Introduction. Our salespeople and managers are flying blind. CEO, Industrial Supply Wholesaler-Distributor

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1 Introduction Our salespeople and managers are flying blind. CEO, Industrial Supply Wholesaler-Distributor The idea for this book began as a question: Can today s customer relationship management (CRM) tools create value for wholesalerdistributors? We quickly discovered that the answer is an emphatic yes! Wholesaler-distributors are aware of CRM, and many, perhaps more than we expected, have already adopted CRM tools. Use of CRM ranges from simple contact and lead management tools all the way through robust pipeline, forecasting, and social media applications. CRM has traction with wholesaler-distributors because it fills a gap the ability to manage sales with data and metrics. CRM is growing with wholesaler-distributors because it can improve profitability. As our work proceeded, we found that executives want answers. How can CRM help my business now? How should I pick a vendor? What are the best practices for implementation? What does the future hold for CRM and wholesaler-distributors? The answers to these questions, and many others, are the subject of this book. The answers are useful and timely, both for wholesaler-distributors that are considering CRM and for those that are already users. This book is a strategic guide for leaders about adopting and using CRM software, with the goals of improving sales effectiveness and, ultimately, growing sales and profits. In a sense, it s a book by leaders for leaders. The insights and facts presented throughout the book reflect the experiences and opinions of owners, CEOs, presidents, and vice presidents, gathered through interviews, surveys, and exchanges. Wherever possible, we provide the exact advice offered by experienced wholesaler-distributors, as well as the questions, barriers, and uncertainties faced by wholesaler-distributors that are not users of CRM and those that are. We also offer our own experiences and perspectives to confirm, expand, and, at times, challenge the perspectives offered by wholesaler-distributors. 1

2 Our ultimate goal is to help distributors create a roadmap for evaluating, adopting, and leveraging CRM to help improve the competitiveness of individual wholesaler-distributors and, perhaps, contribute to the ongoing evolution of the wholesale distribution industry as a leading user of sales and marketing automation tools for the benefit of customers and suppliers. What We Found CRM is helping wholesaler-distributors manage their sales organizations as they already run the rest of their businesses: with disciplined processes using data and metrics to guide business decisions and day-to-day performance. CRM makes customer data easily assessable for salespeople and improves the flow of on-the-ground insights about customers and competitors from salespeople back to sales management and leadership. CRM provides wholesaler-distributors with dashboards for tracking sales opportunities and account performance, helping salespeople to stay focused on highly effective activities and helping management to keep their fingers on the pulse of the business. More than once, leaders compared CRM to warehouse automation tools. Just as warehouse management systems help wholesalerdistributors manage the flow of products to market, CRM helps manage sales behaviors and activities to meet customer needs. These observations point to the potential effect of a well-planned and -executed CRM strategy, and across all of our interviews and surveys, seven strategic findings emerged: 1. CRM can improve profitability. Experienced CRM users offered many ways that CRM has a positive effect on profits. Opportunities are accelerated through the sales pipeline. Win rates are increased. Return-on-marketing-investment is improved. Customer retention is increased. Price maintenance is improved. And so on. CRM is not a magic solution, but our interviews found that when properly applied to challenges, CRM is a very effective tool for improving profitability. 2. CRM delivers the best results when coupled with four levels of planning. Adopting CRM without a plan is a formula for wasted effort and investments, and experienced users have identified four planning needs: (1) a plan for selecting a vendor with benefits that best match 2

3 the sales process and business culture; (2) a plan for launching CRM that encourages adoption and expands usage over time; (3) a plan for improving sales productivity and effectiveness; and (4) a plan for simultaneously developing sales capabilities and competencies, including coaching, account planning, territory management, and value-selling skills. 3. CRM is fast becoming a standard practice. As one distributor explained, The use of CRM will grow in the same way that and websites became a standard business practice. There will be skeptics and some will fret about return-on-investment, but the fact is that modern businesses use automation tools, and sales organizations are overdue for getting onboard. 4. CRM can improve individual and overall sales performance. CRM helps salespeople focus on the right opportunities and saves time on internal communications and administrative activities such as managing co-ops, managing leads, and gaining price approvals. CRM requires a time investment by salespeople to enter customer information. However, when required inputs are limited to the most essential and CRM is deployed on mobile devices that can be used in the field, the tradeoff is more than acceptable. It leads to improved sales and profits. 5. CRM implementations usually start small, then grow. Almost without exception, wholesaler-distributors emphasized that one of the critical requirements of launching a CRM solution is to start small. Starting small means implementing the small set of CRM features that are both valuable and easy to adopt. Starting small can also mean rolling out CRM to a subset of your sales force before extending it to all salespeople. Starting small is about building credibility with your sales force and managers and earning the right to expand CRM to include new features. Early CRM features may include contact management, lead and prospect management, and call-planning tools. Some wholesaler-distributors may stop here, but others will go on to implement more advanced instruments, including pipeline management, sales forecasting, and social communications that enable instant messaging and microblogs within the CRM. And there are many, many more apps that may be considered and adopted, over time, as CRM makes a greater and greater contribution. 3

