How to Unlock Profitable Growth in Today’s Market – Value Creation Strategy #7
For many distributors, growth has been stagnant. The question is — why?
Partly because of their sales-oriented mentality, a senior executive may hear responses such as “we need to hire more sales reps” or “increase sales calls.”
However, the real solution to market access is understanding what’s occurring in your markets and responding appropriately. It’s about running from the one-size-fits-all approach and reconsidering your position in the supply chain.
Here are five ways distributors can unlock growth.
1. Understand how demand is created.
First things first — it is nearly impossible to be effective in sales if your team isn’t aware of the customer’s primary motivation for purchasing products. Research has shown that a high percentage of a supplier’s business is genuinely bought, not sold. Essentially, customers’ decisions to purchase are made on their own. They aren’t swayed by a sales representative.
How much does a customer rely on you to select products? What is the customer’s ratio of purchases to quotes? How has the product mix purchased changed over the years (if at all)? If you want to know whether your product is bought rather than sold, I recommend starting with these questions.
2. Provide different levels of service to different customer segments.
The main conflict that customers are running into is that they’re being offered the same level of service. For example, how well would the demands of each customer be met if a sneaker company offered shoes in just a size 9? Not well. Customers value different options, based on their needs.
Some will pick the business that offers them the best price. Others put product availability above the price tag. Segment your customers based on what drives them so that you can align your selling resources to meet their needs at the lowest cost to you.
3. Measure the right things.
Grow overall revenue by eliminating ineffective activities by sales reps. This includes calling on customers more times than needed or delivering technical support the customers don’t actually value. Do not measure business productivity by the number of transactions. Analyze activities with results.
A sales rep’s role boils down to protection, interception and disruption. If you’re focused on protection — delivering reliable service, not giving the customer a reason to go somewhere else — measure service levels rather than monthly sales variances. Interception — a rep’s primary opportunity to take share — can be gauged by capturing the number of critical sales events seen, intercepted and won. Finally, there’s disruption — when a sales rep shows what the customer is missing out on without your product. This can be measured by comparing target account growth with the average growth for your company.
4. Understand true market potential.
As a distributor, it’s essential to use external market data and customer insight to understand true market potential. Avoid using established beliefs as they are based primarily on emotions rather than facts. In other words, recognize that you are probably overestimating your share of customers’ wallets, and underestimating the available potential in your markets. Data is most powerful when it conflicts with existing assumptions. Use external data to prime the pump for discussion and to identify where you need to gather more qualitative information to better understand opportunities in your market.
5. Invest in new capabilities.
To reach aggressive sales goals, you don’t need to add more sales reps in many cases. Instead, develop more specialized sales roles and support those with other roles within the company. And, invest and provide your current team with better data and tools that could make them more effective.
The distribution industry continues to grow faster than the overall economy; despite concerns about the role of the distributor going forward, if you invest in the right thing, embrace data and think strategically, you’ll avoid the fate of distributors that can’t get beyond the one-size-fits-all model of the past.