A new Arthur Anderson study tells distributors how to achieve maximum sales velocity.

by Richard Vurva

The sales process today is more challenging than ever. Customers expect salespeople to be experts in their businesses, capable of anticipating their every need and aware of every industry trend. At the same time, technological advances have made many products more complex, requiring salespeople to have deeper industry expertise than before.

Despite these tougher requirements for salespeople, relationship-building remains important. Salespeople must find time to cultivate strong relationships with customers and develop a comprehensive understanding of their industries, markets and customers.

That’s how David Woodrow of Arthur Andersen describes the role of distributor salespeople today in the introduction to his book “Maximum Sales Velocity: How to build a world-class sales organization,” published by the National Association of Wholesaler-Distributors. The book is based on a study conducted by Arthur Andersen for NAW’s Distribution Research and Education Foundation.

Tie pay to objectives
The study reveals that most distributor compensation plans are not tied to the goals and objectives of their companies.

“Despite changing market conditions, distributors continue to use commission-based compensation plans tied to gross margin to pay outside salespeople,” Woodrow says. “When you’re in a mature market, the objectives of your company change and your compensation needs to align with those new goals.”

Commission pay plans promote going after the quick sale. In a mature phase of the market, distributors need incentive plans that reward retaining customers, developing long-term relationships and providing value-added services.

Commission plans work when the sales rep has a great deal of influence on the sale. In a mature market, the company as a whole gains influence and the salesperson’s influence decreases.

Salespeople used to sell the few products they felt most comfortable selling, then go on to the next customer and sell those same products. One of the biggest opportunities for distributors is to further penetrate accounts with more products.

“Customers don’t want to see a bunch of product specialists,” Woodrow says. “They want to see one person who knows enough about their business and the distributor’s business to bring all of those sources of the distributor to bear.”

Commission plans focus on individual performance. Today, distributors use a team approach to serving a customer. Customer satisfaction isn’t just the salesperson’s responsibility. It’s influenced by accurate billing, delivering the right quantity of products at the right time and other factors.

Under a traditional commission structure, once a salesperson has a customer base that provides a satisfactory income, that salesperson has little incentive to focus on deeper penetration of existing accounts or to develop new ones. In addition, focusing on gross margin does not motivate salespeople to improve customer satisfaction and retention or improve the profitability of their customer relationships.

Woodrow suggests that distributors tie compensation to specific objectives, such as new account development, penetration of existing accounts, customer retention, faster collection of receivables and improved account profitability.

“You could even tie compensation to customer satisfaction if you do customer satisfaction rankings with customers,” he says.

He also says distributors should develop incentive pay for inside salespeople.

In many cases, inside salespeople are no longer just order takers. They’re account managers, freeing up outside salespeople to spend more time on other value-added activities.

“Generally, a distributor’s highest priced resource is the outside salesperson,” he says. “You’ve got to be careful where you use your outside guy, to get the most bang for your buck. A lot of tasks traditionally handled outside are being handled inside. Now, the trend is to move clerical tasks from inside salespeople to clerical support staff because inside salespeople are now account managers.”

Eye on training
The salesperson’s changing role requires new skills. In addition to product knowledge, salespeople must also possess strong management, problem- solving and consultative selling skills. Yet most distributor training programs continue to be product-focused.

Eighty-seven percent of distributors provide product training to outside salespeople. Little more than half offer training in the areas of selling against competitors or consultative selling. Less than half provide training in presentation skills, complaint handling, problem solving, negotiating and listening.

The numbers concerning inside sales training are even more disturbing. While about three-quarters of distributors offer product training to inside salespeople, only 39 percent train the inside sales force in complaint handling and only about a quarter provide training in consultative selling or problem solving.

“We don’t say you don’t need product knowledge, but other skills are more important,” Woodrow says.

He believes distributors should spend more time providing training in areas such as complaint handling, problem solving, time management, presentation skills and consultative selling skills.

Typical distributors offer 42 hours of training per year to outside salespeople and only 25 hours to inside salespeople.

He suggests that distributors need to increase the amount of training they offer to inside salespeople and also focus more of their training efforts on sales skills other than product knowledge.

Get up to speed
The business environment is changing. Industry consolidation is creating larger, more powerful players. The Internet is creating new business models that didn’t exist a few years ago. Manufacturers are looking to multiple channels to reach different customers.

A distributor used to know its competitors because they were down the street and you could see their brick-and-mortar buildings. Your salespeople would run into their salespeople. Today, competitors could be halfway around the world and reach your customers just as easily as if they were down the street.

Customers are also becoming more demanding. Customer service levels and expectation levels are increasing. Customers expect all of your processes to work flawlessly. If they place an order, they expect it to be filled the day the order arrives. They expect billing to be accurate. They expect high-quality products.

The way distributors can adapt to these changes and reach maximum sales velocity is by building an organization that responds quickly to changing market conditions, ensuring that all resources, activities and performance measures are constantly in alignment with the needs of customers.

This article originally appeared in the Progressive Distributor 1999 ASMMA/I.D.A. fall edition. Copyright 1999.

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