From Purchasing to Procurement

From Purchasing to Procurement

Technical Abilities

A young woman came into a distributor’s store to buy a robot to automate her company’s business. The counterperson referred her to their trained technical sales rep. She made him aware of the options she needed on the robot and seemed to know more about the product than he did.

She quizzed the rep on his technical capabilities and asked if their company could train and service the robot. This scenario should not be a surprise to anyone who follows purchasing trends.

The Procurement Department as a Client

While salespeople once worked with purchasing agents, in today’s digital world, they will more likely be answering the needs of procurement departments.

In her article, “Making Procurement Part of the B2B Sales Process,” Michelle Richardson states, “77 percent of B2B buyers don’t talk to sales reps until the buyer has done their research, and 99 percent are comfortable spending $50,000 or more using a self-service web portal.

In addition, “The procurement department is responsible for identifying needs, sourcing suppliers, negotiating and managing contracts and costs, including ways to save money.”

The shift in Sales Attention

As in the example above, the purchasing process now includes assessing the seller’s added-value capabilities on complex products and services. B2B selling is a collaborative effort and is about personal relationships.

Furthermore, Suppliers must create new partnering principles to enable data sharing and transparency while protecting proprietary interests. It is important to determine the needs of all decision-makers and determine who controls the purchase.

Lastly, The shift of sales attention from purchasing departments to procurement groups is part of the new digital sales cycle. Be sure you understand your customer’s organizational dynamics and use Enterprise Selling techniques to remain competitive.

Get tips and tricks like the above in The Art of Sales books. Or subscribe to the FREE monthly articles here.

Justify Your Price

Justify Your Price

Remind Customers of Your Value

As Benjamin Franklin said, “The bitterness of poor quality remains long after the sweetness of low price is forgotten.” In today’s world of competitive alternative virtual purchasing channels, it’s important to remind your customers that price isn’t everything. Learn to justify your price.

At the beginning of my career, I worked for an international atmospheric gas and welding company as a territory sales engineer. There were eight independent distributors in Texas who were my customers. Floyd was the sales manager for one of those Fort Worth distributors.

He allowed me to listen to a return call to one of his top 10 accounts. The customer was leaving them for lower pricing. Floyd reminded the buyer of the special inventory his company had stocked for them and the added services they provided. Then, he thanked the buyer for their years of business. After the call, Floyd told me the customer would be back within 6 months. He was right. Lastly, Floyd has successfully justified his pricing.

New Pricing Pressures

Today sales calls are a world apart from my experience with Floyd in the 70s. With a multitude of alternative channels available to the buyer, we face very different competitive pricing pressures. Some basic sales principles never change, however. Consider these suggestions when faced with lower pricing pressure.

The fear of the unknown – Remember the last time you bought something online and received a product you didn’t expect? What was it like to return it? It probably was an ordeal you would rather not repeat. As an independent distributor, your customer knows he/she can count on you to resolve issues without a hassle. Remind them of this value that you offer. The fear of the unknown often outweighs the gain of a cheap price.

The total cost of business – In our distributorship, we recorded all customer interactions in call reports. In annual review meetings with our top customers, we would share the list of the added-value services provided and included in the price. Those services included deliveries per month, technical assistance, order fill rate, face-to-face rep calls, vendor joint calls, and eCommerce order rates. By making our customers aware of the cost associated with delivering added values, they perceived our price as justifiable.

Understanding True Value

As Steven Tyler once said, “You’d be surprised how expensive it is to look this cheap.” Justify your price.  Make the case that price isn’t everything by letting your customers know the true value of your business relationship.

Get tips and tricks like the above in The Art of Sales books. Or subscribe to the FREE monthly articles here.

Promoting the Product: A New Sales Model That Meets Your Needs

Promoting the Product: A New Sales Model That Meets Your Needs

The New Sales Model

MSC Industrial Supply Co’s new brand proposition — built to make you better — is an important strategy to note. The digitalized world has created major changes in the way we sell. The sale no longer ends when you deliver the product.  MSC’s refocused sales model involves helping the customer tackle their “mission critical” channels on the plant floor through a decentralized sales effort.

Assisting customers with emerging issues, such as a lack of expertise, is part of this process. Due to the pandemic and subsequent post-COVID business acceleration, customers are experiencing a skills gap. As a result, MSC has begun evaluating assessment needs. Customers of the company can have their analysis audited onsite by the company’s technical experts.

Distributors need to look closely at their sales model and make changes where appropriate. As early as 2010, the distributorship I was with added a Productivity Enhancement Team. Further, this group was tasked with assisting our outside reps by touring key accounts and helping to develop areas for manufacturing improvement. They considered welding process selection, robotic applications, machine tool transitions, safety product adaptions, etc. In the mid-2010s, my company built a team to initiate vendor-managed inventory (VMI).

Where Information Meets Experience

The younger generation in our workforce has the ability to find information quickly, but they don’t necessarily have the experience to use it to their greatest advantage. Develop a sales force that has a balance of fresh new ideas and hard-won experience. This provides you with the best opportunity to deliver value-added proposals to meet your customers’ needs.

Lastly, the sales qualification bar has gone up. Today’s sales force must be prepared to present more than a good product. Reps have to be creative and able to share ideas that can improve the client’s performance. In the new digital world, business is won by finding better ways to meet customer needs.

Get tips and tricks like the above in The Art of Sales books. Or subscribe to the FREE monthly articles here.

