How to Turn Spot Buys into Repeat (and Profitable) Customers

Written by Mike Marks on Monday, 26 February 2018. Posted in Business Strategy, Distribution

Many distributor field sales reps spend most of their time maintaining customer accounts that don't really need ongoing help and are already giving a high share of wallet. Unfortunately, that means these reps may be missing out on opportunities to acquire new, small customers and turn them into large, profitable ones.

If you have an electronic catalog or are an Amazon reseller, you probably have a bunch of customers that have bought something from you once and have never come back. These are the customers distributors typically ignore, but they are actually an important part of any successful customer acquisition model. You can transform some of these one-off customers into profitable business using the following acquisition strategy, which involves a combination of digital and human customer interactions performed at specific points in the process:

  1. First, qualify online leads by having the marketing team do an assessment of the prospect, collecting information including whether competitors are selling to them, what they tend to buy, their credit rating, etc. You can further qualify them by having a telemarketing person call them. It is important to have a process to feed all of this information to field sales reps.

  2. From there, have field sales call on the most promising leads. Even though they are small customers now, the fact that they are making spot buys may mean that their current supplier has made a mistake, making now the perfect time to swoop in and capture that business. When the sales rep visits the lead, they should show up with a value proposition. For example, they could offer the customer services normally only reserved for larger customers on a trial basis. Their goal shouldn't be to get a purchase order on that visit, but to sell a value proposition.

  3. Start to expand share of wallet. This is where many traditional sales reps get stuck. They tend to have an "It's all mine," "My territory is different," "You don't need to do it, I'll take care of it" mindset. But accounts grow faster when there are as many new relationships between the two companies as possible. It may be against the salesperson's nature, but bringing inside salespeople, customer service reps, project managers, supply chain specialists and others into the relationship will bring about faster growth.

  4. Reduce cost-to-serve to make the account more profitable. To accomplish this, field sales reps must further relinquish control by letting inside sales take the lead. The goal is to allow them to support the customer as they continue to make digital purchases, via your website or punchouts of your ERP system. These types of purchases, which only require human interaction for the physical movement of the product, are referred to as lights-out order processing (LOOP). LOOP is ideal for increasing margins with customers that are already sticky and giving you a high share of wallet.

Some world-class distributors have gotten to the point where 80 percent or more of their sales take place via LOOP, but many of those customers started out as spot buys. The key to making that transition is to intercept the spot buys that have growth potential, grow them by providing valuable services and relationships, and then recover your margins by reducing your cost to serve.

As you probably already know, there are plenty of things that can go wrong during new customer acquisition. For help setting up a multichannel strategy that both increases sales and decreases cost-to-serve, consider taking advantage of our professional business consulting services.

About the Author

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.