Episode 14 Sep 10, 2020

Commercial Challenges in Specialty Chemicals Distribution

Dr. Steve Laborda, chief executive officer of ValueBiz Booster, joins our show to discuss the importance of commercial excellence in the specialty chemicals distribution industry. Laborda and host Barrett Thompson diagnose the biggest challenges facing these businesses, including increased complexity, changing relationships along the value chain, and the eCommerce revolution. Traditionally these distributors were seen as simple logistics providers, whose main role was to extend the reach of manufacturers to small and midsize customers. 

In the last 10-20 years, many have differentiated themselves with value-added services and tailored solutions that sometimes compete with their own suppliers. This complexity creates a challenge for sales teams that have to deal with inconsistent and misaligned market pricing. Learn how leading chemical distributors are using data science-driven tools to reach commercial excellence in this dynamic environment.

Find the blog post mentioned in this episode here.

Dr. Steve Laborda

Dr. Steve Laborda

People are scared. You can really see it in their faces when you say the words, “commercial excellence.” In easy words it's about making sales and marketing work better together. Let them work faster together in a more efficient way so that the customer can see it and feel it. It's about getting back to the basics. Because I have seen so many companies doing, for instance, customer segmentation after customer segmentation and wondering why it is not working. 
- Dr. Steve Laborda

Episode Transcript

Barrett Thompson: Hello everyone. My name is Barrett Thompson. I'm the General Manager of [00:01:00] Commercial Excellence at Zilliant. And I'll be your host for our podcast today. I'm joined by Dr. Steve Laborda, who is the CEO at Value Biz Booster, and we'll be discussing commercial challenges in chemicals distribution. Welcome Steve.

Steve Laborda: Hello, everybody really great to be here. And my pleasure to share some thoughts about the commercial landscape in the chemical distribution.

Barrett Thompson: We look forward to our conversation today. Steve, before we do, would you take a moment and introduce yourself to the audience? Tell us about your background in this space.

Steve Laborda: Yeah, of course, Barrett. I have spent actually the last 20 years in the chemical industry in value score, starting on the R&D side, and moving quite quickly on the Nye side, being closer to the customers, working on the sales and marketing side. And I've been working in several companies. The last 10 years I have been working in Kenya. We have been spending [00:02:00] most of my time on commercial excellence and finally leading a corporate program around commercial excellence. And now since beginning of this year, I have actually started my own business as consultant, coach, and speaker, focusing on commercial excellence, acceleration as well as value-based setting acceleration.

So, bringing all my experience that I gathered the last 20 years to help companies to develop themselves from a top and a bottom line.

Barrett Thompson: This is great. You're an insider in this space. You've walked in the shoes. You've done the role. And I think that's going to be an incredibly valuable perspective.

Let's get started. Why don't you outline for us what are the primary commercial challenges that you see in chemicals distribution today?

Steve Laborda: Happy to do so. I have to say the challenges that I'm going to list are almost all applicable along the wall value chain of the chemical industry. So, it applies for many cases - for the manufacturers, as well as for the formulators. [00:03:00] But I would say for the distributors, obviously, they have been seen many years as just a kind of logistic partner.

So, trying to shut down, let's say, to limit for the manufacturer, the cost for networking capitals for the stock management, for instance, and try to deliver to small customers. That has been for many years, the whole of the distribution And I would say that the last 10 years, those companies have tried to differentiate themselves and they have tried to backward integrate themselves as well.

So many of those challenges are linked to, first of all, the complexity they are still dealing with. So having still very small customers, more packages, and a lot of SKUs that they need to deal with, the sales enablement part of the sales organization they have. So, they have plenty of markets to cover.

And that means having the knowledge of all these [00:04:00] applications and the understanding of the customers is a big challenge. And then finally, I would say the other one is entering in competition with their own customers or suppliers. That has been a big challenge as well. Then I would say once will come to me as well, is of course, related to this complexity is having the right price in place for all these industries or these products is a big challenge, not only on a price list, obviously, but also the sales guys on the field who need to apply those prices properly.

Barrett Thompson: I'm interested to explore that first challenge that you mentioned. It sounded as if the industry itself is redefining their identity or their value proposition away from being just a logistics provider to something more. Can you give us a little more insight into what that something more is?

Steve Laborda: Yeah. Of course, this doesn't apply to all of them, but if you look back, there are two elements.

