Marketing Implementation Articles

Part 2: Get the Facts That Help Your Salesmen Sell

One of the necessary ingredients required in any quality process is access to any and all the information needed to do a job effectively. In most areas of distribution the information system provides a great deal of this data, but it seems the sales group has been at the bottom of the list in most distributors' and manufacturers' computers. Yet the ability of today's information system to collect, store, manipulate and report information has never been greater. The capacity of your information system to provide timely exception reporting to your most important function is virtually unlimited, but most software systems concentrate on the accounting functions or the inventory control procedures, and just give lip service to the sales and marketing functions of your company.

The major function of an industrial distributor is that of communication. The only reason you stock an item is because you can make some additional profit by doing so. The only reason you grant credit is because you also can make a little more money by doing it. These functions have a tremendous amount of support from the computer, but the complexity of the sales information usually gets a fraction of this attention. The following will try to shed some light and ask some questions about this shortfall, along with a few possible solutions.

We have often wondered how any individual could keep track of one thousand variables at one time (and that's the challenge if you have 200 customers that buy five of your products). Now imagine the average distributor salesman, with ten, fifteen, or more than twenty lines, each having a thousand products. The challenge is not the customer/product mix, but "Where should I spend my next effective sales call and what should I sell them?" Even 100 customers and 20 major product lines are still 2,000 variables, far too many for any mortal human. On the other hand, if your trusty computer is put to work on this challenge, your company could help with that overwhelming job, and do the exception reporting for you.

What's All the Business Worth?

First, how many sales people have any idea what their entire set of accounts is worth if they could get all the business available to them from each customer? Who is the highest potential customer? What is your market share in each one of those customers? These are not easy questions to answer, but if you want to know if you have a viable sales territory or market share you must answer these questions. You could survey each account and find the answer, but that could take months, or years.

We have found two ways that are faster, but less accurate. First, establish your company's historical sales per SIC code per employee ratio, first by assigning each customer a primary SIC code, and a total employment count. Then keep track of annual sales of those customers buying from you by SIC code, then divide by the total employees in that SIC code. This will, of course, give you a myopic picture of demand, and only results in an "average" demand per employee, but is a better tool than no tool at all. Now you can use your company's SIC code demand profile to analyze each account, and each sales territory as to its total historical demand for your products. You now are getting to some usable information that may show that there are some large differences in sales territory potential.

Another way to establish customer potential is to establish consumption ratios using external data for your products, and then use those ratios to analyze the accounts by SIC by employment. This will give you a better estimate of the actual potential of the territory, but at the account level, remember, the sample size is one, and while the total group of accounts approaches reality, any one account may be distorted.

Too Many Calls on "B", too Few on "A"

Now you have an idea of the size of your territory, what can you do with it? You may want to start asking some questions like: Am I spending the time I have in accounts that can give me enough business to justify the time spent? Or, if you call on Customer A and Customer B once a month, but Customer A appears to have ten times the potential of B; if you call on A once a week, could you get more business from him?

Of course, if you start looking at call patterns, you want to have the call reports available in a database, so your system can display this information together.

You may also realize you have too many accounts. If you can make five calls a day, and you work all 253 working days in a year, you can only make 1,265 calls per year. If you have 100 accounts that's about one call per month per account. Now if you're doing six figures with an account that has a seven figure potential we'll bet you spend more than one two-hour call a month with him. What you should be asking yourself now is: How can I maximize my sales/compensation per call, and what information do I need to make that educated decision? If you can answer this question, then you must sell the products you know, to the customers you know buy those products.

With a Little Help from the Computer...

Here is where your company can help you, by showing you your call frequency, sales year-to-date, last year-to-date, and total last year, and then giving you an idea what the account is worth, and your penetration into the account. And your company should do this automatically, not with any additional work on your part, after the original setup.

Now that you have established the total demand for the account, you need to break it down to the actual products they buy. Again, this becomes a statistical process (unless a survey is done). You can repeat the same type of process that gave you the original consumption data, for each product, or the manufacturer you represent may have some data that he might share with you.

But remember: if you use many competing sources for a given product line, don't expect any of them to share this type of data with you. On the other hand, if you use a single, or primary source for a product line and they have this type of data, they should be willing to help you out. (A word of caution here. They may have some of the same problems you have in marketing myopia, e.g.: if they don't do well in a SIC code they will not be able to show it as a good potential use.)

You Can Get Data Now and Automatically

You can now start to see the scope of the information you are gathering, and also the problem in using it if you don't have a way to electronically organize and manipulate it. However, if you're serious about increasing the productivity of your sales territories you should start looking for ways to accomplish this, first with your existing system(s), or second with some help from the outside.

Think about this: If you want your actual sales by volume in a product line compared to your potential sales, for the top 50 customers in a territory, you should have it, TODAY! And the clerical staff shouldn't need to spend time re-formatting and compiling the information. (If they do, they will be highly displeased if you don't increase your sales after all the work they did.)

How about a report that gives you total sales calls this year and last year to date, potential sales, sales this YTD, last YTD, total prior year, sorted by this YTD volume? Would this help you with your day-to-day planning? If you could take all the vendors and combine them into groups of like product classes, and then create the same type of report by an aggregate product class, would that help you to make more efficient calls? These types of reports are available to the other departments in your company (e.g.: accounts receivable exception report by customer, by aging date by salesman, or committed stock by line, by customer, by salesman, etc.). Shouldn't the most expensive department on most distributors' P&L have the same information (see exhibits)?

Key Account Contact Lists, Mailing Lists

There are other areas that could also help a salesman do a more efficient job of covering his territory, like an easy-to-use report of key contacts in an account, with an indication of the products they buy. Or, how about a mailing list that will give you some sort of response analysis (e.g.: the increase in sales of those products in a special promotion)? It has always seemed a shame to develop, lay out, print and mail a promotional flyer when there was absolutely no way to measure its effectiveness.

Another set of reports that could help both the distributor and factory salesmen, is one that shows the factory's sales by distributor sales territory, by major customer. Then, the factory rep can plan his call frequency with the salesmen more effectively.

All of this type of data should be available to the distributor and his salesmen at their request. If it isn't, then you should be working on providing it. After all, you spent the largest part of your expense dollars on the sales department last year. Shouldn't it get the appropriate use and benefit of your information system?

Next: Establishing an information system to control your company's marketing effort.