The sales generation conundrum
Developing sales from the middle of the bell curve
by David Gordon and Stan Rydzynski
Beginning the first quarter of a new year, the current forecast for many industries is for nominal growth, at best. And while we can debate the reasons, the market will be what the market will be (didn’t Yogi say that?)
Looking forward, all you’re really concerned about is your growth (it’s OK to be selfish). Growth can come from one of three ways:
- Taking market share within existing customers
- Identifying segments of your market that are experiencing superior growth due to macro issues (i.e. energy efficiency, energy production, technology markets, etc.)
- Cultivating new accounts and taking them from your competitors
Each of these strategies requires different tactics, different tools and different mindsets. Sales and marketing management should develop specific goals for each of these areas. Manufacturers and distributors will follow sales generation leaders.
It is the only way you can ensure you’ll achieve your desired growth in 2013. In this type of market there will be winners and losers. The right plan, well executed, will put you in the winner’s circle.
Distributors are very good at focusing on core customers, which are typically the top 10% to 20% of their customer base. The remainder of their customer base they either chalk up to “they don’t do much more business” or “my competition has the account.” The concept of developing new accounts, for many distributors, is akin to going to the dentist for a tooth extraction.
Why? Because:
- It requires a skill set that most of their salespeople do not have
- They don’t know where to “easily” identify prospects
- Communication of their value/ value-added services is not a core competency
- They believe their salespeople don’t have enough time
- It requires active sales management
- They lack understanding of the potential within their marketplace
- Utilization of analytics to evaluate sales performance is lacking, and often non-existent, within distributors
- And distributors traditionally lack lead generation and sales collateral tools
Additionally, distributors believe that if they continue to focus on their core 10% to 20% base, growth will occur.
However, when they analyze their growth patterns, many distributors identify that their mid-level accounts grow at a faster rate with less sales involvement (although salespeople still claim these accounts on their lists for “compensation justification” reasons). And frequently, those accounts are more profitable!
Consider a customer bell curve (and evaluate your customer base based upon volume categories). See example above.
A simple diagnostic tool that we use with many clients segments
customers into different revenue groups. We’ll use five to seven volume categories and total the number of customers, revenues, gross profit for each category and then analyze the percentage of customers, sales and profit in each category. We review trends annually as the objective is to move accounts from one range to another. The strategy is then replicated either geographically (by branch) and by salesperson. Using this approach, you can quickly see where there are “diamonds in
the rough.”
Some solutions:
- Be honest with yourself and your salespeople. What are their strengths? Some are great at relationships. Others are account managers and are very good at orchestrating your support team; some have extensive product knowledge and focus on preferred product categories (or customer types). Some are great networkers. Others, albeit a few, have the passion to knock on doors. As someone once said, “you need to put the right people in the right seat on the bus.”
- Target your salespeople on top performers and high-potential accounts. Force them to identify all of the contacts within these companies, not just the ones they call on.
- No account stays on a top salesperson’s account list unless they have purchased a minimum of $50,000 in at least two years. If they can’t make inroads (read relationships) to sell your “difference,” perhaps there is a relationship issue. Either reassign the account or service it differently.
- A tried-and-true approach for successful companies is conducting a company, branch and salesperson and account level product mix report. Once you have this, generated in percentages and color-coded using conditional formatting to determine acceptable ranges, you can quickly see where there are opportunities to present products to customers, and sometimes to identify sales training needs.
- Allocate sales resources to mid-level accounts. Utilize marketing strategies to drive demand and communicate your company’s capabilities.
- Consider the concept of the “power of one” (or one-third in some instances). Think about the impact of adding one-third or one new line item per invoice. What is your average sale per line item? What would happen if your salespeople “suggestion sold” and added more line items per invoice? If you do the math, there is a significant benefit to your bottom line.
- Consider a sales outreach strategy. Involve other internal resources in account development.
- For prospecting, utilize marketing to generate awareness and leads; consider outbound calling resources (some can be outsourced); make lead follow-up a sales management priority; coordinate credit, marketing and sales so that new credit apps are capitalized upon.
- Track new credit applications and use this as an opportunity to communicate to the new customer about the range of services your company provides. Also, credit applications are great tools for populating customer marketing databases. Are you asking for contacts from pertinent departments, e-mail addresses, what industry they are in (or markets they serve), their overall revenue (at least in ranges), and their estimated material spend, and possibly more? This information can help you monetize the account.
- And remember that this audience responds well to promotions and incentives.
Remember, too, that marketing plays a role in your sales initiative. Consider them the Air Force that bombs (communicates) a country so that the specialists (sales organization) can then go in to capture objectives. Do your sales and marketing departments support each other? Are you using marketing as an ancillary sales organization, responsible for effectively selling your company when your salesperson is not visible?
Consider what message you are communicating to your customers. Is it more focused on manufacturer products or on customer needs and how you can solve them? Ask yourself, “Why should someone want to buy from my company (not your products) rather than my competitor?” Do you know, in the eyes of your customers, how your customer service compares or do you, like most distributors, believe that you provide superior customer service and/or solicit feedback from only your top customers?
Sales and marketing, when working symbiotically, can significantly accelerate your top and bottom line. A narrow sales base leaves you at risk if a client has credit issues, is sold, closes its business, your salesperson leaves you or a myriad of other issues. Expanding your base, penetrating existing accounts and new account development are the keys to protecting and accelerating your revenues in 2013 and beyond.
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David Gordon and Stan Rydzynski, of the Channel Marketing Group, help manufacturers and distributors in the construction, industrial and energy industries. Reach them at (919) 488-8635 or by e-mail at dgordon@channelmkt.com or srydzynski@channelmkt.com.
This article originally appeared in the Jan./Feb. 2013 issue of Industrial Supply magazine. Copyright 2013, Direct Business Media.
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