One is of course the [00:05:00] consolidation of the markets. So, you see that even bigger and bigger players are outdated because they are consolidating the markets. And then I would say the midsize ones are trying to differentiate in another way, because they don't have the power of, let's say, of acquiring other companies in a meaningful way.

So, they try to help the manufacturer for their non-core businesses or smaller businesses to take over the manufacturer or the formulator roles. So, shifting slightly towards the manufacturing, where it is possible, obviously where you don't necessarily need huge CapEx investment and so forth.

But this helps to differentiate compared to simple distributors, I would say. And that leads sometimes to stronger partnerships as well with the manufacturer.

Barrett Thompson: So, as they're making this transition, you mentioned they may be competing against their customers, did you say? [00:06:00]

Steve Laborda: Not necessarily the customers, but also the desk supplier.

So, the manufacturers themselves. it's a bit shifting in all the directions. And of course, this doesn't apply to all the industries, but in the chemical scope. But that here and there. And of course, that makes the partnerships sometimes easier and sometimes a bit more complicated because your relationship is not one-to-one – like you are supplier, you are customer, or you are a distributor, you are a manufacturer. It sometimes overlaps and that makes it complicated from an interaction point of view.

Barrett Thompson: Yeah, not like the good old days. You could draw it out on a simple sheet of paper. And now it’s more complicated connections.

Steve Laborda: Yeah, it’s not a line anymore. There are many nodes going on the line back and forth.

Barrett Thompson: It's a network. Let's take it to maybe some specific examples. You mentioned a distributor may take part in what looks like a manufacturing activity as they take on a new role as a formulator. [00:07:00] And I can imagine the business thinks immediately about what must happen inside the plant to support that.

What are some of the commercial implications of taking on this role, which they may not think about at first, but are really important to them making that transition smoothly and successfully?

Steve Laborda: Indeed, many companies think about the manufacturing side of it and forget completely that they need to provide new tools to the sales teams and new processes.

To think about a concrete example, let's take a distributor is moving towards formulation technologies. You can't come up with just a catalog of chemicals, because now you need to add value to the offering, and you need to provide value to the customer. So that means you need to find the best solution as a formulation for your customer.

And that's a completely new set of skills. First of all, you need to enable your sales teams. The pricing is completely different as well. So, you can't just [00:08:00] come in and form and it on a very transactional or cost-plus support. You need to create value and to capture value. So, this is clearly a big impact.

And on top you can't do that for every single customer. So, you need to choose why you’d choose your customers because you can't do that for very small customers because you don't get any return on investment on all the sales activities that you are performing. So, you need to have a PR understanding what are your key accounts, and what are maybe your mid-size customers, where this still applies, and the customers you can't serve that way. Does that resonate, Barrett?

Barrett Thompson: It really does. In fact, I've seen in more than a few manufacturing businesses, whether they're moving into configured products and parts, where they were only doing stock items before. I hear your description of that, the formulation is likely to be unique for each customer. So, the [00:09:00] skills to do that, the systems to record that, I can think there might be applications around the cost isn't known at the time you're trying to set the price, unless you go back to someone in the plant and someone in procurement to ask about the raw materials and the manufacturing sequence could even think about the implications of scheduling and quantity commitments that might be made and what is required to scale up and produce that on some frequency for the customer.

These are things that, maybe in a pure distribution business, you don't think about, because you always have enough of the stock chemical in the warehouse, and you're just going to ship it. Right? Suddenly you have to have more conversations, and deeper, with other parts of the organization, so you can give a confident answer, and a profitable answer, back to your customer. Right?

Steve Laborda: Exactly. And I think that means really for many of the distributors who are going towards this path, you need really good to go back to the basics for many elements and look at the sales processes and not only the sales processes, [00:10:00] it's almost the end-to-end process that you need to review. I agree that at least few of the sales processes, as you mentioned, related to costing, pricing, they are all sales-enabled.

So, also - the pricing. So, what do you price? How do you price it? How do you pack it with the services? Because obviously the services are slightly different as well than the typical distributor services that you provide. And then on top of you might need even to have application know-how that you need to add on top. And then, train your organization.

Barrett Thompson: So, now maybe what I hear you saying there, at the end, is that you may need a greater amount of engineering, knowledge, or technical knowledge to specify what that formulation would be in completing that sale. Whereas before, with the stock catalog, someone could read the product data sheet and understand what was going on with that particular chemical.

