Is Your Sales Force Structure Built for the Rebound?

Written by Mike Emerson on Thursday, 30 July 2020. Posted in Sales Management, Distribution

We find ourselves in uncharted waters. In just a few months, many distribution businesses look very different than they did in early spring. But at some point, this tumult will be behind us, and sales and profit growth will once again be our focus.

To prepare for this inevitable rebound, ask yourself:

Is your sales organization in February the same organization that you want as you rebuild? Or should you take this opportunity in the midst of disruption to restructure your sales force?

What’s Changed in Sales

It’s not breaking news to say a lot has changed since 2000. New channels have emerged with dramatically lower cost structures. And many decision-makers have grown up in a digital world, trained and comfortable in a self-service environment.

Over that same time, we’ve seen an ongoing race to the bottom on pricing, an improvement in supply-chain efficiency, continued industry consolidation and the internet rising as a primary source of product and application information for the customer.

These trends have only accelerated in the past few months. Outside salespeople can’t visit most of their customers and are engaging remotely using Zoom or Microsoft Teams. Online retailers are reporting record sales and going on hiring sprees while everyone else is laying off and furloughing employees. Customers are delaying projects. Manufacturers are passing along sudden price increases and COVID-19-related fees.

Yet, many distributors have sales structures – and the related costs – similar to what they were 50 years ago, staffed with such general roles as inside and outside sales. Field sales reps still complete many tasks that could and should be completed by a lower-cost resource, such as delivering product to customers, creating quotes and checking price and availability with vendors.

Will your current sales structure, anchored by the traditional sales rep role, work when everything returns to a “new normal?” Or will you be dragged down?

What’s Missing in Sales Structure: a Data-Based Approach

Not only is the market different, but the data accessible by distributors is beyond what we could have imagined 20 years ago. Many distributors have used this information to great advantage, realizing hundreds of basis-point increases in margin through the use of detailed customer profitability models and pricing algorithms.

This same analytics approach can be leveraged to optimize sales structure. When you understand customer needs by looking at customer geography, market segment, service output, travel required (though that is different today), how reps are spending their time and so on, you can realign your structure to meet them.

In fact, it’s our belief that distributors can reach more customers, more effectively, at a lower cost than they do today – or did pre-pandemic. We usually find that more than 20 percent of accounts assigned to an outside sales rep can be moved to another lower-cost function, such as inside sales, customer service or even an online self-service solution.

Specialize Sales Roles to Meet Market Needs

Role specialization, based on your industry and customer needs, can help you narrow the role of the field sales rep to one that is focused on new business development and demand creation.

Successful distributors are adding dedicated customer service reps, product specialists and quotation departments that narrow the responsibility of the field sales rep. Many distributors have found impressive productivity gains by building processes and routines that allow a subset of its field sales force to become hybrid reps that visit customers when needed but use other remote methods as their primary means of customer engagement. The field sales role that remains is no longer defined by a set of static assigned customers but based on where they are required to protect marquee customers and are able to move the needle on growth.

This market-based model is more efficient and effective, and allows you to provide better customer service and market coverage while also realizing a lower cost to serve. Key customer-serving responsibilities are unbundled from demand creation with skill sets most appropriate to each allowed to specialize on what they do best.

With all the disruption we have been facing, now is an excellent time to explore these possibilities through an inclusive conversation both internally and with customers.

Want more on optimizing your sales force? Download our whitepaper: The Gorilla in the Room: Why Field Sales Must Evolve & The Future of Relationship Selling.

About the Author

Mike Emerson

Mike Emerson

Mike Emerson has been a IRCG partner since 2004. Mike joined Indian River in 1998 and has worked with hundreds of distributors and manufacturers of all sizes and within many lines of trade.

As a Partner in the firm, Mike has managed a broad array of projects. His main focus areas include: compensation design, strategy facilitation, market research, and data modeling and analysis.

Mike writes extensively on distributor and marketing channel topics and is frequently quoted on contemporary issues. He has authored four books, published by NAW: What’s Your Plan? Smart Salesforce Compensation in Wholesale Distribution, Working at Cross-Purposes: How Distributors and Manufacturers Can Manage Conflict Successfully, Value Creation Strategies for Wholesaler-Distributors and What’s the Right Plan? Effective Sales Incentive Design for Wholesaler-Distributors. Mike is also a university lecturer on marketing topics.

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