Water the Crops

The Training meeting had ended. Like so many sessions before, it was billed as sales training when in fact it had been product training. Lots of materials had been shared to show the enhancements to the product. There were several shiny new bells and whistles, none of which me or my colleagues had ever been asked for by a customer. We were assured that these new features were in the best interest of the customer and the best part was we could charge for them. What was even greater was we were being told we could earn lots of commission selling them. The trouble with all of this was there was not a shred of tactical sales strategy given to us, to help us with that process. Sound familiar to you?

As I talk to fellow sales professionals across the country, I hear countless stories like this where their organizations confuse Product training with Sales Training. Where they confuse CRM Training with Sales Training. In Product Training, features and benefits are discussed and we know that features tell, and benefits sell, but not alone and by themselves. They usually require an individual to put their spin on the benefit in a way that brings that to life for the customer or prospect. That successful spin might involve a story or an anecdote and should be delivered with enthusiasm and knowledge. This is where tactical sales training comes in, that is separate and distinct from all other trainings that involve salespeople. Just because you involve a salesperson in a training session does not make it a sales training session unless you are talking about how to sell what you are selling.

Thinking more about my career and the sales training I had received, I thought back as to how many sessions I took that were actually conducted by salespeople themselves. The more I thought, the fewer I could recall. The sessions were normally conducted by someone that was from Sales Enablement or Sales Support or the Sales Training Department. These were usually very nice people but had never worked in the field or sold the product they were speaking about. Sure, they could whip up a fancy 25-page presentation with the latest graphics and information, but their trainings never had an ounce of tactical sales strategy. I began to think if this was like this at my former firm, might it be that way at others? And if it is, how many salespeople are starving for Tactical Sales training, that could actually help them sell their products. And do their organizations even know this is an issue?

In the present environment with so many salespeople working from home and via zoom, the traditional “tell all” signs to gauge sales performance are becoming blurred. With fewer and fewer calls currently being conducted in a face to face environment, interaction between salespeople, their leaders and Senior Leaders can be scarce. The pandemic has led to even more pressure on results as clients and prospects retrench and refocus on their bottom lines and examine every item of cost and process to ensure their own survivability. As that happens, what worked for Salespeople in an up economy becomes a struggle for them in an uncertain economy. To further combat these poor sales results, companies across the country cut budgets for items that are considered not business critical and an unnecessary expense. Unfortunately, one of the items first on the chopping block, becomes training. I liken this to a farmer who grows crops, where the price has gone down for his product. Does he stop watering the crop and risk losing it all, or does he water it intelligently, ensuring he has a harvest and can get what the market will bear?

In such uncertain times, businesses in my opinion should consider this the best time to tactically train their salespeople. Just like the farmer who continues to water their crops, continue to feed your salespeople with the tools to harvest the business that is available in their markets. More importantly it is critical to invest in the right training for your specific needs, from the professional that can best provide it. Do everything you can to help your salespeople grow and prosper as opposed to withering and dying on the vine.  When it comes time for the harvest, they will thank you and you will see the results.

Roger McNamara Bio:

Roger is a 25+-year veteran of the Payments Industry, most recently as the Director of Business Development with American Express in the US. He has worked on the largest Acquisition targets for acceptance across multiple Industries and across the globe that include : Airlines, Communications, Technology, Cruise Lines, Entertainment, Fractional Jet, Freight, Government, Healthcare, Insurance, Oil & Gas, Residential Rent, Restaurants, QSR’s, Retail, Services, Supermarkets, Travel, Vehicle Sales,  B2B and Wholesale. Over that time, he has sold more than $200 Billion worth of Card processing and became an expert in Bankcard Interchange and Discount Rates, how they are calculated and what merchant pay to accept Credit and how this is dramatically different from what they believe they pay. He is an expert in Merchant Statement analysis and payment processing and the rules and regulations associated with payments and the associations. Roger has also developed the insight for Merchant Services Salesforces and salesforces in general to be able to better position their products and gain share particularly in B2B. Let him show you how you can too. He can be reached at Guide2Interchange@gmail.com

Industrial Distribution: Who’s doing the selling?

(by Frank Hurtte) Let’s talk about selling.  More specifically, let’s discuss selling technical products – products that possess unique features differentiating them from the competition.

