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:

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.

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.