The Distributor Channel

We are gathering information and building a list of frequently asked questions.   I am often asked about commission structures within the Automation, Electrical Distribution Industry and other knowledge-based distributor operations (Power Transmission Distributors PTDA, Fluid Power Distributors FPDA and Industrial Distributors). Considering the frequency of the question (from potential salespeople, experienced seller, managers and others,) I feel it appropriate to post some thoughts on the practice. While this is not our typical kind of post, I wanted to create a forum for discussion. Commissions based on Gross Margin are one of the most commonly used incentive practices on the channel side of the business. On the manufacturing side, many people are still paid based on their gross sales numbers. Often you will hear distributors refer to this practice as paying on “tonnage” because sales professionals compensated in this matter really aren’t required to worry about whether thei

If restaurants can upsell, why can’t we? After a whirlwind trip around the country and a couple dozen meals in places ranging from pizza to posh, I want to share an observation:  Restaurants know how to upsell. From the lowly “do you want fries with that?” to the more sophisticated and expensive, “at least let me show you our dessert tray,” food service folks have created a culture of upselling. Aside from the pounds I’ve managed to pack on, I wanted to gain something from the experience.  How can restauranteers train surly teenagers making minimum wage to automatically upsell when we struggle to convince professional, commissioned inside salespeople to do much more than say “thank you” and push forward? Thinking back, I don’t recall a single moment of agitation caused by this constant upsell campaign.  When poorly done, I simply smiled and said “no, thank you.”  But, getting back to the dessert tray, I was actually glad I was re-sold. Distributors encouraging th

Last week we wrote about the right activities for tough economic times.  One of our points was the need for improved negotiations training with our salespeople.  At the risk of repeating myself, I stated: “….major industrial firms have gone public with their plans to squeeze their supply chain.  Some have noticed, they can get additional discounts just by “asking” for them.  Customer purchasing types are going to negotiate with our sellers and we need to be prepared.  Based on my observations, most distributor salespeople have not received proper negotiations training in recent history.” Last week I attended one of SPASigma’s inaugural events called, The Battle for Margin, a two-day seminar developed to assist distributors in growing their gross margins.  Much of the seminar revolved around negotiating with buyers.  During one of the breaks, I had the opportunity to speak to several distributor salespeople who candidly shared their experiences with buyers.  In a shor

For those of us selling into the industrial sector, the economy has turned tough.  One of the gauges of business levels comes from large manufacturers of industrial products.  Numerous end of quarter reports point to slumping sales.  We’ve seen everything from no growth to decreases from three to six percent being typical.   At the same time, a few large industrial corporations have announced plans to “revisit, reevaluate and rethink” their supply chains.  Their strategy is simple:  The economy is slowing and they plan to squeeze a few points out of their suppliers to offset other slides in profitability.  In the past 45 days or so, distributors have shared feedback on margin squeezing moves by key customers.  Longer payment terms (How does 105 day payment sound?) and requests for across the board price reductions are common.  In the past month alone, at least a half dozen distributors report moves to “eliminate the middleman” with customers asking key vendors for a direct relat