The Death of a Distributor - The Wrong Kind of Culture

A typical Iowa summer storm-2013

Recently, I had an opportunity to visit with some old friends. We’ve known each other for a very long time and I felt as though I really knew their company. Back when I knew them, they were innovative, entrepreneurial and aggressively nimble in their approach to opportunities.

Lately, the supplier grapevine is rife with reports of their slow-down. Instead of the glowing stories of the past, comments like “can’t make a decision to save their soul” and “everything is a committee” flowed through the market. Even competitors had chimed in with tales of grabbing business opportunities away from their company. None of the stories seemed right or reasonable, based on my previous experiences. But things change…

My conversations with these old friends were telling. As we talked about business and all that was going on in their lives, I recognized something. Somewhere over time, this company had changed from an organization that learned from mistakes to a place where mistakes were to be avoided at all costs. The message was out; mistakes will be remembered and punished.

In the past, when an employee recognized a window of opportunity, they felt comfortable pulling out all the stops to capture the business. Mangers who noticed a new or innovative approach to solving a problem thought about it for a moment then put the full force of their authority behind fast and immediate action. Decisions were made, actions came immediately and the results often caught competitors napping. Were mistakes made? Absolutely, mistakes happen. Were the mistakes sometimes costly? The answer again is yes, but looking back costly mistakes occurred on just a few very rare occasions. On the other hand, the number of positive outcomes was huge.

Somehow the culture of the company had shifted.

Davenport, IA during the
Great Mississippi Flood of 1993

When presented with opportunities, the company’s managers create committees to discuss, rehash, and dissect the course of action. The committees, knowing full well mistakes are punished, avoid making bold moves. Very often, by the time a decision is made, it is diluted to the point of not providing a substantial competitive difference. In many instances, decisions are made after the opportunity has expired.

The net result has been slow growth and employee stagnation. Entrepreneurially spirited employees have moved on. The whole place moves forward like a bunch of bureaucrats positioning for the next election.

Deluded to the point of dumbness, this previously high flying distributor’s leadership team congratulates themselves on employee involvement. Committees, task forces, ad-hoc groups abound. Lots of talk, massive study and lots of smoke with very little fire replace action.

I went away from my meeting feeling spent and tired. What a shame to see something like this happen. I generally stay away from the whole “culture thing” but after seeing the negative impact, I had to vent. Here are five valuable thoughts framed by the words of great leaders from business, politics and big-time sports:

“A good plan violently executed today is better than a perfect plan executed sometime next week.” General George Patton
In distribution, timing can be everything. If involving others slows down your decision process, you lose some of the advantage. Innovative new product lines are scooped up by competitive distributors. Customers find new alternatives elsewhere. Highly qualified prospective employees get a job down the street. Carefully review your ability to pull the trigger quickly.

Quad Cities Ice Storm, Davenport, IA-2013

“If you see a snake just kill it… don’t appoint a committee on snakes…” Ross Perot
Decide early on who is qualified to make decisions. Committees are a useful tool, but somebody should hold the decision making power inside the committee. Beware of managers who take everything to committee and use the committee as their excuse for underperforming.

“If you're not making mistakes, then you're not doing anything. I'm positive that a doer makes mistakes.” John Wooden
Mistakes are valuable learning tools. I would never recommend ignoring mistakes. Quite the contrary, I recommend analyzing mistakes. By better understanding the circumstances, why the mistake happened and how your team could have responded differently, a distributor can train their people in a real world setting. It’s only when the similar mistakes are repeated over time that disciplinary actions should be considered.

“The more people you make responsible for something, the less chance there is for it to get done.” Jason Fried – 37Signals
Involve a committee if you must. But activities are completed when one person is responsible for making things happen. Group decisions along with shared responsibility set the wheels a spinning.

“The buck stops here…” President Harry Truman
If you occupy a leadership position in a distributorship, albeit Owner, President, VP, Sales Manage or something else, you are responsible for the decisions of the team. When things go wrong, absorb the heat. That’s your job.

A parting thought….
I find the quotations of those great leaders of the past inspiring. Across from my desk hangs a portrait of President Andrew Jackson. His men called him “Old Hickory” because he was tough and aggressive. He made some tough decisions and at least a couple of time, he made poor decisions. He played an instrumental role in pushing our young nation to greatness.

