The rumors aren’t true. The B2B sales rep still has a long life ahead despite the (not completely true) stories that Millennials and Gen Z don’t want to meet with them. It’s misleading to declare sales reps are over; the value of the sales rep depends on the nature of the relationship and the complexity of the products and services being sold. In this episode of Wholesale Change Ian Heller and Jonathan Bein talked about how conversations around the role of the sale rep today need to go beyond just blaming the next generation.
The Death of the Distributor Sales Rep has been Greatly Exaggerated
Ian Heller: There’s a lot of talk now about how distributors don’t need sales reps. And there’s some confusion because when you talk to a lot of executives, it doesn’t square with their experience. There is no framework for thinking about how to reconcile what is often advice that you get from really good consultants and distribution leaders that is well intended, but not nuanced.
Often what you hear associated with this recommendation not to have salespeople, or offered as justification for it, is that, “Millennials are buyers, and Millennials don’t want to meet your people.” That is confusing, and also not true, and it’s not really the main point.
Are you hearing that thanks to Millennials in buying positions, distributors don’t need sales reps anymore?
Jonathan Bein: Maybe not to that degree, but directionally, absolutely. And I believe you’re aware of the work we’ve done in shopping and buying, and it really bares out that younger folks are more digitally-oriented, but it’s painted as too much of a black and white picture, and leads to bad decision making as a result, which is, I think, where you’re going.
Heller: Yes, it’s an oversimplification. I don’t think there’s any doubt that Millennials don’t have the same desire to socialize, and go out for lunch, and golf as other generations do. Although, if you look at how much Millennials golf, and they actually still golf a lot. There’s some suggestion that they just want to do it for fun less than for business. The data is that they’re still doing those kinds of activities.
Bein: I think the other thing is that the younger generation is simply more proficient at using digital technology. People that have our hair quantity and color have all been schooled by our children on some part of technology that we don’t know how to use. And it has often got an ‘OK, Boomer’ undertone to it. That is a fact. If I want to ask a question about technology, I ask a Zoomer, I ask my son.
Heller: I think you’re actually getting to the reason behind the reason. It’s not so much that Millennials don’t like people or don’t want to meet with us, it’s that if your business is all easy stuff to buy online, then you don’t need sales reps for that, right? It’s not so much about the buyer as much as the method.
Bein: What about the product?
Heller: The complexity of the value proposition, right? Let’s examine this in the context of the distributor relative value model. The first dimension is, ‘how complex is the product, and the services, and information requirements that are attached to that?’ Do you have complex products that require service and a lot of information? This may be stuff that you’re selling into factory automation, power transmission products, plastics that get cut and shaped for every order, hydraulics, or any one of the number of things that distributors sell that require some expertise, or some services, expert information, or training. The more of that stuff you sell, the more complex the product and the total value proposition is, then the more you need sales reps.
The other dimension is logistics complexity. If the customers’ requirements are just ship it by common carrier, put it on UPS, the Amazon delivery fleet, FedEx, or whatever, it’s not a complex logistics requirement. Anybody can do it. If your customers are looking for customized delivery, maybe something like “I need scheduled PO deliveries to the factory for my Kanban”, or “I have a need for construction products that come on to a job site with the job site forklift on the back of it”, or cold storage, or management of expiration date material.
There are all kinds of stuff that distributors do that’s not just a simple pull a package off the shelf in the back, put a label on it, and ship it out the front on a common carrier. As that value proposition and that relationship gets complex, then your need for a salesperson to manage the relationship becomes greater. There’s also a scale thing. If you have a big company, and you’re going to have 100 buyers and 10 different accounts, that’s hard to set up on your own. You might need a sales rep to help you do that. But for those simple, non-complex transactions, there is no need for a sales rep. That’s really the driver of whether or not you need an account manager, not the person’s age who happens to be placing the order. Make sense?
Bein: It does. Please summarize that one more time, because I think it’s really important to get these dimensions, as it is the key to the rest of the discussion we’re going to have.
