Progressive Distributor - Panning for gold

Panning for gold

Tips to help your salespeople prospect for new business

by Paul Markgraff

Forty-eight percent of end-users don’t want distributor salespeople calling on them, according to a 2001 survey of end-user customers conducted by Progressive Distributor magazine and MRO Today magazine. Entrenched integrated suppliers prevent competing distributor salespeople from winning new business or expanding existing sales. And, distributor salespeople who sell their way into a comfort zone often stop looking for new business and rest on their laurels.

With all these towering obstacles in place, how can a sales manager push salespeople to prospect for new business?

“Half the battle in prospecting is getting in the door,” says Larry White, founder of software solutions and consulting services provider Interlynx Systems. “Distributors really struggle getting appointments these days. Any advantage you can get as far as getting that first appointment is huge.”

Raise the bar
Distributor salespeople can use a number of methods to get that first appointment. But before trying, it is important for distributors to rate themselves on how well they prospect.

Using this prospecting metric by territory, distributors can learn how well they develop sales to new customers, says Mike Marks, co-founder of Indian River Consulting Group. Take sales to new customers where the customer creation date is less than 12 months old and divide by total sales to get the percentage of total sales to new customers.

“Most people pay prospecting lip service, but they never dive in and do anything about it,” says Marks. “This is a very useful way for a distributor to find out if he is doing anything with new customers.”

Distributors should strive for 1 percent sales to new customers, says Marks. One of Marks’ clients, who employs more than 800 salespeople, focused on expanding business to existing customers. This distributor’s median sales to new customers was 0.03 percent by salesperson.

“Customers are eroding all the time, which is why you need to strive for that 1 percent new customers,” says Marks.

The prospecting gamut
There is a spectrum of sophistication when it comes to prospecting customers. The lowest level is made up of doorknockers. Many companies employ sales reps who look for smoke stacks and go door-to-door searching for sales. This type of prospecting requires little pre-qualification, but winning new sales is difficult.

The next level is when the distributor puts processes in place to work aggressively with manufacturers to get leads. Many leads from manufacturers aren’t terribly qualified, says Marks. When end-user customers fill out bingo cards, many are merely “looky loos.” They’re not serious buying prospects.

“Plus, one of the biggest problems manufacturers have is they spend a lot of money to get these leads for distributors and distributors don’t do a thing with them,” says Marks. “To increase the value of manufacturer leads, distributors need to commit to getting back to the manufacturer in 30 days to let him know the status on those leads.”

Many times, manufacturers subscribe to or purchase databases. They have names of other facilities in the same industry they sell to in a different territory. Manufacturers can also ask their sales reps whether other distributors are having success at a particular location, and can find that information fairly quickly. Manufacturers that generate this information are helpful to distributors.

“If I am a distributor trying to get access to a prospect in my territory, it would be helpful to know that another distributor is selling to the same company in another territory,” says White. “Principals that facilitate knowledge sharing across the distributor network will help all of their distributors open more doors. That is one reason manufacturers ask for customer information from their distributors.”

The third level, the one most distributors have not yet achieved, is going out and purchasing market data from places such as Industrial Market Information or NAICS.com. This market data contains valuable Standard Industrial Classification (SIC) and/or North American Industry Classification System (NAICS) information that shows distributor salespeople what kind of products are required in the end-user’s plant. Knowing that information will make getting the first appointment that much easier.

“You can look up the name of one of your current customers and find their SIC or NAICS code,” says White. “Then you can search on that NAICS code or SIC code to find other companies in your local area in that same industry.”

One of the greatest benefits of using this type of information is there’s an existing system in place, so there is no expense in creating a system. Distributors can spend a little to get a lot of valuable information.

On the other hand, not all organizations are easily assimilated into the industry classification system. Less mature industries do not necessarily fit well into these systems.

The sales blitz
One more way to prospect effectively is to use what sales trainer Dave Kahle calls the sales blitz. It’s a straightforward method that focuses on creating numerous prospects fast.

