While conducting research for the 2022 State of Distribution Sales report for The Distributor Strategy Group, we learned two important points. First, more than 41% of distributors see real costs of sales operations rising by more than 10%. Second, distributors are making fewer traditional sales calls today than in 2019 and more importantly, they expect to make even fewer over the next three years. This doesn’t mean they are planning to shrink their business or quit selling an ever-growing number of products. Instead, it shows they are evolving beyond the old-fashioned sales rep of the past.
These distributors have begun the search for new and better ways to boost the personal productivity of their teams. In this article, we will devote time to understanding some of the technologies they are employing to grow the efficiency of their teams.
Distributors are Getting Serious About CRM
There is nothing new about Customer Relationship Management (CRM) systems in the distribution business. The road to distributor nirvana is littered with failed CRM attempts. One distributor made this comment:
Reviewing customer purchases on a timely and more consistent basis has resulted in sales growth for larger customers.
“After a couple of costly and embarrassing attempts to move into the modern days, it looks like our current CRM is gaining traction. In some ways, this is partially a management-driven thing, but the COVID experience did help move some of our sellers to understand the importance of knowing more about our customers.”
In our survey, we asked distributors if more than half of their sales teams regularly used CRM. Nearly 70% responded affirmatively. It appears two things are driving this behavior. First, more distributors are moving their marketing efforts into the modern era. Even the most basic electronic marketing is impossible without good customer data: think email addresses and SMS. Many distributors have moved from the general-purpose email blast of the early 2000s to more sophisticated targeted marketing campaigns. Marketing teams still face the issue of poor email maintenance but many report a steady improvement over the past year and continued emphasis by sales managers.
Marketing requires information for more than just emails. Voice-of-customer efforts require the ability to track customer involvement with specific products. The ability to match known customer needs recorded via CRM to responses to social media activities is becoming critical as well.
Second, at least a half dozen distributors indicated they were using CRM systems as a tool for identifying customers who for one reason or another had decreasing sales volume. Here, marketing took the lead in recapturing the customer’s business by sending out a series of re-engagement emails.
Today, more than ever, there is a need to optimize the sales approach. Distributors have discovered the need for an efficient and effective way to share information with specialists, inside salespeople, application engineers and anyone else interacting with customers. The information being shared needs to be useful and, in most instances, requires input from several people in one central repository.
Appoint a Person to Assist
While not directly tied to technology, our research indicates that companies that bring on a person to act as the human interface between technology and the sales organization have been more effective in driving things forward. For the sake of this article, let’s call this person the sales administrator.
Unlike gasoline, eggs and Busch Light beer, there will not be a rollback on labor costs.
In simple terms, this person serves as the go-to person for simple technology tasks. Having a workable understanding of technology (but not at the same level as an IT person), this person works on tasks like creating easy-to-understand spreadsheets tied to data already existing in the system, setting up digital dashboards tied to specific activities in the CRM and other metrics that commonly fall on the sales manager or others in the organization.
One example of this comes in the form of updating the information found in the systems. One distributor reported that nearly 30% of contact data found in their CRM contained errors. Email bounces on marketing plans demonstrated this in spades. Even those sellers who are great about adding new contacts often neglect to remove contacts who have moved on. Further, as customer organizations are acquired or change their names for various reasons, salespeople neglect to correct the company name and/or changes in the email information.
Getting More from Existing Technology
Years ago, I had a conversation with the late Allen Ray—one of the leading authorities on distributor Enterprise Resource Planning (ERP) systems. In his opinion, the average distributor utilized less than 60% of the power of their computer system. Tying back to the sales administrator, many distributors are using this person to conduct a quarterly or monthly gap analysis of their customer base.
While the gap analysis concept is not new, the concept of reviewing customer purchases on a timely and more consistent basis has resulted in sales growth for larger customers. These customers are predisposed to buy more from their favorite distributors. However, it is common for a busy salesperson to miss out on opportunities for products that are most likely being purchased from a competitor. The best example of this is one distributor who discovered their sales of DC-operated sensors did not match their sales of the DC power supplies required to make them work. Laser focusing attention and effort onto accounts not purchasing the power suppliers resulted in a quick uptick in sales. The best part of the story: the whole conversion took very little effort.
There are other examples of already purchased technology being moved front and center. Distributors have discovered the Microsoft software purchased for each of their employees has the Teams capability. For most organizations, that feature has been largely unused. However, many distributors have stumbled on the value of using Teams as a form of communication and file sharing within their organizations.
The file-sharing experience has proven beneficial in creating quotations that call for various sections to be created by a team rather than an individual. Further, the system allows for things like company terms and conditions, and profile information to be created once and used many times. Extending this further, the system allows for the easy creation of video-based meetings both internally and with customers and suppliers. This feature is much like Zoom except with a much shorter and straightforward plan for scheduling short-duration meetings.
Using Technology and People to Drive Efficiency
Pushing the point of using already paid for technology a step further, a growing number of distributors are creating plans to create appointments more efficiently for their sellers and product specialists. Here is how the plan works.
Inside sales and customer support teams are given access to the calendars of outside salespeople. If, during a phone call, there is a need for the seller or specialist to make an in-person visit, the inside salesperson can immediately create an appointment. This point eliminates additional phone calls and delay in scheduling a time for the seller to stop in. The customer gets better service, and the outside salesperson saves several days of phone/email tag with customer.
Automating Other Processes for Productivity
Most distributors report most of their incoming orders arrive via email. Each email is opened, and the customer purchase order is transcribed from the email to the distributor’s computer system (ERP). In some instances, the inside sales or customer service representative can “cut and paste” a portion of the order information. Most times they cannot. This means a big portion of the typical customer service day is spent on the tedious task of transposing from one form of electronic document to another.
Many distributors have made the step of moving to systems that automate the process. The good news is these systems work. The better news is the technology is no longer only in the price range of mega-sized distributors. Vancouver-based Conexiom (an IMARK member service provider) appears to be the leader in the distributor space and was specifically mentioned by most distributors with systems in place.
Another place automation appears to be gaining traction comes in tracking and recouping ship-and-debit style Special Pricing Agreements (SPAs). Our industry experienced a growth period of SPA activity following the economic downturn of 2001-02 and a literal explosion in SPA activity after the recession in 2008-09. Inflationary pricing shifts appear to be further complicating the SPA activities. Distributors are looking toward automation of this activity into the future.
Productivity is the Key to Inflationary Times
We began our time together discussing the rising costs of operation experienced by distributors. Although gasoline prices have started to ease, year over year inflation continues to track well above the 8% range. While the price of some major consumer products like gasoline, groceries and other things may go down, these decreases will impact distributors in small ways.
For distributors, people costs have historically represented between 57-65% of our gross margin dollars. Unlike gasoline, eggs and Busch Light beer, where some downward price adjustments might be expected, there will not be a rollback on labor costs. Just the contrary, experts tell us experienced people with the technical skills to impact our business will be in shorter supply and more expensive to retain.
We as an industry must find ways of processing more business, providing better service and meeting our customers’ needs with fewer people. Productivity enhancements, automation of non-value producing tasks and elimination of the duplications of effort between manufacture, distributor and customer will be the key to successful business.