Heller: This is about complexity. How complex is the nature of the product, including the services, that you offer, and how complex are the logistics requirements of your customer base? For example, at my last job, I was VP of Marketing at HD Supply White Cap, now construction supplier, White Cap. And we had very complex products. Many of them had to be delivered as part of a job site package that we quoted for a specific location. Many of the products were unique to that customer’s location. The mix of products for every job site was unique. They have a bunch of big flatbed delivery trucks, a lot of which have a job site forklift on the back with big tires.
It’s hard on a big construction site to know, where do you deliver it, because UPS is going to give it to the first person who’s going to sign for it. The job site superintendent needs you to find him or her, or their trailer, or the part of the job site where the product needs to go. A lot of these products are actually specified, so they’re selected by engineers. Sometimes they’re rental products. All of this contributes to a complex environment, which requires a salesperson to coordinate. In fact, if anything, the term sales rep undervalues the value add of the people who are doing this, because they actually become construction process and construction industry experts.
Now, add to that the safety requirements. The supplier offers training on how to comply with OSHA requirements and make sure people don’t get hurt, that’s a very complex environment. And sales reps are, and for as long as I can foresee, essential to building relationships and supporting job sites in the construction industry. And that’s just one example. There are others in manufacturing and other industries.
It’s about complexity of products, services, information, and logistics requirements. And the more complex the relationship or the set of customers’ needs, the more you need a sales rep. And if you don’t have that stuff, if you’re just selling simple transactions online, then your requirements are pretty simple. You know what you need. If you just want to be a pure ecommerce seller, you need a broad assortment, you need to make it really easy to order, you need fast small package delivery, you probably need to do some things like order notifications, and you don’t need a sales rep for any of that stuff. Because demand generation is more about SEO and email marketing, and customers don’t have a lot of questions. They’re just ordering because it’s pretty simple stuff, with a pretty simple transaction. And distributors have a growing part of that business. But for most distributors, it’s not most of their business. Is that fair?
Bein: Absolutely fair, yes.
Heller: I think for the distributors reading this, you need to figure out for yourself how much of your revenue is falling into different parts of the complexity map. Do you have a lot of revenue in a highly complex area, or do you have a lot of revenue in the non-complex area? And frankly, the stuff in the non-complex area is really vulnerable because of the players down there. What we’ll also see is some that require a lot of logistics complexity, but not product complexity, and others that are vice versa. Figuring out how your revenues break out on this map is a way of understanding your vulnerability, your exposure to pure digital players.
Bein: As we’ve discussed, if we look at the $7 trillion distribution GDP market, it may be the case that a significant portion of that seven trillion is closer to the non-complex end of the spectrum. It might be that four and a half, five trillion of that is in the non-complex end of the spectrum, and then two or two and a half trillion is a bit more complex in the spectrum. But the challenge here is to figure out how you get not only the complex transactions that you’re already serving well, but you’re able to drag along the non-complex ones, and you don’t lose them to disruptors.
Heller: A couple thoughts on that. One is you and I talked to the CEO of a billion dollar company distributor that we won’t name, either the CEO of the company, who told us that first of all, he completely agrees with this model, that maybe 5% of his revenue is in that very simple, non-complex in terms of products or logistics side of the complexity model. But he also said, “If I lost that business, I would probably lose all my profits, because those orders have much higher gross margin and a much lower cost to serve.” And so, you can’t just concede it, you have to go after it. Here’s where doing away with your sales reps becomes a big problem. Because you’re not going to win that business by going head-to-head on your ecommerce capabilities.
You need to have great ecommerce capabilities; you’ve got to make it easy for those customers to buy. But if you compete with Amazon, Walmart, Amazon Business, and some pure digital distributors just on digital terms, they will beat you because they’re better at it. Your secret weapon and your method for getting that business is by having great sales reps, who help you get the complex stuff. Along the way, they persuade the customer to place their non-complex orders with you as well, because it’s part of that deal.
