for salespeople if they invest the time and effort to apply the concept properly. Some of these are so powerful, they offset some of the fears and contradict all but a couple of the concerns outlined above.


Let’s review those positive results from a seller’s perspective.

Better contact management – Let’s talk about customer contacts. The average distributor salesperson encounters hundreds of buying influences. Keeping track of your main contact at the top 20 accounts is pretty easy. Pushing further, my guess is a person can even handle the next level contacts which puts us near 50 contacts. This is only 10-20 percent of the total and maintaining a relationship with the other 80 percent is critically important.

What about the rest-- the ones who get lost in the shuffle? First, the project managers who are only actively involved with you when they are engaged in work which uses your products and services. Safety managers, production managers, training managers who influence their company’s purchases are out there somewhere too. Most importantly, the financial influencers of your customers are in your system and these are the people who can veto a purchase order headed your way.

How do we track our interactions with these folks? If you review your records, are there people with whom you have not interacted for 6 months? A year? Maybe longer? Salespeople fully intend to review their lists monthly, but schedules and other activities often distract from the task; so it goes undone.

A good CRM package will allow you to review your contacts and scan for activities (often automatically logging email exchanges.) Imagine being served up a weekly list of folks you haven’t talked to for a while. It’s hard to argue with this power.

Team selling empowered – Forgetting the personal computer, fax machine, cell phone and smart devices for a moment, the biggest single change in our industry over the past three decades has been distribution’s adoption of team selling approaches. Good CRM practices enhance the value of the team. What’s more, they help the salesperson sell more and ultimately make more money. Let me explain.

Inside salespeople are constantly dealing with your customers. Mostly, the same individuals call in orders, ask a
few questions or get price/delivery information, but occasionally they get questions which could lead to bigger opportunities. They communicate with new people and some of those customer contacts with whom you don’t often interact. If the inside salesperson has access to your customer list via CRM, they can add new names and identify those peripheral contacts not in your regular call routine. Pushing this concept further, with the proper flagging, the salesperson is then quickly allowed to ring up that seldom contacted individual to determine if immediate attention is required; thinking especially toward project managers or financial guys.

Similarly, specialists and technical support people are able to identify and enter the names of technical people at the customer, many of whom are hidden deep in the bowels of the customer organization. These are the kind of contacts who can give you the inside scoop on what’s happening at your customer from a technology point of view.

Marketing is growing in importance - Just a handful of years ago, the marketing groups at most distributors were basically event coordinators and the keepers of the company golf balls and other trinkets. Today, they are developing plans for generating leads, building interest in new customers and reinforcing the company brand. Much of this requires accurate customer contact information, including the current email address.
Herein lies three major issues:
1) trust and cooperation with marketing (will they send the right information to each customer contact or just irritate them with spam?)
2) can sales provide accurate email addresses?
3) does the company maintain the proper segmentation of customers?

As River Heights Consulting wraps up several major
distributor/customer satisfaction surveys, the “bounce” rate for email address stands in the 30-40 percent range. Here’s what we found: email addresses which were spelled incorrectly, email addresses which were obsolete because the customer changed their name and “url” (for example the “@riverheightsconsulting.com”,) inactive accounts and customer contacts who have been dead since 2009.
It is the salesperson’s responsibility to make sure the emails are accurate and proper. This is part of good CRM practice. Further, it proves, at least to me, that the seller has not been regularly touching some of these contacts; at least by email.

Supplier engagement – While this one might be viewed as more of a benefit for management, there is nothing more powerful than demonstrating just how hard you are working to help a supplier develop their business and grow market share. I have heard countless tales of suppliers complaining about selling activities only to “eat their words” when somebody showed them the number of selling events made on their behalf.

With Special Pricing Agreements (SPAs) growing at exponential levels and giving distributor sellers a near exclusive deal with suppliers, I believe CRM data can make a difference in the win-loss column for salespeople. By sharing sales activity with various key suppliers, I believe seller position themselves for a pricing advantage should intra-channel competitive rivals (other distributors selling the same supplier’s product) rear their ugly head.

