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The Target Driven Distributor

Feb. 20, 2013
We Americans continue to feel the influence and inspiration of the profound words of our forefathers. Thomas Jefferson declared, “All men are created equal.” Ben Franklin, writing as Poor Richard, praised the virtues of hard work and equal treatment for rich and poor. Our culture and earliest remembrances, played out in dozens of The Waltons episodes, Hallmark specials and Horatio Algeresque dramas, reinforce the ideal of fair and equal treatment.
With this cultural background, is it any wonder so many salespeople burn their time servicing customers with little or no payback? To drive home just how pervasive this equal treatment for all ideals loom, allow me to relate a story. In distributors around the country, salespeople argue for technical support for customers lacking the potential to ever repay the investment costs of this precious commodity. And pricing process expert David Bauders of Strategic Pricing Associates demonstrates how tiny customers are given the same pricing level as the biggest guy in town – because a counterperson didn’t want to overcharge a nice guy. Equality for all personified.

Without the right training, it can happen to anyone. True confession: as an energetic young sales guy, I found myself torn as I decided to purposely focus my time and attention on high performance customers at the expense of nice guys with a limited pocketbook.

What do these waxings on American philosophy have to do with sales? Everything. To reach our full potential, we must understand all customers are not created equal. Further, recognizing and channeling our efforts to high potential clients makes a major difference to our business.

As our new century marches forward, I believe it is critical that distributors prioritize their resources – be it money, time or marketing efforts toward customers with the payback. In the past, financial analysis of distributor industry customer lists indicated 20 percent of our customers deliver 200 percent of our bottom-line profits. How can this be? The model points out that the next 50 percent of our customers are break-even at best, and the final 30 percent actually drains our bank account. By identifying the traits of our most profitable customers and searching out more business with similar characteristics, we build fatter wallets and better businesses.

In years gone by, sales managers directed their teams to focus on high volume accounts, but this dimensional approach rarely produced the results anticipated. While big numbers are cool, big does not necessarily equate to profitable. To move forward as an industry, wholesalers must identify profitable accounts with business behavior and value needs meshing closely with their own. Further, distributors should actively seek ways to focus their resources in a way that creates the biggest bang for the buck. Maximizing the efficiency of our efforts marches at the vanguard of business process, with efficiency pushed down to the lowest product selling level.

We call this focusing of efforts targeting. We call it targeting because we are directing the efforts of our organization in a well-defined and measurable direction. Like the process of aiming an arrow, we think before we unleash the energy of the arrow. Targeting is measured as we place measures around our activities and coach our team in their efforts to hit the bull’s eye, paying close attention to near misses in the same manner as a Marine rifle instructor teaches a young recruit to become a shooting expert. As business owners and sales managers, we improve the accuracy of our team by coaching sequential iterations of the process.

Today we’ll spend the next four minutes thinking about targeting in one aspect of our sales process. (Keep in mind that targeting, in fact, extends into many areas of our business.)

In the world of sales, we have defined targeting in three categories: Product Targeting, Solution Targeting and Strategic Company Targeting. Product targeting is the first foundational block in laying out a target process. It’s relatively easy to implement. Establishing product targeting lays out a cultural tenet for distributors’ sales team. Planning and thinking about sales calls before their execution sounds basic, but experience indicates the vast majority of distributors’ selling teams still do not follow this practice.

Introducing Product Targeting

In product targeting, we ask salespeople to identify the low hanging fruit for specific products from their line cart. Instead of taking a new product to all of their accounts (which rarely happens anyway), they’re asked to identify the five companies most likely to purchase the product soon after its introduction. Let’s use a hypothetical example.

One of your supply partners introduces a great new underwater air-conditioning system (I know there’s no such thing, but bear with me). Obviously, this product isn’t for everyone. You immediately eliminate customers providing solutions in arid applications. Instead, you create a quick list. The targeting process calls for each salesperson to think of and list the five (or so) customers who might achieve the greatest value from the product.

As the accounts are listed, the sales manager is afforded the opportunity to provide coaching in the selection of the five customers on the list. Does the customer have a real need? Which person at the customer’s business would be most interested in the product?

It is expected that salespeople will move the customer from identified target to a measurable outcome in less than six months. Again, coaching moments become evident as the manager discusses the progress of the salesperson in working toward the final goal. Things like sales call activities, presentations, scheduled customer visits and use of resources (like specialists, supply partner sales team) are discussed.

