Read how HVAC distributor Gustave Larson has introduced and driven real value from innovative services. Andrew Larson, the long-time CEO and chairman of Gustave Larson, an HVAC distributor, joined Distribution Strategy Group to share what has worked for the company as it has transformed its sales force and built a suite of services focused on helping the customer’s customer.
Gustave Larson serves the wholesale distribution business in HVAC and refrigeration and its primary customers include refrigeration contractors, commercial and mechanical contractors, and residential heating contractors. In addition to leading Gustave Larson (which is celebrating its 85th anniversary), Larson is the CEO of Applied Product Solutions, which focuses on the applied and heavy commercial side of the HVAC industry. He also serves as a University of Colorado trustee and received his MBA from Kellogg and a Bachelor’s in business from the University of Southern California.
Distribution Strategy Group: What do you think you’re going to do differently on an ongoing basis as a result of your experience over the past year?
Andrew Larson: We’ve done a sales force transformation. It took us a year and a half in the planning, and we just happened to release on April 1, 2020, essentially when COVID hit. It was a blessing for us because that omnichannel transformation allowed us to take our outside sales team members and put many of them into pods, so they could call on customers directly by the phone. We were prepared for that with our systems, and having sales force and a customer pipeline management tool behind the scenes. We’re making sure we continue to evolve. Our transformation team makes sure we’re constantly striving to keep getting better.
Customer engagement really was a big, strong initiative for us coming out of COVID. We’ve also looked internally with another initiative regarding our employee and branch engagements. We’re learning how to understand our front lines and our own processes. Personally, I’ve worked at three of our locations in the past few weeks –including working in our warehouse and working on the counter. I was inspired by the young talent we’ve got. It makes me excited for the future, but we really want every person to understand how they contribute to Larson and also to the success of our customers.
DSG: Could you expand more on your sales force transformation? What did you do, what was different, and what worked?
Larson: We used Justin Roff-Marsh’s book, The Death of Field Sales as a guide. We didn’t follow it directly, but it was a guiding light for us. We considered, “How do we make sure that we are taking care of our customers and moving them to the future along with us?” We’ve always tried to be progressive in the way that we act, and we want to be pushing that envelope of how we can grow faster than everyone else, and get that lead advantage.
We’ve created business development manager (BDM) roles from outside sales jobs that are now focused 100% on new customers. One of the challenges we found looking at the outside sales team members was that they spent so much time traveling, doing quotes, working on customer service issues behind the scenes that realistically only 10% of their time was spent on new customers. That wasn’t nearly enough to drive the growth that we want to have and expect for the future. Those BDM positions essentially allow us to have 10 times as much focus on those new customers in the future for every person in that role.
We also reorganized a lot of our other outside sales team members into pods focused on inbound calls, which are customer experience reps, and other territory managers who focus on outbound contact. The outbound contact can be on the phone, but it can also be going to call on that customer out in the field as well, however that customer wants to be served. We also have support teams assisting everything.
DSG: Since Justin Roff-Marsh came from the tech world, the model that he describes works impeccably for the tech world. Did it require adaptation for the distribution world?
Larson: 100%, that’s what we had to do. If Justin advocates that you’re going to have an inbound/outbound pod only calling on the phone to customers, that won’t work for us. We are in a huge transition now from our Baby Boomer generations to the Millennials and Gen Zs. As a result, each customer and each generation seems to want to be called on differently. You cannot call on the Baby Boomers by telephone. If they want to be called on in person, we’re going to do that. That’s how we want to take care of our customers.
DSG: You have to do a lot of work to develop a detailed customer database at the account and at the contact level within accounts, as well as a prospecting database. Is that something you’ve invested a lot of resources in?
Larson: Our contact database was based on each salesperson’s Rolodex and Excel spreadsheet. We made the conversion to a Salesforce system, that’s allowed us to create a customer pipeline management tool. It’s been adopted wonderfully, which was one of our concerns going into it, hearing how a lot of times the sales team doesn’t want to focus on inputting information in the CRM system. But we have said, “If it didn’t get put in Salesforce, it didn’t happen.”
DSG: How did you drive adoption of Salesforce? There are a lot of statistics that say that half of all CRM implementations fail. Our view tends to be, if they’re done to help the sales rep, they’re more likely to succeed versus if they’re an electronic form of the old call reports. What’s your experience?
