Issue link: https://www.e-digitaleditions.com/i/825042
Segment Customers Customers ascribe varying value to the services provided by wholesale dis- tributors. Yet, oftentimes, distributors offer the same level of service to every- one. Some customers are price-con- scious and whichever source offers the lowest price will receive their business. Other customers assign value to product availability, extended credit terms, the ability to procure most of the products they need from a single source, frequent delivery, and so on. The sales support provided by a dis- tributor is no different when it comes to influencing customers' purchasing behavior. It has material impact on some customers and very little, if any, on oth- ers. Evaluating your customer base with a critical eye and understanding their economic drivers is essential. You can start by asking the following questions: How much does a given customer rely on you to help select products, or do they always know what they are going to buy? What is their ratio of purchases relative to quotes? How have the products purchased by the customer evolved over the last few years and how do you expect them to change in the immediate future? How much untapped oppor- tunity exists within the customer? How many strong relationships exist with the cus- tomer, aside from the outside salesper- son? (The inside relationship is key, if there is one.) Is the customer significant enough to your business that having an outside salesperson call on them is necessary, strictly from a defensive per- spective? Do sales reps primarily fulfill demand that already exists or do they create demand by, for example, showing customers how a product or service can improve productivity? The answers to these questions will identify what type of sales resource is appropriate for each customer based on their needs. Customers that require assis- tance when selecting products, clearly need active involvement, while those that use internal capabilities to select products, need passive involvement. Customers that rarely purchase, but are constantly asking for quotes, likely make buying decisions based on price, and an operational fax machine is the only selling resource required to main- tain or grow sales. Customers whose purchases have changed little may only require support from inside sales as ful- fillment, not selling. The objective of this analytical cus- tomer segmentation exercise is to iden- tify how to align customers with sell- ing resources so that their needs are met at the lowest cost. Most companies that complete this analysis will find that more than 20 percent of the accounts assigned to an outside sales represen- tative can have their needs met by a lower-cost function. This translates to an opportunity to reduce outside sales staffing by an equivalent amount. Use Effective Sales Management Practices Sales productivity is frequently mea- sured by sales or gross profit per person. One of the reasons this metric is com- monly used is because it's easy to measure. Companies have no difficulty obtain- ing sales information and the number of individuals employed, but it gives no insight into the activities that generate the results. It is simi- lar to measuring how hard an engine is working by looking at the speedometer instead of the tachometer. Aligning Your Selling Resources to the Market By Mike Emerson, Indian River Consulting Group One question many distributors are asking is, "How can I reduce costs without losing sales?" The answer: Align your selling resources more closely with the market. Achieving this is not simple, but there's a proven three-step process to help you execute it—segment customers, use effective sales management practices, and ensure incentive structures are in alignment. Each is key in improving sales and profitability. Here's how. continued on page 20 18 FEDA News & Views