Further, sharing similar reports monthly can help harness the power of the supplier’s selling resources, be they individual calls, demos, samples, access to factory engineers or marketing goodies. Imagine a meeting where the distributor and supplier’s salespeople sit down as co-equals, dividing the work and assigning one another focused tasks. The exercise might also include populating the CRM with new contacts and future opportunities discovered by the supplier’s team.

Opportunity tracking – Last month we wrote about opportunity tracking (read it HERE.) In that post, we assumed you were somehow tracking opportunities. However, based on emails and calls over the past few weeks, it turns out a good number of people aren’t tracking opportunities. That’s some “bad juju”, so allow me to review why tracking opportunities as part of your CRM practice is better than a collection of good-luck charms and rabbit’s feet.

Like customer contacts, a seller should discover hundreds of opportunities every year; some large, others small, and varying in time to fruition. The big opportunities coming in the near term are easy to remember, so too might be smaller and immediate potential orders. The ones that make the difference are those coming in six months, a year or perhaps even a couple of years. This phenomenon is pretty evident. Generally, most distributors do poorly with long sales cycle selling. However, a few (typically those distributors selling OEM parts where design and development is part of the product offering) excel in a world where 18-24 month selling is the norm.

The question is: how do they do it? They carefully track each and every opportunity constantly positioning themselves for the final decision. Unfortunately, without a process for tracking each and every opportunity, most distributors fail. They certainly fail when they go up against a competitor with a longer range view. Again, let me urge you to read the opportunity post.

Wrapping all this up…
Forgetting management and the organizational value, we’ve explored five of the advantages of CRM from the seller’s perspective. We could have listed 20 or maybe more, but time and attention spans are in short supply.

I can already hear some of you disagreeing with me so here’s a challenge. Shoot holes in my theory. Send me an email, make a comment or call me up and give me a piece of your mind. If you don’t like CRM systems because of one of the five reasons outlined in the first three paragraphs, just post the number and I will understand.


Those of you who believe in CRM practices, send us a quick note on what convinced you to embrace the practice.  The Grand Prize will be, yep you guessed it, post card from Iowa.

Sunday, July 30, 2017

Competitors – We know they’re out there but what do we need to know about them?

Last week we covered the topic of managing opportunities. I made this comment:
“Strangely, many “experts” advise sellers to ignore the competition. I believe the competition plays a major role in planning your strategy and understanding your situation.”

Some of you took note of this comment and requested more information.

It’s impossible to ignore the competition. Like the forces of market supply, recessions, economic recovery and upticks in energy prices, competitors influence your business environment. Extending further, competition varies from market to market and even territories within the market. While not paying attention to competition sounds high minded, noble and customer-centric, it won’t help you make more money.

Competition is specific and local
Except for Amazon, your competition is manifested in the form of a specific person or team of people. They need not live in your community, but they are assigned to one of your accounts, which makes them local to you. Again, with the exception of Amazon, these folks have names, faces and personal idiosyncrasies. Yet, when I talk to distributor salespeople about their competition, I commonly hear the name of a brand sold by several distributors in the market.





The brand or technologies provided by the distributor have bearing on the sale in instances where:

• The customer has standardized on a specific brand of product. For example, in the automation market there are four or five high market share brands that work diligently to establish customer specifications. If you are a distributor who doesn’t represent these products, you may as well be out of the race before it starts.

• The customer has a national contract with a specific supplier-manufacturer which is served by the combination of the supplier and distributor sales team.

• Your company’s line card lacks the technology desired by the customer. For instance, the customer has a strong preference for Wi-Fi enabled widgets and none of your current suppliers offer a Wi-Fi widget.

The real competition typically comes from another distributor. Even with national chains the behavior of the competitor is probably localized. Our experience points to differences in market strengths, strategies and selling behavior across territories of even smaller distributors with one location. The nationals, in spite of what is broadcast, are just as diverse in their methodology. As a side note, I personally believe this difference in service and approach to the market demonstrates the weak level of process employed in distributor sales groups, but that’s another article.