Heller: Sales reps, ironically, in our view, for many distributors, are the way you get those simple transactions, because they allow you to build a relationship that’s essential to the customer. Part of the deal is that when you need the small tools, or the MRO that’s easy to buy, make sure you bring that along, make sure you buy that from us, because that’s going to be a part of your earning future discounts, rebates, or whatever. Also, we’re going out there anyway with this complex stuff, so if you need something, just add it from our website to the order, we’ll throw it along with, you won’t have to have a second delivery and more delivery costs. So, the irony in the messaging here is that by suggesting you don’t need sales reps and you should focus on digital, many distributors are putting themselves in a position where they can’t sell the complex stuff, and they can’t get the digital. Does that make sense?
Heller: What kind of salespeople do you need today then to win? Because certainly, the bar has gotten higher. Basically, in what is on our graph, the non-complex stuff is in the bottom left corner. And our point is that if that’s all you’re doing, actually, no matter what you do, those sales don’t typically need sales reps. They don’t need brand support. They don’t need most of your services. They don’t even need telephone service. You can’t call a lot of these digital players to place an order, so, you’re not bringing to bear the differentiating things that you do.
All of us have been around salespeople who just had an extraordinary ability to close deals, write contracts, build relationships, and make customers want to buy from their company. And let’s call that selling. Let’s call account management an ongoing process of understanding how you meet more of your customers’ needs over time. And I would say that your sales people need to be both. Do you agree?
Bein: Yes. And there are different models of getting new accounts versus growing new accounts. Some organizations treat those as separate things. In what you described, they may be the same person.
Heller: I think they usually are.
Heller: I do think that even if you have a salesperson who is great at closing deals, over time, to grow that account, they’re going to have to continue to add value.
Bein: That’s right. We talked before this conversation about the article that was written by Forrester, Andy Hoar, in 2015 called Death of a B2B Salesperson. In a sense, the title of this talk, The Rumors of the Death are Greatly Exaggerated, is a rejoinder to Death of a B2B Salesperson. Death of a B2B Salesperson explained that there are consultative sales people. That is a growth area. There are going to be more employees who do that work. And if you look at the other extreme, closer to order takers, but there are a couple of other categories as well. Those categories were going to be losing employees over a five- or six-year period. The only growth of the four segments of salespeople was the consultative salesperson. In the extreme, the order taking person that maps to our low complexity environment is going to be going away.
What we’re saying is actually, in a sense, even though the title of our talk appears to be in disagreement with Andy Hoar, we’re basically agreeing. We’re saying, “Yes, the sales rep who is adding value in understanding solution, understanding product categories, understanding product, understanding application, that is a growth area”. And I think if we look at some of the other research that we’ve done recently, also from state of shopping and buying, there are certain sectors that depend very heavily on a field sales rep. In manufacturing, construction, about a third of the time, people said they shop with a distributor sales rep. Much less of the time do they shop with a manufacturer sales rep. Clearly, those sectors depend much more heavily on field sales.
By contrast, the retail trade sector respondents in our survey, only 15% of them said they shop very frequently with a distributor sales rep. I’m curious what you make of that when I tell you that construction and manufacturing depend twice as much on the field sales rep on retail, and how it pertains to our discussion here.
Heller: I think that’s right. Look, if a retailer is buying from a distributor to resell something, for example a hardware store buying from a hardware third party provider, or somebody like that, they’re replenishing stock. They don’t have to talk to a salesperson to do that.
Bein: There’s not a solution in that scenario.
Heller: Right, I’m just replenishing. If I’m a regular customer of Staples, and I need more janitorial or break room supplies, I don’t need a salesperson or any help placing those orders. They’re simple products. I’ve a demand history I can rely on. But if I’m a manufacturing customer, and I’m looking for MRO to support a large plant, it’s a mix. Now, some of that, I don’t really need any help with, but then some of it, I do. And some of that MRO is actually used to help in production. Cutting tools, abrasives, and safety products, et cetera. And I may have a vending relationship or a bin replenishment relationship, I’m not going to go online and just set that up. I need someone to come in and look at my needs. You need to do a bit of an audit of my processes.