Steve Laborda: Yes. Could be. But I would say historically, even the distributors were already, [00:11:00] I would say, quite well-populated with engineers. But I agree with you that the level of knowledge required is higher. So, you need a higher proficiency in, let's say, in an application knowledge for the specific formulations, for instance.

Barrett Thompson: So, I think this is very helpful to characterize both the shift that you see within the industry and the challenges that occur and thinking about the commercial side, which may be the second piece or the forgotten piece of this whole transformation. Let's pivot now and begin to discuss commercial excellence; domain of expertise to be overlayed on these challenges. Why don't you characterize for us, Steve, in your own words, what is commercial excellence and how should we be thinking about that in applying it here to the chemicals space?

Steve Laborda: Yeah, it's good that you asked me to do it because I would have done it anyway, honestly, because so many people are scared.

You can [00:12:00] really see it literally in their faces when you say the words, “commercial excellence.” So, in easy words it's about making sales and marketing working better together. Let them work faster together in a more efficient way so that at the end, the customer can see it and feel it. So that the customer satisfaction increases then, of course, ultimately everybody's doing that to increase bottom and top line.

So, improve your goals for revenue and your profitability, obviously. Try in simple words to explain what commercial excellence is and why are you doing it actually? And so, you should take it from there. And in commercial excellence, we talked a lot about it. And I mentioned it already, is about getting back to the basics in many places. Because I have seen so many companies doing, for instance, customer segmentation after customer segmentation and wondering why it is not working.

And I think there it's the same story. So, [00:13:00] yes, we need a customer segmentation, meaning yes, we need to define the size of the customer, the potential of the customer, but even more important is what are we going to do with it? So, once we have a customer in a basket, what does it mean for a salesperson? So, how many of these do I do? How much effort do I spend? What is the pricing for this customer? What product is available for that customer? For instance, is it a key account or only a large customer, for instance? So, you need to make it really tangible for the salespeople, so that they know, if a customer is a goals customer, then he needs to visit them often. He needs to create value and capture value for them. He needs to have clear targets and so forth in the pipeline. And then if it's a maintain customer, it has other implications of pieces I have seen that so many times in many companies the last 20 years that they have an Excel sheet or a software where all these customers are [00:14:00] classified, well-segmented, but no action behind it.

And I think that applies, as I said, also at the beginning, it doesn't apply only to the distributors, but also to the manufacturers and the formulators. You need to get done in the past was the strategies for each of the customer segments and tangible actions that is understood by the salesperson.

And that's the key.

Barrett Thompson: That makes such sense to me, Steve, what you've just said, because it sounds as if beginning with the end in mind, recognizing that you'll take the segmentation, that you'll build policy and action and strategy around it, to execute in the business. It's not just an intellectual exercise. It's an operational exercise.

That's the end goal of declaring that strategy. And if you decide what operations you're taking, I could imagine that would even inform what kind of factors would be more useful in the segmentation. [00:15:00] I've run into customers who will say: “I have a segment.”

And I will say: “Tell me for what purpose that segmentation was constructed.” And they might say: “I built this segmentation for purposes of helping manage and coordinate the sales team.” And you say: “That's useful.” As far as it goes, you've segmented by geography, because your sales team has managed by geography.

You may have segmented by type of product because, perhaps your sales team knows something about type of product or size of customer enterprise versus small medium business, because you go to market that way. But such a segmentation main may need to be modified in order to achieve a different purpose.

And so, to your point, Steve, if you're thinking all the way through to the strategy of how you approach a customer, the pricing on how you approach that customer, the services you want to offer to that customer, there may be alternative ways to define a segmentation that best serves those ends. That isn't [00:16:00] something that the company is thinking about today when they think about segmentation.

Steve Laborda: Yeah, I fully agree. And your wiser two big points. The purpose point, I fully agree. So, no purpose. Don't start with the segmentation and vice versa. So that's one thing. And the other part is a customer segmentation doesn't have an infinite lifetime. So, you need to challenge the segmentation on a regular basis.

So, to check that, does it fit the purpose? Does it fit with the corporate strategy that you have in place or the business strategy you have in place? Because many companies tend to start with one and they keep it for five years. And then they wonder why it doesn't make sense anymore. So, this is really a key point, which I haven't seen yet, really in many companies in the B2B landscape, meaning that I haven't seen too many companies really challenging their customer segmentation on a regular basis because it still feels like a big [00:17:00] effort and not enough rewards, in a sense, but that he wants is really linked to what you mentioned; the purpose, the strategy, the actions related to it towards the customers. And if you do it properly, if you link your customer segmentation, your actions with a customer satisfaction initiative, you can even directly measure your impact.

