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The rising importance of inside sales

by Frank Hurtte

Consultants seem to pepper their messages with scary stories that start with the sky is falling and end with some expensive plan for erecting an atomic umbrella. The whole changing world of distribution thing is a bit overplayed; everyone feels the impact. Distributors respond to a thousand changes every week. Instead of calling this a change, let’s call this a metamorphosis.

Like the metamorphosis of the monarch butterfly or spotted tree frog, metamorphosis is best viewed with time-delay photography. Applying some of the same principles of a Science Channel special, let’s revisit our inside sales group over the last several decades. I will provide a personal snapshot of the group starting with my first experiences and move forward in time. As you follow along on the journey, I believe the shifts will become clear.

The 1970s
When I received my first territory, inside sales revolved around answering customer questions pertaining to local stock, price, delivery schedules from manufacturers and occasionally assisting in the selection of specific catalog numbers.

For the wholesalers under my young charge, cutting-edge technology revolved around marking up and building tools into each inside salesperson’s personal catalog. To build competitive advantage, we spent a couple hours nearly every Wednesday night practicing the speedy lookup of products from a few of our major suppliers. Applications and various product nuances were deemed important for outside sales but were not a concern for inside sales.

Extending this picture further, there was no computer system for part lookup. If a part could not be readily found, a phone note was created for the more highly trained and capable outside guy or a call to the manufacturer. Pricing was purely top down, with multipliers off list used to establish pricing levels. Deliveries from suppliers took much longer and, should a part need expediting, the work was tedious and involved multiple phone calls to establish approximate arrival dates.

The 1980s
Two amazing bits of technology impacted inside sales departments during this decade. First, computer terminals tied to a distributor business system popped up like mushrooms. Second, about midway through the decade, fax machines made the same type of miraculous appearance. The combination of these tools, if nothing else, quickened the speed of business. But the overall view within the department remained otherwise unchanged.

Inside sales was viewed as either a stepping stone to outside sales or the “final rusting spot” of loyal but somewhat flawed people who lacked the mettle required for an important role in front of customers. Human interface between customers and the computer, tasks like entering orders on the fly while talking to customers and quickly running through the entry of a fax-based order, would be an accurate job description. Talking to sales managers at the time, one often-mentioned skill was the inside guy’s ability to recite common catalog numbers from memory. Following in close second was the ability to maneuver through the many screens of the computer system, often typing the right buttons to fly from order entry to inventory lists while the computer was still updating.

The 1990s
This decade saw even more orders coming via fax and a few progressive distributors created a quasi-clerical position to simply handle the incoming faxes. The rest of the job description was pretty much the same, with the possible exception of pricing duties.

Fueled by the economic slowdown of 1991-1992, the list downward discount as a practice began to break down. Desperate to get orders, distributors instructed their teams to not lose an order on price. This was complicated by all but a few distributors’ reluctance to carefully maintain pricing in their system. The cost of goods was shown prominently and, without a better way, inside teams were allowed to decide a suitable margin. Suddenly and without training, the inside team was given the power to set pricing. I believe this is still an issue for most distributors.

The turn of the century 2000-2010
Distributors began a switch from pure product sales to a value-add culture. In addition, the shift from pure product-oriented technology to a broader scope of products began; electrical distributors branched into automation, fluid power distributors migrated into electrical sensors, power transmission folks added electronic drives and all kinds of permutations were created.

At the same time, customers began to experience the impact of massive downsizing in the mid-’90s. Technical staffs that once numbered in the hundreds were cut to a few. Customers found themselves leaning heavily on distributors for more than just part numbers. Most knowledge-based distributors augmented their inside sales teams with staff capable of answering not only parts-oriented questions, but application and problem solving as well.

Along the way, many distributors discovered an important thing; outside sales opens the doors to customers and locates new customer contacts, but a quality inside sales team keeps the phone ringing. Progressive distributors have come to further recognize the inside sales team is not just a training ground or, worse yet, a dumping ground. Developing a level of professionalism and training to new standards makes business sense.

Inside sales resources rose in cost. But much of the work remained the same. A substantial portion of the inside sales team’s work revolved around transcribing orders from phone calls, emails and, because old habits die slowly, faxes.

Present Times 2011 to today
We are in a technology-driven state of flux and it’s mostly driven by customers. Outside sales people struggle with their new role. Gone are the days of salespeople serving as the customer’s primary source of new product/technology information. According to experts, 80 percent of people gather information online before making a purchasing decision.

Similar research in our industry shows slightly lower numbers for most, but younger, millennial-aged customer contacts are definitely bringing this habit to the workplace.

Customers are growing hard to reach. I sympathize with new salespeople charged with making proactive appointments; customers don’t want to see the seller. At the same time, hard-to-reach customers want timely responses to information requests. They want questions answered instantly. Outside sale people are often engaged in other activities, which throws the onus of instant information squarely into the hands of inside sales departments.

People capable of and trained in providing this type of information are expensive. At the same time, even the highest paid members of the team are expected to handle the roles of human interface to the distributor business system. We are talking employees touching against the six figure mark and capable of providing massive customer value, twittering away major portions of their day keystroking orders into the system. From my perspective, this is untenable for our industry.

The future calls for technology improvements in inside sales
Nothing bugs me more than under-utilized resources. As an industry, industrial distributors (and suppliers in general) need to turn their attention inward toward the inside sales group. Here’s a rapid-fire list of areas where we need improvement.

• Incoming order entry continues to be a drain on qualified people. EDI, which was the talk of our industry a decade ago, has yet to live up to the promise of allowing the customer’s computer to communicate directly with the distributor ERP system. Further, a new study indicates that 72 percent of customers would prefer to communicate and send orders by email. The cost of this technology has fallen and the capability is here. Channeling email orders straight into the distributor’s business system without human impact makes great sense. There are a number of distributors currently using technology from Conexiom for this capability today.
• Automatic messaging of shipping information and order confirmations have become standard for purchases made through non-traditional suppliers. It has become expected in most sections of business. Yet, distributor inside sales teams still fritter away time passing the information along to customers.
• Instant text messaging to inside sales has the advantage of allowing the customer and inside salesperson to multitask. Customers who text questions into your operation don’t come with the same level of urgency as a phone call. Further, the “text” system allows for historical trail of information should there be a misunderstanding later.
• A solid pricing process frees inside salespeople of many hassles. Close observation of inside sales departments across distributorland reveals much inside sales time spent on checking and justifying price levels. Often, this includes looking back at the previous price paid by the customer (which is time consuming) and quickly establishing the right price on the fly when no history exists. Credible distributor ERP systems have the capability of setting the correct price level for each of the thousands (if not millions) of price permutations. However, you need a process for establishing the right price. Strategic Pricing Associates of Cleveland has the best track record for not only freeing up inside sales departments to provide customer value, but adding two points of gross margin to the equation.
• Upselling and add-on opportunities in the inside department have been the topic of conversation since the 1990s. However, I can only think of a handful of companies in our industry that have made substantial improvement in this arena. I believe it’s not a matter of will; even inside groups with major incentives fall short of the goal. Truth is, it’s darned hard to remember all the upsell stuff during the heat of the battle. Compare this against Amazon where a search for a simple six-pack of motor oil brings up not only the oil filter but a couple hundred other sponsored recommendations. Distributors need to employ technology to make it happen. Recently, I visited with a Thailand-based software company (KYKLO.co) that has developed the distributor-focused information for a couple of dozen global electrical manufacturers, so apparently this isn’t a North American distributor phenomenon.

A final thought on the inside sales department
Imagine if, through some unimaginable twist of fate, you had to replace your entire sales organization (both inside and out) over the next week. Who would be your first hire? I suspect that person would be someone capable of handling incoming orders. This is inside sales. When was the last time you evaluated this department?

Frank Hurtte’s new book, “Plan on Breaking Through: Customer-based Strategic Planning,” lays down a road map for distributors in building stronger and more profitable sales. Contact him at frank@riverheightsconsulting.com, (563) 514-1104 or at riverheightsconsulting.com.

This article originally appeared in the May/June 2018 issue of Industrial Supply magazine. Copyright 2018, Direct Business Media.

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