Same with the electrical distributor selling into a plant, or a safety distributor selling into an industrial and construction environment. It takes some expertise to evaluate the customer’s needs. That is where distributors can offer value, because those big players who are the disruptors don’t want to have any variable costs in their model. So, they’re not likely to start adding salespeople and services and all that stuff. The irony is, if you look at the advice that’s been given distributors in the last decade, two constants have been the more digital revenue, the better, and you don’t need sales reps anymore. Those have often been paired up. Well, if you actually pursued those strategies, you would wind up eliminating everything that differentiates you from Amazon Business. You would close your branches because you don’t need salespeople. You don’t need anywhere to put services together, like kitting, custom stocking, or whatever. And you would fire your sales people, and you’d become a pure online player with a huge disadvantage to big digital players.
Bein: Right. So, you would be more clearly in the crosshairs of the big disruptors like Amazon. You’d be aligned entirely with what they’re focused on.
Heller: That’s correct. So, you need to have a great website for those simple purchases because customers expect it. If they’re going to buy from you online, it’s got to be an easy and pleasant experience, and it’s got to be reliable. Their expectations are high. We know that. But it’s not true that your strategy should be to drive that number up as high as possible. Because then your strategy is going to force you, or going to lead you to do things that eliminate your differentiators. Because if you’re renting equipment, renting tools, or you’re assembling cables or circuit breaker boxes,cutting plastics into shapes, or whatever, it’s really hard to do that stuff online. Not that there aren’t configurators in some ways to do that. If that’s efficient and works for you, you should do that. But if the goal becomes a percentage number of your sales online, you’re going to start doing foolish things like killing your differentiators, firing your sales people. You’re going to be following a strategy that’s not really meeting customer needs, and doesn’t help you build things that differentiate you from people who are better at that.
Bein: Let’s take a couple more examples. Let’s think about an OEM scenario. Let’s look electronics. So, aero, Avnet, that whole world. Simple or complex sale?
Heller: I think that’s a complex sale. Do you?
Bein: I do too. And I’m curious, let’s tease out what makes up complexity, because we talked about this before. Is it number of line items? Because certainly, some of those OEM orders have hundreds or thousands of line items. What is it that drives complexity?
Heller: First of all, those are specified products. Engineers are determining what they need. The delivery requirements are often associated with something around Kanban, or some other production control driven requirements. The mix of products is unique to the production run for whatever you’re making. The volumes are very large, so I need to have pallets and pallets of some semiconductors and passive components. And a lot of times, there’s some cross stocking involved. It’s a large-scale relationship that lasts over months or years, meaning you have to negotiate the price. No one’s going to go online and say, “Send me a million capacitors of this model number.” They’re going to say, “Here’s an RFQ.” They’re going to give it to half a dozen electronic components distributors, and you’re going to have to negotiate to be the winner in many cases on a job.
Bein: All of that sounds complex. I’ll add another level of complexity in that particular case. You might be buying literally a million of something that costs less than a penny per thing. I can imagine there is complexity, logistic complexity, in delivering a lot of very small things.
Heller: And then negotiating the price. Is it worth considering situations where there is a difference between initial order and reorders? The first may be complex, but reorders may be simple.
I also think that if you get the contract up front, part of the deal is you get the reorders. And that’s one thing you want your salespeople to do. I think what you’re trying to do as a distributor is say, “Look, the initial order.” When I was at White Cap, this happened all the time, where we were supporting the construction of the new Apple headquarters. Then we went out there, and trained 2,000 employees on site on safety. That was a huge value add for them. It got us a whole bunch of new customers who were subcontractors there who weren’t buying from us previously. That’s the kind of value add that we’re talking about. We coordinate with a bunch of suppliers to come in, and you’re not going to get that from an online player.