Barrett Thompson: Steve, I'm curious. Are there factors that you think would be very valuable in a segmentation that you rarely see when you speak with companies and see what they're doing already? Is there something that jumps out to you?

Steve Laborda: Honestly, not really. If you look at the parameters, the consideration, they are all good.

One thing which I would like to highlight, which is maybe one mistake, which is happening often, is that the companies are looking backwards. So, they look at the historical data instead of looking at a combination of historical data, plus a future for what, looking at the aspects, [00:18:00] like the potential and so forth.

So that sometimes is missing. But otherwise, I think the parameters out there. I'm repeating myself quite a lot now, but it's so often happening that I think it's worth repeating. It is that it's really the link between these parameters, the segments, and then the strategies, your derive out of it. So, really defining is not this customer segment and maintaining. Is it more something that you want to get rid of? And then the actions and the discipline behind the actions. So, once you have defined the actions, you need to follow them up and ensure that your organization is doing what is said. And defined. And I see that's a big challenge in a sense, having this long history in the sales organizations, doing, let's say for many years, working in a similar way.

And now breaking these ways of working towards a more structured and more discipline - following the rules of the [00:19:00] customer segments.

Barrett Thompson: I want to highlight something that you brought out. I think there's a huge opportunity here. You were talking about backward looking versus forward looking and you brought up the idea of potential.

I think this is a great one. I have run into a few businesses that will say: ‘Yes, we want to consider not only how much the customer is spending with us today, what you might consider the last trailing 12 months, customer size or customer spend.” But they will say: “I want to look forward to potential.” Now, even a great idea could be weakly, poorly implemented.

You might say: “How will you come up with such potential?” And they might say: “I'll ask all the sales reps to tell me how big this customer could be or how big they expect them to be next year.” That's a starting point. Recently we've discovered some things that might be possible by extracting signals out of data - various sorts of third-party data that might be available. There might be market share data. [00:20:00] There might be other ways to gauge: What else is this customer buying that I could sell to them? But they're not buying from me because that would define the potential for me, as a seller. If I could somehow estimate what my share of wallet is inside of them. I think that's a rich area because I've heard this puzzle. Some have said to me: “Should I price a customer according to how they behave with me today? And maybe that limits what they can become in my future. Or should I price them for the kind of customer I would like them to be and induce them and inspire them to come and do extra business with me?

And to order in a more favorable order quantity, and to order on a more routine schedule or whatever the definition of a good customer who buys in an efficient way for me in a satisfactory way, for me as the seller, do I price them in order to entice them to become that very favorable customer? Or do I price them in a way that reflects only what they're [00:21:00] doing today? …maybe penalizes them for when they're non-ideal. I think there's a big opportunity there to use future looking insights.

Steve Laborda: I would say definitely the challenge is again, none of those set of data. Is it going to the data source, let's say, or let's say database data that are available kind of discern parties, data that you mentioned?

No, the sales rep estimates, which are always over optimistic. I would say the truth lies in between. Even the system has some limitations. I have experienced it. So, I knew it a bit. But it has some limitations because typically the data you get is for larger cases. So that's important. It covers a big chunk of the business, but it doesn't give you 100% of your customer base.

And so, you need to have a blended approach because for the smaller customers, either you make just a simple assumption, or you have, indeed, some data. But typically [00:22:00] for smaller customers, you don't get those because nobody's taking care of them. And then that helps a lot because it's really important. Because if you think about larger accounts and those larger accounts typically have strict policies of sourcing.

So, they have two to three suppliers, for the security of supply, but typically the share of wallet is 60 / 20 / 20 or something like, 70 / 20 / 10. If you know that you are the one who has the 70, you don't need to push with price strategies where you are going lower with the prices and another service and another service because you're not going to get more the parts piece of the pie. So, that is very important. And that's back to explaining how I have heard that I have seen that many times this discussion that you need to explain to a salesperson: If you have 80% of this share of wallet, you are never getting the 100. So, don't push, [00:23:00] do not waste time trying to open another opportunity, another opportunity.

Keep him happy, maintain him, but spend your time going on another account, which is maybe 30% or 40% of a share of wallet. Because you are then the challenger in that role. So, you use another strategy. But I have seen so many times, sales people not yet understanding those strategies.