He also said, “I was born for the storm. The calm does not suit me.”

I say create your own storm.

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The New Salesman: Personal Marketing

Marketing is not just a department down the hall

Here’s a story. A couple of weeks ago I was working in Eugene, Oregon. It was lunch time and rather than eat at the hotel, I decided to let “Yelp” (a great free app for your iPhone) do the deciding. I plugged in restaurants and took off for a hole in the wall joint with great gyros.

The directions took me to a “locals only” joint with a walk up counter and a few seats out on the sidewalk. I placed my order and started taking in the ambiance. One side was plastered with pictures of Chicago, an Albanian flag and dozens of grease drenched documents produced by local patrons who had consumed mass quantities of the lamb specialty. The opposite wall displayed posters announcing local festivals, concerts and Independence Day events. A table in the corner held a collection of business cards; everything from termite terminators to tae kwon do masters – and one very special card.

Photo: www.NathanWallner.com

The card carried this message: KnuckleSandwich Distribution.

I am a distributor guy. I have worked for, consulted with, or known distributors from nearly every one of the National Association of Wholesalers’ 300-plus lines of trade. KnuckleSandwich Distribution was intriguing. It caught my eye and moved me to grab the card. I had to know more.


The guy behind the card is Nathan Wallner he is a veteran, recent graduate from the University of Oregon, a Mixed Martial Arts combatant, and fitness instructor. He understands marketing and is creating a brand around – himself.

There’s a lesson here. I believe it’s time distributor salespeople take a quick look at “marketing themselves”. Here are four things to get you thinking.

What do you want to be known for?
Are you the local expert or the lowdown discount guy? I sincerely hope you are providing your customers with more than a price. Deep discount guys always tell me they are the last of the big time deal makers always looking to save their customers money. While I believe negotiation and aggressive pricing have a place in the distributor sales world, the best customer value comes in other ways. Innovative ideas which increase uptime and personnel productivity provide way more value than cutting 5 points off the buy price. Plans for decreasing rejects, energy consumption and financial risk make your customers thousands. Improvements in the way they do business provide an ongoing steam of revenue. Cutting price saves them a measly handful of dollars. And, it’s a one-time deal.

Don’t confuse your company’s tag line for personal marketing. Distributor organizations with mottos like “our service is the customer’s competitive edge” have salespeople who market themselves as “dirty deals done dirt cheap”. If you want to provide value-creating solutions, talk about value not price.

Who is your target?
Marketing professionals call this the Perfect Prospect Profile (3P). This one is a little tricky because we sales types like to think of the world as our oyster. The truth is, we do better if we invest just a bit of time into determining which customers benefit most from our work. Selfishly, we need to determine who will be willing to pay for our efforts. If you create customer value, the customer must be both willing and able to afford your offering.

This little factoid may rule out accounts which are very small. Customer organizations with overly aggressive procurement groups may not deserve the same attention as those who appreciate your work. Developing a tiny account may make you feel good all over, but the commission check may lead to a life of poverty. We’re investing our most precious commodity – time. Stack the deck in your favor by selecting the best opportunities.

Segmenting: Different Customers - Different Needs
Rookie sales guys make the mistake of thinking of customers as, well, customers. We live in a customer world, but some salespeople still trot around with “product of the week” demo units. Let’s see, it’s the week of January 23rd so every customer gets treated to a product pitch on the double left handed widget; regardless of interest or need.

The customer’s time is valuable. Your time is limited. If you match product needs to specific customers or groups of customers, your presentations will be more successful. And, your customers will put a higher value on the time they spend with you.

Further, segmenting allows for higher margins. One of the first things Pricing Expert David Bauders instructs distributor clients to do is review the pricing offered to tiny and small customers. Typically, the small customer pays more than the gigantic guy down the street. Taking advantage of this market phenomenon allows you to create a better mechanism for getting paid for your work.

The Touch
Marketing professionals call customer contacts a “touch”. For instance, each email sent to a customer is a touch; so too are phone calls, mass mailings, and finally, your sales calls which are the ultimate touch.
Each touch causes the customer to momentarily think of you, your company and your products.

Customer relationships are constructed over a period of time. Each properly executed touch is a building block in that relationship. Think of your personal friendships. Many of our closest friendships involve a period of time where you interacted with your friend on a regular basis.

