Three benefits of point-of-sale programs

by Larry White

More and more manufacturers are requesting that their distributors provide point-of-sale (POS) data. For many distributors, this is a dreaded request. They are uncomfortable with sharing their customer lists and many just don’t have the resources to compile the data in the required format from their manufacturer. Getting beyond these issues, however, a good POS program will actually benefit the participating distributor.

Segment your customer base
A good POS system will help you segment your customer base into more definable criteria. By categorizing your customers using industry codes (SIC or NAICS), employment size, product mix and other criteria, you can begin to profile your customers. Just adding these definitions will help you to better understand your customer’s buying habits and help you serve them better.

The good news is that some manufacturers will provide the segmentation information for you. They then research the data you submit and compile it into a profile report for you, normally using easy-to-read pie charts or maps.

After you receive the segmented customer information, we recommend spending a day with your key managers performing a “deep dive” on each significant segment. This may be a review by SIC, employment size, public vs. private ownership or a combination. If you spend an hour on each of the major segments, you will start to identify trends, product and service needs and, hopefully, new selling opportunities.

Understand market penetration levels
It is critical to be open-minded about your customer and market penetration levels. Many manufacturers ultimately judge your performance on this information, and it’s a key factor when they consider adding or dropping distribution.

A good POS system will help you identify under-penetrated accounts. While these figures are normally calculated from a macro level using ratios, they can help you understand if you are under- or over-performing at the account. You may also be able to identify coverage levels in your territory. Your manufacturer will be able to compile statistics on market potential and help you to better understand new selling opportunities in your territory.

Tap into cross-selling opportunities
A good POS system also facilitates cross-selling, where you take success in one industry or customer and use it to generate new business with other customers.

POS data may identify markets with high potential for the manufacturer. Ideally, the manufacturer will create a program around this market that includes marketing collateral, testimonials, training and a list of prospects for each distributor. This is a great way to drive new sales at prospective accounts.

Another way of cross-selling is to drive a strategic account program. In this scenario, the manufacturer identifies a high potential customer with multiple locations and takes a success at one or more locations and leverages it across all of the customer’s locations. Often, this involves assigning a manufacturer rep to the prospect’s headquarters, while the distributor works on the local accounts.

Summary
While many distributors have not taken full advantage of them, a good POS program can help distributors uncover new sales opportunities. To make it even easier to comply, some POS programs actually allow distributors to submit their data in any format and will append the records with additional fields. Finally, it is critical that the manufacturer shares key information that will benefit the distributor for the program to be successful.

This article originally appeared in the January/February 2008 issue of Progressive Distributor. Copyright 2008.

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