Sales Training for Distributors – Don’t forget Inside Sales

Last week I threw out some thoughts on sales training for distributors.  The response was great, but I received more than a half dozen challenges from inside sales groups.  The overall feedback could be summarized as: Don’t forget about Inside Sales. 

The comments reminded me of a couple of points:

• Outside Sale people may make the phone ring, but it is the service the customer receives when they call that keeps customers coming back (aka customer retention).
• Most customers gauge Distributor customer service by the quality of the Inside Sales team.

Historically, distributors have focused on outside sales improvement…

Experience shows when distributors invest in skills training (which is meager at best,) they tend to focus on the outside sales position.  A quick “Google Search” on the topic of “distributor sales training” brings up something like 28,600 results.  While I didn’t read all 28 thousand of them, I did look at the first twenty listings.  All were outside sales related.  Assuming that training organizations follow the money, we can assume there is darn little effort devoted to the team who keeps the customer calling and by which our customer service is often judged.  Houston, we have a problem...

Inside Sales was once a baby step in
the trail to Outside Sales

There are three potential reasons for this lack of investment in inside sales: 

1. Back in the good old days, inside sales was viewed as a stepping stone job for outside sales.  The career trajectory for most people looked something like this: start in the warehouse, move to the counter, go to inside sales and finally grab a company car and hit the road.  Compensation for inside sales people was meager and anyone who stayed in the department was viewed at lacking in personality, drive, motivation or intellect.  You might say the good old days were not so good for the inside team.
2. Most of the sales managers serving the distribution world grew up in the outside sales world and don’t understand the inside sales role well enough to realize what training should be focused toward.  They realize the need for training but tend to see it as a subset of the training they provide for outside sales people.
3. Again going to distributor sales managers, most grew up in a pre-internet environment.  Only the most progressive managers realize selling roles have shifted.  Customers no longer count on their outside sales person as the harbinger of information.  Research indicates customers review products, find information and make preliminary decisions without waiting for data sheets to be delivered by their friendly outside sales resource.

The job of inside sales is changing…

Just a decade ago the job of inside sales centered on transferring phone and fax orders to computer system (ERP) orders, answering questions on delivery and selecting the proper part number from a customer’s detailed description.  All good stuff for the time, but nothing like today.

The end of these activities is on the horizon.  New computer technology allows orders entered onto customer PO forms to be automatically entered into the system without human interface.  Further, some of the product selection criteria has been automated or moved to mobile apps allowing customers to better determine the proper catalog number (even in instances where complex part number strings are involved.)

Today customers look to inside sales for more.  For instance, for most distributors, the first line of price negotiations has been switched to the inside sales team.  Front line technical support falls on to inside sales to do some logistical matters like expedites, freight issues and invoice clarification. 

Provide world class technical support and you will attract customers.

How do we train for customer support?

If your companies sells highly technical products (Programmable Controllers, computerized operator interfaces, complex sensors, drives or irrigation controllers, programmable heating systems, etc.), we recommend establishing an inside specialist(s).  This person would be the phone resource for customers with urgent issues. 

The inside specialist need not be a new hire.  We have seen companies delegate slices of their technology to individuals with keen interest in the products.  This will work well assuming the person is not overloaded with other tasks. 

But product support can be taught.  First, let’s assume customers commonly ask the same set of questions.  Identifying these questions and training on the answers grows the overall support.  Rather than being tasked to learn everything, inside sales is taught to understand the 20 most commonly asked questions on the product. 

Further, inside sales is taught a plan for escalating the call to someone more knowledgeable.  Years ago, my own organization created a “who to call list” which allowed the inside team to access factory and internal experts on various topics – but not until the problem was qualified.

Train for add-on product sales…

The most powerful marketing tool in history is McDonald’s

own, “Would you like fries with that?”  Sure, everybody knows Mickey D’s has fries, but just prompting the customer with the question turns a five dollar order into a seven dollar ticket (a 40 percent sales boost not considering fries have a high gross margin for the company.) 

Many of our computer systems (ERPs) allow the addition of suggested sale or “goes with” products.  We need to reinforce the importance of both populating the system and training our people to remind customers of products they may have forgotten.

Proper pricing can improve the inside sales role.  First, without a well-developed pricing system, inside sales teams devote lots of time looking up last prices paid and checking on price levels with their outside sales counterparts.  Inside sales should be trained to spot poorly maintained price files and provide the feedback required to get these fixed.  Second, inside sales people should learn a few basic negotiating tricks to avoid being “duped” by procurement professionals who have been trained in the science of negotiation.  If you have not yet see the information provided by Strategic Pricing Associates or their sister company SPASigma, we recommend you check out this really funny video.  

Again a special offer…

Last time we offered a postcard from Iowa to everyone who shared their suggestions for sales training with a grand prize of a professionally developed training class set up to be shared with your team.  We are repeating the offer.  No obligation, no telesales calls, no nothing.  Everyone will be a winner. 

