Monday, January 30, 2017

The Dog Ate My Customer List (and other Excuses from the Sales Department)

Picture it: September, 1965- 5th grade. Brushy Branch School.  The sun gleaming through the tall windows after recess. School had started the week before, and no one had bothered to tell the weatherman. The days were long and balmy, perfect for playing outside. But there we sat, marshaled in old-style stamped army surplus steel school desks.

Our first big homework assignment of the year was due. All the kids were excited by the prospect of impressing the new teacher, except Johnny. As we proudly turned over yellow papers featuring our finest cursive hand, we heard the now-famous line. “Mr. Stanko, the dog ate my homework.”

Shy of selecting a fresh slab of bologna over a clean sheet of ruled paper for a writing tablet, the whole K-9 misadventure sounded a little “fishy.” Somewhere along the way, many sales managers have heard a grown-up variation of this excuse. If you haven’t heard a story like this, there’s a good chance you aren’t demanding enough process from your team.

One would never expect salespeople to be change averse, being harbingers of change for their customers and all, but in Distributorland, we’ve discovered salespeople often stand directly in the way of profit enhancing adjustments. They have also managed to perfect their excuses to the point that they’re almost believable.

Join me as we detour from the hard road of business improvement and take a short stroll down the primrose path of almost plausible excuses.

The Dog Ate My Customer List - a Customer Relationship Management (CRM) System Story
Capturing important customer information is becoming a critical piece of the wholesale industry. It’s crucial to building modern marketing programs. The information is vital to customer segmentation, which allows better matching of pricing to perceived customer value. As customer data allows us to better understand customers, we can develop and test new sales approaches. Simply put, we don’t live in a one-size-fits-all world, and customer data gives us objective measures.

As an industry, we hold information generated by CRM systems in high regard, but the road to implementation is littered with half-done systems. Even after spending tons of money, it’s common to discover distributors lacking fundamental customer information. Email addresses of technical primary contacts, proper titles and even the correct names of the very people so important to success are left to chance.

To illustrate how bad this really is, I’ll take you back to a meeting I had a couple of years ago. The customer, being of proud Lithuanian descent, had a last name with six vowels. In a customer satisfaction interview, he lamented that he spent nearly a half million dollars with his local distributor, yet they still couldn’t manage to properly spell his name on their invoices. It had become a joke within his organization and he made light of the whole thing, but I suspect it cut into some deep sensitivities that sellers are best to avoid.

Beyond these very simple “name, rank, and serial number” issues, we discover more. When inside and outside sales share the same data, sales call effectiveness improves. Seemingly small snippets of information create major impact. A question about a previous product presentation or an extra follow-up on a past quotation can accelerate sales growth, yet we hear excuses. Everyone is too busy to find time to capture and record the data.

Progressive companies are upping the ante by evolving away from capturing data to what is being dubbed actionable analytics. Armed with actionable analytics, these distributor managers are capable of tying activity to results. For instance, by measuring new product revenue against the cost of selling activities, the manager can more precisely gauge future launches. And as distributor policies migrate to tiered “pay-for performance” plans, top distributors will employ this information in forging new distributor deals.

So why are salespeople so practiced in avoiding CRM system responsibility? Some are concerned with accountability. The fantasy notion of the Lone Ranger Seller cruising the open spaces of their territory in a late model Ford lives on in legend. Strange as it sounds, these guys envision themselves as rugged individualists setting their own pace and making their own plans.

Romantic notions aside, some salespeople withhold data for other reasons. Assuming positive intent, some salespeople have lulled themselves into believing they are the only person in the company capable of comprehending the customer’s best interest. Their deepest fear centers on someone else making an epic blunder and setting back the selling effort.

Other times, the outlook is sinister. More than a few sellers
believe information equates to job security. Hoarding information immunizes the salesperson against management initiatives. This set believes they hold the final trump card and they can easily take their best customers to a competitor.

In today’s reality, selling has become a team effort. Failure to share information throughout the team hampers process. Inability to follow predetermined plays limits success within the whole team. 

Of course, this isn’t the only excuse you are likely to hear.

I’m Already Working 12 Hours a Day, Do You Want Me Selling or Planning? Planning ProcessMany distributors have discovered that it takes a very long time to establish new customer relationships. Others find that in spite of success with existing products, their organization’s ability to launch related products necessary for long-term business health are hampered.

