Change is required in the role of the field sales representative. Based on current value added and competitive choices, customers are choosing lower cost alternatives.

E-Commerce is going to exert further pressure on margins and lowering channel costs. After such a long time of working with a system that seemed right, where do you begin to change? You have several choices.

Create an Inside Sales Function

The Field Sales Rep is usually a highly paid individual. If they spend a significant portion of time in low value activities, the result is low productivity and high cost. The Field Sales Rep in the New Century concentrates on managing customer relationships and market growth. The team and the system take care of the transaction activity and the servicing.

To know who is on the team, look at the work that needs to be done. Customer inventories and replenishment orders can be done by a part or full time, median wage $9.17 an hour "wireless detailer." If Field Reps are spending time on administrative or clerical work, group five reps together with an assistant or secretary and have them "earn" the right to access by increasing sales calls. At two additional calls per week, those reps will earn five times the cost of a secretary. (See example 1)

(Example 1)

Create a team selling model by pairing an Inside Sales Rep with one or two Outside Sales Reps. The Field Sales Rep has responsibility for getting new business from existing and new customers by displacing the competition. The Inside Sales Rep does repeat or replenishment sales and account penetration through add-on selling. Customer Service assists in problem solving, expediting, handling returns, and administrative support.

As you delegate routine tasks to lower paid employees, expect median territory size to increase for the Field Sales Rep. The best Field Sales Reps will stay in that role. Less productive Field Reps will be moved to Inside Sales or let go. See example 2, which demonstrates the trend in the Electronics Industry, which increased median territory four times over a ten year period by shifting routine, replenishment job responsibilities away from the Field Sales Rep.

(Example 2)

Developing Strategic Partnerships with Customers

Real "Value Added Selling" focuses on helping customers solve their problems without regard to making a sale. The customer, in terms of their goals and their business, defines value added. Gather information from your customer and then apply your experience to build unique solutions and solve their problems.

Calculate gross profit by customer and you are likely to change your focus and your top ten accounts. Consider cost to carry inventory in this calculation of gross profit. Which customers are supporting your most profitable items and which are requiring you to carry slow moving inventory? Also consider payment terms and order size. All of these things have an impact on your cost to serve.

Profitable customers deserve higher levels of service and should be the first to be offered cost reductions. Base strategies by customer on profitability. Begin sharing cost-to-serve information with less profitable accounts to see if they are willing to change to earn the cost incentives or pricing enhancements you offer to your prime accounts. Consider volume purchase agreements that rebate merchandise credit instead of cash.

If you offer high levels of service and are feeling price pressure to remain competitive, consider unbundling your pricing. Be open with customers on sourcing product and then charge a fee for the value added services to those customers who need them and are willing to pay for them. Examples of potential fees for service include engineering support, training, emergency turnaround time, processing a return, or adding or changing a part number.

Get and Keep the Best People

To be happy, employees have to receive fair pay that is market based, plus incentives to encourage them to do more. From a job or career, each employee gets opportunity, recognition, affiliation, benefits, and cash compensation. In exchange, an employee gives commitment, energy, skills, endurance, capacity for pain, and actual work. Constant development and performance appraisal will provide the feedback and encouragement necessary to keep performance high. The performance appraisal can be as simple as listing the employee's greatest strength or contribution over the past six months and the area for greatest potential improvement during the next six months.

Effective Sales Incentive Design is critical to getting the results you want. You manage the activities while incentives reward the results. The best incentive design is a program that rewards focus. Decide which type of sale and gross profit is strategically important to you and create a reward system that allocates money based on performance of your strategic goal. See example 3.

(Example 3)

A Weighted Factor Bonus Program pays out against goal on several sales objectives. Sales Management determines the goal and the weight for each Sales Rep. Earnings are based on a percentage of each rep's salary. Incentives start at performance levels above 80% of goal and increase for increasing levels of performance. Top performers are rewarded with top dollar compensation. See examples 4 and 5 for a numerical depiction of this program. The key is to choose those goals that are strategically important to your future growth.

(Example 4)

(Example 5)

Team performance can be rewarded based on Field Sales performance for the Inside Rep or the achievement of branch goals, such as increase in Gross Profit or reducing the number of abandoned or "disconnected" calls. Or monthly gain sharing incentives can be established for all employees.

Time Management through Technology

There are hundreds of emerging tools for organization and time management. Look for those that can tie in with your database and contact management system to create triggers for activities. Set the triggers to alert you to exceptions. For example, if a customer that orders every week neglects to place an order two weeks in a row, set up a trigger to generate an email to that customer's sales rep to find out what is wrong.

Information is key and technology allows you to track and retrieve information at a low cost and low time investment to customize and personalize for each customer. Identify what your customer needs. Capture pain data on each customer. Build systems to provide what each customer class needs.

Website Integration

Your web strategy is designed to increase customer intimacy and competitive advantage. A strategy-driven site includes:

Start by identifying your target groups of customers. Identify what adds value to those customers. Determine what you can do for them, forgetting about yourself and what you might get in return. Develop a list of what your customers would value. For all items, establish an anticipated cost to implement. Start first on those things that provide the most value at the least cost.

The Bottom Line

The issue is Executive vision and drive to change the status quo. The pain is huge amounts of whining. The benefit is huge cost reductions. Sales Management is under pressure to lower costs or lose sales. The customers define value and their choices are increasing. It is critical to make decisions now on priorities and get started on initiating those things that will have the greatest impact on your most profitable customers.

Indian River Consulting Group is an experienced-based firm in the Distribution Industry. Michael Marks, Principal,  consults with distributors and manufacturers to make the changes necessary to maintain competitive advantage. You can contact them by calling 321-956-8617 or at www.ircg.com.

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