In terms of cost, the sales function in a typical distributor represents the largest expense. Yet it is arguably the area where the fewest analytics have been applied.
Pricing and profitability have garnered much of the attention in terms of process improvement, to good effect. Companies that have changed their pricing policies and analyzed profitability by product, vendor and customer have better weathered the dramatic market shifts of the past few years. Sales and marketing is the final frontier in wholesale distribution for process improvement.
Most distributors today are still selling products using the same model that worked in the “Age of Mass Markets,” a term used by MDM contributing author Jonathan Byrnes to describe post-World War II markets up until a few years ago. For a long time, it worked fine for distributors to focus on products and sales revenue. But today’s markets are much more specialized and fragmented. They require a deeper understanding of customer segments and market niches, and how to profitably mine them with limited sales resources.
In this post-recession period, distributors must transition to a more analytical approach for developing and growing sales. It starts with getting a deeper knowledge of local markets, customer segments and ultimately customer patterns. Many distributors already identify specific customer segments by SIC or NAICS code.
But even those that do aren’t analyzing purchase trends by product across similar segments.
For example, the best customer in a segment may be buying a broad product array because of a high-level relationship. This class A customer can be used as a benchmark for measuring the potential of other customers within the segment by dividing sales by product by the number of employees, and then applying that ratio against other customers in the segment.
There may be some large untapped potential that simply was not visible to the outside salesperson calling on the account.
This is the core model MDM’s sister company, Industrial Market Information, uses by applying government data on industrial product consumption to customer segments at account or territory levels.
The real power of this type of marketing analytics is that it can reveal what you can’t see from traditional sales force-generated market intelligence.
It shifts the focus from purchase history to product consumption based on processes used. That’s a difficult culture and process change, but a critical one to make.