4 6. CRM helps wholesaler-distributors build sales capabilities. When asked how CRM fits with the business model, a common theme emerged: wholesaler-distributors are all about execution, and improving execution is about building capabilities. Balanced strategies for building capabilities focus on people, processes, and tools. CRM can improve sales performance as an automation tool, but unlocking the full potential of a sales force requires following a disciplined sales process, executed by salespeople with the right skills and motivations. Wholesaler-distributors that achieved the highest levels of performance gains through CRM described initiatives that addressed all three elements of a capabilitydriven strategy for growing sales and margins. 7. CRM can be transformational. One executive coined a phrase: CRM helps salespeople become opportunity managers. Today, salespeople manage accounts and territories, and their activities are often reactive (answering questions, responding to complaints) or transactional (checking customer inventory, taking or facilitating orders). With CRM, salespeople can manage opportunities through a sales process that flows through generating leads, identifying needs, offering solutions, and delivering value. The transition can be dramatic, not only in effect on sales and profits, but also in the attitude, motivation, and culture of the sales force. What Is CRM? CRM can mean many things to wholesaler-distributors. It s a software and sales automation tool, of course, but CRM can also be viewed as a strategy or process, depending on the business experience, technology affinity, and sales orientation of the wholesaler-distributors we encountered. Occasionally, we were asked to provide a definition, and we relied on Wikipedia as a starting point for our conversations: Customer relationship management (CRM) is a widely implemented model for managing a company s interactions with customers and sales prospects. It involves using technology to organize, automate, and synchronize business processes principally sales activities, but also those for marketing, customer service, and technical support. The overall goals are to find, attract, and win new customers, service and retain those the company already has, entice former customers to return, and reduce the costs of marketing and customer service. 4

5 Customer relationship management describes a company-wide business strategy, including customer-interface departments as well as other departments. Measuring and valuing customer relationships is critical to implementing this strategy. Wikipedia, December 2012 In more practical terms, one executive offered a similarly comprehensive definition of CRM: For wholesaler-distributors, CRM delivers the following benefits: pipeline management providing a clear picture of where all sales are in the sales cycle, win-rate percentages per salesperson and by location for each product group and supplier, and lead-to-opportunity win-rate percentages tracked by supplier and salesperson. CRM tracks real-time sales revenue and booking values. We use CRM to report on product group performance and segment results. In our business, CRM also provides real-time days sales outstanding by account with easy access by salespeople. CRM helps sales teams collaborate. CRM s fundamental value is its ability to provide salespeople and management with customer data and real-time metrics. Vice President of Sales, Construction Equipment Wholesaler-Distributor Other executives offer their own definitions, quickly getting to bottom-line priorities according to their own business needs, expectations, and results: We use our CRM software to manage prospects, customer activity, and lead generation. It has also become a tool to assist in outbound calling to lower sales cost activity. General Manager, Sanitary Supply Wholesaler-Distributor CRM is helpful for accelerating sales or new products or technology, not so much for existing products that are well-understood by salespeople and customers. Executive, Industrial Supply Wholesaler-Distributor CRM enables contact management, e-marketing campaigns, sales dashboards, opportunity tracking. We don t use CRM much for funnel and overall forecasting. Vice President, Information Technology, Electrical Wholesaler-Distributor 5

6 CRM provides a common base of information that includes the customer s technical and anecdotal information, quotations, and contacts. President, Industrial Gas and Welding Wholesaler-Distributor Wholesaler-distributors also offered perspectives on the status of adoption of CRM by their business and the wholesale distribution industry: CRM is an essential tool and standard practice for any sales organization. Wholesaler-distributors that don t use it will fall behind. Vice President, Health Care Wholesaler-Distributor CRM is almost a complete unknown to my company. We haven t looked at it very hard because we don t think it fits with our values and culture. We prefer a personal touch. President, Food Service Wholesaler-Distributor As the survey results demonstrate, this last view of CRM as a complete unknown is rare. Most wholesaler-distributors are aware of CRM and have at least a working knowledge of CRM s features and benefits. Virtually all executives indicated that CRM was a fit for industry needs. Wholesalerdistributors that were less familiar with CRM did not argue that it was irrelevant or unnecessary, but rather offered a ready list of questions they wanted answered to gain an understanding of how CRM might benefit their business needs. The most frequently asked questions go to business results that can be achieved, the most relevant features and benefits, and the best practices for driving adoption in the sales force and across the company: Before implementing CRM, I want to understand the data and information that can be leveraged to create the largest positive impact on a customer s business. And, how do wholesaler-distributors leverage CRM/business intelligence to gain sustained effectiveness on sales and margins? CEO, HVAC Wholesaler-Distributor 6

