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WWW.IRCG.COM INDIAN RIVER CONSULTING GROUP

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Make 2020 Your Best Year—Sales Models that Outperform

Sponsored by:

Produced by: Modern Distribution Management | 6309 Monarch Park Place, Suite 203 | Niwot, CO 80503 | 303-443-5060

Download handouts (PDF): visit www.mdm.com/slides or email [email protected]

February 6, 2020

J. Michael Marks, Thomas P. Gale


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J. Michael MarksManaging PartnerIRCG

© 2020 Gale Media, Inc. All Rights Reserved.

Thomas P. GaleCEOMDM

Speakers


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Agenda

• Sales Model Evolution

• Sales Enablement

• Digitally-Enabled Sales Models

• The Future of Sales in Distribution


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An Economically-Driven Sales Model Evolution

Current State

• Everyone “sells service” and pays for it with GM

• Sales rep is a generalist who sells themselves first

• Personal relationships are the core element in competitive advantage

• Distributors are aligned with suppliers giving them growth to keep the lines

Transition events

• Technology investments focus on digitizing the customer journey and lowering labor costs

• Low-value activities removed from field sales role with migration to omnichannel structures

• Role mapping, ABC*, and process design expose all cross subsidies

• Analytics become core competencies

End State: Digitally Enabled

• Service offerings are explicit, clear and cost-effective

• Sales reps know as much or more about customer pain than product knowledge and truly understand how to sell services

• Product is provided, along with services, at lower prices without any cross subsidies

• Distributors are aligned with customers and manufacturers pay them differently for market making and market serving

* Activity Based Costing


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Sales Enablement Requires Digital Activity Integration

• A transformation process driven by the need to improve sales effectiveness while simultaneously lowering costs as spending ~25% of gross margin for just selling is becoming too expensive

• Business models and channels are changing as everyone looks for a better way to win

• Technology has changed every process in distribution already, except selling practices. The days of the relationship-centered sales generalist are numbered because they are costly and ineffective compared to new alternatives

Relationships are still necessary, but have become insufficient for success


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Sales Enablement Can Go Really Wrong

Mike’s Maxim: Sales enablement is inevitable if distributors are to survive in the digital age, and those firms that don’t will fade away as acquisition targets• But if the pace of change from today’s state to the end state exceeds the sales force’s willingness

to move, then bad things happen:− Good sales reps rebel and leave going to customers, taking some customers with them− Every sales territory suffers lower productivity while trying to manage all the change− All the change effort takes the team’s eye off the ball and distributors start messing up

• The defining speed factor is the balance of interests in the mind of each sales rep:− What is their balance of interests between their needs as an employee (leave me alone) and

their trust and confidence in their leadership (will they win)?

• For those well down the path, the issue is not the resistance of the sales team; it is the lack of a clear plan and WIIFM from their leadership


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Implications From the Emerging Transaction Donut Hole

Distributors wrap services around products and provide them to customers • GM on products covered the cost for services provided along with a good return• The sales function is integral and provides:

1. Pre-sales;2. Transaction; and 3. Post-sale support to their customers

The Internet, price transparency, and non-traditional competitors are rapidly and effectively unbundling the price of the product from the service bundle traditionally provided by distributors

− If the provided services are of stand-alone value to the customer, they will be compensating you with fees

− Your cost structure changes when the customer doesn’t want them− This has major implications on the sales role

*http://sethgodin.typepad.com/seths_blog/2010/03/the-factory-in-the-center.html

The Factory in the Center*

Are You Still Feeding the Hole?

What happens when the

transaction goes away?


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Software Is Eating the World

Marc Andreessen essay in WSJ – 2011Premise: Anything that can become software will become software, it is only a question of when

Marketshare challengers always win at the expense of market-share incumbents

It took 70 years to get everyone a computer (in your pocket) and also to connect them to each other in the cloud, so major disruptions are just starting now• The music industry fought streaming (Napster),

so what would you do if customers were begging to buy product from you in a different way?

Like many of you, they were established and respected industry incumbents that were irritated by outsiders• Record industry revenues shrunk for ten years after it flipped,

but live concert revenue grew 10 times

https://a16z.com/2019/08/16/software-eaten-world-healthcare/

https://a16z.com/2019/08/16/software-eaten-world-healthcare/


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Transition

What Does the Digital Transition Really Mean?

• All business processes started as artisan processes, but machines replaced factory workers, creating replicable processes

• Digital is doing that for white-collar workers

1865

1965

2020

Artisan VaseAccelerate

Analog Gen 1 TACFIRE

Gen 2 C-RAM


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Global Trade Networks

• A-D (Σ=$34B) and Network (Σ=$16B), are distributor buying/marketing groups that, in limited circumstances, already have this capability and several others are working on it

• This was a major theme at last week’s NAW Executive Conference:https://www.mdm.com/blogs/20-distribution-operations/post/40720-are-online-marketplaces-the-future-of-distribution

* https://www.mhlnews.com/transportation-distribution/adding-value-your-supply-chain-seven-cardinal-sins-avoid

What are the threats and opportunities open to you from the growth of these sourcing networks and digital platforms emerging?

