Many segments of the wholesale business use rebates as a plan to modify and reward distributor behavior. While the roots of these end of year rebates and similar programs are mostly lost to history, they have become an important part of the distributor financial sheet. For example, Electrical Distributors typically report around 40-60 percent of their bottom line comes by way of rebates. Other lines of trade indicate similar numbers. This information is not anecdotal. This is not beer talk, the Profit Reports published through groups like NAED and others back up the statement. Without rebates, the channel could be in serious trouble. Marketing and Buying Groups help drive the rebate dollars Many independent distributors receive their rebates through   marketing groups. Organizations like IMARK and Affiliated Distributors (AD) in the electrical industry come to mind, as do groups in other lines of trade. Here is a short list (mostly top of mind): • Distributor P...

Last month one of Frank’s Articles was featured on the front cover of Distribution Center Magazine. They liked it so much they decided to do an interview with Frank. Here are his personal comments: “Videos not only make you look ten pounds heavier, they make you look 100 years older. I guess my chances of becoming a key contributor to Fox News are pretty limited, so I’ll be hanging around the world of knowledge-based distribution for the foreseeable future.” While we had better not comment on the 10 pounds or 100 years, we do feel like many of our readers will enjoy seeing the interview.

A couple of weeks ago, one of our  articles  covering sales compensation and commissions ran in two major industry trade publications.  Never in the previous 12 years of writing for this type of publication have we received anything even vaguely resembling the outpouring of thoughts and ideas.  Thinking more about the situation, it seems our industry is reconsidering and re-evaluating a six-decade old compensation plan. Many readers asked us to expound on the topic.  This is an attempt to provide some additional thoughts on the topic.  Do you pay commission on accounts where the salesperson does very little work? One of the biggest lies in our industry comes by way of the assigned account list.  Sometimes it’s geographical and other times it comes under the heading of “covering all the available accounts," but we continue to see sellers responsible for 100, 150 and even 250 customers.  Either way, it’s more than they can physicall...

Last week, we explored the distractions presented to management during solid growth economies. Process breakdowns and loss of strategic initiative focus were on our minds.   This week we cover a couple of people related topics which can create roadblocks to success in distribution.  Since people represent the biggest single expense for distributors – actually something like 60 percent of our gross margin dollars go to employees – it’s prudent to explore the potential pitfalls. Issue Three:  Good Economies Drive up People Costs One byproduct of growth economies is an overall increased call for good people; the law of supply and demand kicks in.   Since distributors are notorious for poaching employees rather than developing themselves, the prevailing wage goes up.  Sales departments are heavily affected because the business level gives commission paid guys a lift in compensation.  Hiring someone during the upswing mostly sets a new base-li...

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 ...

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 ...

An Open Letter to New Salespeople Maybe the word "slimy" comes to mind. Last week I had the opportunity to interact directly with a young person thinking about a career in distributor sales.  They were put off by the image of being a “salesperson,” but because of the experience of one of their friends, they were taking a fresh look at the industry. Their questions revolved around a handful of unknowns.  ·       Is sales a position that taints your ability to do something else later in life? ·       Do customers see salespeople as valuable or as sleaze-ball characters to be avoided? ·       What is this commission thing all about? ·       Do I need to be a natural born salesperson? ·       How hard is the job?  It seems like a lot of people “used to be salespeople but quit.  For the benefit of everyone just s...