The New Salesman: Thinking Like Your Customer

Trade publications aren't just for decorating the lobby!

Trade Publications


One thing that differentiates great salespeople from the new guys and the “also-rans” is their ability to think like a customer.  I am told that the only real way to gain this type of insight comes via years of customer experience.  I’m not buying it.  We can accelerate the process.  After years of direct customer visits, I cannot think of a single lobby that didn’t have at least one (often a pile) magazine catering to the customer’s industry. 

These trade publications are a wealth of information surrounding the customer’s day to day problems.  Editorial pieces often prominently make the case for solutions to common critical issues - literally begging to be solved.  Other times, published studies point out detailed economic justifications for our products.  Our table is set; the sale is half made.

I recently came across an article so valuable to the economic sale; I forwarded a copy to many of my clients (it’s linked below).   If you happen to be a Sales Manager responsible for new guys selling pumps, drives, or other process related equipment, I recommend you devote time to ensuring your staff can talk intelligently about all of the points mentioned.
This wasn’t intended to be a sales brochure, but I believe it could be one of the most powerful tools in a new salesperson’s arsenal.  The short piece outlines the current state of many plants, the economic value of fixing the problem and everything the new guy needs to jump start the selling process. 

To get you started, here’s how I would approach my customer:

“Mr. Customer, I ran across this article in Plant Engineering.  I know you have many pumps in your plant and wanted to get your feedback on the points they made.  Do you think the numbers they present for cost of ownership are correct?  I know you have a plan and priorities for attacking the economics of your plant.  Can you share a bit about your plan of attack?”

 

Then I would pull out my notebook, shut up and take notes.  No product pitches, no fancy selling techniques – just listen.  Why?  Because only through a solid understanding and the ability to talk about these problems can a distributor salesperson become the provider of key business decisions.

 

Now a question for the new guys:  Was this difficult?  And for the new guy’s manager:  How many of your sales people use trade publications to further their cause?  If not, we need to talk.

 

Here’s the promised link…

Distributor Planning Made Easy.  Check out our Distributors Annual Planning Workbook:
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Don't Let the State of the Economy be an Excuse

The State of the Economy – a down and dirty analysis

Everybody always wonders how the economy is impacting business.  The topic comes in Numero Uno in the cocktail chat at most distributor association meetings.  No distributor to distributor phone conversation excludes the topic.  We are in some uncertain times.  In general I have heard stories of great Januarys followed by pathetic Februarys or some permutation of the story.   

Privately held distributors often won’t provide sales data for the record and sometimes exaggerate when asked.  Yet I believe most of us are still interested in what’s going on.  With this point in mind, we thought about providing a short recap of the publically held companies in our sector.  They are required by law to report sales so the information is real.  While there is a difference between their business model, territory and scope, I think it gives us a subtle insight into the economy.

Grainger

Up 4% compared to the same period in 2012.  This is a difficult number to contrast as Grainger is in a constant state of expansion in products and territories.  Here is an interesting little tidbit for distributors out there. “The company's gross profit margin increased 0.8 percentage points to 45.2 percent versus 44.4 percent in the 2012 first quarter, primarily driven by the United States segment.”   If your team is dropping their prices because of price competition from Grainger you better inspect the data.

Fastenal

Sales growth of 4.9% with the highlight announced… “during the first three months of 2013, we installed 4,352 new machines.”   We took a tongue in cheek look at this vending machine thing here.

AIT – coming May 2^nd

Motion Industries

Down 2%  (EIS – their sister electrical supply division was down 5%)

Wesco

Up overall, but organic sales were down 3.4%.  Using some hocus-pocus of numbers of days in the quarter and other stuff for the financial world, they are saying down between 1.8% and 2.2% let’s just say down 3.4%.  For those of you wondering about gross margin at Wesco here is what they reported.

Gross profit of …. 21.1% of sales, for the first quarter of 2013 improved 120 basis points compared to 19.9% of sales, for the first quarter of 2012.

We believe the gross margins of these companies are trending upwards as they apply more sophisticated pricing process to their business.  If your organization does not have a similar plan, we recommend you give us a call.  We are not in the pricing business – but we have studied it pretty thoroughly and have some recommendations for you.

A final note: What does this have to do with on-boarding?

The answer is probably nothing.  However, we feel you should share this information with your new sales guys.  There are two messages. 

First, if you are a knowledge-based, value creating distributor you should be outperforming these national players.  Why?  Well for one thing you are most likely doing more for your customer.

Secondly, gross margins are going up.  Distributors are making more money.  And, my guess is none of their customers are sharing that message.  They need to hear it from somebody.  You are hearing it from me.

As a footnote – these guys are not distributors but since a number of the distributors subscribing to this series serve the automation and electrical space.  And, because they enjoy such a large marketshare in the US it might be good to note this comment from the Rockwell Automation Quarterly announcement - Rockwell said U.S. sales rose 2.5 percent in the quarter.

Distributor Planning Made Easy. Check out our Distributors Annual Planning Workbook:

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The Rationale of Following Your Passion

Steve Jobs, Mark Zuckerberg and me.

