What’s to become of outside sellers? If you are contemplating the future of the distributor sales effort, this two-part series should help.

by Scott Benfield and Richard Vurva

For the past decade, distribution consultants and analysts have questioned the geographic allocation of the outside sales effort, the typically large discrepancy in outside sales vs. inside sales income, and the use of personal selling in commodity industries. Most distributors, however, have developed a wait-and-see attitude on any major change to the sales effort.

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Although there are many reasons why distributors are reticent to change, their resistance may be on its final leg. Why? Recent market research on the comparative value of the outside sales force clearly sheds doubt on the current use and allocation of outside salespeople. The research was done as a joint project between Progressive Distributor and Benfield Consulting. The results of the research are sobering.

As reported in the May/June 2001 issue of Progressive Distributor, a survey of MRO/OEM buyers and end-users found that 48 percent of the customers “did not want to see” industrial distribution company outside sellers. Since the outside sales call is one of the largest expenses of business-to-business distributors, it begs the question: “Why do distributors send outside sellers, at a typical cost of 4 percent of sales dollars, when nearly half the customers don’t want to see them?” 

The importance of the question becomes especially clear when you consider that the majority of distributors earn 2 percent of sales or less before taxes. A distributor with $5 million in annual sales could double its income if it could nearly cut in half $200,000 in sales expenses.

The objective of the new research was to explore the original survey results and give comparative value choices regarding the sales effort. Our purpose is not to suggest that outside salespeople should be eliminated. Outside salespeople continue to fill a valuable role in the industry. However, our research suggests that distributors would benefit by taking a long, hard look at how they utilize this expensive resource.

For an explanation of the survey methodology and demographics, click here.

Questions and explanations
We asked end-users and buyers of MRO supplies a series of 12 questions on a disagree/agree scale. Respondents could indicate their agreement with a series of statements on a scale from 1 to 4 (1=Disagree, 2=Somewhat Disagree, 3=Somewhat Agree, 4= Agree). The questions and possible explanations are given under each response.

Question 1: “I need to see supplier reps more often.”
Answers to the first question earned the next to lowest average score (2.0) for the entire survey. In essence, respondents largely disagreed with the statement. This supports the findings of the May/June survey in which 48 percent of the respondents did not want to see an outside seller. The outcome of the question remains to be seen, but suppliers should consider that they call on customers too often, they may have too many sellers, or their sellers just aren’t needed commensurate with their call frequency.

Question 2: “With a good catalog, Web site and inside sales reps, I don’t need to see the outside sales rep.”
The score for this question was the fifth highest score of the survey (2.8). Respondents generally agreed with the statement more than they disagreed. The intent of the question is clear. It is time for distributors to invest in alternative contact methods of catalogs, Web sites, and inside sellers. The funding for these efforts may largely come from a decrease in the outside sales effort.

Question 3: “Products offered by suppliers are 
commodities and supplier reps can’t add value to them.”
The question was the third lowest scoring question of the group (2.1). Customers appeared to be saying that sellers can add value to products and overcome some of the effects of commoditization. The statement “can’t add value” was probably objectionable, too rigid, and may be the cause for the low score. In essence, sellers can add value but answers to other questions place their value at less than what is commonly perceived by distribution managers.

Question 4: “Inside sales reps of suppliers 
add more value than their outside sales reps.”
The score for the question was in the middle of the scale (2.6). Roughly speaking, half of the respondents agreed and half disagreed. The real paradox occurs behind the scenes where outside sellers earn far more than inside sellers. If the customer was compensating for the value of both, he/she would most likely even the payouts. The user/buyer group placed a slightly lower score than the purchasers on this question. In other words, they value the outside seller slightly more. Surveys about inside vs. outside sales compensation find that there is typically a 25 percent or higher gap between the earnings of outside sellers over inside sellers. In some vertical markets of distribution, the income gap is narrowing but there is still a significant difference between compensation of the two sales groups.

Question 5: “If my suppliers’ outside sales reps 
cost 4 percent of purchase prices, I would rather not 
see the sales reps and save their costs in the prices I pay.”
This is what we dubbed the “up front and honest” question. It puts the monetary value or cost of the outside seller in concrete terms. The question achieved the third highest score (3.1). Customers are clearly interested in saving the cost of the outside seller in prices they pay, and the majority of them somewhat agreed or agreed with the statement. The question got a higher percentage of “agrees” than most other questions in the survey. Translated, this means there is a large proportion of the customer base that wants lower prices and no outside sellers.

Question 6: “It would be better if suppliers 
deducted the cost of outside sales reps from my order 
and instead billed me for sales calls when I needed them.”
The answer for this question was middle of the road. It was the median score for all questions in the survey (2.5). We believe the question is unique and its median score is a real eye opener. The customer seems to be saying that having the flexibility of choosing to pay for a sales call is an option worth exploring. We caution distributors to experiment with this option. If you offered the option of deducting the cost of the sales call from the order, and the customer sidelined the majority of your sellers, you would most likely have to remove them from the payroll or go into the red.

We’ll publish the next six questions and our conclusions in the March/April issue. Until then, read through the questions and plan accordingly or do nothing and risk wasting precious assets by over-serving customers with too many sales calls.

Scott Benfield is a consultant for distribution. He can be reached at Bnfldgp@aol.com. 

Richard Vurva is editor of Progressive Distributor magazine. He can be reached at rvurva@milomediapub.com.

This article originally appeared in the January/February '02 issue of Progressive Distributor. Copyright 2002.

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