Maximizing Sales: Executive Summary. Techniques & Tools to Boost Selling Productivity NAED NATIONAL ASSOCIATION OF ELECTRICAL DISTRIBUTORS

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1 NAED NATIONAL ASSOCIATION OF ELECTRICAL DISTRIBUTORS Maximizing Sales: Techniques & Tools to Boost Selling Productivity Executive Summary Researched by: Gerald S. (Jerry) Hagerman & Bethany L. Sullivan

2 Executive Summary This research project, Maximizing Sales: Tools & Techniques to Boost Selling Productivity, addresses three major areas: Channel Productivity How can your company identify duplicate sales expenses throughout the channel? What role does your company play in the sales process? Sales Efficiency How does your company measure sales representatives selling time vs. non-selling time? How can sales representatives be better deployed and managed to maximize their efficiency? How are fixed costs allocated across your end-customer base and what elements of cost are included in your analysis? How does your company measure sales success for value-add products? What sales productivity tools does your company employ to support the sales effort? Product Introductions What is your company s process for introducing new products? The highlights of the research findings and recommendations are presented on the following pages National Association of Electrical Distributors Maximizing Sales: Techniques & Tools to Boost Selling Productivity 2

3 Chapter 1 Who is the Customer? Who Owns the Customer? How can your company identify duplicate sales expenses throughout the channel? Sales expense is one of the electrical distribution channel s highest outlays and a key area for channel productivity improvements. There is little agreement on roles, goals, and who owns the customer resulting in duplicate efforts and leading to a lack of trust. Work together as partners to grow sales and market share, eliminating duplicate efforts. Channel partners should regard their relationships with their trading partners as strategic assets; the distributor sales professional should manage all facets of the end-customer relationship including any and all manufacturers resources; and the distributor sales representative must bring together all applicable resources in order to provide the end-customer with the best solution for their unique situation. Chapter 2 The Sales Process What role does your company play in the sales process? There is an informal and largely self-taught approach to selling in the channel, with little or no formal selling processes. Understanding the sales process is the first step to improve efficiency, allowing channel partners to reduce costs while adding more value to end-customers. Firsthand knowledge of sales processes and customer requirements reinforces management s commitment to boosting sales productivity. It s imperative that company executives be directly involved in the sales process National Association of Electrical Distributors Maximizing Sales: Techniques & Tools to Boost Selling Productivity 3

4 Chapter 3 Selling 101 How does your company measure sales repsresentatives selling time vs. non-selling time? Fewer than one-third of distributor companies measure how their sales representatives spend their time. On average, distributor sales representatives only spend 46% of their time face-to-face with end-customers! And 34.4% of a sales representative s time was consumed by non-selling activities. What gets measured, gets done! How distributor sales professionals spend their time should be measured and monitored on an on-going basis. Studies conducted by Corporate Executive Board indicate world-class companies keep non-selling time to 15% or less. Distribution management must regularly monitor how sales representatives spend their time; continually review, evaluate, and invest in systems to enhance sales representative productivity; and evaluate alternative sources for non-selling tasks. Chapter 4 Deploying Sales Assets for the Highest Return How can sales representatives be better deployed and managed to maximize their efficiency? Salespeople are often promoted to sales manager and expected to make the transition from selling to managing with little or no training. The sales manager s focus is often on achieving top line growth. They may give little attention to analyzing sales force productivity. End-customers are often assigned on the basis of personal relationships or geography. Most distributors measure sales and gross margin, with little or no attention paid to the efficiency of individual sales representatives. Optimize the sales force and account assignments to obtain the highest return on investment. Assign the most proficient (i.e. the best) sales representatives to the most profitable accounts. Top sales representatives focus on personal efficiency, resulting in higher sales from fewer calls. Distributor executives must ensure newly promoted sales managers receive sales management training; be actively engaged in the company s sales process; designate end-customers as company assets, not the personal property of individual sales representatives; and consider end-customer profitability, density, and geographic dispersion in making the decision to use sales generalists, sales specialists, and/or product specialists. Benchmark the sales processes of your top sales performers. Set internal performance goals and benchmarks for metrics such as Return on Time Invested, Sales to Call Ratios, and Return on Assets Required. And make sure your company s compensation plan incentivizes the right behavior. Reward and celebrate improvements National Association of Electrical Distributors Maximizing Sales: Techniques & Tools to Boost Selling Productivity 4

