Those of us who claim the title “distributor” ride the same emotional rollercoaster. The thrill of a well-executed product launch and the agony of a nice order snatched by the competitor both comprise the human drama of distributor life. Join me as we pause for a moment and think about the contrasts between our business and sports. I believe two things are undeniably clear about the business of distribution today.
First and foremost, there are no magic bullets, no instant cure-alls capable of delivering gigantic results.
Dozens of opportunities await us, but each of them carries but a small reward. No sprinkling of fairy dust can double your business, expand your horizons or instantly position you miles ahead of the competition. To use the first of my sports analogies, it’s a game of inches, small gains and slow grinds. Failure to comprehend this opens you to risks and disappointment.
Secondly, distributor selling has steadily migrated from a solo activity to a team sport. More than 70 percent of distributors report the use of product specialists, category managers, special customer service groups, technical liaisons and even application engineers (based on work we did for the NAW Institute for Distribution Excellence). In spite of reports coming from some of your sales guys, the days of the run-andgun superstar are over. To ensure maximum scoring potential, teams need plays, playbooks and most importantly, coaches to manage the whole thing.
Great coaches have learned that you don’t coach to the final score. Think of a football coach telling his team, “Here is my coaching session, score more touchdowns,” or a soccer coach spouting, “Kick more goals.” It doesn’t happen that way. Instead, they develop plays, choreograph interactions and build strategic game plans. Practice sessions are useful to drive fundamentals and understand every nuance of the team’s plays. Finishing our sports-themed argument, most teams win not on raw talent but on execution of a game plan. Distributors must assume the responsibility of both coaching their teams for improvement and managing their players for execution.
Here are a few thoughts for budding coaches.
Develop a playbook for joint calls
Experts tell us our kind of sales call comes in just north of $400. It makes sense to surmise that joint calls are even more expensive. Yet most distributors have not laid down a plan for precisely how to orchestrate these calls. Specialists accompanying salespeople on the calls often report no real plan for the call … at all. Instead of one guy “winging” it, there are two. The costs are double, and the chance of error is greater.
With all this money and human talent in the mix, I recommend outlining a set of rules for joint calls in your company. First, we’ll assume the purpose of using joint calls is something more than two guys driving around.
Technical demonstrations and technical prove-outs are common joint call activities. If demo equipment or samples are required, somebody needs to be responsible for lining them up. Test product to ensure working order; nobody appreciates a nonfunctional demonstration unit. Product literature and group presentations probably belong to the specialist, but you need to determine what works best in your company. Finally, I insist that salespeople make a reasonably good introduction of the specialist or other support person. Distributor owners almost universally point to their support specialists and other technical staff as a “competitive differentiator.” Wouldn’t it be wonderful if you introduced this expensive resource as “Jill who serves as a technical resource to assist our important customers in meeting federal green standards” rather than “Here’s Jill, she understands the federal stuff ”? Understand, these kinds of things can be set as the corporate standard; the playbook. But coaches are also responsible for ensuring their team follows the play.
Consider these points as well. If you need a follow-up quotation, who will create it? Technical calls bring out the need for technical details. Who handles these? What is the time line? How does the salesperson keep up with the information flow without becoming bogged down? It’s the coach’s job to lay out the best plan for the whole team.
Similarly, define joint calls with manufacturer’s reps and other salespeople. Laying out a procedure for when and how to use the rep should not be left to happenstance. Topics for a playbook might include which manufacturers are introduced to customers, rules of engagement on developing special prices and precisely what margins are expected. With manufacturer’s reps covering large territories and traveling long distances, follow-up details are often mishandled. Establish a plan for how follow-up items are recorded and tracked in the days coming after the call.
A playbook for orders
In the time of advanced business (ERP) systems running most facets of order entry, one would assume that nearly everyone can enter an order. However, after studying the sales teams of hundreds of distributors, we have noticed a nagging tendency. Orders handled outside of the normal customer service, counter and inside sales groups are more than five times as likely to experience an issue.
While the inside team enters hundreds of lines per week, the outside, specialist and management guys enter a handful of orders into the system. They might know how but they lack the subtleties of inputting data quickly and correctly. Selecting the wrong part number can move an order from stock to a nonstocked category. Checking the wrong delivery method may create costly errors with special handling required.
Open orders become an important part of the playbook. Without a welldefined standard for open orders, customer service suffers. Customers wait patiently for parts that no one ordered. Ship-when-complete orders languish in the warehouse waiting for a final button push. This creates commercial issues. Distributors waste time and money arranging for “red-label” shipping to cover these easily avoidable errors. From a purely error-prevention-driven standpoint, it pays to assign order entry to a specialized group. A policy defining how to perform this common task will gain your organization a minute bit of efficiency.
Will your pricing play move the ball down the field?
Most distributors miss the boat by not using a scientific pricing process. Pricing is a complex beast. Back when I was a kid growing up in my dad’s distribution business, we used a discount column to generate our customer price. Here’s how it worked, in theory. Civilians walking in off the street received first column pricing. Small garages and neighborhood gas stations got second column. Bigger operators got third column, and the largest of the large received 5 percent off third column. Remember, this was in theory.
In practice, everybody got better pricing than they deserved. Anybody who was a member of the same civic organization as the salesperson got moved over to the next pricing level. Preachers, teachers and the high school football coach all got the best price on the planet. Nobody paid what they were supposed to, but the price was based off the pricing sheet. My dad, who knew all the prices, would use a pricing sheet that inflated his margins and made pretty good money.
Sometime in the 1980s, we all got computers. Information was supposed to be a good thing. Knowing distributor buy price was supposed to allow us to maximize our business and grab the commercial fumbles of our competitors. Halfway through the second quarter, we realized things weren’t working out so well.
Armed with distributor cost, our industry morphed into a “cost up” mentality. Every distributor salesperson believes they know the right amount of “markup,” and every distributor has their own “magic” gross margin number. Unfortunately, this is a 20-year-old bad habit.
Coaches break bad habits by measuring execution. You need a pricing plan. We like the pricing process from David Bauders and Strategic Pricing Associates. They employ a scientific algorithm to analyze their clients’ data for pricing anomalies. Their system assists you as you separate spectators from players, the tiny customer from the gigantic guys. And their system allows you to measure your team. Knowing how well each salesperson follows suggested pricing allows their coach to use instant replay-like comparisons. For instance, a conversation might go like this: “Had you followed the pricing strategy, your commission check would have been $1,512 higher.”
It’s fourth and goal, the top of the ninth … Or pick your own analogy
Once more, the boundaries of time and space keep us from covering even more coaching opportunities. As we watch the clock tick down the final seconds of this article, allow me to leave you with two points and a follow-up.
Professional athletes are skilled in their sport; some are superstars. They still need coaches, managers and playbooks. It’s a major league mistake to assume your guys don’t need your direction, guidance and management. Athletes call on their coaches for inspiration, guidance and an occasional “Win one for the Gipper” talk. Don’t shirk your responsibilities.
Professional athletes practice and their coaches insist on it. Practice covers the fundamentals – basics like pitching, catching, blocking and tackling. Take stock of your sales meetings. Are these meetings and community bulletin boards “bases loaded” with product features and supplier trivia rather than coaching opportunities? Does your coaching improve the team’s sales, customer service or logistics skills?
Now is a great time to evaluate your strategy. If you are doing some annual planning, you’re not doing your job. Book selling isn’t my game, but if you are struggling to get an annual plan off the ground, check out my book on Amazon. It will help you kick off a few ideas. There’s the final bell. Sorry about the sports analogies. We’re out of here.
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.