And that is really one big part of the sales enablement path. So, providing them the right tool, the visibility. So that's important as well. So, they need to have down cash flow, very simply where they can see where are they at a certain customer? And then of course, if you have those data, that's very helpful, because then you can really easily integrate in tools like the CRMs or the pricing tools. But you need them to still train them, coach them, so that they get the insights and understand what to do with it. [00:24:00]

Barrett Thompson: One area Steve’s heard many businesses talk is about the need to look backward. I think it's valid and I want to see if you've seen it and will confirm it in this space, is when they set up a price contract or an agreement with customer. And usually, the seller is committing a price per unit. It's a $2 a kilogram or 2 Euro kilogram. And the customer, the buyer is committing some sort of volume.

And I hear over and over again, that many organizations I see at many organizations have very poor ways to record what that commitment is, or very poor ways to confirm and track whether the buyer is actually bringing anything like the volumes that they committed, which were the justification for the price that they were granted.

What's your take on that in the chemicals distribution?

Steve Laborda: I actually never heard about that problem in the chemical industry. I’m just kidding. Of course, it is a big problem. [00:25:00] It is really a big problem. And indeed, there are many companies who are real smart from a sourcing perspective and ask for huge quantities.

And so, they get the best price.

Barrett Thompson: And then we understand their motivation. It's clear.

Steve Laborda: Yeah. So, they order 1,000 ton, and then they ordered to pay. And indeed, if you have going back to the distributors, if you have a huge landscape of customers. So, you have a huge number of customers per sales, and a huge number of ESCA use per sales that you are not able as a normal human, I would say, to follow that for each of your customers.

And so, you need to have also some tools and assistance, let's say that would be ideal. I haven't seen it yet. Honestly speaking, it would be great that you have a warning system where, you enter the price and the agreed volume. And then after the 12 months [00:26:00] or in between, you have an estimate running and say, your customer is not buying in the pace they should be buying. So, you need to discuss that next time yet, for instance. So, this is guided selling, in a sense, and top and bottom-line improvements.

Barrett Thompson: Yeah, it's doable. We've seen that brought together with the transactional data and the commitments captured at the time of the pricing agreement and to your point, the mathematics can be pretty straight forward to answer the question.

Is this customer on pace to meet their commitment, over the life of the agreement? You can measure that one quarter of the way into the agreement. One half of the way into the agreement. And adjust for seasonality. Do any of those kinds of things that you need. And then generate these alerts when the actual behavior deviates from the expected behavior, by some tolerance. I've seen that done in dashboarding and other kinds of alerts. As you were saying, right back to the sales rep to that's who needs to see it. Right? That sales reps so they can call a customer and say:

“What's going on? [00:27:00] What’s happened in your business? What's different? Has something changed? Are we doing our part as the seller that would encourage you to keep your commitment as the buyer?’ If not, we'll adjust that. But if you're not hitting your volume, the implied conversation is if you're not hitting them and you're not able to hit them, maybe a price adjustment is appropriate here.

I think that takes a lot of courage to have that conversation with that customer. But I think it's appropriate. Steve, I'd like to get your perspective on threats or opportunities that are emerging as more B2B is moving to digital. What have you seen? What should a business be thinking about in terms of their digital strategy?

Steve Laborda: That's a very good question. And everything in the sense that the coin is two-sided. So, as you said, there are threats, and there are opportunities. I’ll start with the opportunities. This digital overhaul with all the data that we can measure. So, getting all these data together and analyzing properly gives a [00:28:00] lot of insights to the company. But at the same time, the challenge is that you shouldn't get overwhelmed by the data.

That's a bit tricky. So, you need to make it meaningful. So definitely that helps a lot. Of course, also, even if we go towards the processing of the invoices, all of this can be done by robots in the meantime. There's a lot of administrative burden and added-value work, which can be really transferred to automatization. That, also for the distribution business, with dealing a lot with this high complexity design number of orders, invoices that can help and reduce the errors, obviously as well. But at the same time, if we go on the sweat side briefly, what I see is that if you try to optimize processes with digital elements, meaning that the dosing, for instance of the chemicals is optimized. There, you can have another [00:29:00] challenge; that you might have sold, as a sales guy, quite good quantities. It is sometimes more than actually needed. But because of the manual nature of the process, people were just to be on the safe side, maybe overdosing. And now comes the digital step, which is then measuring and optimizing every second or every five minutes or whatever. And what happens (is) then suddenly you decrease your consumption.