7 How easy is CRM to implement, and what is the acceptance rate of features beyond the basic features of the program? Vice President of Sales, Fluid Power Wholesaler-Distributor How difficult is it to get sales representatives to input customer information on a timely basis? How do you avoid garbage in/garbage out? CEO, Food Equipment Wholesaler-Distributor Does CRM lead to better accountability? Does it improve productivity despite the time required? Is there a steep learning curve? Does it work better with certain personality types? General Manager, Plumbing, Heating, and Cooling Wholesaler-Distributor What return-on-investments were hoped for? Were they achieved? How were they measured? Executive, Building Materials Wholesaler-Distributor These questions and others provided direction for our work and helped to determine how we organized our findings and recommendations. Our work sought answers to these questions, and our findings are the contents of this book. Our Approach To help ensure that this book is by wholesaler-distributors and for wholesaler-distributors, our work began and ended with in-depth, openended conversations with wholesaler-distributors. Most executives were very willing to share their ideas and experiences as we began our work, and many more offered their time to help confirm, challenge, or refine the perspectives gathered through interviews or our online survey of executives. Along the way, we reviewed materials provided by CRM vendors and their implementation partners and gathered perspectives from suppliers. 7

8 Key areas of exploration in all interviews and surveys include current state of CRM adoption most important best practices and realizable benefits barriers for adoption and achieving measurable results perspectives on valued features and integration needs return-on-investment roadmap for evaluating, adopting, and leveraging CRM vendor-selection criteria and evaluation process change-management needs and best practices future vision of CRM use and results pace of change, including new social media tools. We conducted an online survey to help quantify the perspectives gained through interviews. These findings, combined with interviews and conversations, provide a useful picture of the current state of CRM in wholesale distribution and offer important reference points for helping wholesaler-distributors make their own plans for adopting and using CRM. To our knowledge, our research is the only survey focused on the needs of wholesaler-distributors presented independent of a vendor or implementation partner. The makeup of our online survey is shown in the following three exhibits. Exhibit I-1 shows the leadership position of the online survey participants. Consistent with our objective to provide strategic guidance for executives, cross-functional perspectives are provided by the leaders of teams who are the primary users of CRM (sales, marketing, and customer service) as well as leaders of supporting teams (finance, information technology [IT], and operations). 8

9 Exhibit I-1. Online survey: participants by leadership position. 17% 10% Executives and Principals Sales, Marketing, and Customer Service Leaders Finance, IT, Operations, and Other Leaders 73% Data represent findings from online survey of executives. Exhibit I-2 shows the wholesaler-distributor s size, as measured by the total sales revenue of the online survey participants. We found that there were innovative users and cautious nonusers across all sizes of wholesalerdistributors. Large wholesaler-distributors may have deeper pockets for making investments, but the availability of low-cost, streamlined CRM solutions allows smaller wholesaler-distributors to achieve meaningful results at appropriate costs. Exhibit I-2. Online survey: participants by sales revenue. 11% < $50 Million $50 to $249 Million 17% 31% $250 Million to $1 Billion > $1 Billion 41% Data represent findings from online survey of executives. 9

10 Exhibit I-3 shows the ownership type of the online survey participants. As expected, we found that wholesaler-distributors are fact-based, rational decision makers, and the ownership model of an individual wholesalerdistributor did not predict attitudes or experiences about CRM. Exhibit I-3. Online survey: participants by ownership type. 9% Public Private: family-owned 32% Private: not family-owned 59% Data represent findings from online survey of executives. How This Book Is Organized As a strategic guide for leaders, this book is organized in chapters that follow a natural flow for decision making. Chapters 1 and 2 build a foundation of knowledge, chapters 3 and 4 address vendor selection and implementation, and chapter 5 describes one wholesaler-distributor s journey and then looks to the future evolution of CRM. (See exhibit I-4.) Each chapter begins with a summary of strategic findings and ends with a ready-to-use management tool to help apply the chapter s findings and recommendations. In between, key research findings are presented and explored, supported by quotations, exhibits, best practices, and frameworks. 10

11 Exhibit I-4. Chapter summary and reader guide. Chapter 1 Getting to Go Adoption and use Practical benefits Sales effectiveness needs Chapter 2 Focusing on Behaviors Behaviors and results Salespeople, managers, and leaders Stoplight assessment tool Chapter 3 Selecting a Vendor Principles for selection and launch Vendor-selection criteria Process-design tool Chapter 4 Implementing CRM and Change Three phases of implementation Organizational change Change-management punch list Chapter 5 Leading the Way In-depth case study Future visions for CRM Management retreat practices Following this introduction, this book s chapters will focus on these topics: Chapter 1: Getting to Go The overall goal of this chapter is to provide leaders with perspective to assess their current use (or nonuse) of CRM relative to other wholesaler-distributors. The chapter provides data on the overall level of adoption and perceived benefits of CRM by wholesalerdistributors. The experiences and recommendations of experienced users are explored, as well as the questions and concerns of nonusers. The chapter provides a tool that identifies common elements of sales effectiveness, and we recommend that each wholesaler-distributor customize the framework to match its effectiveness drivers and capabilities. 11

