The authors of Value Creation Strategies for Wholesaler-Distributors implore distributors to define strategy in terms of
closing gaps with the market rather than operational weaknesses. Tactically driven initiatives may meet intermediate goals,
but they often produce unsatisfactory business outcomes.
This is an excerpt from Value Creation Strategies for Wholesaler-Distributors reprinted with permission from the NAW Institute
for Distribution Excellence. Order the book at www.naw.org/valuecreationstrateg.
Strictly speaking, best practices are business operations that are statistically correlated with superior financial performance.
The study of best practices is now widespread and has contributed to significant productivity improvements by wholesaler-distributors
across all lines of trade. The most comprehensive review of distribution …
For distributors who have had to implement reductions to their sales force, there is a legitimate concern that as the number of salespeople go down, so will revenues. A three-step process exists to help mitigate these potential effects.
One question many distributors are asking is, How can I reduce costs without losing sales?
The answer: "Align your selling resources more closely with the market."
Achieving this is not simple, but a proven three-step process for doing so does exist. The steps: Segment customers, utilize effective sales management practices, and ensure incentive structures are in alignment. This article will discuss the importance of each step and illustrate how the outcomes from each will enhance ...
Here are two case studies with tactical illustrations of how two separate distributors revised longstanding sales compensation plans to adapt to a new competitive environment.
The Margin Conundrum This is an example of a straight-commission compensation program with a few twists. The company was clear on what it was trying to accomplish and did a good job of communicating and transitioning the sales representatives to the new program.
The net profits of a multiple-branch building products distributor kept decreasing as sales and prices for the products sold were increasing. Investigating the cause, executives realized that sales representatives were not passing along price increases to their customers. Asked why, the sales ...
A wholesaler-distributor of janitorial supplies had just gone through a management succession where the son had taken over from his father as president of the company. The new president had been in the business as long as he could remember, holding, at one time or another, nearly every job within the company.
The job he enjoyed most was that of outside sales representative. Being out of the office, meeting with customers and helping them solve their problems was appealing, as were the challenges of balancing the expectations of customers, vendors and the company.
His years as an outside sales representative proved to be valuable after he became president, because one of the biggest challenges he had inherited from his father was dealing with a clearly overpaid ...
A large distributor of semiconductors to the OEM electronics market had a clear strategy and corporate objectives that included growth generated by expanding its customer base. One problem was the cyclical nature of computer memory chips. When a new chip was introduced, it was expensive, had a long lead time and was hard to get. Most memory manufacturers had set up allocation procedures to ration chips to their wholesalers. In the early stage of this cycle, wholesaler-distributors could sell 10 chips for every one they could deliver. At the end of the cycle, prices would collapse, product would be readily available and customers would cancel their entire backlog.
The company's corporate objective was to use the hard-to-get memory product as a tool to help expand the ...
A regional medical gases distributor had been operating on two sales compensation programs for years. Historically, sales representatives were paid 100% commission. But when the company began a period of rapid expansion, managers found it difficult to hire new sales professionals under the existing program. The new markets the company was moving into required sales representatives to have an engineering background.
The company found that the candidates having the necessary background perceived the 100% commission program as too risky and would gladly trade off some of the possible upside opportunity for some security. The company offered new sales representatives a salary and small commission with the intention of moving them into the 100% commission program once they saw ...
The vice president of sales at a distributor of safety products was called into a meeting with the president of the company. The president informed the V.P. that he was not pleased with the progress being made in a number of areas. His displeasure centered on market share growth and profitability. The company, founded in the '20s, had grown through acquisitions to exceed $200 million in sales. The president was eager to continue this growth. He recognized that the company had become highly leveraged with its most recent acquisitions. His father and grandfather, still on the board of directors, were not shy about taking money out of the corporation. He knew that if he was to continue the growth demonstrated in the past he would have to do it organically, through improved performance in ...
Executive summary: This article looks at the biggest errors companies make relative to their outside sales compensation programs in lean times, the 'don'ts,' as well as the activities that companies should undertake, the 'do's.'
'Much of the squeeze on profit margins of domestic operations results from a rise in unit labor costs. Gains in compensation per hour picked up over the past year or so, responding to a long period of tight labor markets, the earlier acceleration of productivity, and the effects of an energy-induced run-up in consumer prices. The faster upward movement in hourly compensation, coupled with the cyclical slowdown in the growth of output per hour, has elevated the rate of increase in unit labor costs.'