Progressive Distributor - One step at a time

One step at a time

By strengthening its vendor base, segmenting products into logical groupings and helping salespeople develop a more value-focused approach to sales, Martin Industrial Supply wins new sales battles one customer at a time

Its tough to differentiate yourself when your company is known only as the place to buy hammers, drills and tape measures. Even when you have long-lasting customer relationships, at some point you risk losing business when the only way customers can tell you apart from your competition is because you stock 16-ounce, fiberglass-handled hammers made by Brand A and your competitor carries Brand B.

A few years ago, that realization caused Martin Industrial Supply to take a serious look at itself.

Despite a long history of success ($74 million in sales across three divisions in 2000), Martin recognized it couldnt continue to grow by doing business as usual. Continued growth required a new approach. So, for the past few years, the Sheffield, Ala.-based distributor has been making strategic decisions to help prepare it for future success. It began focusing on three areas: shoring up its vendor base, segmenting products into logical commodity groupings and teaching salespeople the importance of selling value, not products.

Martin recognized that continued growth would depend on four key factors:

1) You must carry the right brands.
2) You must sell value.
3) You must sell services.
4) You must gather and analyze market data.

You must carry the right brands
One of the first things Martin management realized was the company needed to align itself with the right vendors. They had particular interest in doing business with vendors that invest in research and development, and vendors with experienced, capable manufacturer reps who offer sales training and field support to distributors.

We think its important to align ourselves with the one or two leaders in every product category, says president David Ruggles.

Martin managers segmented the companys line card into nine major product groupings, then asked themselves if the category leaders were present in each segment. In some cases, they werent. So Martin began a campaign to align itself with leading manufacturers. Over the last two years, it signed with abrasives, brush and cutting tool vendors American Saw, Seco-Carboloy, Milacron and Norton, and with safety manufacturers Uvex, Howard Leight and 3M.

We know that our future growth will probably rely more on technical sales than on commodity products, says James Teat, vice president of operations and marketing. Coupled with the name brand products we already had, these brands give us a good offering to go after customers.

Today, Martin has approximately 25 key vendors, many of which are members of Affiliated Distributors. Nearly half of these key vendors are new additions to the line card. Ruggles instructs salespeople to spend most of their time focusing on these strategic product lines.

We still fill orders for other product lines, of course, but we dont do sales training, run promotions or exert extra effort to present these products to the customer, Ruggles says. We just dont have the time. Were hoping that by providing technical support on those key products, it will pull through sales on all the other products.

He also prefers to work closely with vendors who dont load them with excess inventory simply to meet unrealistic sales quotas. He points to a recent experience with a key vendor to demonstrate why he considers it distributor-friendly.

A regional manager from Seco-Carboloy visited Martins Sheffield offices and asked to see their inventory records.

The vendor looked at them and said, Youve got way too much inventory here. You need to send these items back.

It was several thousand dollars worth of inventory, Ruggles says. We sat there with our mouths open. Wed never heard that from a vendor before.

Paul Kieta, Seco-Carboloys manager of distribution and business development, says Seco-Carboloy wants distributors to stock only products with high frequency turns and products needed for customer-specific applications where local inventory is a value to the customer. It promises to ship any order received by 4 p.m. to the distributor or drop-ship direct to the end-user customer.

Were trying to reduce the total channel investment in inventory and help the distributor get a better return on his inventory investment, he says. It also helps us better plan our production because we see real-time activity.

Teat says too many manufacturers still believe a loaded distributor is a loyal distributor.

Programs designed to load a distributors shelves, especially at year end, do nothing for the distributor or manufacturer except create lower turns and replenishment headaches, he says. Hopefully in the future, more manufacturers will concern themselves with moving product from the distributors shelves to the end-user.

You must sell value
If you want to get in deeper with your customers and have a better relationship, you have to show them value, says Teat.

That might mean introducing the customer to a new abrasive wheel that lasts longer or removes stock twice as fast. It might mean spending time with the customer to investigate a skid-resistant coating to solve a problem with slippery floors.

If you can come up with a solution that gives them value, youve partnered with that customer, he says. Youve actually provided something above and beyond a product.

Selling value isnt an easy concept to grasp. Many salespeople tend to fall back into the habit of equating cost savings with price-cutting. To help salespeople understand how to sell value (not price) and sell solutions (not products), Martin recently began emphasizing value-added selling in sales meetings.

Selling value starts with the simple concept that everyone is interested in saving time and money. It might mean increasing production time, extending tool life or eliminating unnecessary labor or material costs.

We want to constantly hammer home the idea that when theyre out there, theyre looking for ways to save time and money, he says.

Salespeople also attended a training session on how to document and sell value utilizing the Win-Win-Win value-added workbook developed by the American Supply & Machinery Manufacturers Association and the Industrial Distribution Association. The training introduced salespeople to the concepts of documenting cost savings, and demonstrating productivity enhancements and process improvements that affect the customers bottom-line profitability.

Old habits die hard

Some salespeople are, in a word, stubborn. No matter how much you lecture them about spending most of their time selling products of key vendors, they remain stubbornly loyal to their pet vendors. Sometimes, they only learn through doing.

