The vast majority of distributors who are still in business today have good direct salespeople without whom they would not be in business. Yet the distribution world is changing – it’s not your grandfather’s distribution business anymore. Your grandfather’s distribution business relied almost exclusively on strong relationships between direct or in-store salespeople and the customer.
The first big change is that in today’s world, your competitor could be across the region, country or even the globe in some cases. Because of centralized purchasing in national accounts, the bill-to address can be a long way from the ship-to address. Or the purchase is made over the Web from an even longer distance.
The second big change is that customers in many businesses now expect to be able to purchase when, where and how they want. In the consumer world, Charles Schwab was one of the first to recognize the importance of multiple channels for doing business in the late 1990s. This included telephone service, face-to-face in a Schwab branch and the Internet.
If you think you can survive in this new world with only belly-to-belly selling, look again because the biggest and best distributors are in your back yard and in your face not only through direct sales, but also through the Web, inside sales and targeted marketing. Global competition and multichannel operations are here to stay.
Distributors need to make three moves to grow revenue in 2013, or they risk obsolescence.
1. Take another look at direct marketing.
For many people, direct marketing conjures an image of junk mail that goes right into the garbage. Indeed, we have had a number of discussions with distributors whose perspective on direct marketing goes like this: “We used to send stuff out occasionally. I don’t think it did much good. We kind of gave up on it.”
There are two important aspects of this sentiment about direct marketing. First, the direct marketing program was occasional and not regular. A key premise of direct marketing is that the prospect is regularly touched with offers. When done properly, the accumulation of touches improves the credibility of the marketer in the mind of the prospect. Through time, it allows the marketer to showcase the variety of products the distributor has available.
The second aspect is that the marketer did not really know whether direct marketing did much good. This is a common problem. Often the measurement of the direct marketing programs is inadequate or non-existent.
Many successful distributors employ catalog marketing as part of their direct marketing efforts. However, there are other less ambitious ways to get started. A simpler approach is to create a monthly direct marketing vehicle. It could be as small as a one- or two-page offer or as large as a digest/Slim Jim narrow-format catalog (up to 48 pages).
An even simpler first step is to deliver the offers via email before including print. Email programs such as Constant Contact and Vertical Response provide convenient functions for managing these campaigns.
More sophisticated marketing automation programs like Marketo, Net Results Marketing or Eloqua allow tailored nurturing of leads, particularly if you also have an e-commerce site. These programs allow you to send follow-up email based on the prospect’s specific response or lack thereof.
If you are combining print direct marketing and email direct marketing, it is essential to measure the response. A straightforward approach is to have four groups: print only, electronic only, combination of print and electronic, and no offer. The group that receives no offer is the baseline against which the other groups will be measured so that you can optimize the mixture of print and electronic marketing.
2. Build a proactive inside sales force.
If you ask distributors whether they have inside sales, they will probably say that they do. If the next question you ask is how much their inside salespeople do proactive, outbound calling, the answer is very little, if any. An MDM survey from this summer showed that more than a third of distributors have no inside salespeople who do outbound calling. Among those who have inside sales, nearly half said that the inside salespeople spend less than 10 percent of their time selling proactively. Their time is frittered away with customer service and with inbound calls.
Proactive inside sales can play a key role in accounts of all sizes. For large accounts, inside sales can work in tandem with field sales to identify leads and handle smaller orders. This frees up field sales to focus on larger opportunities with that account or others.
For small and medium-sized accounts, proactive inside sales is the difference maker in acquiring and growing the accounts. When these accounts are assigned to a field sales rep, the ugly truth is that they get little to no attention from that rep.
Instead, field sales representatives focus on large accounts because it is the best way to earn bonus or commission. An inside salesperson whose total compensation is half or less of the field sales rep can cost-effectively service these accounts. They can reach 20 to 30 customers or prospects per day.
Keys to success with proactive inside sales include:
- Hire hunters, not gatherers
- Invest in cleaning your own customer data and acquiring more prospect data
- Track productivity through the call management system
- Where possible, centralize the proactive salespeople rather than scattering them across the branches
3. Take advantage of e-commerce as a sales channel.
An MDM survey in the fall of 2011 showed that more than 40 percent of distributors have no revenue from e-commerce and 25 percent have less than 5 percent. Half of the distributors without e-commerce-enabled websites planned to implement an e-commerce site. To be sure, we are aware of a great deal of activity in e-commerce site development among distributors.
For distributors who not yet begun an e-commerce implementation, there are a few ways to simplify the effort:
- Deploy with a subset of your entire products, perhaps just your A items. This will accelerate the deployment of an initial site.
- Reduce integration with the backend ERP system. Initially, the number of orders per day is small enough that you can handle the effort to re-key data into an ERP or order entry system. Once they increase, then you can integrate with the backend.
- Hire a third party to do data cleansing and scrubbing.
- Subscribe to a SaaS or cloud offering rather than buying a traditional license. This will substantially reduce your initial cash outlay and the subscription is almost always an expense item rather than a capital one.
Getting the website built is only part of the problem. When we ask distributors how they are marketing their websites, the typical response is: “We have an SEO/SEM consultant.” Search engine marketing may be good for prospective customers, but it does very little with your existing customers. And existing customers are the ones most likely to use your website.
Instead, it is important to get existing customers registered and using the website. Create offers on the Web that compel them to make a first purchase. Once they have the habit of buying from your site, their loyalty will increase.
Synergy and Priority
There is enormous synergy in making all three marketing moves. But if priorities are dictated by budget, then the initiatives should be prioritized by ROI.
For most companies, the fastest payoff will come from direct marketing. As mentioned, you can start with electronic direct marketing rather than bearing the cost of print mail. You should expect to see a good return on direct marketing in six months.
Inside sales also has a fairly quick payback, often six to nine months. To minimize initial expenditure, the proactive sales group should be small at the beginning, perhaps only a few inside sales reps. When the processes are working, you can expand the size of the group with predictable return.
Given the long time for implementation and to get revenue traction, for most distributors e-commerce should be the last initiative.
The implementation of a multichannel marketing program in conjunction with direct sales is the best insurance for growth in today’s world.