New Customers: The Lifeblood of Distribution

Years ago, one seasoned distributor executive said, “One of the natural laws of distribution is that you will lose between 8-10 percent of your business every year.  Companies change direction, close their operations, are acquired by others, and a mess of other things.  If you don’t plan for this, you will be forever behind the eight-ball.”  The message was shocking.  While I am not sure his percentages were entirely accurate, the message was true.  Customers do occasionally go away.

 

Having a solid source of new customers is important.  Yet, according to our 2022 State of Distributor Sales research, only a dismal 34 percent of distributors are happy with the number of new customers brought into their organization each year.

The distributors we spoke with went on to state that traditional salespeople were their primary source of new customers.  It has been my experience, and this research further illustrates, that distributor salespeople do a poor job of prospecting.  This statement is not meant to degrade the work of sellers. 

 

Today’s salespeople are generally too busy to devote the time required to find new customers.  Even if they are trained in the process, carrying out the work does not pay great dividends.  Throw in the point that it is easier to sell more to existing customers than to go out and find new customers and the case for a better way to find customers becomes more solid.

 

Leads for new customers are important

Leads that identify new potential customers (and new contacts at existing accounts) are universally recognized as a solid source of new customers.  Distributors are interested in receiving these leads from their supply partners.  What’s more, the distributors we spoke to indicate leads from suppliers tend to be the best quality (versus leads purchased or generated in-house). 

 

One of the reasons for this higher quality comes by way of the process most supply partners go through before sending the leads out to the distributor.  Typically, manufacturers put their leads through a screening process that looks a bit like this:

1.      Lead is generated via trade publication, online offering, or tradeshow.

2.      Lead is checked to determine if it came from a real person or real company.

3.      Lead is contacted by phone or email to determine if the customer is simply gathering information for the future or has an immediate need.

4.      Lead is provided with additional technical or delivery data.

5.      If the lead is immediate or has well-defined future needs, the lead is passed to the distributor.

 

This process costs money.  First, just identifying and acquiring the raw lead may run in the 50–100-dollar range.  The cost of

qualifying the lead adds to the cost – pushing it well over $100.  Regardless of the exact number, these things cost money.  Second, most supplier marketing teams are measured on their ability to provide quality leads.  The best companies try to tie lead costs to opportunities created. 

 

Why does this matter?

Manufacturers, our supply partners, have a choice as to where they send their leads.  The leads are already expensive and the cost of acquiring the leads continues to increase.  To justify the leads, they need to know three important points:

1.      Are the leads followed up promptly by a qualified distributor salesperson?

2.      Do the leads result in opportunities?  They understand they will not be able to capture every opportunity, but does the customer at least have the potential to purchase their equipment?

3.      What orders are harvested because of the lead?

 

Sadly, only a few of the more progressive distributors track leads like this in a disciplined manner.  Instead, most rely on anecdotal feedback from their sales teams.  Moving from sad to terrible, evidence indicates some salespeople just never quite get around to following up on leads. 

 

Looking into the future of leads

Distributors report that leads from e-Commerce efforts is the fastest growing category.  That’s the good news.  The bad news is the leads being channeled to the sales team are of poor quality.  Why?  There is no filtering of the leads before being handed off to already busy salespeople.

 

Extending even further, distributors are upping the ante on their marketing efforts.  These groups are bringing in even more leads using Linkedin targeted ads, social media, Google Ads, and other tools.  Again, mostly unqualified.

 

The best distributors of the future will soon be measuring their websites and marketing efforts against the lead process.  The efforts will be expensive and there will be a need to “justify” the cash outlay.

The same kind of process needs to be developed for internal leads as with those sent from manufacturers. 

 

Finally,

Our 2022 State of Distributor Sales Report discusses lead information and other valuable metrics. It can be downloaded for free here. 

 

If you have questions or comments, please feel free to give us a call, email, or send a carrier pigeon.  The pigeon will have no trouble finding us.  I just washed my car today.

Frank Hurtte, Founding Partner of River Heights Consulting, shares his personal experiences with
28 years of "in the trenches" training and 17 years as a consultant. He serves as a personal coach to industry leaders across many lines of distribution. He has authored 5.5 books (one is almost done) and has written hundreds of articles for national trade magazines.

Frank is also a sought-after copywriter of marketing materials for technology companies. His charismatic, yet laid-back, easy-to-follow manner makes him a favorite among public speakers.