For example, some of my closest friends are classmates from school. We saw one another on a daily basis for years. The friendship was cemented. Now let’s think about a customer we call on once a month. How long does it take for you to build a friendship? It could be a year, a couple of years, or longer. We can use other touches to accelerate the time required to build the rapport.

Touches can come via phone calls during the period between call. The words might sound like this:
“John, I was driving down Highway 61 and was thinking about you. Did the literature I dropped off last week give you everything you needed?” Even if you just leave a message in the customer’s voicemail, you have left the impression that you’re not just thinking about them during the sales call.

Touches can come via a hand written note on a magazine article. Here’s how this one works. John’s company was talked about in Widget Times. You make a copy of the page and mail it to John with this inscription on a Post-it Note: “John, I saw this and thought you might like to review it.” If

the magazine article covers a personal interest rather than business, it’s even better. Early in my career, I had a customer who shared his love for antique air rifles (BB Guns). A couple of weeks later, I saw a story in the Des Moines Register (my local newspaper) about the surging popularity of BB guns. I tore it out and sent it along with a note. From that day forward, I was treated like royalty in his office. My knowledge of the infamous Daisy Red Rider had nothing to do with business, but the message rang true; I was thinking about John even while not seated across the desk from him.

Touches can come from emails too. But beware, many people hate email spam. Bulk email blasts with generic impersonal messages aren’t really a touch. In fact, they often have an opposite effect. If you email someone, make it personal and specific.

The End, but not really
Create a brand, be unique, and understand your customers. Treat customers as individuals with specific needs – this applies to companies, departments and individuals. Ponder their reason for buying from you. Accelerate your relationships by letting customers know you think about them when you’re not making sales calls via alternative touches.

And just in case you're in doubt about the Knucklesandwich card, here is what it looks like.  A bit worn from being a the restaurant, but it sure packed a punch with me.  

Think about being a Knucklesandwich Distributor. Nathan Wallner has it right. He has a message.

Have an interesting card that draws attention?  Send us a picture and you may see it right here some day!

Let Freedom Ping

Independence, Freedom and Adios Autonomy

It’s Fourth of July Week in the United States.  Independence Day, America Day and the Fourth of July are all names marking American Freedom.  The distant beat of John Philip Souza patriotic melodies mingle with the steel gray smoke of fireworks in the distance.  Folks, kids and cousins gather at the local park, braving the summer heat, grass stains and mosquitoes.

To steal a phrase from my pal, Tom; “That’s the way we roll in America.  We’re celebrating Freedom and if you don’t like it-- tough.”  Under this great backdrop of Freedom, Independence and Liberty, I would like to raise a discussion.   

Electronic Privacy in the Sales Department

The word is out.  The government has accessed the phone records and electronic data of all of us.  Deep within some top-secret vault in a non-descript suburb of Washington DC, they have our text messages, our emails, and other goodies.  They know precisely how much time you spend reading this blog (Pretty scary, huh?).  Along with this information, they have your location coordinates.  If you’re sporting a fancy phone with GPS built in, they know your location to within 15 feet on the vertical and horizontal axis.

Simply stated, some analyst at the National Security Agency in Washington, DC knows if you are making sales calls or hacking the ball around the back nine. 

Nope, I’m not spouting the latest conspiracy theory.  For the record, I haven’t seen any jet-black helicopters hovering over the River Heights cottage.  I believe the hummingbird I saw yesterday was real and not an NSA drone learning about channel issues. 

I do believe we are entering a new world of data combinations.  And the Fourth of July, a day marking freedom and independence is an especially good time to broach the subject.

How much freedom does a salesperson deserve?

A few days ago, A Midwestern Distributor asked me to be part of a sales force evaluation process.  As we worked our way around the conference table, it appeared each sales manage had a couple of sellers with questionable numbers.  What’s worse, the reporting tools available (call reports and opportunity/funnel reports) made their managers wonder just how hard the salespeople in question were working.

The conversation took a turn.  The Vice President of Sales quacked, “We should put a GPS on their cars.  I’d bet you J.R. (name changed to protect the guilty) doesn’t make four calls a week.  One of my friends lives in his neighborhood and sees him playing tennis every morning at 9:00.”