Competition is personal
It pays to know the competitive distributor salespeople calling on your accounts. They have names. You might even recognize them as the guys you sometimes see in the engineering department. If you know who they are and have access to the guest register, you can find out if they are talking to people you don’t know. Additionally, if you observe and ask a few well thought out questions, you might identify who their allies are within your customer.

Here is a short list of helpful things to discover about these people we call competitors:

• Do they have the habit of leading with price? I know a guy who everyone in his market calls “five percent Pete.” If you are dealing head to head with him, you’ve got to figure out a way to get the customer off the purchase price and onto the long term cost of ownership.

• Do they understand their products or rely on others to provide technical support?

• Do they provide good support on the mundane stuff, like handling paperwork, returns and other bits of business which can irritate customers?

• Where else do they call? Could this competitor have discovered a sleeper account in your territory?

Before we jump from this subject to the next, allow me to throw out a final thought on competitors. Salespeople relocate, change jobs, retire and sadly sometimes they die. Each of these are disruptive events at their accounts. Further, as a group, distributors do a poor job of transitioning when a salesperson goes away. I can think of at least a dozen times that sharp salespeople made significant gains based on competitive retirements alone.

Sometimes competitive behavior is company driven…
Often companies encourage specific behaviors with accounts. Once you understand how they operate it’s easy to take advantage of their habits. For a moment let’s pick on an automation sensor manufacturer who decided going to market direct was a great idea. Instead of seasoned distributor sellers they have an ever churning cadre of freshly graduated engineers. These new “kids” are pressured to quote and close a certain number of orders every month. Sadly the business world doesn’t always work that way. If this rookie direct force quotes something on the 12th of the month and hasn’t received an order by the 25th, they call the customer and start deeply discounting the price. If the customer refuses to issue a purchase order by month end, the discounting goes away.

This phenomenon isn’t limited to manufacturer’s trying their hand at direct sales. There are distributors who are notorious for offering up consigned inventory even if the customer doesn’t want it. Some distributors excel at packaging products from several different manufacturers and only offer pricing bundles. Then there are distributors who use a top down sales process; skipping over the “worker bees” and focusing attention and a financially bent sales pitch on C-level management types.

Parting thoughts on competitors
Looking back at these examples, we can position our efforts to minimize competitive impact and maximize your own advantage. Many times, the actions of competitors are predictable. If you give up the advantage of understanding and counteracting the competitors best moves, you will certainly be less effective than you could have been.

Finally, share your best competitor story and win the River Heights Consulting Grand Prize – A post card from Iowa.

Monday, July 24, 2017

Opportunities – There’s more to it than just tracking…

Progressive distributors have learned the importance of tracking and following opportunities in their sales group. For those of you who aren’t following this practice, here is a quick overview of how it works. When sellers learn of a potential for a sale, they log the following data:
The customer - Besides the actual account, it’s best if you log the customer contact who told him about the opportunity.


The product/technology involved – Sometimes it’s hard to identify the exact catalog number of bill of materials, but understanding approximately what the customer may need is required to call this a real opportunity.
The potential size of the opportunity – How many parts will be purchased, how many dollars will the customer spend or what does the current budget for the project look like are all questions which would allow an order of magnitude estimate of the size. For OEMs, we recommend understanding the size of the opportunity per year. For example, $1,000 per machine and the OEM manufacturer’s 100 machines per year would equate to a $100,000 opportunity.




Where or how the customer will use the product – It’s important to understand how or where the customer plans to use the product in their facility if an end user or in their machines if they are an OEM.

An approximate time frame – Is this a project which will happen in the next six months, in the December of next year or just sometime in the future? The better you know the approximate time of the purchasing decision, the more efficient the application of selling time.