*“Paired with cloud-based solutions, a global trade network (GTN) supply chain model can generate more advantages for businesses. The GTN links carriers, shippers, forwarders, suppliers and customers through one cloud-based platform. These network members are able to access data in real-time, helping them to avoid committing the aforementioned “deadly sins” while gaining a competitive edge” *

https://www.mdm.com/blogs/20-distribution-operations/post/40720-are-online-marketplaces-the-future-of-distribution


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The Evolution of the Field Sales RoleThe sales reps that have no future are the ones that are essentially field customer service reps writing transactions where > 90% of the products have been purchased before and they are unable or unwilling to do or learn anything else

From 2015-2019 the U.S. went from 4.5 million B2B sales reps down to 3.5M as the route order takers were replaced by lower-cost alternatives

− The transaction processing gets shifted to lower-cost alternatives with reliable processes creating boring reliability, like Amazon

Field reps spend a much larger share of their time in market making− Their value proposition expands beyond their personal relationship to include provided company solutions

tailored to customer challenges (marketing becomes key to build the solutions)− Business development becomes a marketing responsibility, no more cold calls− They transition from being a Lone Ranger to becoming the point of the spear in a team-selling mode− There will be fewer of them and they will be compensated more


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Your New Competitor: The Omnichannel Distributor

4. Punchouts & LOOP*Inside sales leads with specialists

You have sticky customers with reliable service

Field sales is on call, as needed, by your team

3. Field Sales LeadsExpand share of wallet using team members and introducing specialists along with special services

1. Reps in the PoolE-catalog or AmazonEasy to buy & “once and done”Early-alert opportunity tool

2. Field Sales LeadsProspect with provided marketing analysis on cost to grow and potential to grow

Your value proposition is explicit and key

* Lights Out Order Processing (ERP or App)

What % of your sales calls are on the right side

of the model?

Start

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Specialized Selling Roles – Build Your Own MachineFAM

Field Acct MgrIAM

Inside Acct MgrISR

Inside Sales RepCSR

Customer Svc RepSpecialist TSR

Telesales Rep

Commontitles

SAM, AM, TM, FSR, OSR AM, IAM, Segment AM ISR, CSR CSR Many TMR, TSR

Primary SOS(1) Business solution “Relationship” =

reliability and trustTechnical and transactional Transactional Technical or

functional Awareness

Customers assigned? Yes, by dirt Yes, by dirt or segment Yes, by dirt or segment No Periodically, by need

or projectNo. Uses call list and

RFM(2) tickler

% in field >80%Own car

5% - 50%Shared car

<5%No car None >50%

Own car None

% demand creation >90% 5% - 50% <5% 0% >90% >90%

Customer relation role Primary Primary Primary but often

shared with FAMMaintenance

“first do no harm”

Support but Primary in peer to peer

situations

Generate and find CSEs(3) to pass to

other reps

Account capacity ~30 ~100 Hundreds Hundreds Hundreds

Usually a set of <1,000 changed

periodically

Median comp (vs. FAM) 100% 70% 60% 50% 80% - 120% 40%

(1) Service Outputs Supplied: the key elements of the customer value proposition(2) Recency, Frequency, Monetary (RFM): analysis to determine the optimum call frequency(3) Critical sales event: a sales opportunity driven by external circumstances


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Old Sales Model

Case: Creating an Integrated Sales Team


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New Sales Model

Creating an Integrated Sales Team


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New Sales Functional Roles &Characteristics

Creating an Integrated Sales Team


17Action Steps to Get Beyond Just Talking

• Attend Sales GPS May 12-13 in Chicago salesgps.mdm.com

• Read the new Facing the Forces of Change report from NAW

• Get involved with your ERP user group, specifically on how your peers are becoming digitally enabled

• Develop a source of customer insight that does not come from your sales force so you can see the $ erosion to alternatives

• Network with your non-competing industry peers from your trade association who have started sales transformation efforts

Avoid the majority who are mostly talking about it

• Build your own transition plan that takes you out to the end, getting help from your board or outsiders, if needed

Choose your own speed, but without a plan you are just a talker

www.naw.org/ffc19

http://salesgps.mdm.com/

http://www.naw.org/ffc19


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Transform Your Sales Function to Higher Performance

Topics:• How to best transition outside, inside and service rep roles into more effective teams

• Sales comp programs that retain the right talent to grow your business

• Integrating sales and marketing most effectively

• Getting sales reps to support your online channel

• Innovative sales models for creating a seamless, omnichannel experience for customers

Visit salesgps.mdm.com to register

Join us May 11 – 13 in Chicago

http://salesgps.mdm.com/


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Make 2020 Your Best Year—Sales Models that Outperform

Sponsored by:

Modern Distribution Management | 6309 Monarch Park Place, Suite 203 | Niwot, CO 80503 | 303-443-5060


February 6, 2020

J. Michael Marks, Thomas P. Gale

Q&A


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J. Michael Marks Thomas P. GaleIndian River Consulting Group Modern Distribution Management321-956-8617 [email protected] [email protected]

Contact Information

http://ircg.com

http://mdm.com

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