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Many distribution companies have an informal plan to target key customers or develop growth opportunities. But too often a focus on the monthly numbers leads to inefficient sales behavior contrary to management’s plan. This article outlines a straightforward and disciplined process that establishes clear priorities in terms of customers and products, strategy for differentiating among different types of customers, and the role and functions to be performed by the sales force.

Frequently we find a disconnect between what an organization perceives its strategy to be and what the sales force is actually doing in the field. The disconnect is between what the management of the organization thinks the sale force should be doing to execute company strategy and what they are actually doing. The result is a sales force that is perceived by the rest of the company to be overpaid, underworked primadonnas.

While there may be some truth to this perception, it is probably true to varying degrees throughout any company. Truth be known, most of the salespeople are hardworking and have a desire to do the right things. But in most cases nobody has told them what the right things are. It may be that no one really knows and, in fact, everything is important. Often, management has not made a clear connection between the right efforts on the part of the sales force and the company’s strategy.

You need a plan that establishes clear priorities in terms of customers and products, strategy for differentiating among different types of customers, and the role and functions to be performed by the sales force. In the absence of such a plan and without a clear identification of the ‘right things,’ the attention of management shifts to the ‘numbers’ rather than to the efforts which lead to the numbers. The problem with this is that it will probably cause the sales force to engage in activities that are inconsistent with the ‘informal strategy’ to differentiate the best customers, in an effort to get the all important ‘numbers’ without regard for the cost of getting there.

The long and short of it: most distributors have an informal plan that is understood to some degree throughout the organization. In many cases, systems are in place to motivate the sales force to engage in activities that are inconsistent with the distributor’s ‘informal plan.’ An example of this might be when your strategy is to focus on your key customers but your sales territories are defined geographically (thus any account is fair game).

As a result, there is motivation to get all the accounts possible because the incentive compensation plan doesn’t make any distinction between the customers we want and those we do not. Many sales incentive plans are driven by gross profit dollars, where the message to the sales force is ‘get me gross profit dollar.’ The implication here is that all products and all customers are equally important to the company, therefore they must all be equally profitable.

Connect the dots

The best way I can see to overcome this disconnect is to document your strategy: define clearly the role of the sales force in implementing the strategy, ensure that the sales force is capable of implementation (they possess the skills and knowledge to do the right things) and that the performance measures and compensation plan are structured in such a way that the sales force receives a clear message regarding what the right things are.

What I often find when working through this process with clients is a willingness to set objectives, segment customers and even to document the strategy for differentiating among customer segments. Where we seem to run into a great deal of resistance is when we ask what changes must be made in the sales force as it exists currently to successfully implement the strategy.

In many cases, there seems to beinterest on the part of the sales management and the sales force. These are both very powerful voices in most organizations that appear to be in favor of segmentation and differentiation as long as it only effects change in customer service, purchasing and the warehouse, but not the sales force. This is the point at which the disconnect occurs and the barriers to aligning the sales force with company strategy begin.

The sales force resists changes in the status quo and management does not truly want to manage the efforts of the sales force. So, by default there is a tendency to rely on the sales force’s ‘good sense’ to do the right things even though what is expected in terms of a good selling behavior is not necessarily reinforced by:

• the way territories are structured
• a formalized account profiling and planning process
• a proactive sales management function (note: I referenced the function as opposed to an individual)
• clear performance standards that are not based purely on the output (GP dollars, sales dollars, etc.)
• a compensation plan that emphasizes the highest priority products
• customers and activities and de-emphasizes everything else
• and a regular feedback loop to the sales force.

These things seem to have a much greater and more enduring impact on the efforts of the sales force than does their ‘good sense’ or their desire to do what is good for the company.

Segment differentiation

When I discuss differentiation of customer segments, I am referring to the notion that you would treat your key and target customers better than your maintenance and why bother customers, in turn. I have found that in most of the companies I’ve been involved with, there is a contingent of people that believe that some degree of informal differentiation already exists, and another group that is of the belief that we must be ‘fair,’ in other words, ‘all things to all people.’ The way to differentiate is to clearly define what we will do for key and target accounts and what we will not do for maintenance and why bother accounts. Consider the following questions:

• Why would your sales force call on a why bother account?
• Why would you buy non-stock products for why bother accounts?
• Why would you let your maintenance and why bother accounts tie up your resources that could be invested in your key and target accounts?
• Do you currently do everything you can possibly do to grow your key accounts? to convert target accounts? If the answer is no, is it because there is a shortage of resources?
• Is there really a resource shortage or more simply some poor resource investments?

In any event, to be effective the strategy to differentiate must be documented and communicated to the entire organization. Everyone must not only understand, but they must be measured on the implementation and the results of the strategy.

John Monoky is the principal of Monoky Associates, Toledo, OH, a consulting firm with a focus on strategic sales and marketing. He may be reached by email or 419-536-7637.