Distributors who track opportunities understand that not all opportunities will turn into orders for their organization. Many sellers make the mistake of only tracking the opportunities which they feel confident of getting the order. In truth, understanding potential opportunities likely to not fall to the “home team” is equally important. Further down the road, a competitor may experience some kind of game changing turbulence which might reshape the odds of success. With these points in mind, here are a couple of other things to track:
Perceived chance of success – What are the current odds of getting the order? I prefer this to be listed as a percentage. Obviously, this is subjective. Further, it’s fairly common for the chance of success to shift over the life of the opportunity. Customer breakthroughs improve the odds, setbacks and new competition might dampen the hopes of victory.

Competitors in play – Strangely, many “experts” advise sellers to ignore the competition. I believe the competition plays a major role in planning your strategy and understanding your situation. Are you going up against a price cutter, technology powerhouse or a company with a long history with your customer? It matters.

You have the opportunity identified, now what?
Salespeople and their teams are more successful when they do more than just identify opportunities. As straightforward as it sounds, many folks fail to scientifically explore ways to strategically improve their position for capturing the business at hand. Let’s spend a few moments looking at things we should think about for moving our chances of success forward.

Do you truly understand the justification for the purchase? No matter how sexy and sophisticated your product offering, very few companies are making the purchase, just because they want to own one of your shiny new special widgets. In our world, there is either an underlying reason for the outlay of cash or the project will hold zero chance of success. For end user customers, justifications center on improved productivity, reduction of waste, lower operating costs, compliance with government regulations or improved worker safety. OEMs look to improve the marketability of their products (add new features, improve speed of operation, etc.,) reduce production costs, match government standards and find ways to drive down the price of the machine. The more you understand about the customer’s purpose and justification, the more closely you can fine-tune your solution.

Do you understand the decision making process? Regardless of what some people will have you believe, there are usually multiple people involved in the decision-making process. For example, have you ever had an engineer tell you your solution looked great, but later said “the project is on hold” or cancelled? This clearly indicates there were others playing a role in the decision and they decided not to buy. Similarly, purchasing/procurement departments will insist they are the final decision maker as a negotiation ploy. Truth is, they are rarely, if ever, more than a small part of the verdict. If you don’t understand how the buying decision will be made, ask. Actually, ask several customer contacts. Compare their stories, ask questions, do some detective work and learn how this will happen.

Have you identified all of the decision makers?
Before you say yes, reread the question above. Do you really know all of those involved in the decision? Typically, there are multiple types of people involved. They all have different outlooks and will be looking for the seller most likely to match their needs. Here is a quick list:

1) The Technical Buyer is usually someone in engineering or maintenance
2) The User is the person who will put the solution to work (think production)
3) The Economic Buyer is the most often ignored buying influence by distributors, which is a mistake since these buyers control the dollars for the project and we all know a sale won’t happen without money changing hands
4) The Coach is typically a person who works for your customer but is not necessarily involved in the buying process. They provide insights and help you navigate through a sea of people.

Are there people who might give insight into the decision making process?
If you recently inherited an account, the previous salesperson or your sales manager might understand how decisions are made. So too, might experience rich supplier sales people. Ex-employees of your customer might assist and as could your Coach contact at the customer.


Have you engaged everyone within your organization? Modern selling is a team sport. Every customer touches up against a number of people in your organization. Often, customer service and technical people are not viewed as a “threat” by customers. They sometimes hear idle chit chat which makes them privy to information that might not come to the surface on sales calls. Do they know things about your opportunity? They might. Extending, if you brief them on things to look for, they might be able to move your position forward.

Do you have the support of your supply-partners?
For distributors this is a critical issue. If you operate in an environment where other distributors sell the same brands as your company, soliciting supply support is not just suggested, it’s mandatory. The supplier needs to understand you have identified the opportunity and are working on their behalf to turn it into an order. Because even mid-sized opportunities can turn competitive these days, Special Pricing Agreements (SPAs) often come into play. Do you have one locked in? Further, many suppliers have special resources to assist in your efforts to convert the business or create a new application.