Further, let us define precisely what we mean by selling.  There are several definitions of types of selling.  This example illustrates the two most radically different types of selling:

Further comparing the two types of selling

Distributors specializing in transactional (only) selling generally carry multiple brands of the same product.   This “one-stop shopping” is advertised as a customer convenience; however, this works similarly to Walmart’s approach to selling colas.  When a customer walks into their local mega-center the company does not care if they buy Coke, Pepsi, RC, or some other brand.  Further, this approach also leads to “house brands” like Wally Worlds Sam’s Choice Cola. 

Amazon is another excellent example of transactional selling.  There is no need to walk into a store when you can open your phone or laptop and be instantly connected to Amazon.  Again, if the customer knows what they want, products can be purchased.  And like Walmart, Amazon doesn’t much care which product is selected as long as the purchase comes from Amazon. 

At both Walmart and Amazon, companies are offered opportunities to grow their sales for a fee.  If you happen to sell a generic product, it might work.   For example, at Walmart soft drink makers pay to have their product “featured” as you walk into the store and sometimes pay to offer deep discounts which are used to drive sales and sometimes to talk consumers into making an extra trip.  Similarly, Amazon offers manufacturers/sellers the ability to upgrade their accounts to designate their products as “featured,” thus giving the seller more visibility.

The same rule applies to “commodity-like” products and distributors.  If a customer wants a common product where the brand is not a consideration, they ask for it, sometimes using industry slang, and the customer service representative provides a price and delivery.

When distributors carry multiple brands of a commodity product, the smartest salespeople sell (using a generic form of the word) the brand/product which creates the greatest gross margin.   It is possible for a manufacturer to temporarily increase unit volume by dropping these margins.  The issue becomes, most manufacturers do not carefully calculate the increase necessary to offset the loss in margin.   Further, in time other credible competitors adjust their price making gains difficult.

Who sells the product? 

To answer this question, let’s further break down distributor selling.  Virtually every selling component is described below.  (If you have other points, send them along and we will add them!)

Mostly transaction activities

Advanced transactional activities

Active selling activities

Sales activities cost money for the distributor

Each of these activities costs money.  If the distributor does not provide the activity, then the onus falls onto the manufacturer.  Somebody pays – it’s just a matter of who ends up with the bill.

Sadly, most distributors have done a poor job of tracking the expenses tied to each of these activities.  Based on observations within the study of distributor association profit benchmarking reports, the “active selling” tasks require a gross margin percentage that is approximately 30-32 percent higher than “transactional selling.” 

Contrasting distributor types to see the need for higher margins

In the industrial sector, distributors operating in Electrical Distribution (members of the National Association of Electrical Distributors – NAED) and Automation Distribution (members of the Association for High Tech Distribution – AHTD) often sell to similar customer sets.  The primary difference comes in the types of products sold, with NAED members selling a higher percentage of “commodity-like” products. 

NAED members generally sell more replacement products to End Users in MRO environments.  Many of the transactions involve replacing a component that arrived in their manufacturing facility on a piece of machinery.  The customer usually knows the part number and description of the replacement part.  Even if the product is not a commodity, the selling effort is still largely transactional.

AHTD distributors, who tend to focus on new OEM applications and more technologically complex end-user needs, engage in more active selling.  While they do sell some replacement parts, the majority of their business is focused on active sales.

Profit Benchmarking Reports tell the story

Both AHTD and NAED participate in profit benchmarking.  Data from these indicate the typical gross
margin for an AHTD member is approximately 26 percent while the typical NAED member reports a gross margin hovering around 20 percent. 

Armed with this data, one could expect the bottom-line profitability of AHTD members to be substantially higher than that of NAED members.  However, the reports indicate the profit margin percentages for the groups to be approximately equal, pointing to an increased cost of sales activities.

What this means for manufacturers

Manufacturers must understand the difference between transactional and active selling.  While many manufacturers have created tiered distribution plans with terms like “market makers,” “market servers,” and other types of categorizations, the strategies appear to have failed. 

In a special report generated after nearly 20 in-depth interviews with highly focused active selling distributors, we arrived at these conclusions:

The problem is many times the situation is not black and white – there are hundreds of shades of gray.  Even the previously mentioned companies have salespeople probing into other types of business.  This creates issues.  Here are some problem points made by the distributors interviewed:

If this type of distributor can get an SPA this opens the doors for them to block out the market making distributor.