So, as a chemical company, you are not that happy, obviously, if you don't do it towards that way. So, you need to think about as a manufacturer or distributor, when you're optimizing the processes of your customer with digital elements, think about the business modeling around it. So, think about how you are going to earn money afterwards.

So don't just put the elements in place and hope that it will go right anyway. Because at the end, what you will see is you will have a decrease of revenue. Then [00:30:00] you have other challenges, obviously, which come with that. So, you need to think really about how you are going to sell this new offering. Because at the end, yes, the chemical stays the same, but through the digital part it's almost disrupting the right earning logic.

So you need to carefully think about it and prepare yourself and ensure that you have the right business model, the right earning logic, the right value proposition in place, to be sure that you capture enough value. Because business is always the same. It's a win-win situation. And if one of those doesn't win anymore, then it doesn't make fun anymore. And then it's not business anymore. For my perspective.

Barrett Thompson: It's not rewarding. You want to leave the game?

Steve Laborda: Maybe just briefly. The last one, which I believe is very important, is doing the right things on pricing. So, all the artificial intelligence and the [00:31:00] data crunching on pricing, but they're also this rollback is that the organization doesn't necessarily believe in the data. So, you need to provide trust to the sales guys that the guidance that is now coming out of the algorithm from the pricing tool is trustable. And so please apply the guidance. Because you can have the best data, the best algorithm for pricing, but if the sales guy didn't want to apply those prices on the market, it's a waste of time. And of resources.

Barrett Thompson: Yeah, you're onto something. In fact, if we're honest, I think the mistrust may go deeper in some cases. They mistrust the data. They mistrust the organization that's managing the data and designing the algorithm.

They have fear that the price guidance that's being given doesn't fit the selling circumstance that they're in. That it doesn't appreciate or recognize who this customer is or the competitive nature of this particular product or the region [00:32:00] that I'm in, or any of the factors that they, as an experienced sales professional, have been using for years to help them get into the right zone for price.

So, I think you're right to say: “We have to work on educating and including the sales organization to see what we're doing when we use the data, develop a model to make it transparent, to share the factors that are going into the segmentation to explain how they contribute to pricing.” Open up the door, if you will, and let people see ‘Oh, here's the price recommendation coming out of the pricing tool and here are the last 30 times we sold that product to the same kind of customer in the same industry with the same quantities, with the same distance from the plant’ - all of the things that are the factors in that pricing model. When you share those other peer data points, I find that's a powerful way to help people say: “I get [00:33:00] it. That makes sense to me. In fact, oh, two of those customers in that scatter chart are ones that I sold last year. Yeah, you're right. That is the market price when we're in this kind of selling situation a little bit different than somebody that I might've sold to yesterday, who's in a very different market, but somehow, I had that price point on my mind.”

Steve Laborda: Exactly. And I think this black box effect needs to be taken away and then it becomes very full. I fully agree.

Barrett Thompson: Is there a particular challenge? I'm imagining that the raw materials are moving very quickly in this industry. Some industries, raw material costs (are) pretty static, or they get locked in with financial hedges, other kinds of mechanisms to smooth that out over in the plant on the production side.

My understanding here in chemicals is the raw materials, the feed stocks, are moving quite frequently high velocity. Is that correct? Is that creating some additional kind of challenge to keep prices fresh and aligned to the market [00:34:00] as the costs are moving?

Steve Laborda: Yeah, I think, it depends a bit on the end markets. But indeed, sometimes there's even a disconnect between the frequency of negotiation and let's say the dynamics of the whole material cost changing.

So that's the biggest challenge that I have seen. That indeed, it is a big challenge. In some places, your formulas, obviously, which are one-to-one linked to the whole materials, which has the nice effect that you are safe, in a sense, because it's moving exactly the same way with few months of delay, obviously, always following the rules. But of course, it doesn't give you a big leap to make high profitability you desire, because you are always in these boundaries. So, there's no perfect solution. Many companies are using formulas and models are for certain chemicals, which are maybe not that dynamic, from a costing perspective that are just taking just prices for six months or 12 months.

It really depends. But there is [00:35:00] there's no silver bullet, unfortunately for that one. So, it is really a balance between profitability and the risk you want to take. Everybody's cooking with water like I say in the chemical industry. A lot of them are doing that with water and so you need to define what is really your risk versus profitability profile and for business.