The time metric allows the sales manager to accelerate the overall sales cycle. There is a value in knowing long-term results. Selling is an emotion driven endeavor. Often, salespeople miss out by not fully identifying their individual strengths and weaknesses. Most cannot tell you what works for them and what doesn’t because they rarely track customer-specific sales strategies. Measuring a long-term success ratio allows the manager to identify products where the seller is inherently skilled. As an example, think of a salesperson who does very well with switchgear products but poorly with motor controls. Armed with historical data, the manager can suggest new techniques, provide additional product training or reassign accounts to place the seller into accounts matching their strengths.

Fighting Pushback and Building a Culture

Change is hard; change in distribution sales is extremely hard. The road to selling Nirvana is soiled with the trash and beat-up remnants of failed processes. Salespeople know this because they have seen selling strategies that come and go. They resist, they grumble and, quite bluntly, they push back.

Any change to their environment is met with comments like, “Do you want me selling or doing reports?” Or, “I have 20 years of experience with these customers and I know what they want, how they work and how to get the maximum business from them.” Some salespeople will openly argue with any new technique that requires training, CRM systems and other tools. We circumvent that by starting slowly and building a few points at a time.

Institute targeting after a new product release; after the training, ask your team to provide you with five target customers. Use the following criteria.

  • The customer must be their best opportunity for a sale in the next six months.
  • The best contact at the customer must be identified as soon as possible.
  • They must provide their sales manager with a copy of the list.
  • The sales manager must be willing to invest time revisiting the selection.

Sound painless? Establishing a single target sets the stage for establishing a few targets each month. The sales manager closes the loop and builds on the process by scheduling times to review each of the lists along with their sellers. For experienced salespeople with good selling habits, these meetings are short, to the point and require little additional work. Working with the other salespeople allows for focused coaching. Each bit of coaching builds long-term habits and establishes cultural shifts.

The Final Product Target Results

We’ve started our sales teams off slowly with a single target assignment. Gradually, perhaps over the next six months, you have accelerated targeting activity. A year into the process, a typical salesperson is handling 40 to 60 individual target assignments. New coaching opportunities abound.

The sheer number of targets – 60 products targeted times five customers per product – equates to the need for organization and time management. This presents the sales manager with many opportunities to coach on topics like call planning, time management and opportunity management.

Further, distributors using a target-driven process find conversations with supply partners to be easy and forthright. Identifying and sharing product targets between sales organizations allows for better joint planning. And, in our age of multiple distributors per market, targeting allows the distributor to “quadrant off” accounts, protecting ongoing work from the encroachment of competitive distributors. Combine targeting activities with special pricing agreements, and the distributor creates what one of our clients calls “the new exclusive.”

Pushing into the Future

Target-driven distribution becomes a part of the distributor’s culture. Your work has better focus as product specialists, customer service and other support people are wrapped into the target process. Specialists in particular play a role as they join the sales manager in directing the targeting activities of the sales guys.

Using targeting, distributors identify and build relationships with high-margin niche products. Because in past years, distributors tried to identify products with a retail-like broad appeal, products appealing to just a few accounts in their territory were never pursued. The time required to manage the distributor-supply relationship outweighed potential profits. Today, the use of a targeting process simplifies the sales side of the task. Combine that with the willingness of many short line companies to work with distributors around drop ship programs and other logistics issues. By streamlining the product management issues apparent today, niche products become important components in the effort to open new doors and cement customer relationships. Growth flows from technologies once thought to be too small to explore.

Finally, supply partners play an active role in target-driven sales activities by compensating distributors to target – and accelerate the sale numbers of– specific products. In fact, today, a good many manufacturers are open to funding targeting activities around their products. It’s good business for them and builds a stronger bond within their channel.

It’s Planning Time and the New Year

As you ponder this article, think about how you might apply targeting to your sales activities, consider the options for adding targeting to your next supply partner agenda and think about the first product to test the theory.

But wait, there’s more; product targeting is just the first step in building a target-driven business. In the selling process, we have identified best practices around building strategic customer alliances, allowing us to “own” important accounts.

A final thought: Research indicates that selling organizations with a well-defined targeting process are 47 percent more likely to reach their financial goals. With the winds of a new economic storm stirring in the distance, a head start like this is too important to ignore.

Frank Hurtte provides Strategic Insight for New Times. He speaks and consults on the new reality facing distribution in a post-recession world. Contact Frank at River Heights Consulting via email at [email protected] or via phone at 563/514-1104.