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One of the younger managers commented cell phones have tracking capability built in… just in case anyone was serious about using it.  I think the group was ready to pounce on the idea.  Fortunately for “J.R”, they decided some of the sellers owned their own phones and turning on tracking required settings on the phone.  And, maybe they needed to think about a policy before they ran down that particular path. 

A few facts on GPS tracking

According to at least one supplier of GPS trackers for corporate fleets, the average fleet client sees a 20% improvement in gas mileage when monitors are added to vehicles.  They chalk this up to better driving and less idling time.  Vehicle maintenance goes down.  And accidents see a similar decrease. 

From a purely theoretical standpoint, the GPS system would give managers some interesting data.

1)      Managers can set a GPS Monitoring System to automatically generate an email when a salesperson’s vehicle/phone or other device leaves a “normal territory”.  This is pretty handy for monitoring those summertime trips to the beach during selling hours.

2)      Managers can set the system to receive a report of places the car/phone or other device stops along the day.  This might be translated into sales calls, activity reports or stops at the local golf club. 

3)      Data on start time and office time is very easy to follow.

With an increasing number untested salespeople working from home offices, sales managers are asking themselves the question, “The clock is striking 3:00.  Do you know where your salespeople are?”

Spy in the Sky

To many the GPS/electronic tracking stuff smacks of an Orwellian Big Brother.  This runs counter to the sales stereotype of the “Lone Ranger’ salesperson.

Stoic, independent, and free the Lone Ranger roams his/her territory fighting for truth justice and the American way.  In this group’s mind, any management ends at the edge of the parking lot.  They follow their own process, doing exactly as they please and justifying their actions on myths of the past.

Putting an electronic monitor on the sales team sounds a lot like ripping the mask off the Lone Ranger.

Reason, Common Sense and Civil Discourse

Quite honestly, I can convince myself to go either way on this topic.  For the last several days, I’ve felt like I had an angel on one shoulder, and the devil on the other.  Here’s what they’ve been whispering in my ear.

Angel	Assume positive intent Frank, most sales guys are hard-working, honest and loyal to their companies.  How would they feel if suddenly their managers decided to spy on them?
Devil	Frank, don’t be a sap.  If the salesperson isn’t doing anything wrong, why would they care if the boss knew precisely where they were at any given time?
Angel	Being a salesperson requires lots of flexibility: sometimes sellers start late, sometimes they work into the wee hours of the night.  Most put in long hours in a super stressful environment.  Do they need the stress of explaining every second of every day?
Devil	Frank, you’ve got to be kidding me.  The hard working guys work hard constantly.  Every move they make is to generate business.  The slackers talk big stories but you know they’re goofing off.
Angel	This whole thing raises massive questions about work place privacy.  What is a salesperson has to stop during the day for personal reasons?  Should they be required to explain deeply private matters with their boss just because he knows they stopped off during the day?
Devil	Now I know you’re joking!  Everybody else in the office has to ask for personal time and those “prima donnas” in the outside sales group can just buzz around town like they own the company.  What makes them so special?

Ok you get the idea.  This could be controversial.  I am still making my mind up on the potential of electronic monitoring.  What say you?


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The New Salesman: Square Peg, Round Hole

My assistant came back to the office today with a distinct look of disgust.  Apparently she did some last minute dress shopping over lunch.  She went on to explain how infuriating it is when a salesperson tries to cram a “hideous mess of a dress” on to anyone willing to buy.  She further explained how she had met this salesperson before and was given a song and dance about how great an outfit looked, when clearly it was just meant for a mannequin.  This trip, she tried to avoid this salesperson and with good reason.  While I laughed at her fitting room trials, I couldn’t help but think about how it’s not just mall employees who push their way in for a buck.

Tips for the New Guy – Don’t sell a square peg for a round hole

Want to ruin your career?  Just establish a reputation as a guy who “force fits” the wrong product into customer applications. Customers will never forget or forgive you for it. 

I call the practice selling square pegs for round holes. Allow me to share a war story.  Join me as we hop into Mr. Peabody’s WayBack Time Machine.  We’ll set the dials to the 1980s. 

One of my friends was working for an automation company.  The company had just launched a brand-new product – but it was a dog.  The technology was too little and too late for the market.  Nearly everyone-- customers, competition and salespeople, recognized the issues.  But the upper management of the company insisted the product could be sold.  When it didn’t sell, they instituted a large ($1,000 back when this was a lot of money) bonus for anyone making a sale.

