Editor’s note: Hear more on this topic from Hale in his session, “A Growth-by-Analytics Success Story,” at MDM’s upcoming conference, MDM Analytics Summit 2018 on Wed. Sept. 20 in Denver.
For any distribution business, other than having solid inventory and smart sales people on the street, probably the most valuable asset you have is your data. How do you use that to grow your business? How do you use it to become a better partner with your suppliers? The ones that figure that out are going to be rewarded for that capability.
Over my 18-plus years at FCX Performance, a $350 million super-regional leader in the special flow control distribution market, our jumping off point with data analytics was to use it to understand who our customers were and how they bought from us, with the ultimate goal of driving margin improvement through accurate, intelligent pricing.
Among the important questions we wanted to answer:
- What’s the customer spending?
- What’s the range of products they buy from us?
- What’s the volume of the stuff they buy from us?
- What’s the size of that customer relative to others?
The second goal we had with our analytics program centered around sales management. Acquiring the following information and sharing it with our sales force:
- How do I identify who my customers are?
- What are they buying and what are their buying patterns?
- How can I identify white spaces that I can potentially fill within that customer?
- And then how can I go out and find new customers?
Next, we needed to take that information and combine it with market data to figure out how to best deploy the sales force. Instead of doing what most distributors would historically do, which is simply deciding to add a salesperson to a new territory with zero analytical underpinning, we would use the data we had to figure out exactly where salespeople were actually needed.
The Economics of Analytics
Most distribution businesses have the same challenges. The playbook around analytics, around salesforce effectiveness, around market share, around pricing, around purchasing — the challenges are generally the same regardless of the product that’s distributed. Being smarter about your decisions by supporting them with real-time analytics is critical to being successful.
At FCX Performance, the use of strategic analytics allowed us to grow organically and more profitably with a more effective and efficient sales force. Simply put, we improved our margin through analytics.
As one example, we acquired many businesses over the years. In doing acquisitions, if I could buy a business that had one margin profile and one growth rate and leverage the capabilities that I had within my business I could improve the profitability and the growth rates of the acquired business — making the economics of that acquisition significantly better.
That said, I know technology can become a constraint as much as it is an asset in implementing proper data analytics. A lot of businesses don’t have current systems, or people who understand how to get the data out of their systems. Perhaps they just aren’t willing to invest.
Sometimes it means committing to changing company culture to drive the investment. I’m looking at you, sales team managers. Historically, distributor sales people run the show. Management is afraid to push them, so when you introduce analytics into the mix, you either get pushback from a sales force or you have a fear of a pushback. You need to direct them. Force them into the analytics-based plan if you have to, and then hold them accountable to it.
Here’s why. Not every sales dollar is worth the same amount of money. So you’re forcing them to sell strategy products to strategic accounts. You’re forcing them to develop new business. Sure, it puts those people in a sometimes uncomfortable position. But analytics not only drive accountability, they drive company growth.