This is often influenced by field sales and reps who feel like they gain favor with the distributor by offering up the additional margins associated with being a market making distributor.

Large orders do not necessarily qualify a distributor for this role.

It is the role of a procurement department to drive unit price cost to the minimum level.  Opening up the distributor landscape to other distributors typically drives the prices down. 

Citing another recent report on small to midsized distributors in the market, we found many distributors who have become extremely specialized in specific technologies.  These distributors have created a niche by selling a few very focused product groups, mostly to OEMs serving one or two categories. 

These distributors state they must often switch their “active selling” direction because their manufacturing partners allow other distributors to apply margin pressure against them at their accounts.  This is disturbing because this group of distributors is truly creating market expanding services to the manufacture in at least several categories.

Manufacturers with the broadest product lines often fail to realize the specialized activities of this breed of distributor.  The result is extra energies are required of the manufacturer’s team to supplement the efforts of a more general distributor. 

The time is ripe to better understand who is doing the work

This is complicated.  First, product technologies shift.  For example, years ago, variable frequency drives were considered cutting-edge technology, yet today many classes of this product approach “commodity” status.  Second, some distributors fall into the middle ground – actively selling in some instances while transactionally selling in others. 

Further complicating things, manufacturer field sales teams (rep-based, direct employees, and regional managers) are often asked to judge distributor performance without much objective input.  Many bet on larger plays hoping they will ramp up their active selling activities. 

In the case of manufacturers with multiple distributors in the market, the manufacturer’s team probably knows the transactional distributor better than the active seller.  Why?  The active sellers often know the products better or at least as well as the factory salesperson.  And the nature of the sale precludes lots of day-to-day distributor/manufacturer interactions.

Finally

Manufacturers who understand the size and extent of the opportunity to expand market share in new products and technologies find ways to model and mold their channel sales efforts to match their distributor partners.  Strangely, many manufacturers do not fully understand the value of market share on some of their products.  Without this key piece of information, decisions surrounding the cost of sales activities are impossible.  Sad but true…

Frank Hurtte is one of the leading proponents of Knowledge-based distribution. A business should surround the products they sell with their engineering and technical expertise. Even though he is a speaker and consultant, he is first and foremost a Sales Engineer. For more info, please visit: http://thedistributorchannel.blogspot.com/

Ode to Inside Sales

The inside sales representative is often an unsung hero in many companies, and that is a shame. In many ways they are one of the absolute keys to revenue and the whole sales operation. Sometimes referred to as a different title (sales support, etc), here we will look at the value of ISR’s and also the possibility of converting an ISR to a sales engineer.

The first job I had out of college was as an inside sales rep. I had my Bachelor of Science degree, but this was my first “real” job. The truth is that inside sales is often an entry-level position at many companies- and there is nothing wrong with that. Some people remain as ISR’s their entire career, others manage an inside sales team, and others convert into outside sales/ account managers or possibly to sales engineers. More about that later.

Being quick on your feet, and solving problems

What did I learn in inside sales? Plenty, including:

company culture

product/service knowledge – technical

company structure/ who does what

working alongside an outside/field sales person

customer service

solving client problems / answering questions

quoting & proposals

dealing with our service or product providers

The truth is that all of these skills are needed to become a good sales engineer, or to become an account manager or account executive.

I recall many times throughout my career in outside sales or as a project manager- when I needed my supplier or some material, 85% of the time my first call was to “my” inside sales person at that company. They had the answers. They answered the phone (imagine that!). They got things done quickly. They valued me as a customer. In many cases, the times that I did reach out first to my account manager- all they did was hang up the phone and then call that same inside sales person!

For the company at-large, there is great value in simply engaging constantly with your inside sales team; they speak to more of your customers on a daily or weekly basis than any other position. They know the pain points of many of your clients. They know that the new upgraded widget won’t sell because it is too expensive (10 of you customers have told them so in the past month).

In summary, as a former inside sales rep and one who has relied on the ISR for most of my career, let’s give a virtual round of applause to this very needed, yet sometimes underappreciated, role! (And hiring managers- worth taking a look at these people for sales engineer openings….)