My friend leveraged all the trust one of his customers put in him to force the product into their operation.  He collected the bonus check, and prepared to live happily ever after.   But problems soon showed their ugly face.    

The product didn’t work in the application.  The customer (and my friend) worked weeks trying to get some level of suitable operation.  But again, it was the wrong product.  And, even though networking wasn’t the same back then as it is today (no internet, no users groups, no on-line forums), the customer soon came to realize others knew about the problem well before their purchase.

They felt burned, ripped off and abused.  And, my friend was caught in a terrible position.  He had sacrificed the customer’s trust for a hand full of bucks.  He sold a square peg for a round hole.  Branded: My friend was permanently branded as a guy not to be trusted. 

Here are three rules to follow in avoiding the label

Rule One - If your company doesn’t provide the right solution to the customer’s problem, don’t try to force fit a product into the wrong application.

If your product doesn’t work well in a hot environment, explain to the customer why you think this time you need to NOT make the sale.  Doing this demonstrates your integrity and adds to your reputation as a trusted adviser. 

If you know a competitor has the right product, offer to assist the customer in selecting the correct solution.  If multiple competitors offer an appropriate solution, I recommend directing the customer to the competitor with the lowest overall competitive threat.  Online sellers fit this bill, because they rarely push for other business.  Mostly, they simply process the order.  Some sellers have even offered to purchase the product

and pass it along to their customer at cost.  Either way, you send a strong message to your customer – you are a guy who can be trusted.

Many of you have fiscal year end approaching!

Rule Two – If no real solution exists, explain the risks of using your product.

Sometimes, no real solution exists.  Every now and then we run across an application where no real solution exists.  This is a rare occurrence but it does happen. 

Your solution may work, but may not last very long.  The product in your catalog may need to be modified to work.  There are probably risks.  Make certain the customer understand what might happen and that you are only making the suggestion because you can think of no other solutions.  The customer wins and you might still make a sale.

Rule Three – Your solution doesn’t have to be the best on the planet, if it works for the customer.

This whole “square peg -- round hole” issue confuses many new sellers.  They wonder if their products and solutions must be the absolute best on the planet.  The answer is no.  If your product works for the customer and solves their problem, it works. 

There may be other products that run faster, cost a little less, and have a sexier connection, but solving problems is your stock in trade.  The competitor’s product may run for a million operations, but if the application calls for 10,000 cycles and yours will work.  You have done the job.

A final word…

There are a few sales managers out there who are looking for salespeople to “force fit” their company’s offering everywhere.  Most times, it comes as a lapse in judgment.  On rare occasions, it’s a deeply seated case of machismo taken to extreme.

My friend’s management team tried to slam products.  They offered outrageous rewards.  My friend bought into the program.  He got his bonus but lost a more valuable thing – customer trust.

When your manager insists you sell the wrong product, get clarification.  Are you missing something?  Is your manager missing something?  If it’s the macho “I can sell anything to anybody” issue, we need to talk.  Give us a call.

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Channel Killing Blunders: The E-Store

Distributor Policies – Worst Practice Mistakes Revisited

In the past couple of weeks I have been bombarded with horror stories of distributor policies gone wrong.  I have to wonder how and why so many manufacturers fall into the same traps.  Perhaps they don’t have a vehicle for benchmarking distributor practices. 

Manufacturers with strong distribution channels typically participate in Distributor Associations and one can surmise networking takes place to some extent or another.  If not directly with other manufacturers, then information may be exchanged by way of distributors sharing best practices.  The others, well some days it’s tough to imagine where they get their input. 

Management teams from Europe and Asia often don’t truly understand how the channel works in North America.  The whole concept of distribution sounds as goofy as buying hot dogs at a barber shop to their native sensibilities.  I mean, if you don’t really understand value proposition of a distribution channel, the set up really does seem like a massive margin giveaway.  This isn’t an excuse, but it is a definite possibility.  Wholesale distribution in North America is generally more professionally developed, provides greater value to their supply partners and customers than channels elsewhere who merely handle paperwork. 

