Distributor Client Results
Market-based strategy raises net operating profit by 2%.A building products distributor had survived the great recession by carefully managing expenses. It had stopped the bleeding but now needed a way to generate profitable growth. It engaged Indian River to develop and implement its growth strategy. By taking an external perspective the company was able to determine the most attractive market opportunities based on future potential, rather than past history. This analysis led the company to abandon a large but unpromising market, redeploying its resources to target new customer segments. The new strategy was implemented through organizational changes (including new specialist and product marketing roles) and sales management tools (customer partnering, a performance scorecard, a structured review and coaching process, etc.). In the midst of these changes the company was buffeted by a significant softening in some key markets and lost its exclusive distribution agreement with its largest single supplier. Nevertheless, it was able to completely replace the lost revenue with higher margin business. Its net operating profit swung from negative to positive in the first year and is on track to increase substantially more in the second.
The company now has a proactive process for reviewing performance and adjusting to market conditions each month. It identifies and prioritizes initiatives objectively, based on strategy and financial impact. It has established a budgeting process that is far more efficient and based on market potential rather than sales history. There is a far higher level of accountability throughout the organization. According to the CFO “This entire process has been a huge success. It has made a significant financial impact very quickly and set us up for sustained success. Great results so far and we’ve probably only grabbed a third of the opportunity.”
Real segmentation generates 400% profit improvement while growing revenue.A floral distributor segmented its small florist customers based on the professional background of the owner. It found that some were businessmen who happened to be selling flowers, others were flower lovers who decided to go into business. You could never uncover these distinctions by looking at a business directory, but they proved essential for the success of the distributor’s strategy. It created separate set of sales tools (e.g. foot traffic estimation spreadsheets for the former, arrangement-of-the-month promotions for the latter) and ultimately used this information to make market growth projections and allocate sales resources. These tools are part of its integrated sales management system, which includes compensation and the annual budgeting process. The results were an 11% increase in revenue, which represented a significant market share gain, and a 400% increase in profit. The improvement trend has continued and actually strengthened for the three years since completing the strategy engagement.
Re-aligned resources increase both revenue and sales productivity by over 30%.
An industrial automation distributor is a serial acquirer, with a strategy of increasing the “route density” of its field sales force. By offering a broader basket of products the reps can sell more to each customer, enabling the company to afford more reps in any given geography. Ideally, this creates a virtuous cycle in which more rep density increases customer intimacy, which leads to more revenue per rep, which in turn finances higher rep density. It’s hardly an original concept, but few distributors have been able to pull it off. The biggest challenge with this strategy is the difficulty that the field sales force faces in supporting the wide range of products. As the basket broadens, reps can no longer be technical experts on everything they sell. They are naturally uncomfortable in risking key accounts by trying to sell them something new and unknown.
Manufacturer Client Results
A small manufacturer of electrical products expanded its product offering only to see the new lines languish.Worse, the changes caused existing product revenues to erode, threatening the firm’s survival. IRCG used primary research and our proven analysis framework to quickly but methodically determine that the new offering created fundamental hidden conflicts with downstream channel partners. Within 45 days we were able to diagnose the problem, reposition the new offering and realign the market strategy to eliminate the conflict, recovering lost revenue. The firm grew from $50 million in revenue to over $300 million in less than nine years without acquisitions.A well-known consumer products company wanted to expand into the commercial/professional market without diluting its strong brand equity.IRCG consultants conducted primary market research and analysis, designed cost effective marketing channels and management systems, and developed detailed sales and logistics models for the new business unit. The division exceeded its revenue goals and has sustained 30% annual growth over multiple years. A Fortune 500 equipment manufacturer was unable to determine the financial return on the tens of millions of dollars it invested in promotional programs each year.IRCG applied its proven assessment methodology to develop a thorough picture of customer segments and their buying behavior. Using this insight as guiding platform, we jointly developed a revolutionary new approach that increased effectiveness, reduced cost and provided clear, measurable success metrics. The entire project lasted less than 8 weeks.A European flooring manufacturer enjoyed market dominance in Europe but was struggling to build a similar position in North America within their category.IRCG assessed and re-designed its distribution channel strategy in 60 days. Two years later, the company’s North American sales had increased by 145% from a significant base. A market-leading building products conglomerate needed to improve the efficiency of its distribution channels to maintain its competitive position.Some executives within the company had already concluded that a radical overhaul of its distribution network was the only viable option. IRCG showed the company how it could cut costs while actually increasing the reach and effectiveness of its existing marketing channels – a low risk, high return solution.
11 Latin American distributors grow sales and improve customer satisfaction
In the fall of 2017, Indian River Consulting Group completed a three-year channel maturity acceleration project for 11 distributors in Latin America. Sponsored by Rockwell Automation, the project was a success for all involved. View the video below to hear what project leaders and participants had to say about the project’s impact.