Thats exactly what happened with one salesman for Martin Supply, who was particularly fond of selling paper products. In the highly competitive paper business, margins have steadily eroded. The salesman watched as margins shrank from 20 percent to about 3 percent.

A few months ago, he came to me and said, I dont think Im going to spend so much time trying to sell this stuff, Teat says.

So, he started to learn about abrasives products. He attended Norton bonded and coated abrasives training and worked closely with the Norton sales rep on targeted accounts. Before long, he landed some new business with a customer by recommending an abrasive product that far outperformed a competing brand. The customer has since given the salesman an opportunity to bid on another project worth up to half a million dollars a year.

Suddenly, I have a salesman who is eager to go out and find more abrasives business, Teat says.

To make sure salespeople used what they learned, Martin introduced a new cost-savings goal for salespeople in 2001. Each salesperson must work closely with one major customer to achieve a cost reduction of 2 percent of that customers prior years purchases. The corporate goal is to show $1 million in total cost savings.

Part of our job is to continuously tell customers, Youre important to us, so this is our plan for you for next year, Ruggles says.

He believes that by demonstrating the value they bring to key customers on a regular basis, those customers will be less likely to switch suppliers.

If youre dealing with a guy who only wants to know your price, give him your price but dont spend any more time on that customer, he says. He doesnt view what you do as adding any value. Youre just a commodity.

You must sell services
Customers arent multiplying every year. If you want to increase sales, you have to find other things to sell to existing customers, Ruggles says. He believes future success wont come just from product sales.

Moving forward, more of our profits will come from selling services, not from the sale of the goods, he says. In this business, you always have to look at new and different ways to make money. If were looking to make a profit just selling commodities, I dont think we have a long future.

Selling safety services is one of the new areas where Martin hopes to see continued growth. It was a natural transition, since safety products are one of the largest single product lines Martin sells. With the addition of safety suppliers Uvex, Leight and 3M, Martin hopes to do even more safety business this year.

Were not looking just to sell earplugs and glasses, Teat says. We want to go in and show people how to avoid fines from OSHA, how to help their people work safer, whether thats using the right safety products or having a safety incentive program that well help them create. Those things add value.

A newly named safety specialist recently completed comprehensive training from the Occupational Safety and Health Administration and certification from the Qualified Safety Sales Professional program of the Safety Equipment Distributors Association. His job will be to help outside salespeople sell safety products and also to sell safety services to customers, including confined space training and fall protection.

When a customer has a problem, I want them to think of us first and give us a phone call, Ruggles says.

In addition to talking to customers about safety services, Ruggles urges salespeople to discuss other service offerings available, such as bandsaw blade welding. The blade service is conducted in a state-of-the-art welding center in Sheffield that serves all the branches in a one-day time frame. Other services include paint surveys, motor usage surveys, chain sling inspections and overhead lifting seminars.

By emphasizing services, Ruggles says customers begin to look at Martin as more than simply a place to buy MRO products.

I want to get to the point that when the MRO buyer says, Why do we do business with Martin Industrial Supply? the answer will be obvious in all the services and value-added activities that we provide, he says.

You must gather and analyze market data
Martin also began doing a better job of gathering, analyzing and sharing market data with salespeople. To look for new sales opportunities, for example, Martin will generate a commodity sales report for a particular salesperson. The report includes the sales volume that salesperson generated in each of nine product groups by customer.

We can go back to the salesman and point out product groups where he is not strong, Ruggles says.

He and the salesman will discuss why sales in certain groups lag other groups. One reason could be the salesperson is more comfortable selling one particular product group. If so, a remedy would be to team the salesperson with one of Martins four product specialists (safety, electrical, electric motors and drives, and pumps and compressors) to help the salesperson get up to speed on that product group. Another solution would be to bring in key vendors for additional product sales training.

Sometimes, however, the remedy isnt obvious until they analyze which customers buy certain product types. That may require comparing what one customer buys against sales to similar customers in the same Standard Industrial Classification (SIC) code.

For example, if the customer is a steel fabricator, how do its purchases compare to sales to other companies in SIC code 3441?

If the average shows 27 percent of the purchases from customers in SIC 3441 are in the safety product category and you have a steel fabricator not buying safety products, you know hes getting it someplace else, Teat says. Thats a good place for our salespeople to begin to target to sell deeper into those accounts.

Teat says such data can be just as valuable to vendors as it is to distributors. In many cases, manufacturers dont know which SIC codes use their products. He would like to see more information sharing between distributors and manufacturers.

If manufacturers cant tell me which SIC codes use their products, that says they really dont have the marketing information they need to help us sell better, he says. Some manufacturers do a better job today than they have in the past, but there are many that dont have a good handle on who the end-users are and how they use their products.

Ruggles is the first to admit that his company doesnt have all the right answers. But he is convinced that in order to grow, distributors cant continue to conduct business as usual. They must continually evaluate their product and service mix, promote their value proposition, and gather and analyze market data, one step at a time.