5 Chapter 5 Customer Profitability Segmentation How are fixed costs allocated across your customer base? What elements of cost are included in your analysis? Most distributors measure average customer profitability, but few measure the profitability of individual customers. The roadmap to profitable growth requires distributor executives know how much money is made on each customer, vs. how much it costs to serve them. By knowing who the best customers are and how much they are worth, resources can be shifted from weaker performers to customers with a stronger track record. Armed with this knowledge, companies can change how they are organized, managed, and how success is measured so the most profitable customers receive the best service. Distributor executives are strongly encouraged to use the Excel based system Dr. Al Bates developed for the NAED s Research and Education Foundation in 2006 to measure the profitability of individual end-customers. Then mine your data to determine the factors that make end-customers more or less profitable. Next, personally interview the most profitable end-customers to find out why they buy from you. Finally, reallocate company resources so the most profitable customers receive the best of everything your company has to offer! Chapter 6 Measuring Sales Success for Value-Add Products, aka Selling-Up How does your company measure sales success for value-add products? Value-add product sales isn t well understood by most distributor sales representatives, not widely measured by distributors executives, and not viewed as a priority. Develop a company culture that automatically identifies, promotes, and rewards value-add products sales or selling-up. Changing the culture of an organization requires significant executive involvement. The researchers highly recommend distributor executives set sales objectives for value-add products and incentivize adoption with higher compensation on value-add products, since they yield higher margins. Continually track each sales representative s performance against their value-add sales objective, report achievements, and celebrate success National Association of Electrical Distributors Maximizing Sales: Techniques & Tools to Boost Selling Productivity 5

6 Chapter 7 Productivity Tools What sales productivity tools does your company employ to support its sales effort? Distributor websites have a wide range of capabilities and aren t considered a strategic resource by every distributor. Smartphones are left to the discretion of the individual sales representatives. Tablet computers, particularly the ipad, are garnering a lot of interest from distributor sales representatives. Sales Force Automation (SFA) has been adopted by some manufacturers and by a select few distributors, but adoption isn t widespread. Customer Relationship Management (CRM) has been adopted by few distributors or manufacturers. Social Outposts (i.e., Social Media) has a low adoption rate by distribution. Manufacturers, however, are testing Social Outposts for new product introductions and product recalls. The most important tools to boost distributor sales representative productivity are a robust website with order entry and order tracking capability and a Smartphone or tablet computer to access it. Next to the distributor s ERP system, an ecommerce website is the most critical technology investment distributors can make. When customers used a distributor s website to place orders, sales representatives major time sinks fell from an average of more than 800 hours per year to 600 hours per year a 25% improvement in available selling time. Distributor sales representatives access to the website is enabled by Smartphones and tablet computers. Distributors should evaluate both with a cross-functional team of sales professionals and inside sales support personnel before standardizing their use company-wide. Training on how best to utilize the capabilities of the sales tools selected, including navigation tips and application capabilities should also be provided. Distributor executives should also consider whether the implementation of Sales Force Automation (SFA), Customer Relationship Management (CRM), and Social Outposts are appropriate for their business. Chapter 8 Product Introductions What is your company s process for introducing new products? Many manufacturers expect up to 40% or more of annual sales to be generated by new products, yet few have successfully mastered the process of launching these new products through distribution. Unfortunately, many channel partners distributors, manufactures, and sales personnel often work in a vacuum with little or no knowledge or understanding of the goals, roles, and contributions of their team members. To further complicate matters, some manufacturers often expect electrical distributors to actively support their new product introductions with little or no prior input or advance notice. Distributors are sometimes asked to introduce four or five new products simultaneously National Association of Electrical Distributors Maximizing Sales: Techniques & Tools to Boost Selling Productivity 6

7 Chapter 8, cont d Successful product introductions require that the people developing products and those introducing products work together as a team. If everyone understands their role and agrees to their responsibilities in the new product introduction process, it s much easier for everyone to follow through on implementation. Channel partners should adopt the Recommended Best Practices developed by the NAED Product Introductions Task Force in In addition, distributors who don t have a standardized process for introducing new products should develop one. Distributors should also communicate and discuss their new product introduction processes with their trading partners to ensure buy-in to the process. And both distributors and manufacturers should communicate successes, failures, and discuss ideas for improvement. Methodology Approximately: 33% of the project time was allocated to research 33% for analysis of the information gathered 34% of the time for the development of deliverables. The research component of this project consisted of a search of current literature, available tools, and research journals; site visits and personal interviews; ride-alongs with field sales personnel; telephone interviews; input from distributor Certified Electrical Professional (CEP) Outside sales personnel via an online survey; and input from electrical industry outside sales personnel via an online survey. Studies funded by the National Association of Wholesalers Institute for Distribution Excellence were also reviewed, as well as the work of previous NAED task forces and NAED Education & Research Foundation projects National Association of Electrical Distributors Maximizing Sales: Techniques & Tools to Boost Selling Productivity 7

8 NAED NATIONAL ASSOCIATION OF ELECTRICAL DISTRIBUTORS Copyright 2011 NAED Education & Research Foundation, Inc. All Rights Reserved This report has been made possible through the generosity of the electrical distributor and manufacturer members of the NAED Education & Research Foundation, Inc., Channel Advantage Partnership Council. No part of this report may be reproduced or copied in any form or by any means graphics, electronic or mechanical, including photocopying, taping, or information and retrieval systems without written permission from the NAED Education & Research Foundation, Inc. The findings, opinions, conclusion and recommendations provided herein are based on independent research, commissioned and funded by the NAED Education & Research Foundation, Inc. Information in this report shouldn t be regarded as an endorsement or opinion of the Foundation or its parent organization, National Association of Electrical Distributors, Inc National Association of Electrical Distributors Maximizing Sales: Techniques & Tools to Boost Selling Productivity 7