Keys to Market Access, Part 1: Understand How Demand is Created

Written by Mike Marks, Steve Deist on Saturday, 21 March 2015. Posted in Business Strategy, Distribution

IRCG Whitepaper Cover1A market access strategy provides a framework for distributors to align their investments with real opportunities for growth. This blog is the first of five looking at the five keys to unlocking profitable growth.

The first key to building a successful market access strategy is to understand how demand is created.

Our firm’s research has shown that a high percentage of most distributors’ business is fundamentally bought, not sold. In the HVACR industry, we found that, over a two-year period, customers did not deliberately switch suppliers or products about 90% of the time, according to research done for the Heating, Air-conditioning and Refrigeration Distributors International (HARDI). In other words, the decision to buy was made entirely by the customer without any direct influence by the sales force or marketing department. (You can read more about those results in the book we collaborated with the HARDI Foundation on, Myths & Misperceptions: How Markets Are Really Made in HVACR.)

When your product is being bought you should invest in protecting the business, not in demand creation. This means ensuring that customers never experience a reason to look elsewhere. Distributors often consider customer service to be humdrum, somehow less strategic than offensive selling. In fact, many distributors would benefit from investing more to ensure they are boringly reliable.

The goal of protection is no drama, no excitement and no reason to change. Protection means ensuring that critical inventory and transactional services are provided consistently and reliably for existing customers.

In the HARDI study cited previously, we found that about 8% of distributors’ customers switched suppliers or products because of a problem or change within their own organizations. They were not swayed by a persuasive sales rep. Rather the change was induced by something outside a sales rep’s control, such as a new design requirement, a performance failure by the incumbent supplier or a buyer retiring. The sales rep was simply at the right place at the right time, backed by the company’s well-earned reputation.

In these scenarios, the key is to successfully intercept these opportunities, which we call critical selling events. It’s more important to have good coverage of your customers, so that you have visibility of these events, than to have the absolute best sales rep making constant sales calls.

Based on these numbers, only about 2% of the business remains to be proactively sold by your sales rep. We refer to this as disruption selling. This is the classic “let me show you what you’ve been missing” sales role that most of us envision when we think of a great salesperson.

Do you really know how much of your revenue growth comes from protection, interception and disruption? Do your sales and marketing resources reflect this mix?

The next blog in this series will examine why it’s important to provide different levels of service to different customer segments.

Download the 5 Keys to Unlocking Profitable Growth (PDF).

About the Author

Steve Deist

Steve Deist

Steve Deist has been a IRCG Partner for six years. He has over 20 years of experience working for hundreds of distributor, retail, manufacturer and private equity clients in dozens of lines of trade. He is a highly rated speaker, a permanent University of Industrial Distribution faculty member and a distribution company board director.

Steve has extensive knowledge of the distribution and supply chain space, with substantial experience in retail, construction and industrial channels. This experience includes:

  • Strategy, sales effectiveness, operations, supply chain, marketing and technology projects for over 100 organizations over the past 10 years. These clients have ranged in size from $5M family run businesses to Fortune 500 corporations.
  • Numerous marketing channel projects for top tier manufacturers which sell through dealers, distributors, retailers, etc.
  • Frequent industry speaking engagements for clients including, trade associations and manufacturers on a broad range of subjects. These engagements have included workshops, technical sessions for management level audiences, strategic sessions for executive level audiences and keynote speeches.
  • Due diligence and related projects for top tier private equity firms.

Steve is IRCG’s strategy guru, focused on helping companies achieve lasting competitive advantage. His hands-on approach enables him to apply leading edge concepts to the practical realities of daily business.

Prior to joining IRCG, he was director of consulting services at a major supply chain software vendor. Steve’s thought provoking articles appear frequently in premier industry publications such as Modern Distribution Management. Steve has authored three books published by NAW (The Five Fundamentals for the Wholesale Distribution Sales Manager, Value Creation Strategies for Wholesaler-Distributors and the upcoming What’s the Right Plan? Effective Sales Incentive Design for Wholesaler-Distributors).

Mike Marks

Mike Marks

Mike Marks co-founded IRCG in April 1987. He began his consulting practice after working in distribution management for more than 20 years. Over the years, his narrow focus in B2B channel-driven markets has created an extensive number of deep executive relationships within virtually every business vertical in construction, industrial, OEM, agricultural, and healthcare.

Mike has led project teams that improve market access by aligning resources to growth opportunities serving manufacturers, dealers, and distributors. Clients have ranged from small privately owned firms to many of the industry’s market share leaders. Ownership structures have included owner-operators, private equity, ESOPs, and publically traded firms. Mike is proud of the teams work and the confidence clients have shown with additional project work.

He has written extensively, and is frequently quoted on many industry issues. He has substantial board experience on both public and private distribution firms. His contributions to the field include serving multiple terms as a Research Fellow with the National Association of Wholesaler-Distributors, permanent faculty at Purdue University’s University of Industrial Distribution, eight years as Graduate Adjunct Faculty in the Industrial Distribution Program at Texas A & M University, and rendering several precedent-setting expert opinions in contract disputes between manufacturers and distributors.

Prior to forming IRCG, Mike held the position of Executive Vice President at Lex Electronics, an $800 million vertically integrated electronics distributor in Stamford, CT. Mike’s path to management in his early career was through increasing responsibilities in sales and sales management. He also completed a tour of duty as a manufacturer’s representative.

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