Now, those products were specified upfront. That was very complex to work through that RFQ, figure out what we’re going to order, stage it in local branches, deliver it, and sometimes, the timing changes. Once that deal was done, which was very, very complex, the subsequent shipments were pretty simple, but they were contingent. They were the fulfillment of the contract that was complex. I don’t think that the subsequent transactions are out of the scope of the deal, even though they’re simple.
Bein: I’ll give you an extreme of that particular scenario. There are companies who call themselves distributors, who also wade into something that sounds a little bit like contract manufacturing, where it ends up being the SKU is actually owned by the customer. In that case, presumably, the distributor who is making that part is the only maker of that part, and then they would, in fact, get those follow-on orders. Okay, we have a big question here from Marco, “No matter how simplistic the purchase in any industry, there’s still a huge need for a rep. Although basic purchases seem simple on a web or digital world, there seems to be much more issues with logistics.” Agreed. “The reason being is they do not have a rep to handle issues on the back end. And if issues arise, then they go to the customer service rep.”
What Marco is saying is, it’s nice to have a rep in case something goes awry. “This takes much more time to navigate, rather than a rep handling the issue.” I guess he’s saying going through the customer service route is less efficient for the customer. He continues, “Ultimately costing the organization wasted man hours and less productivity. Reps are not your, quote unquote, sales reps. They are problem solvers. And there are problems in any type of commerce. Everyone loves to have a guy, and even the Millennials would rather have someone to navigate them through something because of their impatience and nature. Please comment.”
Heller: His first statement, no matter how simplistic the purchase in any industry, there is still a huge need for a rep. I would say that Amazon’s $25 billion sales achievement in four or five years, whatever it is, would argue that that’s not correct. I agree with most of the rest of what he said, but there are players out there. Grainger’s Zoro division is growing like crazy. There’s no rep involved in that. So, I think Marco’s general point, I agree with, that there is a huge value in reps in certain situations. But the simple transactions don’t need reps, and there are players out there who are just going to marketplaces, and they’re growing at a ferocious rate. If you think you’re going to get those simple purchases without great ecommerce capabilities, or that there are people who can get that stuff even if you have reps on those accounts, I think that’s a risky assumption.
Bein: Jason also had a question. He says, “It’s important to note that distributors should be honest with themselves about the complexity of the products they sell. It’s easy for distributors to perceive products as complex just because they’re expensive.” Great. So, complexity and expense are different dimensions, right? “And because they have a lot of specifications. But Amazon Business was selling Genie scissor lifts online 10 years ago.”
Heller: I think that’s right. Look, if I know I need a Genie scissor lift, and I know the model number, then I don’t need a rep to help me pick that out. It’s an expensive purchase, but I would argue that most Genie scissor lifts are not sold on Amazon Business. Because typically, if you’re buying a lift, you’re buying maintenance agreements with it. I’m going to buy from a local equipment dealer, and that person is going to support the warranty on it, they’re going to do the service. Okay, you can buy that stuff on Amazon Business, but I think the fact that they had it for sale doesn’t indicate that they were getting a lot of market share on it. I think most of that’s going to go to an equipment dealer. Because what are you going to do if the thing breaks? Amazon Business isn’t going to help you. So, you’re going to have to get some kind of an agreement on it anyway. And I would be surprised if you could have gotten it for the same price as an equipment dealer anyway.
I understand what he’s saying. None of this stuff is black and white. It’s not like there aren’t complex things sold on Amazon Business, and it’s not like there aren’t simple things sold by a traditional distributor. What we’re talking about is how do you craft your value proposition and your capabilities in a way that you can compete for as much of it as possible?
Bein: Yeah, I think the other piece in the note is that distributors do need to be honest with themselves about the products they sell. It’s easy for distributors to overrate what they sell. For example, you might say, “Well, I’m selling technology products.” Well, some of those are actually commoditized. In fact, a lot of them are. If you’re selling printers, if you’re selling desktop printers, a lot of complexity to that. If you’re selling an enterprise printer, there’s all kinds of other things that go along with selling an enterprise printer. So, I think that’s a really good point.