Focus on Profit Segmentation

Focus on Profit Segmentation

One of the most challenging responsibilities of a sales manager is bridging the gap on account profitability between sales reps and the executive team. For example, a salesperson may have a key account that represents a major percentage of his monthly sales. However, it is an account that the administrative team constantly complains about. The customer is slow to pay, has too many small deliveries, and buys low-margin products. The sales manager’s job is to try to find a balance between these competing issues. One way to do that is to focus on profit segmentation.

Segmenting Your Accounts

In their book, Choose Your Customer, How to Compete Against the Digital Giants and Thrive, Jonathan Byrnes and John Wass provide insight for handling the sales manager’s dilemma. They suggest segmenting your accounts into these three categories to determine which parts of the business are making or losing money.

Profit Peak – This group consists of the 20% of your accounts that generate 80% of your territory’s profit. It includes loyal customers with whom the account manager has trusting relationships. The clients in this category are recognized as good friends and recommend you to their business associates.

Profit Drains – This category includes accounts that represent about 30% of a sales territory’s revenue but drain off about 50 percent of the profits earned by the rest of the company. These customers are price shoppers who check your price against those of online competitors, and demand the lowest price match. These accounts also often require some form of service.

Profit Desert – Customers in this group represent 50% of a territory and account for 20% of revenues, but produce only 10% of the profits. Properly developed, however, this 20% have the potential to grow into Profit Peak accounts. They should not be ignored.

Find Your Strategic Group

Once you have categorized your customers, you need to make a plan.  Byrnes and Wass recommend carving out a defensible, high-growth, high-profit strategic group that the powerful digital and off-price competitors cannot enter with their low-price, low service strategies. While these customers may require more costly service, the extra expense is justified by the accelerated profits. From my experience, these accounts tend to more readily accept price increases, especially as they relate to service.

Part of your strategy may also include stopping the practice of meeting the lowest price for your Profit Drain accounts. You will find a significant number of Profit Drain customers will eventually purchase at full price.

Find the sweet spot

As a sales manager, you need to find a balance between the competing needs of your sales reps and the executive team.  Focusing on profit segmentation is an effective way to find your company’s revenue sweet spot.

Get tips and tricks like the above in The Art of Sales books. Or subscribe to the FREE monthly articles here.

Mentor (ing) for Success

Mentor (ing) for Success

Proverbs 11:14 says “Where there is no guidance the people fall, but in the abundance of counselors there is victory.”  

I find these words inspiring. The periods of greatest growth in my own career have occurred while I have been under the guidance of wise, mature leaders. Now, I mentor for success, working as a mentor to the owners of mid-sized distributorships, guiding the next generation of leaders to success. The people I work with appreciate that my counsel is borne out of years of experience in the distribution industry.

Managing Projects

My clients, the owners of distributorships, list their top issue as project management. Stephen Covey, the author of “Seven Habits of Highly Effective People” (the-7-habits), has suggestions to help address the challenge of managing deals along a complex supply chain. He advises putting first things first.

In mentoring, I start by asking owners to list all the projects that they are currently trying to complete. They generally begin with a list of three or four, but after careful thought end up with a dozen.  I find clients often fail to write down their projects. This makes them harder to recall and impossible to track with time-based results.

Record, Prioritize, Act

After listing projects, I advise clients to place each one in a category. Covey’s suggests these two groups — Important and Urgent and Important but not urgent. Once categorized, managers can prioritize the top five projects and assign each a specific action step to be accomplished that week.

Attain Success

Implementing the above steps, my clients find they can become a habit within 6 weeks. The owners I work with are amazed at what they can accomplish in a couple of months using Covey’s method. Truly, they agree, “Where there is no guidance the people fall, but in the abundance of counselors there is victory.” I find great satisfaction in counseling young businessmen and women and believe it helps them attain success.

Get tips and tricks like the above in The Art of Sales books. Or subscribe to the FREE monthly articles here.

Leading with Added-Value

Leading with Added-Value

The term added value has been a significant part of sales strategy discussions in the last several years. In the digital age, its importance continues to grow. In a recent webcast by Distribution Strategy Group, Erik Gershwind, President and CEO of MSC, talks about the need for his company’s sales force to deliver added-value analytics — it’s the difference between selling and leading. “MSC is adding value deeper into its customers’ organization while simultaneously expanding the portion of its sales that come through digital channels.”

Helping the Customer

MSC’s new brand proposition which says, “built to make you better” is timely. This means that the digitalized world has changed the way we sell. A sale doesn’t end when you deliver the product. Through a decentralized sales effort, MSC’s sales model assists customers in tackling their “mission-critical” channels on the plant floor. These include assisting customers with emerging issues, such as a lack of expertise. With the pandemic as well as subsequent COVID-related business acceleration, customers are experiencing a skills gap that can be extremely difficult to bridge. To address this, MSC has initiated an assessment needs evaluation. The company’s technical experts will perform onsite analysis audits for its customers.

A Changing Sales Force

MSC recognizes the need for a change in its sales force. They are segmented by the traditional account managers and have created new teams of experienced technical experts to meet the demands of shifting customer needs.

Also, the company is heavily investing in recruiting and training staff to better understand customers’ businesses. MSC focuses on digital integration to measure performance. Clients need an added-value analysis mining in key areas such as metal working productivity, eCommerce, inventory, and purchasing.

Raising the Bar

Lastly, Gershwind believes the sales qualification bar has gone up. The sales force today must be prepared to present more than a good product. Reps have to be creative and able to share ideas that can also improve the client’s performance. In the new digital world, business is winning with better added-value propositions.

Get tips and tricks like the above in The Art of Sales books. Or subscribe to the FREE monthly articles here.