According to global management consulting firm McKinsey, fast-growing sales organizations use analytics more effectively, but most organizations still struggle to marry data with their sales efforts. In fact, McKinsey calls analytics “still a bit of a sideshow when it comes to sales.”
We’ve seen the same disconnect in the distribution industry.
In our research with 15 forward-thinking distributors across varying lines of trade, we’ve found that the typical distributor fails to effectively analyze customer needs, struggles to demonstrate its value creation, and doesn’t secure the knowledge and tools to translate its core strengths into customer success.
Many, if not most, distributors’ sales models are simply misaligned with customers’ needs. For example, it comes as no surprise that a sales-force will struggle to articulate customer value in a digital era while relying on outdated collateral such as line cards and brochures.
The result of these deficiencies is that customer conversations consistently revert to price negotiation. And while customers negotiate price through a lens of perceived value, prices do not necessarily reflect the actual value distributors provide their customers. It’s the job of today’s distributor to express value in terms of customers’ priorities to steer the conversation away from pricing.
The answer lies in successful sales enablement, which requires integrating three focal points:
- Your customers’ specific needs;
- Your company’s value proposition; and
- Your sales force’s competencies.
And to do that, you need data.
The best analytics programs help sales teams make better and more profitable decisions, creating the foundation required for effective sales-force enablement. The result: driving profitable sales growth for the distributor.
WHAT DOES YOUR CUSTOMER WANT?
Knowing what your customers truly value can change the sales conversation from one of price to one of value — as provided by the distributor to its customers. For example, an HVAC distributor we worked with studied its contractor customer base in depth. The contractors attributed four factors to success: safety, quality, on-time delivery and under-budget delivery. The contractors were not just interested in knowing the “great” things that the distributor did; they cared about how that distributor could help them deliver against those four success factors. To do this, the distributor had to develop a framework that linked those factors — safety, quality, on-time delivery and under-budget delivery – to the distributor’s core capabilities.
Many distributors lose sight of what customers want because both sides frequently view the relationship through a product lens. For example, a customer may require multiple related product lines such as valves, controls, drives, sensors and so on, but siloed product managers may not see those synergies, resulting in missed cross-selling opportunities. We worked with one distributor that examined data based on its customers’ end-markets and aligned resources based on its findings to expand market share with existing customers.
WHAT’S YOUR COMPANY’S VALUE PROPOSITION?
Traditionally, distributor salespeople have used product line cards, a standard sales pitch presentation, product demos and colorful brochures to communicate the value of doing business with them. But in the digital era, buyers have already done more than two-thirds of their research before they reach out to a salesperson. Distributors need to up their game. How can your sales team better articulate customer value? The answer starts with understanding whether the value you’re communicating actually matches your core customer needs.
For example, a building materials distributor we worked with stopped merely listing features in their collateral and instead translated them into customer business outcomes. What does having multiple branches mean to the contractor? How does in-depth inventory help contractors meet their own customers’ needs? In other words, they started with a customer’s business needs rather than the distributor’s strengths. That changed the conversation between sales and other front-facing teams and the customers. Using our “Customer Value Builder,” they also customized their value proposition to their target segments, including commercial, residential and industrial construction, and tossed the one-size-fits-all brochure.
But while the role of field sales may be changing in the digital era, it remains an important part of a distributor’s value to its vendors. To effectively deliver this value, the sales-force has to be able to communicate it to the end user.
HOW CAN YOUR SALES-FORCE MOVE CUSTOMER CONVERSATIONS FROM PRICE TO VALUE?
A distributor’s sales force has traditionally been defined in terms of product and application knowledge, but today’s customers expect more than that. They expect their salesperson and other front-facing distributor team members to serve as trusted business value advisers. Salespeople not only need to be product-oriented, they also now need to be customer-focused, problem-solving and performance-driven.
By tapping into data-driven insights, a distributor can change how and where its sales team sells. Distributors have a big opportunity to identify growth and profitability opportunities by analyzing thousands of products, and hundreds of customers and suppliers. For example, when you understand who your core customers are, the sales team can pursue new service opportunities that those customers will value. You may also identify opportunities to sell into new geographies or end-markets.
One distributor we worked with performed a gap analysis with their top 1,000 customers (which accounted for about 80% of revenue), which highlighted key customers that were not buying across all product lines. They also identified customers who were draining company resources. This led to a shift in company resources, strategy and tactical directions for the sales team, leading to dramatic performance gains.
ENABLING THE SALES TEAM
Key business trends — digitization, consolidation and commoditization — have changed customer expectations and redefined customer value.
Customers have unprecedented access to information, including product pricing transparency and availability of alternatives. This has put distributors at a crossroads. Relationship-based selling is still relevant, but it’s not enough. The customer relationship has taken on new meaning as customer value is redefined in terms of how we create and capture value in the channel.
Distributors need to step out of their comfort zone, adapt to this new era of selling and focus on the entire value chain. To succeed, sales enablement must become a cross-functional capability that equips the sales force and marketing teams to have value-based interactions with the right set of customers at each stage of their journey.
The solution lies in integrating what we discussed above: detailed customer needs, the distributor’s value proposition and the competencies of its sales force. After all, the customer value map that distributors develop based on target segments and customer challenges is only as powerful as the capabilities of the person delivering against it. And it all needs to be translated into sales and marketing playbooks. The distributors that win in the digital era won’t be afraid to redefine the roles and responsibilities of the sales force to meet today’s customer expectations.