Presentation version Conversation

15.3 Billion trees are cut down each year across the globe. I dare say a number of these wind up being used for business presentations that quickly make their way then to the paper shredder. You like me have probably sat through that massive deck or presentation; you know the one, a 60 plus pages where your eyes glossed over at about page 6. And where the presenter is hell bent on getting through it in an hour. I once worked at a firm that was all about the presentation. The bigger the better. At one point we were taught to memorize it complete with specific page transitions. It was kind of a one solution fits all and we were delivering it whether you wanted to hear it or not. As I look back it was probably this that created my disdain for a presentation for all occasions. Let’s face it some people need a presentation as a guide for their thoughts, for them not having a presentation would be like jumping out of an airplane without a parachute. For others who have the enviable skill to speak extemporaneously and in detail without the assistance of notes and slides, a presentation is like a straitjacket that needs to be avoided at all costs. For the latter Irish people call it “The Gift of the Gab”, others have a few choice names for it as well.

Having been on thousands of sales calls over the years I was often joined by my key linkages at meetings. A few days before the meeting, I would get that e-mail that would say, “Hey can you share with me the presentation for the call?”  Most of the time I would be responding that there was none. I would have loved to have been in the room when they read the e-mail, as I am sure it was a mixture of disbelief and worry. No presentation, what are we going to do? What will I tell my leader? Where is the proof that we are working on this account? With the product that I sold; it was rarely a one call close. Much had to be done before we got to that point. Usually we needed first to have a conversation, build rapport, learn about the prospects business, and ask lots of questions about how they did things. Who their customers were and what their thoughts and perceptions were about our organization? What were their financials like and how was their business run and finally were there any technical hurdles that needed to be overcome to make a deal work?  After that conversation and with the answers we received, we then could and only then begin the process of putting together what we wanted to present, fitting their needs with our services. On occasion clients would tell us they had no interest in Marketing, right there we could eliminate upwards of twenty pages. Simply put, to present before we asked the right questions would be like slinging you know what on the wall.

Still it never ceased to amaze me how many salespeople within organizations think differently. I am not sure if these salespeople are just uncomfortable or afraid to have a conversation, but they seemed to always have a presentation as a crutch. There is a propensity as we say to show up and throw up. Too often as salespeople we are afraid of the “No”. So, to head that decision off, instead of asking the right questions, we go right into telling, selling, and presenting. Despite good intentions this is a turn off for the prospect. In companies today particularly larger organizations standardization is the normal and it takes a brave individual to stand up if this is the case to buck the need for sales presentations at every turn. A good salesperson following on from asking the right questions will get to the presentation if needed once they know what they need to sell.

Some of the largest deals I sold in my career were sold with a single sheet of paper. In my case I liked to listen to the client to hear what the true objections were, and, in my case, it was usually cost, not price. There is a difference. Once I could establish that cost was somewhat neutral and more about return the conversation shifted to enablement and growth. Without addressing this major issue on calls, no number of pages telling them how great our brand was, would change their mind.

Salespeople need to lead the sales process, do not be led or influenced by what others think should be done. Trust your judgement and instincts with your customer. Be bold and assertive on what needs to happen in your sales process and you just might save a few more trees (and/or “cloud” data space) along the way.

Roger McNamara Bio:

Roger is a 25+-year veteran of the Payments Industry, most recently as the Director of Business Development with American Express in the US. He has worked on the largest Acquisition targets for acceptance across multiple Industries and across the globe that include : Airlines, Communications, Technology, Cruise Lines, Entertainment, Fractional Jet, Freight, Government, Healthcare, Insurance, Oil & Gas, Residential Rent, Restaurants, QSR’s, Retail, Services, Supermarkets, Travel, Vehicle Sales,  B2B and Wholesale. Over that time, he has sold more than $200 Billion worth of Card processing and became an expert in Bankcard Interchange and Discount Rates, how they are calculated and what merchant pay to accept Credit and how this is dramatically different from what they believe they pay. He is an expert in Merchant Statement analysis and payment processing and the rules and regulations associated with payments and the associations. Roger has also developed the insight for Merchant Services Salesforces and salesforces in general to be able to better position their products and gain share particularly in B2B. Let him show you how you can too. He can be reached at Guide2Interchange@gmail.com