During research for our book covering the onboarding process, we have talked to a lot of young people.  More than a couple are fond of quoting Steve Jobs.  He’s a rock star of business; one of those rare guys who crosses generations like a Keith Richards or Sir Paul McCarthy.  And while most of us prescribe to the follow-your passion theory, I believe the majority of business leaders have made a few conscious decisions to position ourselves professionally along the way. 

Does it make good business sense to follow your passion?

_______________________________________________________________________________

Distributor Planning Made Easy. Check out our Distributors Annual Planning Workbook:

http://amzn.com/1481196448

Calculation of optimum selling price using differential calculus

By Jackie, Researcher

Topic: Education

Area of discussion: Management and Cost Accounting

Chapter: Pricing decisions and profitability analysis

The primary objective of this posting is to demonstrate the computation of optimal selling prices using differential calculus. Ideally, the theoretical solution to pricing decisions is derived from economic theory, which explains how the optimal selling price is determined. Interestingly, it is possible to derive simultaneously the optimum output level and selling price using differential calculus, if the demand and cost schedules are known. For discussion purpose, I have taken a past year question from ICAEW Management Accounting; this is an advanced question and it focuses a lot on “equation”.

Suggested answers with workings:

Solution for a:

Fundamentally, profit maximization is achieved when dTC/dx = dTR/dx (or when MC = MR). Therefore, it is advisable to calculate the marginal cost (MC) and the fixed costs (FC) first, so that we can use them to form the total cost (TC) function later. On the other hand, total revenue (TR) function can be found by multiplying selling price (SP) per unit with the output quantity. To solve ‘question a’, we need to calculate what is the maximum profit when the new machine is not leased and when the new machine is leased. Decision on whether to lease or not to lease the machine will depend on the option that can give a higher profit.

Note: The cost of materials per unit (i.e. £2/unit) could be found by dividing £400,000 with 200,000 units. However, do not apply this method (i.e. £90,000 ÷ 200,000 units = £0.45/unit) to compute piecework rate because the computed figure is a sunk cost and hence, it is irrelevant for decision making purposes as the price of the piecework rate will increase to £0.50 per unit in the coming quarter.

[Cont'd]

Note: If the new machine is leased, then the cost of materials will now be £1 (i.e. £2/unit x 50%) as the quality control problems will be eliminated, resulting in a halving of the usage of materials. Besides, the cost of leasing the new machine per quarter (i.e. £115,000) will now be an additional fixed cost element.

Solution for b(i):

Again, this is quite similar with ‘question a’. Profit maximization is achieved when dTC/dx = dTR/dx (or when MR = MC).

Solution of b(ii):

Please bear in mind that, profit maximization ≠ sales maximization. Total revenue will be maximized when MR=0.

Additional readings, related links and references:

For more questions on pricing decisions and profitability analysis, you may go to this link; there are a lot of past year questions taken directly from CIMA, ACCA and ICAEW.

http://www.tlint.com/emea/drury_6e/student/instreviewques/11questions.pdf

Product costing/Pricing strategy: Emphasize more on economics. Computations of profit maximization are included and well-explained. Ample graphs and tables are provided for illustration purposes.

http://www2.accaglobal.com/archive/sa_oldarticles/43958

For students who are interested to learn this in a greater level of details, you may download extra notes, print out, and keep a copy for your own references/studies purposes.

http://download.nos.org/srsec311new/L.No.41.pdf

Optimization problems & solutions in calculus. This is a very short article. It explains the formula: f'(x) = a(x^(a-1))

http://www.ehow.com/info_8062745_optimization-problems-solutions-calculus.html

Calculus review and minor short exercises.

http://www.sfu.ca/~zhent/files/Calculus%20Review.pdf

April Fools Contest!

Just a reminder – it’s April 1^st, better known as April Fools’ Day.  They say a person grows by taking risks.  We grow by pondering the foolish things we have done.  We help others by sharing our learning path. 

I thought I would share one of those foolish moments from my own career.  Many years ago I covered a geography measuring 150 miles x 200 miles.  One would think organization would be an important part of the equation.  Early on, I decided to take advantage of the fancy leather bound calendar issued by my employer.  Each month was a new insert for the calendar and I did my best to set up appointments using the tool. 

However, each month came with an insert.  And, I didn’t do a very good job of making sure I had the right insert for the following month.  The result – I scheduled a whole round of appointments on the wrong day of the week.  This culminated with me finding myself driving several hours for an appointment only to learn it was on Wednesday instead of the Friday.  A whole group of customers had gathered for my important presentation – I didn’t show.  They were less than impressed.  I lost the sale to an arch competitor.  I was a total jerk.   

Here’s our plan.  We are working on a book about on-boarding for new sales folk.  Share one of your dumbest mistakes with us and win a prize.  The person with the most blatantly bone-headed screw up will win a gift card from Amazon.  The second prize winner receives a copy of our latest book on distributor planning.  And, everyone else will receive our undying gratitude written on the back of a genuine post card from Iowa. 

Send your responses to us at RHC here or post them for the whole world to see in the comment section.

Distributor Planning Made Easy. Check out our Distributors Annual Planning Workbook:

http://amzn.com/1481196448