12 Chapter 2: Focusing on Behaviors During our interviews, executives repeatedly told us that while the most obvious benefits of CRM are about the collection, organization, and presentation of customer data, results are achieved only by thorough actions and behaviors. This chapter explores the importance of focusing on behaviors at all levels of a sales organization from salespeople to sales manager to sales leaders. This chapter closes with a stoplight assessment tool with critical questions that can be used by wholesaler-distributors to assess each element of their own sales effectiveness drivers and explore the current and potential contribution of CRM to improving sales effectiveness. Chapter 3: Selecting a Vendor The goal of this chapter is to share best practices and examples that can help wholesaler-distributors take the first step toward building a CRM capability: documenting business needs, selecting a vendor, and executing the initial launch of the CRM tool. As one wholesaler-distributor advised, The ongoing implementation of CRM will be a long and difficult process, and it is very important to get off on the right foot in selecting a vendor with the right features and benefits and, more importantly, with the right business culture to work with your business over time. Properly selected, a CRM vendor can become a trusted advisor with a suite of products that match your current needs and a development pipeline that will grow as your business use of CRM grows. This chapter ends with a management checklist for designing a selection process to fit a wholesalerdistributor s business needs and culture. Chapter 4: Implementing CRM and Change This chapter begins with a leader s long-term strategy for improving his company s business results, and the role that CRM will play over time. CRM can raise the bar of sales performance and profitability, and successful wholesaler-distributors are committed to the long haul. The chapter identifies three phases of implementation with best practices and success measures. Implementation is more than about launching a software tool; it is also about organizational change. Perspectives on change management are offered, and the chapter closes with a management tool, a punch list, for proactively addressing all elements of change management for building a strong CRM program and capability. 12

13 Chapter 5: Leading the Way This chapter starts by reviewing the journey of one distributor across all phases of CRM adoption, implementation, and change management and shares observations from wholesaler-distributors around four trends that point to the future role of CRM: moving toward a data-driven world for high-performing wholesaler-distributors; adopting appropriate aspects of social, mobile, and collaboration; strengthening value-chain partnerships with suppliers; and managing the customer s experience in a way that enhances the wholesaler-distributor s brand. The chapter closes with suggestions for conducting a management retreat to help leaders step away from daily pressures and consider longer-term challenges and opportunities. How to Get the Most From This Book Many years ago, when I was a new manager working for a seasoned operations leader, I was given some sage advice: Use all the tools you can find to improve performance, but always be smarter than the tools you use. I initially understood this comment to mean that I should always understand the inner workings of a tool how it was designed, how its features and specifications work, and so on. Over time, I discovered that there was a more powerful meaning: new tools lead to new behaviors, and it s the behaviors (not the tool) that deliver results. In reflecting on the experiences shared by many wholesaler-distributors while researching and writing this book, I was struck by the relevance of my long-ago boss s advice and how it applies to CRM. CRM is a tool. It is designed to provide data to (and collect data from) salespeople with the objective of improving sales effectiveness. But CRM can also be about behaviors overcoming the initial behaviors of resistance, reinforcing the behaviors that lead to better sales results, and, eventually, strengthening the organization-wide behaviors that lead to the highest levels of performance. How far CRM can go to helping a wholesaler-distributor achieve its business objectives is up to the leadership of each wholesaler-distributor. For some, CRM will be a tactical tool. For others, CRM can lead to strategic change. We hope readers will approach this book as a guide for plotting a journey. 13

14 As readers work their way through the chapters, we have a few suggestions for getting the most out of our findings, suggestions, and tools: Identify the discussions, quotations, best practices, and frameworks that seem most useful for your business and the potential for better results through CRM. Create a short list of the best possible ideas or best practices for your business, including both no brainers and items that stretch your assumptions and capabilities. Encourage your management team to read the book and identify their own list of ideas and best practices for your business. Work with your management team to net out the actions you can do now, in the short term, and in the longer term. Take action our book will have little value if it doesn t help wholesalerdistributors move forward. Bottom line, we recommend that each wholesaler-distributor imagine how CRM can be an essential tool for improving sales performance and growing profits. We found many examples of wholesaler-distributors that have achieved dramatic results through CRM, and we encourage all distributors to start their own CRM journey with a meaningful goal in mind. 14