Ian Heller: Your company needs to improve its service because the days of orders not going out on time or not knowing where orders are or letting things fall through the cracks, there are new operators in the B2B market, like Amazon business and others, and whether or not they directly threaten you, they are setting new standards of performance expectations.
Barrett Thompson: Hello everyone. My [00:01:00] name is Barrett Thompson. I'm the General Manager of Commercial Excellence at Zilliant. And I'll be your host for our podcast. Today, I'm joined by Ian Heller, the founder and chief strategy officer at Distribution Strategy Group. Ian, welcome to B2B Reimagined.
Ian Heller: Thanks so much Barrett. I'm delighted to be here with you.
Barrett Thompson: Ian you have a rich background in distribution. Why don't you give us a quick summary of the kinds of things you've been doing?
Ian Heller: Yeah, well, sure. I started my distribution career in a very lofty manner as a truck unloader at a Grainger branch. I went on to become a counter person, a phone salesperson and then a branch manager at a few different locations.
And then when I left, I was the VP of Marketing. So I really grew up in a distribution company. And then I've done a VP of Marketing job at three other big publicly held distribution companies in electronic components, office supplies, and construction supplies. So I've been in the industry for a long time.
And then also I've done some consulting and writing and speaking like I do.
Barrett Thompson: You certainly know it from the inside [00:02:00] out. You're earned that knowledge, the honest way, right? From the shop floor all the way up. So I appreciate that. I think that's going to be valuable today. Ian let's talk about some of the takes that you see on distribution sales. I'm curious to know if you are observing changes in the sales strategy or sales culture in wholesale distribution?
Ian Heller: Yeah. I don't think there's ever been a time where I've seen more change Barrett. Now, some things are constants, right? Like you still have to be a great salesperson to succeed.
And by that, I mean, sometimes people will say something like, “Hey, the days of the professional visitor and the doughnut delivery guy are over. In my experience those days were never here because if that's really what you did as a salesperson, you weren't in that role long. Now, there are people that bring donuts on sales calls, but I still ride with salespeople. I've ridden with four distributor salespeople in the last month. And make calls with them. The good ones are asking questions and they have good relationships. And they're adding a lot of value, and this notion that [00:03:00] distributors’ outside salespeople are going away is nonsense in many different kinds of distribution because those relationships are important and the value add is real.
What is changing, and a couple of things are specific to the pandemic. One is that even if you make your living, making outbound calls and being with customers, in-person what we have learned, and this has been proven in some of our research is that you need to become more efficient by doing a certain amount of your work over the phone and via web calls because first of all the percentage of employees who are going to be working from home is going to go up. We know that from interviewing distribution customers, more of their employees are going to be working from home. So, you're not going to call on someone's house, so they're going to want you to call them. Right.
Barrett Thompson: And then that'd be weird, right. To come knocking on the front door of the [00:04:00] purchasing manager or the warehouse manager.
Ian Heller: Yeah. Yeah. I was hoping you'd be home. Did you want to get dressed before we meet? And so look, you're going to need to be flexible and learn to how to schedule that work and become good at it and become proficient with the technology if you aren’t today, because some of your customers are going to be working from home.
Secondly, that generational turnover that was already happening before the pandemic continues to happen. So you have a younger generation that puts less value on average in meeting in person. And so some of them are going to want you to call on them by phone or Zoom. And so I think as a professional salesperson, you need to become just as proficient at managing your time and your sales calls that way as you are managing them in person.
I don't think that's a long putt, but it does take some effort. So that's one big change.
Barrett Thompson: So I hear you describing. Maybe when you call or how you call, it has to change the contact mechanism, phone or face-to-face. Is there anything you're seeing about what it is you talk about in that interaction?
Is that shifting at all? I've [00:05:00] had an impression that perhaps in some instances, the things that got talked about, like first in the gate, where are we shipping our orders on time? Are they accurate? Is the billing accuracy? What about product quality? Are those still a part of the repertoire? Is there any add for different conversations that are being had between sellers and buyers?
Ian Heller: I think it's changing. It's a great question. I would say if you are spending a lot of time talking about the level of service or the accuracy of the service that your customers are getting, then your company needs to improve its service because the days of orders not going out on time or not knowing where orders are or letting things fall through the cracks, there are new operators in the B2B market, like Amazon business and others and whether or not they directly threaten you, they are setting new standards of performance expectations that you have to live up to. So people are going to want to know, they expect you to ship on time and ship when you say you're going to ship and for it to, for the material to arrive on [00:06:00] time and to know if there's a problem before they do and tell them.
And so you need to get past that you have to be an outstanding operator. So instead, what you need to do is in my view, anyway, Barrett is find ways of adding value that a pure digital seller would struggle to duplicate. So for example, adding technical support, becoming an expert on the products that you sell, bringing in supplier resources, selling services, I mean, services are going to be an increasingly important part of a distributor’s value proposition because these pure digital sellers can't do it. So whether that's light assembly or kitting, or labeling or vedning or any one of a couple of other of a hundred services that we've documented, your company needs to develop those. And as an account manager, you need to get to the point where you can sell them and not just roll them into the product price. And I think, doing major agreements that last over a number of years and ensure that you're adding value and [00:07:00] building senior executive relationships that you're going beyond the purchasing agent, some of that stuff's always been important, but the criticality of it is increasing going forward in my view.
Barrett Thompson: And you've mentioned the digital seller. You're talking about those exchanges or those kinds of forums where they don't have the account reps, they don't have the relationships and so on. So if I'm hearing you right, it is play out those things that are unique and different about the relationships that you do have, you may be moving the same products, but you don't have the same offer. You don't have the same engagement with the customer that appear digital player has.
Ian Heller: That's right. And look, years ago, