Aligning the sales model to the market strategy
by Scott Benfield
A recent project with senior sales executives for a sizable distributor uncovered a common problem that kept the company from achieving its sales goals. The company wanted to take advantage of the 80/20 rule by pursuing in-depth relationships with the 20 percent of customers who provided 80 percent of their business, and scale back sales and services to remaining accounts. In recent years, large account growth had slowed, and management was distressed by the long-term implications of the trend.
While training salespeople for the key account strategy, management identified the 20/80 accounts for each sales territory and held meetings on the importance of growing the core accounts, including testimonials by key salespeople on successful tactics. Having finished the meetings and stressing the strategy, the sales executives felt confident in their sales team's ability to grow the large customers.
A year later, the sales executives were disappointed. While some of the 20/80 accounts had grown, many were even or behind the prior year's sales. Management was bewildered and accused the field reps of failing to carry out the strategy.
When we visited with the distributor's salespeople and sales management, we found ample evidence of why the strategy did not work. The reasons for failure had little to do with pleas by sales managers, follow-up reviews, and tactics stressed at the sales meetings. The problem was structural. In short, executive management used the wrong salespeople to carry out a complex strategy.
The company's existing sales force had evolved into route salespeople. Each salesperson was assigned to a geographic territory and was responsible for sales and relationships of small to large accounts and numerous product lines. Salespeople were paid on margin dollars, so they signed up any and all accounts that could grow the margin dollar pool. Over time, the firm amassed multiple small accounts that did not generate enough business to cover their costs of service.
In other words, sales management had the right idea to grow larger accounts but picked the wrong people for the job.
Problems with the geographic sales approach
Geographic sales forces dominate distribution. Most distributors assign a salesperson to a definable geography with numerous accounts and pay them on margin dollars. In mature markets where customers have many supply options - including receiving drop shipments from remote locations - geography is not the best way to differentiate a distributor's market value.
In addition, geographic salespeople typically share the following traits:
- The ability to perform multiple small, simple tasks well
- Basic knowledge of numerous vendors and numerous market needs
- More likely to sell products than services
- More likely to reduce price in complex buying situations
- Limited knowledge of other business functions and how to sell solutions
For our client, the geographic sales model and the geographic salesperson simply lacked the skills necessary to grow large accounts with complex needs. As accounts grow larger, their needs shift from products to solutions, including services and complex projects. Many solutions and projects require unique skill sets not common to the geographic salesperson. In many instances, the geographic salesperson is becoming obsolete.
When we surveyed the 20/80 accounts about what they expected from key suppliers, they mentioned help with inefficient processes, in-depth relationships by salespeople with advanced business or process skills, and a desire to move beyond salespeople with generalized product and process knowledge. Given the advanced service and solution needs of large accounts vs. the capabilities of existing geographic salespeople, it was no surprise the sales strategy failed.
New models of sales for different market strategies
In our book, Restructuring the Distribution Sales Effort (Brown Books Publishing), we chronicle six different models of outside sales. Two of the models, Consultative and Enterprise, are appropriate to growing larger accounts.
Consultative Salespeople have unique skill sets in a process or product or both. They typically have a college education, are well paid and are best managed by giving them room to perform. They take pride in their ability to quickly recognize solutions to complex problems faced by the customer. To support Consultative Salespeople, the distributor should have a tested New Service Development process and make sure their consultants are working on new projects over time.
Enterprise Salespeople are accomplished business managers in a sales role. They have the ability, borne by experience and education, to understand the complex interactions of differing functional areas of the firm. In many instances, Enterprise Salespeople are instrumental in getting key suppliers to collaborate with key accounts. The typical Enterprise Seller has some managerial skill, a college education, and has both experience and knowledge of the business processes within firms and across the supply chain. Managing Enterprise Salespeople consists of reviews and updates of projects with key accounts, including their dollar amount, description of solution set(s), and timeline to completion. Enterprise Salespeople have the financial, time management, and ambassador skills to help firms collaborate on joint projects with significant value.
We questioned our client's sales executives and managers about the ability of their salespeople to sell complex solutions and the different models of selling that would allow this to happen. Unfortunately, they couldn't articulate the difference between Geographic, Consultative or Enterprise salespeople. In essence, they didn't know what they didn't know and were lost when it came to growing larger accounts.
Growth of new sales models
As distributors scrutinize their account base, they must reach conclusions about their account mix. Some segments (account groups) are worth growing; some are not. Some segments have diverse needs and some have simple product and/or service needs. And, some segments require complex solutions customized to the account. With the diversity of segment needs and sagging profitability, distributors will be forced into developing new models of outside sales interaction. The geographic one-size-fits-all model of territory coverage won't work in all situations and is downright inefficient, because distributor customers need varying solution sets. Progressive distributors must master the varying models of solicitation and know when and how to assign the correct salespeople to the market strategy.
Our final recommendation to our client's executive management team was that approximately one-third of its sales force had the potential to be Consultative or Enterprise salespeople. The remaining geographic salespeople were calling on numerous small accounts that failed to cover their service costs. The firm would be better off soliciting the smaller accounts with lower cost solutions of telesales, catalogs or e-commerce.
It takes time to develop alternate solicitation models, and train and manage the Enterprise and Consultative salesperson. But in the long run, the client could reduce outside sales costs by close to 50 percent, and have a high probability of increasing sales at key accounts.
Scott Benfield is a consultant on marketing and sales issues to distributors and industrial manufacturers. He can be reached at (630) 428-9311 or bnfldgp@aol.com. With Rich Vurva, he co-authored the book Restructuring the Distribution Sales Effort for Maximum Productivity. Order it online at www.benfieldconsulting.com.
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.
