Progressive Distributor - Inside-out selling

Inside-out selling

Conventional wisdom suggests assigning major accounts to field sales and leaving the less profitable accounts to telephone sales. Distributors have discovered that telephone sales can help penetrate big and small accounts.

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When one of your top customers tells you, "Stop sending your salespeople in here, they're wasting our time," what can you do? You could ignore the request and risk irritating a valued customer. You could honor the request and risk losing a big chunk of business. Or, you could come up with a new way to ensure that you're touching base with all of the right people in that plant without ticking off the customer.

One way might be to have your inside salespeople team with outside sellers to maintain contact with key decision-makers. In truth, you'll not only avoid an ugly scene with the customer, you'll also likely discover it's a more effective way to penetrate a major account.

"There's a lot of potential business out there, and distributor sales managers assume their people are calling on these accounts. They're not. It's physically impossible for them to do so," says Peg Fisher of Peg Fisher & Associates, a consulting firm in Racine, Wis.

She says some companies have discovered they can do a better job of penetrating major accounts by letting field salespeople be the point of contact for engineers, for example, and using telephone sellers to contact the maintenance department or the tool crib manager.

That is how a team sales effort evolved at Carolina Fluid Components, a fluid power distributor in Charlotte, N.C. About seven years ago, the company hired Ed Jarnac to set up a telephone sales department from the ground up. He started by assigning customers that had generated $1,000 or less in annual sales to a former customer service rep.

In one year, she grew the account base from $100,000 per year to more than $300,000. Her sales grew to more than $575,000 the second year and $875,000 by year three. The account is now worth $2.2 million.

Today, the department has grown to four telephone-based account managers who are teamed with outside salespeople, not in a supporting role, but as equals. The team effort makes it possible to call on more people within major accounts more cost-effectively than if the outside sales group attempted to go it alone.

"In a large facility, there may be hundreds of people who make buying decisions," says Jarnac, sales and marketing manager. "If you're an outside salesman going door to door, it can take a lot of time. It's hard to work up a relationship with that many people."

But when you're on the phone, it's much easier to work through a plant, build a list of contacts within the company, introduce your
company's products and services, obtain quote requests and do preliminary market research.

"When we go in the door, our outside salesperson doesn't go in alone, he also has a proactive phone person that has done all sorts of preliminary work in that facility," he says.

Jarnac advises distributors not to try to shortcut the process by instituting a joint sales effort without first establishing a solid telephone sales team.

"We demonstrated to our staff that you can sell our products over the phone," Jarnac says. "They were growing the numbers. If you shortcut the process, you would lose that demonstration, which is essential to making the team work."

Every call has a purpose
Bring up the subject of telephone sales to most people and it conjures up images of telemarketers who pester you by calling your home at dinner time. Don't make the mistake of confusing telemarketing with telephone sales. The two are vastly different.

"Nobody makes cold calls here. Every call we make has a purpose. Every call we make gets that person ready to receive our message," says Jarnac.

He views telephone sales as an integral cog in the sales process. Used properly, a telephone sales effort can be an effective part of a distributor's overall sales mix. Types of calls range from simple contact calls to establish the key decision-makers in a company. Follow-up calls make sure a quote landed on the appropriate person's desk and provide an opportunity to ask additional questions to gauge the size and scope of an account. Presentation calls give an overview of the company's product offerings and capabilities.

Information gleaned from each call gets entered into Action Track, the contact management software from DISC, or an Access-based knowledge database.

"It's imperative that you get a good picture of how that customer's processes work," he says. "Who makes the buying decisions? Who are the key players? During the whole time, we're building a contact database of people and their responsibilities, what the company does."

Employees from several groups within Carolina Fluid are involved
in the sales process, including customer service, marketing, telephone sales, outside sales, product management and fabrication. The more people involved in the sales process, the higher the cost of sales. So the objective is to get the sale as quickly in the process as possible.

"We try to focus on specific aspects of the sales process in order to decide who can do each step the best and most cost effectively," he says.

Don't forget the little guys

In a perfect world, distributor salespeople would spend all of their time focusing on the biggest, most profitable business. They wouldn't waste time talking to customers that don't drop big bucks to the bottom line.

In real life, companies can't easily walk away from small accounts. In many cases, pressure from vendors won't permit ignoring sales opportunities, however small.

"It's easy to say you can't afford to call on smaller customers, but when not doing so threatens relationships with your manufacturers, think again," says Peg Fisher of Peg Fisher & Associates.

She suggests one way distributors can avoid going broke by calling on small accounts is to focus more efforts on telephone sales rather than making expensive field sales calls. She has developed a simple formula distributors can use to convince themselves that telesales can be a much more cost-effective way than field sales to reach certain customers.

Distributors start by plugging in the total compensation paid to a typical outside sales rep compared to a telephone salesperson. For the sake of argument, say both have equivalent sales and profit contributions and therefore are compensated equally. Including base salary, commissions, bonuses and benefits, each earns $59,000 annually. Since companies also reimburse the field sales reps for mileage, travel and entertainment expenses (taking clients to lunch, paying for a round of golf, tickets to sporting events, etc.), add $15,000 to the cost of outside sales, for a total cost of $74,000.

The next step is to determine the average cost of an outside sales call vs. a telephone sales call. As the example below shows, since telephone salespeople can make far more calls per day on average than field salespeople, their average cost-per-call is much lower.

Figure 1

	Outside sales	Telephone sales
Total sales days per year	220	220
Average sales calls per day	5	25
Total sales calls per year	1,100	5,500
Annual cost	$74,000	$59,000
Average cost per call	$67.27	$10.73

"One of the goals of distributors today is to lower their cost of sales," Fisher says. "Telephone sales offers distributors an opportunity to tap the potential in accounts that many consider too small to warrant field sales costs. It's a much better alternative than simply ignoring small and mid-sized customers."