In today’s competitive marketplace, sales organizations are often forced to re-engineer processes to ensure success, as effectively servicing all accounts using field sales alone has become an economic impossibility.
For most organizations, there are simply too many accounts to produce a positive ROI, meaning it’s vital to ask the hard questions and constantly evaluate performance. If any of these six signs of sales channel stress appear, then it is likely time to optimize your marketing methods to increase reach. Doing so will maximize sales, decrease attrition and lower the overall cost of sale.
1. Too many accounts assigned to each sales rep. On average, a building products sales rep is assigned 100 or more accounts but can only effectively manage and grow 20 to 30 accounts. The results of analytics performed on more than 200 companies over the past 10 years has shown a clear “rule of thirds.” In this principle, the top one third of the average sales rep’s managed accounts performs very well – growing by double digits each year. The middle third is managed only occasionally, keeping performance flat. The bottom third is often neglected, resulting in average double-digit attrition. In a field sales model, there is simply not enough time to reach all customers without support.
2. Accounts assigned to reps to justify a figure of dollars under management, rather than true ability to cover. When reps are assigned too many accounts, this dynamic is often the reason. On paper, the philosophy of increasing rep assignment to reach a certain dollar value coverage maximizes the portfolio, but this causes attrition in the bottom accounts and drives less than optimal management in high-value accounts. This phenomenon takes time away from accounts that can be grown and spreads reps too thin, making it impossible to achieve optimal performance.
3. Large number of unassigned accounts that are not growing as fast as field-managed accounts. Another principle proven through long-term analysis of companies is the 80/20 rule, which states that 80 percent of revenue is generated by the top 20 percent of customers. These 20 percent are high-value customers and average double digit growth. Low-value, unassigned accounts average 15 percent attrition, occasionally reaching up to 40 percent. This is often caused by not truly analyzing sales data to understand the inequality between accounts but sometimes is the result of a conscious decision to not focus on low-value accounts because the economies of hiring sales staff to manage these accounts is unrealistic.
4. Lag in sales of new products or non-core accessories. Distributors often see that sales of newly introduced products or high-margin accessories don’t perform to expectations, often the result of fragmented communication and an over-reliance on field sales alone for education. The combination of field resources being able to truly cover only the largest accounts and a primary focus on the best-selling products can easily cause this to happen. To truly reach and educate all accounts, communication must come through multiple channels, or many accounts and/or decision-makers will not be exposed to cross-sell and up-sell opportunities.
5. Over-reliance on field sales as the only channel of communications or management. While field sales reps are very effective in the highest value accounts where the most time is spent, B2B customers complete an average of 57 percent of their research through other channels before engaging field sales, according to a recent CEB study. Not rounding out your communications toolset with other channels, especially email and digital engagement, can result in missed education and sales opportunities.
6. Underutilization of key support programs by customers.Support programs such as rebates, loyalty and marketing assistance programs are often underutilized in the B2B space. In one example, a client program matching a government-funded rebate was only used by a fraction of dealers. In another case, a loyalty program had 13,000 customers enrolled but only 800 using it. In both cases, less than 15 percent of accounts were even aware of the existence or their enrollment in these programs. These examples, seen across the industry, show a systemic lack of process and resources to ensure that programs and their value are communicated to all customers consistently.
A well-managed field sales organization is key to the success of any product sales company, but it has become impossible to manage all accounts using field sales alone. Many companies see these signs of stress within their sales channels and find that they must develop more effective and cost-efficient ways of covering low value accounts and supporting field sales. When reps are spread too thin or have too much to do with every client, sales drop and attrition rises. Using alternate solutions such as multichannel marketing can optimize sales efforts and relieve sales channel stress.
Scott Kay, president, building products, joined Modern Marketing Concepts in 1992. He oversees the company's day-to-day operations, as well as strategic consulting for clients within the building products industry. Scott has helped guide major corporate clients including Carrier Corp., United Technologies, LP, GAF, Amana, Goodman Manufacturing, General Electric, Corning Inc., Philips Medical and Johnson & Johnson as they strive to find creative ways to meet and exceed their growth goals.
John Schnitzler is the product director for Channel 80/20 at Modern Marketing Concepts. John joined MMC as an intern in 2006. Since then, he has specialized in developing and executing database marketing and sales programs to drive sales growth for clients such as Goodman Manufacturing, Ferguson Enterprises, Associated Materials and more. He currently oversees operations for all MMC clients in building products distribution.