Postcards from Iowa for every entry.

Free Sales Program to the coolest suggested subject.

BTW –Sue from California was our winner last time.  Sue claims she had never received a genuine postcard from the Tall Corn State.  Sue, we expect more entries.  The USPS wants to bring you another card.  

Inside Sales in Tough Times

If restaurants can upsell, why can’t we?

After a whirlwind trip around the country and a couple dozen meals in places ranging from pizza to posh, I want to share an observation:  Restaurants know how to upsell.

From the lowly “do you want fries with that?” to the more sophisticated and expensive, “at least let me show you our dessert tray,” food service folks have created a culture of upselling.

Aside from the pounds I’ve managed to pack on, I wanted to gain something from the experience.  How can restauranteers train surly teenagers making minimum wage to automatically upsell when we struggle to convince professional, commissioned inside salespeople to do much more than say “thank you” and push forward?

Thinking back, I don’t recall a single moment of agitation caused by this constant upsell campaign.  When poorly done, I simply smiled and said “no, thank you.”  But, getting back to the dessert tray, I was actually glad I was re-sold.

Distributors encouraging their inside sales or customer service teams to upsell, add-on sell, or otherwise pro-actively impact business, always get pushback.  Typically, complaints fall in to five major categories:

1. My customers don’t want to be sold.
2. Our products don’t lend themselves to upselling because they are too technical, too expensive, too bulky, etc.
3. Our people don’t know what to recommend as an add-on.
4. Our inside/customers service people don’t know how to sell.
5. Our customer service/inside people revolt whenever we ask them to sell.

Our attempt at an upsell...

A few weeks ago we wrote “Tough Times Call for Tough Love.”  I believe now is the time to determine why your team isn’t upselling.  If your company falls into category five, something needs to change.

Some Thoughts on Starting

Start simple.  Instead of asking for a product sale, ask if the customer is aware of some new program, training event or if they receive the company newsletter.

Develop a list of add-on, lower cost commodities.  For example, electrical distributors might want to consider asking for wire markers or the multi-color tape used for identifying cables.

If your computer system allows for “suggested other products,” invest in populating the data fields for your top 200 items sold.  

Hold a weekly “Inside Sales Huddle” to reinforce the need for add-on sales.  Ask each rep to share their successes.  Talk about the customer value of properly done suggested sales. 

Here are a couple of topics to discuss with your team:

1. The phrase “Would you like to supersize that order?” has been estimated as generating over $1.3 Billion in added sales.
2. Amazon recommends additional products (add-on sales) by saying “customers who bought this item also bought…” and lists other products.
3. The young lady in Chicago who suggested that I “just look at the dessert tray” ended up adding $14 to my bill.
   You'll notice these are all examples of painless ways to upsell.  They are not forced, but rather have a natural flow.

We need to begin the journey now…
Times are getting tough.  I just read a great report on the Electrical Trends Blog indicating the electrical market is trending downward for the first time in seven years.  For years, distributors have talked about getting started in with upselling.  A few have been successful.  Most have simply allowed the topic to wither on the vine.  Now is the time to make it happen.

Pricing Professional – The time has come

Over the past decade, modern distributors have implemented massive organizational change. Most were driven by customer needs and market demands while a few others were based on shifts in the behavior of our supply partners. But, I believe the time has come for us to consider our own needs. The time has come to build a position which benefits the shareholders of the wholesaler.

For the next few moments, let’s review some of the new positions and faces around most distributors.

Enter the Professional Salesperson
Based on any objective view, salespeople have become more professional. Rather than the back-slapping, good ole boy relationship builders of our fathers’ day, salespeople are positioned to add measurable customer-focused value. Instead of carrying stacks of catalogs and the latest jokes, today’s sellers bring technical know-how and professional problem solving skills.

Distributor sellers manage their calendars better, orchestrate teams of support people and often understand bits and pieces of the customer’s business better than the customer. In many instances today’s seller has a technical degree and on-the-job experience equal to any of their customers. In most situations, customers see them as peers, and in the best of cases as trusted professional advisors.

The inside sales group has evolved as well. Without great fanfare and sometimes without notice something happened back in the 1990s. The inside department morphed from its traditional role of training ground for outside sales recruits and elephant’s grave yard for folks who couldn’t make it, to a professional team focused on assisting customers in their

selection of the right products for their applications. Today, distributors search for high caliper people who can contribute to the selling effort from the inside position. The job isn’t necessarily a stepping stone or a training slot; it’s a profession with compensation and status levels designed to attract the right kind of people.

Based on research for “The Distributor Specialist: Customer Champion, Profit Generator” in 2007 over 70 percent of all

distributors employed a specialist. For most the position was a new add. These product specialists armed with in-depth knowledge of new technologies are viewed as highly professional. And their abilities to steer customers through complex decisions before and after the sale often impact the customer’s own decision making process.