Bein: And another question, “In a business utilizing inside reps in multiple territories for our showroom channel, what are some ways to repurpose our internal sales team to meet the newer demands of a digital era?” I think this really wades into the whole question of the distinction between field sales, inside sales, which we often called proactive inside sales or telesales and customer service.
Heller: Most reps call it inside sales, even though we don’t think it’s a sales role.
Bein: We don’t think it’s a sales rep. We think that in this area of people wanting faster transactions, easier transactions, not wanting the hour-long sales call, obviously, ecommerce is important. But also, proactive inside sales is important. Let’s be very clear what we mean about proactive inside sales. It is just like field sales, except they don’t get in a car. You might think because they’re sitting in a branch, or they’re sitting in a call center, that they look more like customer service reps. They’re not. They’re just like field sales reps who don’t get in a car. So, I think to the extent that you’ve got a proactive inside sales rep who is adding that consultation value, I think that’s partly an answer to what you are referring to there.
The other thing to note is that it is tough. Your question is about repurposing. Ian and I have different numbers on this, but they’re both small. The percentage of customer service reps that can make the shift to being a proactive inside sales rep, Ian, you think it’s as high as 15, I think it’s as low as five.
Heller: It could be.
Bein: It’s a very small percentage of the people that can make that shift. When you look to repurposing, make sure you’re doing testing, make sure you’re getting somebody that’s got the right psychographic to sell.
Heller: If we lay it out, and this is an oversimplification, but it’s a good starting point to understand it, you use outside sales reps for your big customers, because they’re more likely to have complex needs. You use outbound telesales reps to manage accounts. They’re account managers who work over the phone, and they manage your bit size accounts. They’re not taking inbound calls and placing orders for the most part. They’re making outbound calls, and they can do it at one tenth the cost of an outside rep, if you add up all the compensation, and T&E, and all the other stuff, and the ability to just be more efficient over the phone. They allow you to penetrate into that midsize part of the business, where, by the way, your competitors are probably not going because they’re probably focused on the elephants as well. So, they’re making outbound calls over the phone, but managing accounts, but they manage many more of them per rep at a lower cost.
Then what you call your inside salespeople today, they continue to call them, they are responsible for handling your inbound calls. You can call that a sales role or not. We call a sales role somebody who has an account package and account assignments. If they are taking inbound calls, we call it customer service. The people who are great at that, and make no mistake, these people are essential, they’re really important to your customers, they’re really important to you, but they’re not sales people. They don’t work on a commission, and go out, get new accounts, try to understand their needs, and figure out solutions that you can deliver. That’s what sales people do. Those customer service people are taking inbound calls, and they’re great at it.
If you work for a distribution company, probably sometime in your past, your company has made an attempt to turn those customer service people into salespeople when they have extra time. Somebody said, “You know what? Our inside sales people aren’t always taking calls. So, let’s give them each a list of 100 accounts, and when they’re not busy, they should call those accounts and try to sell them something.” And it always fails, because those people are terrible at that. They’re uncomfortable, they communicate that discomfort to the customers, the program peters out. You have one or two stars who really are good at it, and those are the exceptions in that five, 10, 15%. And so you go, “Why can’t everybody do what Betty’s doing? Betty’s great at it. You guys be like Betty.” Well, Betty is a unicorn at this. She’s one of the few people who can make outbound calls, and take inbound calls, and do them equally well. But most people aren’t like that. So, you can’t combine the account management and the customer service over the phone capabilities and succeed at it. Is that clear?
Bein: I think that’s really clear. If you try to do that in a bigger way, if you say, “Great, I want to have a hybrid proactive inside sales rep and customer service rep.” As the productive inside sales rep gets better and they start selling more, their load is going to grow to a point where they can’t handle the inbound stuff. And so, those calls will fall to the floor. We have a great related question about single point of contact between distributors and customers, is that usually best?
