Delivering for Best-in-Class Wholesaler-Distributors
January 30, 2017  |  ByMark Dancer, NAW Institute for Distribution Excellence Fellow
NAW-How to Build an Industry-Leading Sales Channel – Distributors in the Digital Era #3

Some Distributors Will Soon Have Industry-Leading Sales Channels

I’ve been looking at how channel disruptors, including both incumbent distributors and outside players, might restructure distribution-intensive value chains. A few predictions are emerging, including one that is worth discussing now: Distributors will soon build world-class, industry-leading sales channels.

Some distributors might think they have already achieved this status, but such claims are doubtful, if only because the traditionally thin margins earned by distributors have not allowed for the level of investment required to build world-class sales operations capabilities. Moreover, distributors are only beginning to attract the digital sales, marketing, and analytics talent required to stand toe-to-toe with online marketplaces like Amazon. This is not said out of disrespect. Distributors are supremely skilled businesspeople and entrepreneurs and have a well-earned reputation for surviving and prospering in very difficult and competitive value chains.

The path for distributors to build a world-class sales organization requires laser-sharp channel strategies and a robust capability development plan. The basic framework is emerging and can provide a roadmap for all distributors. Three critical elements or fundamentals that are a starting point for a hyper-competitive distributor sales models are

  • Multichannel excellence – a rough definition includes field salespeople that can create and measure value, and that only perform activities that must be accomplished in the field; inside sales reps that are as fully competent as field salespeople and compete for equal sales revenue generation; and online channels that enable customer self-service and drive (or lead) the distributor’s overall sales process
  • Digital tool utilization – modern ERP and e-commerce platforms are necessary, but not sufficient. World-class sales models align all digital tools (CRM, social media, mobility, and so on) with a company’s unique objectives, executed with excellence. If you are not using all tools, you have not loaded your arsenal with all available weapons
  • Advanced sales analytics – data is the key to dominance. Distributors are in a unique position in the value chain to leverage analytics that can drive customer experience, supply partnerships, and the distributor’s own financial performance.

If your business is acknowledged—by customers, suppliers, and competitors—as clearly ahead of traditional distributor models and on par with incumbent and new disruptors, you are on your way to world-class competitiveness.

Below, we offer three analytics for all distributors of all sizes to consider. World-class sales organizations use all of them. Large distributors will leverage their scale to build world-class sales capabilities. Smaller distributors can also seek sales dominance, with sales models built around a unique market position and entrepreneurial sales culture. Digital tools, smartly selected and expertly deployed, will be used by the Goliaths of every industry, but also by the Davids that seek to take them down.

Measure Response Rates to Drive Sales and Marketing Productivity

Response-rate analysis compares data about effort associated with sales and marketing activities with the data that measures the outcomes of that effort—and then establishes benchmarks and correlations. Once armed with credible response-rate analytics, leading sales organizations use it to direct and optimize sales initiatives and marketing programs. For example, response-rate analysis can help determine the incremental value of an additional sales call, on top of all previously completed sales calls. This is a marginal contribution analysis and it can be used to determine the optimal size of your sales force or whether to add another sales territory.

As one distributor explained:

“Now that we have CRM, our salespeople are accurately entering the number of sales calls and what is accomplished during the call. Call efforts ranges include providing marketing materials, reviewing business results, selling new products, and so on. Through our ERP system, we can align sales call data with overall customer purchases, purchases of new products, and participating in marketing programs. The combined data is rich enough that we can apply statistical methods and calculate the average value of a sales call. This was not possible before we had mobile devices, CRM, and sales processes that ensured that the data entered by our salespeople was accurate.”

Balance Sales Effort to Capture Missing Organic Growth

Balancing is about comparing opportunity and outcome instead of effort and outcome. Opportunity is a measure of the potential sales or profits. The goal of balancing analytics to ensure that a distributor’s total opportunity is appropriately allocated across the sales resources. More specifically, balancing is used to optimize sales territories, account assignment, and lead allocations.

The theory is straightforward. A salesperson with a rich territory does not have to work as hard as a salesperson with a lean territory to achieve the same results. By balancing account assignments or territories, sales effort is better allocated, or balanced, across opportunities. Salespeople with previously rich territories must work harder to achieve the same results, and those with previously lean territories have more opportunity to chase. The net result is an increase of overall sales without adding salespeople. As with response-rate analytics, the adoption and use of digital tools can provide much better data than previously available, enabling more precision around sales assignments and leading to significant sales growth.

Another distributor shared:

“We figured out a way to calculate opportunity in our sales territories and how hard the territory was to work by looking at the number, type, size, and location of current and potential customers. It wasn’t perfect, but fairly accurate in a relative sense. Then, we shifted territories to get more balance. Some territories grew because we gave salespeople more accounts to chase.  Some salespeople had to work harder to maintain their numbers. Overall, we grew our business without adding salespeople.”

Use Data Circles to Develop Closed-loop Metrics

Data circles are an analytical technique that captures data from the very beginning of a sales and marketing initiative, all the way to its ultimate outcome. This can require capturing data from across multiple databases within a distributor, and in more different applications, across databases that are held by a distributor and its best manufacturer partners. Creating data circles requires investments and dedicated, sustained work by leaders and analysts. They are an essential element for building a world-class, industry-leading sales organization.

The following image helps to explain the concept of data circles in two scenarios, one within a distributor and the other in partnership with suppliers.

World-Class-Sales-Channels-exhibit-4-5

The new study by the NAW Institute for Distribution Excellence, Getting Results From Your Digital Investments helps you to build a vision that is the right one for your company and then to take all the needed action to execute your vision. It provides advice for helping you make investments, mobilize people, and ultimately, get results from your digital investments.

Have you downloaded the Pocket Guide about this important study yet?
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Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer founded the Network for Business Innovation to drive awareness, advocacy and excellence for B2B innovation, and to enable an exchange of ideas between leaders on business transformation, technology adoption, social impact and community engagement. For more than 30 years, Mark has worked with leading companies to achieve go-to-market excellence across a wide range of industries in developed and emerging markets.

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