The simple truth is our industry has slowly adapted a dangerous habit. We practice a reactive sales model. It’s not an immediate threat, but long term, it’s crippling. Here’s how it works. An existing customer calls with a question or support issue on some past purchase. The salesperson reacts to this issue immediately. Along the way, some excellent customer support is provided. The customer compliments the seller and potentially rewards this behavior with another purchase. Everything sound good so far? The unfortunate part of this equation takes a while to manifest itself. Our ability to find new customers or expand the product technologies we sell is compromised.

Planning lies central to this issue. More precisely, the lack of planning is slowly cutting and constricting the life’s blood of future success. During the past decade, in spite of technology tools to expedite its impact, planning has fallen on hard times. This can range from simple things like setting appointments to investing the time matching product introductions to customer need.

While conducting research for our book, The Target Driven Sales Process, we discovered many salespeople still used product-of-the-week selling. With no pre-thought, no metrics, and no analytics, these folks randomly hand out product literature in a time-consuming, scattergun approach.

Planning improves efficiency. Yet to a certain segment of our sales force, this concept seems counter-intuitive. Taking time to reinforce planning is frustrating because most of those in management positions take it for granted. There really is a new reality. It truly is different from back “in our day.” Smartphones, iPads, electronic literature and lots of other gadgets allow a rookie to disguise their planning deficiency to a point. Planning is different from 15 years ago, but the skills are still essential to success.

We believe the first step in planning must involve the process of matching customer needs to our product offerings; most call this targeting. Face-to-face customer time is a precious commodity. Wasting a single second talking about a product for which the customer has no interest is a travesty. Wasting the time of a product specialist or other team member should be a hanging offense.

I Know the Market and This Won’t Work- Pricing Process
During in-depth interviews with dozens of distributors who have instituted successful pricing processes, the story always comes back the same. They experience very little, if any push-back from customers, but they get plenty of push-back from their team.
The excuses are so predicable, I can almost mouth the words. “This pricing stuff works in big cities/small towns/west coast/east coast/ anywhere but here. Our customers will react negatively. They will immediately recognize we are gouging them. And the competition will have a field day.” When all else fails, the sales guy will look their boss in the eye and say, “I’m paid on gross margin, I’m doing everything in my power to maximize that gross margin. Don’t you trust me?”

David Bauders’ team at Strategic Pricing Associates has developed some powerful tools to analyze price data. In an interview with him sometime ago, David produced dozens of analytical graphs showing market price, order size and product discounts. Amazingly, they all looked the same. Customers making very small purchases are getting price levels well below the natural market. Simply stated, distributors are giving away money by the bushel.

David recommends a simple test to determine if a distributor’s team actually understands market pricing. He takes the top 20 SKUs from a company and asks the sales team to provide a best estimate of the market price. Fewer than 25 percent of the sales team gets anywhere near a passing grade. The guys who claim to be maximizing your margin can’t.

There are some root causes to this whole issue with pricing. First, most distributor salespeople really do believe they understand the market. The question becomes, where do they get their information?
Let’s face it, in our world, customers have been trained to mislead us on pricing. When was the last time somebody said, “Wait a minute, Jim, your price is too low?"  Purchasing departments see their role as trimming just a few percentage points off of the buy price. Their goal is the best service at the lowest price. Secondly, most customers really are nice folks. Rather than tell us our service is rotten or we lack the follow through required to earn their business, they let us down gently with a well-placed, “It looks like your price didn’t line up this time.”

What’s a mother to do? We believe that using a scientifically driven analytic tool will begin to give you an idea of your company’s pricing in the market. On top of that, pricing process metrics allow the manager to measure, coach and enforce a process that adds significantly to the overall bottom line.

An excuse for excuses
If you find yourself privy to some of these classic lines, take heed, you’re not the only one. At the same time, you most assuredly feel pretty much alone. There is strength in numbers. As you ponder innovation and process improvement, I urge you to network with others. They’ve heard the same stories; they’ve seen how the results prove them wrong.

Drop us a line with some of your favorite excuses for a genuine Postcard from Iowa!

Wednesday, January 18, 2017

An Exercise in Questioning Your Sales Compensation Plan

Some might call it eavesdropping, but we call it our uniquely unscientific methodology for tracking distributor trends. We listen. Plus, we get phone calls, emails and occasional text messages from distributors. When we hear the same topic mentioned more than a dozen times in the course of a month, we know the topic is coming to the surface.

For some reason, the topic of sales compensation is showing up --- repeatedly.

