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14 FEDA News & Views continued on page 29 By Jason Bader jason@distributionteam.com D o you want fries with that? We hear it every time we visit our favorite fast-food chain. The fact of the mat- ter is that these folks have mastered the art of add-on sales. They understand that a menu item rarely stands on its own. On the contrary, the satisfaction of the pur- chase is enhanced by complementary items. In the end, the customer is better served and let's not forget—for every dollar in cost, a fast-food chain can sell approximately 20 orders of fries. While most wholesale distributors can only dream of making such a lofty markup, the principle remains the same. Selling complementary products will drive gross margin dollars to new heights and improve overall customer service. That's why one of my favorite key per- formance indicators is lines per order. Although many companies understand the concept, few review this metric on a regular basis. I highly recommend that you measure this every month and start by creating your benchmark. In the years that I have been push- ing this measurement to audiences and my private clients, I have run across a strange anomaly. When a hard goods wholesale distributor fi rst runs this met- ric, they often fall between 2.3–3.3 lines per order. It does not seem to matter what vertical you service, the numbers seem to fall in this range. Judging by the number of products we stock, this tells me that there's a lot of upward potential. One of the key reasons to study and improve this metric is because of its impact on gross margin dollars. A com- plementary measurement is gross mar- gin dollars per order. As lines are added to the order, the incremental gross mar- gin dollars offset the cost of processing that order through our system. If we can assume that the average cost of process- ing an order is $60-$75, any additional lines we can add will help us become more net profi table on every transac- tion. Think Application, Not Item When training customer service rep- resentatives to drive more lines per order, we must dispel the notion that asking questions is intrusive. Trust me, this hesitation exists in your newer cus- tomer service people. As distributors, one of our strongest value-added services is the ability to fi ll a large percentage of the customer's appli- cation needs. This in turn allows them to make fewer stops or create fewer purchases to get the job done. We sell the items our customers forget. When I teach this subject, I usually discuss the consequences of letting a customer go out the door without all the materials necessary to complete an application. In many instances, they will be forced to get back in their vehicle to source a critical, yet forgotten, item. Maybe they will return to your place of business, maybe not. Superior service means that we help the customer spend more time applying their skills and less time sourc- ing product. The key to supporting this add-on service mentality is teaching customer service people how to sell an applica- tion, not just an item. We should consider it a fail- ure if we let one line item go out on a sales order. I grew up in the c o n s t r u c t i o n supply business, but this holds true for most wholesale vertical markets. When a customer was buying a tool, it was up to me to ask what they were doing with the tool. Were they drilling a hole? Think drill bits or hole saws. Were they cutting some- thing? Think saw blades or cutting fl uid. In addition to looking forward into the application, we were trained to look backward as well. This meant suggesting personal protective equipment, such as safety glasses or gloves. It could also mean extension cords or temporary power equipment. By looking at the whole application, a world of comple- mentary product opportunities is pre- sented. Teaching this concept is a great foun- dation for product training classes. With any number of stocked products having a complementary item, the challenge is where to begin. High-ticket items can be a good start since they often carry a lower gross margin percentage. To bol- ster the overall margin percentage, add- ing some high-margin complementary items can help make the ticket more attractive. Beyond these items, I like to focus on the highest hit items. By defi nition, these items are the most frequently requested and will appear on the greatest number of sales transactions. Take a look at the top 200 items and focus on teaching the complementary relationship of these products. Paying Careful Attention to the Data Goes Hand in Hand with Increasing Add-On Sales The key to supporting this add-on service mentality is teaching customer service people how to sell an application, not just an item.