Please note: this comment isn’t about turning the work over to the supplier, instead think of an alert – their support may be needed on short notice.

Customer situations are fluid, periodic review is needed.
The situations with customers can change. For instance, unexpectedly large orders can impact plans and schedules. Similarly, downturns in order volume, issues with other peripheral equipment and other business dynamics create changes in plans. Salespeople must monitor the situation, all the while working a plan to maximize their chances of success.

I recommend visiting your opportunities on a bi-weekly basis. For each of these, you can determine what current actions might improve your odds of successfully closing the deal. As you work your way through the list, ask yourself what pieces of information might drive your position forward. To assist you in your thought process, here are a few quick points to ponder:
• Do I know all of the decision makers or are there people I should meet?
• Do I understand the decision making process? Could I find a coach who can explain how the account makes decisions like this one?
• Are there support or technical people in my organization who might be listening for clues on the order from their dealings with the customer?
• Update your supply-partners on the situation. Sometimes they discover things on their own, which could be of value to your efforts.




There are at least 100 other things you could do or should do. If you have a situation you would like to chat about, let me invite you to shoot us an email. We’d love to hear from you.

Monday, July 10, 2017

Rep Disconnect: Are you not working with your Local Rep?

It happens with distributors everywhere. For some reason you don’t have a great relationship with one of the manufacturer’s reps assigned to your company. The reasons for this are many. Let’s dig into the big three:

The rep is responsible for lines which are competitive to your company’s key suppliers. Many distributors fear working with reps who are tied to competitive products lines. The reasoning is simple, introduce them to our best customer and the next day, they will return to the customer with a demo of a different brand product. Further, if they know more about “your” customer, proposed solutions become more focused and effective. When the product they sell are an important part of your value proposition, it’s easy for them to offer something similar but better or cheaper or both.

The rep is closely aligned with a competitive distributor. When the rep has close ties to a competitive distributor, it raises a number of trust issues. Will important information be leaked to the guy down the road? Are prices really fair or does the other distributor get some kind of competitive advantage? We recently talked to a distributor who was very certain a rep had shared the dates of their big open house with another distributor, who magically announced their big shindig would happen the week before. While no real evidence supported it, the whole thing wasn’t just a coincidence, they made the decision to not invite the rep to other similar events.





The rep has baggage which precludes you from trusting with your accounts. When Will Rogers said, “I never met a man I didn’t like” he obviously hadn’t met this rep. Unethical behavior can be found anywhere and it sometimes rears its ugly head in our industry. Associating with these kinds of people causes their reputation to rub off on your organization. Misleading statements and lies impact customer service and ultimately create situations where business is damaged.

Reps play an important role in our industry
After surveying distributors across a number of industries, I have discovered a number of breakdowns caused by rep disconnect. The table below things we have discovered:

Issue
Implications to selling
No joint calls
Distributors rank joint calls as the single most important selling tool available from a manufacturer.  These are used to answer detailed technical questions, respond to customer commercial issues and to launch new products.
New literature not available
No literature means proactive sales calls are more difficult and experience tells us that in spite of all the electronic hoopla, customers still want you to place a glossy brochure in their hands when talking about a product. 
New programs poorly discussed
How many times have you learned of a 90 day program a month late?  This means lost opportunity for coordinated market attacks and often translates into lost business.
Special pricing agreements (SPAs) missing
SPAs have become a cornerstone of our business.  As both an offensive and defensive weapon, they can lock in business or lock you out of business.  In candid conversations, manufacturers tell us they judge a distributor’s sales effort by the number of SPA requests submitted. 
No sales leads shared
“Even blind pigs occasionally find an acorn.”  Reps are trained salespeople.  They find business opportunities.  Most likely, they are not sharing with you.  Manufacturers spend millions mining for solid sales leads.  Most intend for them to trickle down to the distributor and you won’t get any.  This costs money.


This whole issue is serious. When the rep is disconnected from your organization for any reason, it costs you money. I believe it’s important to have a company-wide plan.