Clearly all of these customer facing roles make the distributor business look different than early in most of our careers. But, changes have not been limited to the customer facing side.

In a combination back office and customer side move, distributors have upped the professionalism of their warehouse and logistics teams. Customer tolerance for shipping errors has dropped to nearly zero. The cost of fixing shipping and the resulting billing errors has escalated. In response, many progressive distributors have both installed barcode/location systems and raised the wages they pay “out back in the warehouse.” It’s not uncommon to see warehouse managers with backgrounds that include years in a manufacturer’s central distribution center. Further, the distributors establishing professional systems in the warehouse report improvements in efficiency of their operation.

Why the improvements?
Distributors rarely do anything without cause. In all of the instances defined above the changes have been gradual and designed to meet market dynamics. And, because making each step in a more professional direction equated with a good return on investment to the distributor.

Now is the time to consider creating a new professional. The Pricing Professional.
Many readers may be thinking, “I already have a pricing person.” However, a closer consideration of activities performed by this person has more to do with loading cost-centric pricing into the ERP computer system and very little do to with setting a company-wide official price for the products going out the door.

Considering the concept of matrix pricing was a major topic of discussion during my very first distributor management training in 1991, one would wonder why the pricing profession didn’t evolve further over the past couple of decades. Reviewing hundreds of distributor organizations, experience dictates the following:

1. Many ‘customer sell prices’ are not maintained on distributor’s ERP systems encouraging sellers to use cost up pricing.

2. Cost up pricing generally settles on some ‘magical’ number which often does not reflect the value provided by the distributor.

3. Distributors lose mega bucks because their sales team neglects to consider incoming freight and other acquisition costs on specialty lines.

4. The wholesale industry struggles with eroding margins.

5. Most distributors don’t really know if the margin erosion phenomenon is a product of the economy, the market or their own actions.

At the same time, the typical Strategic Pricing Associates’ client gains two points of additional margin often impacting

their bottom line by over 50 percent. Many clients drive even more gross margin improvement. Armed with this justification, there is economic reason to devote some thought to the need for a pricing professional.

Assuming there is room for pricing process improvement, let’s look at the current state of the current pricing person. Depending on the distributor,

Until now, there was little training for “the pricing guy.” Often, they come from one of four backgrounds, each with their own special set of issues. Let’s take a moment to explore the strengths and weaknesses of each.

1) Inside sales guy moved to pricing administration
The inside salesperson typically has some understanding of how the sales process works. However, they often lack the clout with outside sellers to push back on pricing decisions. Worse yet, they sometimes are calloused to the cost up pricing techniques which push margins in a negative direction.

2) The IT department staffer assigned to pricing
Information Technology skills generally allow this type of person to easily pull data and reports from the system and upload new pricing files. What they lack tends to be good commercial understanding of customer situations. Speaking in broad generalities, many times they have almost no previous experience ‘holding their ground’ against more aggressive sales personalities.

3) Purchasing people migrated to pricing authority
When moved to a pricing role, people with purchasing backgrounds often have no clout with the sales team and often shy from the conflict of handling price level pushback from the sales team. Further, in many instances their previous background makes it easier to focus on the correct buy price rather than customer sell price.

4) Clerical workers plugged into pricing administration
For many distributors pricing administration is passed to a talented clerical person as a parking spot until some other use of their talent is discovered. Many times the position becomes a game of musical chairs. The chief issue here is this: most clerical types lack the resources and training to actually make decision. Instead, they simply keep number up to date and run reports for someone else within the organization.

Until now, there has been no real training path for the pricing professional. Certainly, consultants are willing to help establish a process but once the consultant leaves, things gradually slide back to mediocrity; many times initial margin gains are lost and the process must be reenergized.

http://www.6sigma.us

Six Sigma Master Blackbelt Greg Preuer, of Strategic Pricing Associates has designed the first course designed to apply time tested Six Sigma methodology to pricing. Those who study with Greg will learn not only how drive the pricing process but how to sustain the gains and automate the process. They will become Six Sigma experts (Blackbelt) in business process with a focus placed squarely on price management.

Graduates from this course will learn to chart a clear path to pricing improvement. They will learn each of the following steps:
• How to design and design goals which are consistent with their company’s pricing strategy.
• How to measure and identify characteristics critical for pricing success.
• How to analyze the current situation and steps along the way.
• How to design an improved alternative which moves closer to the desired result.
• How to verify that actions taken create the right results.

Is all this worth the effort?
Imagine what two additional points of margin does for the typical distributor. In an industry were financial returns hover in the three to four percent range, adding an additional two percentage points increases profitability by 50 percent (or more). What’s more in an industry where companies are valued as a multiple of earnings, these extra bottom line results increase the company value by the same factor.

I think it’s worth the effort.