Heller: Interpreted the way that it’s written with no additional context, I would say no, you want to have a different person taking orders, answering questions, expediting stuff, and looking invoices, all that customer service stuff than you want to have selling to your customers. You don’t want to blend those roles, or you’re inefficient at selling. If that person is really good at that stuff, they’re probably not a good salesperson anyway. But for inbound calls, if we’re big customers, I think a lot of times that makes sense for the customer service stuff.
Bein: Mark Peck would have a slight variant answer on this. He would look at assigning both field sales and proactive inside sales to the same account.
Heller: I agree with that, yes. I didn’t want to really get into that complexity, but I agree with you, that he calls it integrated account management. If you don’t know who Mark Peck is, he’s a genius at this stuff. He’s been doing it for 30 years. He’s actually producing, developing the content for a series that we’re going to talk about that we’re launching later this year. It’s a three-part series on the reinvention of distributor sales. He’ll get into that. I just think for purposes of this discussion, it’s going to get confusing if we start talking about that. But go ahead, if you want to.
Bein: No, that’s fine. Actually, I didn’t mean it as an advert for that series, but I think it’s a great advert for that series.
Heller: Well, you know me, America’s land of opportunism. So, Jason is asking, “Is there a risk where buyers get the rep to help with discovery, but then buy elsewhere? And related to that, just because the rep shows up on site doesn’t mean the buyer is legally obligated to buy from that distributor.” Yeah, that’s right. This is always a risk. It’s been happening forever, that someone gets some technical support from you, and then they buy from somebody else. I think the better the rep, the better the relationship, the less likely that is to happen.
Bein: Let’s talk about ways that you drag along the less complex orders with the more complex ones. You’ve made the comment, I think very insightful, that people are willing to split orders these days. We used to think in terms of getting all of our stuff from one supplier. What are the ways that we can drag along the simple transactions with the complex transactions? I’ll throw out one. One is that there’s some kind of volume discount that you’re getting from consolidating your purchases with a single supplier.
Heller: And I’ll give you a requirement. You have to make it easy to buy that simple stuff. This is why being great at the complex stuff doesn’t get you off the hook for having a great website. When people do want to make those simple orders with you, they’ve got to have a great experience. You need good product data, integration with your ERP, and good search navigation, all that. You have to have a great website. Even if you don’t want to compete for that simple stuff as a primary part of your strategy, if you want any of it, you need great digital capabilities. That’s different than saying we want as much of our revenue to come out of that simple stuff as possible.
With that as an assumption going in, my answer to your question is that in addition to tying it to some kind of discount or rebate, you should have good, thorough ongoing sales and marketing contacts with those customers. First of all, they’re aware that you carry it, because as we know from our own research and experience, distributors think their customers know what they carry, but their customers don’t know what they carry. If you’ve ever walked through a warehouse with a customer, then you know at some point in time, they point to some product that you’ve been carrying for 30 years and ask you when you added that to your line, because they don’t know.
You have to constantly educate them about what you have to carry, so at least you’re on the consideration set when they need it. Then, on top of that, you should ensure that the sales rep relationship is such that the customer wants to buy from them to reward them for their hard work, and because they appreciate and value the relationship. I think that’s often undervalued, and I think it’s really important. I’ve been with sales reps, and the customers are apologetic that they don’t have orders for them. They want to reward their customer service and sales people. They’re people who are important to them in their business relationships with orders. They like to do business with them.
I think you offer financial incentives, you put it in the contract, that part of the deal is we’re going to bring in inventory to support these projects, and you’re going to buy it from us. You have to out-service the online players. That might mean that you not only know the products better, but you deliver them faster, you have them in stock, or they’re there for an emergency. It’s just that you have to outperform these online players with your own customers.