Larson: Our concern was adoption – and our leadership team has been focused on that. We have a team that is committed to helping all of our team members with Salesforce and enabling their success. We’ve been aligned that this is the tool we’re using for the future, and there is no choice but for them to use it. It’s been both the carrot and the stick.
DSG: There are other companies that have taken that approach where it’s mandated, it’s not optional and they’ve still failed, because account managers will find a way around it if they don’t want to comply. If it’s not a specific thing that you did, is it a belief that you’re really trying to do the right thing for the account managers?
Larson: We think we’ve had tremendous adoption so far. But you’ve talked about culture. That’s a huge thing for us. We hire, fire, lead and coach all based on our values. We also have what we call a 100% accountability initiative in the business, with 0% blame, 0% justification. We’ve had a focus on hiring the right person for each role. Each team member needs to live our values and have the role in our company that aligns with their skills.
DSG: One of the themes in this show is, where in the customer’s organization are you adding value? Are you adding value to inbound logistics? Are you adding value to the core operation? Are you adding value to service sales and marketing?
Larson: We’ve had an initiative in our business, we call it C2. C2 stands for our customer’s customer. It’s really about how do we help our customers succeed with their customers. If we’re going to do that, then they’re going to be loyal to us and buy from us. That guides a lot of initiatives we’re focused on. I guess in one way, we have done a lot to add value to our customers across the board with the services we provide. As an example of a value-added service, we offer crane trucks to help them get a product to the job site so they don’t have to schedule a crane separately.
On the marketing side, we have an initiative for Larson Business Solutions. We’ve worked with a lot of third-party providers to help deliver content and product systems to our customers. It’s been an evolution for us. These third-party providers help us drive growth and profitability in our customer’s business. As an example, we’ve worked historically with some different organizations to teach our customers how to understand their financials, do job costing, make a double-digit net profit, upsell and make more money in each particular job. That’s been a really important initiative for a lot of our dealers that we work with. Additionally, we’ve worked with other companies to help our customers get Google guaranteed, and drive leads to their business. There’s lots of other things we’re doing as well, such as helping them automate the frontend and backend of their workflow in their business.
How do we help drive products and services in the future that they’re willing to pay for outside of what our traditional product has been? We have brought out a new segment in our business, called Services and Solutions. We’re focused on identifying new services we can release to our customers that help drive new value creation and a new revenue stream for us, but at the same time, bring our relationship even closer. Through this, we’ve developed an innovation pipeline.
DSG: The customers that have taken you up on this must just absolutely love it. If you are actually making them more profitable, how much stickier does it get?
Larson: It’s amazing. Some of our best relationships are those customers, again, that have that double-digit net profit. Our pitch has been, “How would you like to make a double-digit net profit, and come learn, grow and evolve with us?” When that happens, they become some of our most loyal customers.
DSG: What are the biggest challenges when you think about how to drive change, and how do you manage the communication and implementation of it?
Larson: Keep it simple. We use a process in our business called EOS, which is the Entrepreneurial Operating System. Focus on the top priorities that can make the biggest impact in the business. If we could say one thing for us for our business over the past four years, we would say, “Four years ago it was the new ERP system.” Obviously, that took two years for us to build up, to be able to hit ‘go’ for that year. But that was the one big thing.
Three years ago, it was sales transformation. Two years ago, it was Services and Solutions. This year, it’s really about getting back to that. We’re coming out of COVID with that extraordinary service that our customers deserve through employee engagement and customer engagement. We’re trying to focus on one big thing.
The other key thing is communication. Throughout COVID, we had weekly videos, weekly communication to every one of our team members and they loved that communication. This also supports us with getting our initiatives done, it’s all about communication, communication, communication.
DSG: What do you do to keep your employees up to speed?
Larson: We have the Larson Learning Center, where we take all the historic learning that we did in our industry in books and bring it digitally for our people to learn online. It all starts with our coaching process and having a personal development plan for all of our team members. In addition to that, as we’re coming out of the pandemic, we have customer education sessions–whether it’s learning how to make more money in their business, or it’s more sales- or service-oriented. We can all evolve and grow together.
Watch the Wholesale Change episode featuring Andrew Larson: