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The rise of Amazon, other digital platforms and fast-changing customer expectations of the buying process have disrupted the role of the traditional field salesperson. More than 100 distribution industry leaders met in Denver in late June at MDM’s Sales GPS 2018 event to discuss the evolution of the distribution sales model to one that adds more value and helps them adapt to a changing market.
The time to question the ROI of distributors’ existing sales structures is now, said Indian River Consulting Group’s Mike Marks. “You guys have invested money in operations, and ERP systems, and pricing systems, and you’ve got all kinds of logistics sophistication,” Marks recently told attendees at Sales GPS, MDM’s summit in Denver. “But what have we done with field sales? We have squeezed this cost structure as much as we can in a lot of areas, but this huge chunk has been left untouched.”
To even start to tackle this complex challenge, distributors must first seek the answers to key questions: How do your customers want to be served, and how can you do so at the lowest possible cost? Where is the highest growth potential, and how can you align sales teams to tap that potential?
As several Sales GPS presenters pointed out, the answers will differ for each distributor, market segment and customer, as will the realignment strategies they employ. Despite differences, though, the data-driven insights these experts shared during their presentations apply.
Here are three big-picture takeaways from Sales GPS 2018 that all distributors should take to heart:
1. The traditional sales force is a margin killer
Marks said distributors “have been rightfully reluctant to face up” to the challenge of overhauling sales structures and strategies. Distributors dread the task and fear their best reps will walk away if they make changes. But distributors have more to lose by sticking with the status quo. Marks told the audience: “Half of your gross margin or more is burned up in payroll, and half of that payroll is burned up in customer-facing selling costs.”
Mark Peck, founder and CEO of Apexx Group LLC, echoed this sentiment and supported it by working with the audience to calculate the cost of a sales call. Considering the cost of salary, commission, sales support staff and other overhead as supplied by attendees, Peck calculated the average annual cost of a single salesperson. Then, using the same crowd-sourced method to identify how many in-person visits the average salesperson can reasonably expect to make in a year, Peck calculated the average cost of a sales call: $372.
Which begs the question: Are they worth the cost? Do these visits provide measurable ROI for the distributor or at least result in overall customer goodwill? Because many distributor sales visits are transactional and could be handled more cheaply through e-commerce or inside sales, distributors can’t afford to ignore the cost of maintaining the sales force status quo, speakers said.
2. Customer size doesn’t equal customer potential
Given the high cost, the sales resource must be employed strategically. John Gunderson, MDM’s vice president of analytics and e-business, said many distributors direct or incent their sales teams to focus on their largest customers, assuming deep pockets and high growth