Rep exclusion needs to be a business decision…
First, I believe the decision to disconnect from a rep is not something to take lightly. With all the negative consequences, it shouldn’t be an emotional decision. Most importantly, it has to be a management decision. Unfortunately, many distributors allow salespeople to make the rep disconnect decision. What’s more, some of these decisions are based purely on personality and emotion. Here are some real world examples.

One salesperson reported, “I wouldn’t work with Joe because he sells the same type of products as my good friend. I trust him and we’ve worked together for something like 20 years. Because of that, I have decided not to include Joe’s company in any of my customers.” Sadly, the company Joe represented was strategic to the sales guy’s company.

Another seller related a story of issues presented by the rep being discussed. Listening to the tale, it would seem this person was not the right kind of business ally. But, I happened to know the company in question and things weren’t adding up. After a few questions, things got interesting. The issues were nearly 15 years old and several of them could potentially be cleared up with a discussion. Still, the distributor salesperson persisted. What’s worse, his particular point of view had spread to others in the organization, who had never had an issue. An important product line flat-lined because the rep had been excluded.

Addressing the issues…
First, allow me to restate, the issues we described in our two examples are common. We are not discounting the need to occasionally make the decision to disconnect. It’s a business decision and as with every business decision their needs to be a plan. Here’s a sample plan:

1. Gather facts. Specifics on the situation are important. Issues with past performance should be tied to dates, customers and how the rep behavior could impact future business.

2. Speak to the owner/principle of the rep agency. Even if the owner/principle is part of the problem, arrange a meeting to share your grievances and outline why you feel that working directly with them creates issues for your business.

3. Explore potential work-arounds. Is there a way the rep could work with your organization which would not impact business? If the issue is with a single salesperson, would it be possible to assign someone new? If the rep agency carries a highly competitive line, could there be at least a few accounts which could be worked? If not, move to the next step.

4. Talk to the manufacturers involved. First, this is a business discussion with the manufacturer’s regional manager or VP of Sales. Avoid personality issues and character assassination because you have no real way of understanding the depth of relationship between the manufacturer and the rep. Ideally, your plan would be to find a way to “work around” the issues of not having a rep. This would involve identifying the right people to call for getting negotiated pricing, sales backup, customer support and a source for sample, demos, literature or other selling tools. An alternative training plan might be needed as well.

5. Build a working plan with the manufacturer. Make certain the manufacturer knows that you still want to build your business with them. Further, make sure they understand the potential financial impact of operating with rep disconnect. Set up a plan for providing the necessary services for your growth and pre-schedule monthly check-ins to keep the plan real.

6. Periodic reviews with manufacturer. Without a rep, you are outside of the normal lines of communications. You miss news on programs, specials and sometimes new products. These are important for distributor and manufacturer alike. Even though some might argue this is backwards (with the distributor being the customer… and all that jazz,) I recommend the distributor take a leadership role to ensure the reviews actually take place.

Is this perfect?
In most instances, operating without a rep is more difficult than with a local rep. When the relationship is strong, the work is properly assigned to the right person (whether they be on the manufacturer or distributor side) and everything is running well, the rep/distributor combination is a thing of beauty. When things are dysfunctional, profitability and business growth for both manufacturer and distributor are stressed. The worst case scenario is to ignore the situation and hope things change.

Finally…
Distributors and their supply partners regularly have this kind of conversation at association meetings, marketing group conferences and conventions; I know because I have been involved in many of them. I’ve seen some discussions become very productive and others take a turn for the worst. Most turned from business to emotions. First and foremost, this is a business discussion; specific details and data are important. Comments like “Joe is a slimy snake” make you look petty and unprofessional.

Just in case the conversation turns in this direction, be prepared with a list of reps you believe do a good job in your territory and be prepared to explain why.

I am further researching and revisiting some of the distributor-rep relationship issues. I would love to hear your thoughts either via comment here, email or by phone. Once again, those sending us emails get the River Heights Grand Prize… A lovely hand addressed postcard from Iowa.