Start by gathering a group of four to six salespeople and focus them on the task of creating an appointment and a first meeting with a prospect. The sales manager should provide the salespeople with a little training and any company literature they might need.

Next, pair them off and tell them they will be focusing on generating prospects for one salesperson’s territory. Begin in the morning and try to build a sense of camaraderie and competition. In the afternoon, gather them together to rehash the day. In between, each pair of salespeople will cold-call prospects for two or three days.

After the salesperson creates the first appointment and gains some idea of the account, all information will be turned over to the salesperson responsible for the territory.

“The salesperson now has a whole group of potential customers who have been qualified and are indicating some willingness to talk to him,” says Kahle. “For the rest of the salespeople, they are in an intense learning and production environment, focused for two or three days. Because they are immersed in the one type of call, they will become much better at it after three days than they were at the beginning.”

This type of prospecting is not without costs. Distributors need to dedicate a group of salespeople outside of their territories for two or three days. While it may seem like a large price to pay, the new business generated can greatly exceed the costs.

“One of the most common complaints I hear from sales managers in the distribution industry is that their salespeople don’t make cold calls,” says Kahle. “One of the reasons for that is they don’t know how and can get by without doing it. They can work with their regular customers and not make cold calls and their jobs are not threatened. This approach really addresses those issues.”

Understanding the prospect
Every customer within a geographic territory has a natural purchase volume. Any given customer’s natural spending volume with a distributor is zero dollars, says Marks. They don’t have to buy from any given distributor.

Ask any distributor sales rep to name the five largest customers in their market, and they’ll probably name their top five customers, even though these are not the companies that spend the most money in their market. In fact, they may be driving past the five largest users.

With the cost of a sales call at about $100, having an industrial distribution salesperson walk around aimlessly tends not to work, says Marks.

Distributors that get the best results have prospecting processes in place, whether they work with manufacturers to generate leads, focus groups of salespeople on cold-calling numerous prospects, use market data to pre-qualify specific companies in their region or use any number of other processes. By employing these processes, distributor salespeople will be able to interrupt a customer’s current behaviors in order get an order.

“The whole idea behind prospecting is that prospecting starts the cycle of bringing new customers in that will grow and develop and replace sales lost to erosion from existing customers,” says Marks.

What subscribers say
“What is the best way you know of to find new customer prospects?” We posed that question to subscribers of Progressive Distributor magazine and Progressive Distributor Dispatch, our e-mail newsletter. Here is what several had to say:

“Having an industrial directory for your area would be extremely helpful to determine where prospects may be located and what they do.”
Bob Coates
Sales Engineer, Timken

“Check the want ads in your local newspaper for shops that are hiring new machinists. This could be an indication of new business and their location/phone.”
Steve Bell
Sales/CSR, Duncan Equipment

“Listening to your customer and asking discreet questions reflecting your understanding of the value of your production and/or service to the industry you serve will continually open new doors to prospects.”
Boyd Knau
Vice President of Sales, Two G Windows

“First, have current satisfied customers. That does not mean you have to have everything they want, but know how and where to get it. Then, ask for leads. If you have been doing a good job, they will be more than happy to help you.”
Bill Gindhart
Account Manager, Rock Valley Industrial Supply

"Ask people from the area you work in. Talk to those who have worked in the area but have moved somewhere else. Ask sales reps that supply another type of product in the area. Find out where people work that attend your church or where parents work that their children go to school where your children attend. Always read the business section of the Sunday paper. Know people who are on the chamber of commerce in your area."
Eddie Flynn
Sales Management, Wallace Hardware Company

"Networking with your current customers through initial introductions whereby the customers have common needs and interests. We distributors can perform valued tasks and offer solutions."
Scott Heller
Sales, Madsen & Howell

"We have done this a few different ways, but the one that seems best is customer matching. If you have a customer, they have a competitor. If you ask them who their competitor is, you have a lead. You can also do this with SIC codes and database services."
Tim Pritchard
Customer Service Manager, Zemarc Corporation

"Think outside the box! Network with existing customers."
Cindy O'Neal
Lead Sales Rep, MSC Industrial Supply