Bein: It’s an interesting point you bring up. I was working with a company in the construction space a number of years ago. And as you know, when you got started at White Cap, pretty much anybody in that space at that time lost 40 to 65% of the revenue as a result of the downturn. They had noticed they had a bunch of customers who were just getting to get a deal. And they decided, well, we’ve got two ways we can go out of business. We can give it away, or we cannot give it away. They decided to not give it away. They precipitously raised prices on these customers that were essentially bandits or outlaws, and a bunch of those customers left. But then literally 10, 11, 12 months later, there was this huge spike in the return of those customers, because this particular distributor could get stuff not just to the address, not just to the building, not just to the floor, but to the corner of the floor on the construction site where things needed to happen. The customers decided it was worth paying another nickel, dime, or whatever the increment was to have this quality of service. This was a logistic value add.
Heller: I’ve seen this again and again. My first experience with this was when I was in the Grainger marketing department. I started as a trucking loader at Grainger, then I ran branches, moved to the marketing department. The national accounts department had decided that they were going to terminate rapidly the contracts of about 80 customers, because those customers refused to take price increases that we needed to make them profitable. Well, they communicated with them that they were terminating the contracts, and I would say 90% of them came back and said, “No, wait, we didn’t realize you were that serious about it. Let’s talk about the pricing.” Because they those services really were essential, they were just negotiating.
I’ve seen that happen a lot. Now, I don’t suggest that as a strategy, but that’s how it worked in that instance. And I’ve seen it before. If you’re really the best at what you do, you will earn your business with customers. There’s no substitute for terrific performance and a great relationship. Let me tell you, though, I want to tell you one anecdote, worst sales rep I ever rode with. I’ve ridden with a bunch of them. I got into the passenger seat of his SUV, which was coated in dog hair. And he goes, “I’m sorry, I used to take my dog with me on sales calls.” Really? So, I was in a suit at the time, and I had dog hair all over me. Every call we stopped at was a surprise to the customer. They didn’t have any idea that we were coming. And he kept saying, “Oh, I didn’t bring my dog today. I brought this guy instead. I know that’s a big letdown.” You can see the customers going, “What?” And that kind of sales rep never will last long. And that’s my closing here, is there never were great account managers who did nothing but drop off doughnuts and shake hands. Unless you have bad sales management, those people were never successful and they never lasted.
The bar is getting higher now. Your sales reps need to be more like business consultants, they have to have better technical knowledge, they need to be better at evaluating customer needs, they need to help you develop more services so you’re more essential to your customers and differentiated from pure digital players. Bad reps have always been bad reps. And good reps have always tended to develop these skills over time. You just have to be more deliberate and focused about it and more demanding of your people. Does that make sense?
Bein: It does. Now, we have one more great question. “Amazon and Grainger have field sales reps to drive traffic to their sites. They also focus on key accounts for their business. How do you get traffic to your site unless you have a sales force to drive people to your site and explain to them why they should buy from you?” I’m going to take part of that, and then I’d love to hear your thoughts. The research that our colleague, Dean Mueller, and I have done on ecommerce shows that the strongest ways to drive ecommerce business are through your customer-facing personnel. Your customer-facing personnel, field sales reps, proactive inside sales reps, and customer service reps can make or break your ecommerce initiative. If they want to shut it down and not promote it to customers, you’re going to have a hard time succeeding. So, I would say that when it works right, you’re spot on, the field sales rep is a big proponent of the digital piece and the driving force.
Heller: Okay, so the first statement is Amazon and Grainger have field sales reps to drive traffic to their sites. The vast majority of customers for Amazon Business and Grainger do not have field sales reps. Only the big customers. Amazon itself has no sales reps. Amazon Business has what I think are called customer advisors, who are there to negotiate the contracts. But they’re not there to provide ongoing account management. I’m 100% certain, the vast majority of those companies do not have field sales reps. Only the big companies do. And so, a whole bunch of the revenue coming in is not coming in because of sales reps’ work. If you really want your non-complex purchases that come through a sales rep to succeed, yes, you want to get them from your big accounts, and that is a sales rep challenge, but you’re also going to need to be good at online marketing, like email marketing, SEO, etc.