Here are a few questions I believe are pertinent to any thinking directed to the topic.

Point One: Do you see you sales efforts becoming more team focused?
• Do you see your business employing more or fewer people in the sales function in five years?
(Potential new positions might be Specialists, Project Managers, Customer Crib/VMI maintainers, Tele-sales, Application Engineers and others.)

• Do you believe a well-developed team could sell more than semi-autonomous salespeople?

• Do you believe your current outside sales force will be or should be part of that team or will/should they operate somehow independently from the team?

• If not operating in a semi-autonomous “lone ranger” capacity, how do you see outside salespeople fitting into the organization?

Point Two: Which is more important, Account Maintenance or New Account conversion?
• Have you ever had accounts which maintained their ongoing volume during the interval “between sellers?”

• Do you have an inside sales team, customer service group or specialists who have built followings amongst your customers that matches or eclipses the efforts of the salesperson?

• How much time do your sellers invest in prospecting for new customers or additional contacts within an existing customer?

Point Three: Do you currently employ commissions or base plus commissions in your compensation plan?
• Are good salespeople open to working in a non-commissioned environment?

• Do you rely on commissions to drive quantity or quality of output from salespeople?

• Do you ever offer additional incentives or special performance awards to impact sales?

• Do you rely on commissions to provide variability to your costs (i.e. lower sales compensation during bad years?)

• In his book Drive: The Surprising Truth about What Motivates Us (chapters 1 and 2,) Daniel Pink lays out research indicating creative knowledge-based work is not enhanced by monetary rewards. If you use a commission-based compensation plan, could it not be working as planned?

• Do you believe a greater volume of selling engagements is more effective than increased quality of the engagements? How does commission impact the number of appointments?

Point Three: How autonomous are your sellers?
• If you use a compensation plan which is heavily focused on commissions, how do you keep sellers goals aligned with company goals?
• Is it possible for salespeople to be totally autonomous with responsibilities and compensation tied directly to sales results and at the same time be cheerful about attending sales meetings or spending needed time to update CRM systems (in which they see little value?)

• Does a good salesperson view their account list as “their customers” or “your customers?”

• What happens when each autonomous salesperson insists other team members operate according to their specific rules of engagement with “their” customers?

Point Four: How do you handle small customers?
• Do you see small customers as a source of income or growth?

• How many customers are on each outside salesperson’s account list?

• Do you assign accounts and pay commissions to sellers on accounts which probably do not warrant much of their time, just to be sure there is somebody responsible for the account?

• Is there a lower cost way of handling some of these transactions without a “normal” assigned salesperson?

Point Five: How do your sellers spend their day?
• How do you define a sales activity?

Here are some thoughts in order of perceived importance:
 With customers personal visits?
 On the phone with customers?
 Researching customer needs?
 Tracking opportunities?
 Creating quotations?
 Following up on quotations?
 Entering orders?
 Expediting orders?
 Babysitting orders?
 Administrative work?

• Do your salespeople duplicate work performed by others in the organization?

• Would your sales numbers improve if work were routed to others?

Point Six: Thinking about new territories and newly hired salespeople.
• Do you ever use “guaranteed commission” plans for new hires because the territory currently does not generate enough business to justify the seller’s compensation? How long are the guarantees in place?

• How long does it take for a salesperson to build a new territory from nearly zero to profitable for your company?

• Have you ever had an issue where a new seller’s compensation grew to an acceptable level before the territory became profitable?

• Have you ever hired an experienced seller with the promise of them bringing along established customers? What percentage of the promised business came through?

Point Seven: What else impacts selling strategy? Miscellaneous thoughts…
• Does your sales team struggle to launch new products in a timely manner?

• Most distributors depend on manufacturers for leads but the quality and quantity of leads has dropped off significantly in the internet environment. Where do your salespeople get their leads?

• Are there strategic products that require a great deal of missionary work (during which actual sales commissions are not flowing?)

• At what point might a salesperson run out of bandwidth?

• What have you done to make your “outside sales” process more efficient in the past five years?

• If you are currently using internet-based order entry, how are sales compensation be handled? If not, is tis part of your future plan?

A call for your input…
I would love to hear your thoughts on the whole topic of sales commission. Feel free to send us an email or drop an anonymous comment. Specifically, what other questions are missing from your perspective?
It will be better than this one!

There will be prizes…
Everyone sending us a comment will receive a shiny new postcard from Iowa.