And then you drive it that way along.

Barrett Thompson: What are the common toolsets that you see used today in the pricing practice and the segmentation practice? Some of these things that we talked about. What are businesses using as their core technology and how well is it working for them?

Steve Laborda: I assume there's already the question about using is a big question. Because I have seen so many times, pieces of the organization using it and other pieces not. That there is the first [00:36:00] challenge.

So, there are many things like, the customer segmentation is typically done on very basic Excel. Sometimes with some visualization tools. Sometimes the pricing tools, but that's more than even already going towards micro segmentation. So that's even one layer down. But then the utilization is really challenging in many places.

So, it's not always working that way that, just because you provide a dashboard to a salesperson, that he is going to use it. And that he's going to interpret exactly what you want him to do. So, there are days to know yet the solution. I have to say, more than providing them training and maybe he ended up some pop-up text with guided selling in a sense. But I haven't seen more than that yet. For the pricing, obviously, that many years already many, companies like yours, providing pricing tools and the CPQ is as well for more complex offering.

Typically, what happens is that the price guidance part, [00:37:00] really the marketing or the pricing manager or product manager, depending on how they are calling the different organization, are using it quite heavily and they see a lot of value. But then on the other side, the sales organization in many places are more using it as an administrative tool.

So, getting the prices locked in the system so that they can process their orders and get the invoices and all dissolved. Some examples companies are doing it twice, but many companies have not yet extracted the full value of the off the sales side of the pricing. So, that's really something which I've seen many times.

I would say obviously the CRM tools is used in many places and helps a lot to understand that the share of wallet, for instance, for customers, which are then used later on for the pricing again, and for the strategies for the customer segmentation. The worst thing I have seen is using a CRM as pricing tool.

That's the worst thing I have ever seen because that creates a monster that you don't want to [00:38:00] have actually. But nowadays, I would say, the integration capabilities between the CRM and the pricing tools are so efficient. It's, the API is typically that it should work quite easily. So, you don't need to create that type of tools anymore.

You just integrate them smartly. And then from the learning side, the sales enablement part, training the people, these micro moments, or some little apps on the phones of the sales guys who get weekly challenges on some topics where they need to answer queries and everything to keep up the learning.

Because as when people come out of a training, typically there is not much left after a few days. But yeah, it is sad to say, but it is like that, indeed. So, I don't recall exactly the percentage, but it's something like 10%, if I recall properly, that if you ask them after a week, I think what remains from a training.

So, you need to maintain that. And indeed, let's say, [00:39:00] micro moment trainings are quite a good best practice, I would say.

Barrett Thompson: That's an intriguing idea. And I can imagine how those might be delivered right through the same digital tools that the sales team is in every day. If you were thoughtful and intentional about it, you could certainly find a way to do that and make it fun.

To your point, it might be a little quiz, or could even imagine that moving into a game and ‘Who got the high score this week?’ or ‘Who completed it first?’ or any of those sorts of things. So, you get people excited about it.

Steve Laborda: Yeah. And that works well for those people because they are typically on the competitive edge, so you can motivate them.

And I would say those tools are needed indeed. To have the fun element and to have the keys element. So, keep it stupidly simple. So, you need really to have one tool, ideally. We talk a lot about one tool, but it needs to be smartly integrated that it looks like one tool. So that's what it means.

So just for those who are trying to create a monster, don't do that.

Barrett Thompson: Make sense. That makes sense. Steve, I want to thank you so much. We've [00:40:00] covered a lot of ground. I've learned a lot. I have a new appreciation for how commercial excellence supports this transformation that is going on to the benefit of many businesses in the chemicals distribution space.

So, it's great. I want to thank you for being with us and thank you for sharing your perspective and your expertise today

Steve Laborda: Thanks, Barrett, for the opportunity to share those ideas and thoughts.

Barrett Thompson: So, this wraps up our conversation for the day. I want to thank the audience for listening to the conclusion of the podcast.

And I invite you to learn more. If you look into the session notes, you'll see a link there to a fantastic blog post from Dr. Steve Laborda “Three focus areas to get your specialty chemical distribution business back up to speed.” Fresh content aligns with what we discussed today. I know you'll find it valuable.

Thank you very much for joining us on B2B Reimagined. We look forward to speaking with you next time. And this concludes our podcast for today. [00:41:00] .

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