Distributors can no longer use traditional sales and marketing strategies to sell to major customers. Instead, they should develop intimate relationships with customers that have transformed themselves into segments of one.

by Stu Mechlin

The signs of the times are all around you. One of your competitors was just acquired by a large regional or national distributor. Another major end-user customer recently inked an integrated supply agreement, reducing its supply base to one or two distributors. Vendor reduction and supplier reduction are here to stay. Bigger customers wanting fewer suppliers will become a greater part of your marketing and selling program whether you like it or not.

How can you be assured that you will be left standing, healthy and profitable, when the smoke clears?

Your biggest problem is to manage and sell into a customer base populated by fewer, larger customers as profitably as you manage and sell into other market segments. And you want to learn how to do it fast to stay ahead of your competition.

The first step is mastering what I call “segment one selling” (SOS). Increasingly, customers are transforming themselves into segments of one. A segment of one is a unique customer with a huge potential for increased sales. Each major customer needs to be viewed as a rich delta of income streams and flows. As a seller, you want to command more of these flows. After all, you devote a lot of time and attention to this customer. More importantly, these customers want fewer suppliers and fewer people calling on them to provide the products and services they need. They are looking for sellers to whom they can write larger checks.

Here are four key concepts that will help you master the art of SOS.

First, you need to view the customer relationship as the biggest, if not the only, thing of true value you possess. Second, develop an “I want it all” approach toward the customer. Next, you must elevate negotiating skills to a level even more important than traditional selling skills. Finally, take a broader view of who your competitors are. Learn, implement and reward all four of these concepts and you will increase your customer revenues and profits. At the same time, it builds a wall around your relationship that few competitors can scale.

Value your relationships
Today, practically every supplier produces and delivers high quality services and products to their customers. Most distributors limit their conversations with customers to those products and services. These sellers can expect flat growth at best and lost business at worst. Only a few sellers see the customer/supplier relationship as the true valuable asset they sell. These sellers reap large, continuous flows of information, contacts, opportunities, products and money.

For your segment of one customers, SOS means focusing your resources on developing and enhancing these relationships. It means concentrating less on what you previously thought was your greatest value, your product and services.

The traditional product/service seller approach is to constantly seek new customers and to steal market share from weaker competitors. Segment one selling focuses energy on growing unrealized profit opportunities with existing customers by processing information to solve all kinds of problems for them and to create new opportunities for you.

Segment one selling requires extensive knowledge about these valued customers. You must know and understand everything about the customer, who they sell to, and what goes into and out of that organization. You must develop multiple points of contact with many decision-makers. It requires you to devote more than the usual amount of resources on that unique segment of one.

Product sellers usually know the purchasing person and maybe a few other people. SOS sellers go deep and wide in the organization, seeking out more managers and workers to know and get information from. Very simply, time and information from as many people at the customer as possible rapidly turns into opportunity and dollars for you.

For example, one distributor is now getting paid to provide training to his customer’s personnel. Training has little to do with this distributor’s on-time delivery stats and product breadth, topics salespeople usually discuss with customers. It has everything to do with a need an SOS salesperson learned from a key decision-maker who was not his traditional contact. The distributor developed a training schedule, revised an existing training program and now receives revenue that previously went to someone else.

“I want it all”
There is nothing wrong with an “I want it all” mentality. In fact, your customers want you to be a bit selfish and ask (in a nice way) how you can help them. Increasingly, your bigger and better customers understand that an intimate customer relationship solves problems and saves them more money on a more consistent basis. The customer’s future is inextricably tied to your destiny. They know it and want it.

Sometimes called top-down thinking, this approach allows you to brainstorm with your customer. Making the simple statement, “Let’s explore what more I can do for you” starts the brainstorming process. This process leverages the time and effort you have spent developing the relationship, understanding the customer, knowing the decision-makers and establishing a reputation as the go-to, can-do supplier.

Don’t worry that the customer may ask you to take over buying postage stamps and you haven’t a clue how to do it or how to save them money doing it. For every 10 ideas you discuss, you may throw out nine. But that No. 10 idea will be a gem. It will be something you would have never thought of during a traditional conversation about existing products and services.

For instance, some end-users buy MRO supplies used in the maintenance department from one distributor, and purchase similar supplies used in the motor pool from another distributor. One distributor with a relationship with the maintenance department of a major airline realized it could save the customer money by handling the airline’s motor pool needs as well. By asking permission to contact this segment of the end-user operation, the distributor is tapping into a revenue stream previously thought to be untouchable.

This new idea may be something neither of you would have expected your company to provide. It may involve a service that you never expected you could deliver, or never dreamed you could provide at a better cost. But there it is, and you realize now that you will get even more income from this customer as a result of adopting an “I want it all” mentality.

Elevate negotiation skills
In segment one selling, selling time gives way to more negotiating time. Rather than trying to sell an extra 5 percent of one product or service, you are negotiating for the customer to take a risk on you in an untried area, to allow you to see more decision-makers, to gather more information from the customer, to gain more access or a trade-off on price. The list goes on and on. I have not forgotten that you still need to sell something to get income. You must still practice the critical skills of needs identification, product/service solution, objection handling, etc. But constant negotiation becomes the framework in which segment one selling takes place.

Negotiation used to be the tail that came after the selling dog. In segment one selling, negotiation is the dog. Negotiators and negotiation skills are crucial. Negotiators know how to assess risk, time and value added and equate them to price.

Traditional sellers negotiate terms and conditions after making the sale. SOS sellers negotiate from the start. They negotiate access to more senior people, right-of-first-refusal on new opportunities, and the right to brainstorm, among other things. They know how to ask for and get trade-offs. Above all, they know how to leverage the value of the ongoing relationship so they gain additional income opportunities.

Improving negotiation skills is critical. A key challenge of segment one selling is to change the mindset of everyone in your organization, from senior management on down, that negotiation is as important as selling, marketing, accounting and production.

Competitor paranoia
Traditionally, MRO distributors have viewed their competitors as other MRO distributors.

Your competitor isn’t another distributor of a specific product category, geography or service level. The most important value you sell is your customer relationship. If your goal is to negotiate and seize additional income streams, then your competitor is anyone who has a relationship with that end-user that gives them more time and more income streams than you receive from that customer.

Stop describing competitors by the products and services they sell. Start describing them by how much time they receive and how much cash they earn from that customer. If you don’t know, ask. Part of every conversation and contact you have with your end-user should be framed in this context.

SOS experts, regardless of their specific product expertise, garner the lion’s share of time, opportunities and cash from customers.

You may have a difficult time viewing the Xerox salesperson as a competitor, but they see you that way. The day a customer calls to tell you that a company you always thought did “x” is going to take over your services will be too late.

Most salespeople go from customer to customer selling some here and some there like a hummingbird flitting from flower to flower. We are constrained by what we believe is the customer’s limited ability to buy more and by our limited view of what we do.

There is a hummingbird in New Guinea with a curved bill that is twice as long as its body. This bill fits just one flower and only this hummingbird can drink the flower’s nectar. The bird drinks often and deeply with little competition, since no other birds can reach the nectar.

Adopt SOS, concentrate on your segment of one customers and drink deeply of their revenues. You will enjoy sustained and profitable growth.

Stu Mechlin is vice president of the industrial supply division of Affiliated Distributors.

This article originally appeared in the November/December 1999 issue of Progressive Distributor. Copyright 1999.

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