Newly minted MBA’s often only understand wholesale distribution in an abstract way.  After reviewing some of the case studies developed around wholesale distribution for MBA programs, our kind of industrially focused and knowledge-based distribution lacks representation.  Instead, one is likely to see stories of food, beverage and pharmaceutical distributors.  In other words, unless they seek to understand what we do, they can only imagine our model looks just like the local Dr. Pepper Distributor.  

Regardless of the reason, their mistakes cost them plenty… money, marketshare, growth, brand recognition and the good will of the world’s largest industrial selling resource.

I plan to publish a series of channel killing blunders but to get you started here is a good example of a bad strategy:

Case 1: Poorly thought out E-Store Strategies

Everybody needs an e-Store

Manufacturers are playing with the concept of e-stores.  They get bombarded with articles and sales calls expounding the benefits of an e-store presence.  In theory, the ideas make sense.  Provide customers who lack a local distributor relationship an easy outlet for your products.  While in most cases, a list of distributors by zip code would work just as well at a fraction cost.  Based on the view of e-stores only serving customers without a distributor partner, the e-store concept still seems benign.

Issue arises.  Nobody actually uses the e-store.  Careers are on the line.  Somebody has to do something.  After all, the manufacturer laid out big bucks to have it programmed, produced and populated.  Why not call on marketing to attract business?

Distributors discouraged

Advertising your e-store irritates your channel.  Distributors hate direct business because it has a long checkered history of abuse.  Distributors value sales leads.  Most do a pretty good job of following up on the leads.  Progressive distributors see leads as door openers for not only one product but for their whole line card.  Some turn into immediate sales opportunities, others bloom over time (after weeks, months, and years of nurturing calls).  But when an e-store is in place, it becomes the recipient of any new leads.  If the advertising works, the e-store gets traffic.  But since most customers want someone to provide intelligent assistance along the way, e-store purchases don’t happen.

Still no customers down at the e-store
The e-store manager contemplates business levels (or lack thereof), they assume published list prices are the culprit.  Cutting prices on the e-store should attract customers who are “on the fence” or comparing brands.  Unfortunately, discounting published prices impacts distributor margins.  When the distributor’s customer says, “I can buy the product cheaper on the internet.”  The distributor salesperson usually gets the sale, but at a lower than normal margin.  If they hear the “cheaper on the internet” story more than a couple of times, most distributors will switch their strategy.  Distributors who once actively sold the manufacturers product by finding new applications and converting competitive business invest their time in more profitable products (in selling time is money).

If the online price gets low enough and the distributor feels they no longer make sufficient gross margin to turn a profit, the distributor will begin to actively target the e-store owners product for conversion to another line.

A word of warning to the guy with an e-store
If you are congratulating yourself on not yet seeing distributors switch your products at the customer, you’re not out of danger.  Product conversions take time.  By the time you notice the effort, it will be too late.

Shipping is part of the price

If the customer gets better shipping terms than the manufacturer’s authorized distributor, it will affect your distributor channel too.  Why provide free freight to online customers, but charge distributors a freight fee?  A combination of low prices and free freight will “whip up” your channel’s blood pressure just as quickly as dirty deeds done dirt cheap pricing.  

Sometimes, the e-store doesn’t even belong to you
Every manufacturer should have a published distributor policy for advertised prices.  Without even committing a single of the e-store sins described above, a handful of distributors adopted strategies for using the internet (and very low pricing) as a tool for expanding their business. 

These wholesalers have taken on a new business model for business.   They see themselves inserting technology in place of a sales force.  Working the internet model to expand their business to the world is their credo.  I appreciate their entrepreneurial bent.   However, I also see the poaching effect of their very low prices on the distributors who actively sell.  They provide deep discounts and do absolutely nothing to promote their manufacturers’ brand, discover new applications or grow the marketshare.

I am not an attorney

I’m not passing myself off as an attorney, but here is my understanding. 

It is illegal to dictate price levels.  If the on-line guy wants to give the product away, that’s their right.  However, you can dictate lowest advertised price.  The customer can still call and negotiate, but that’s another step and it’s the banner add with a super low price that hurts your distributor efforts.

Finally…

We’ve all benefited from best practices.  Perhaps some can benefit from a list of worst practices.  If you see a manufacturer who is going down this path, shoot them a link to this post. 

Better yet, if you have a favorite worst practice to share, send to me.  We’ll add it to our list (without naming names or companies).

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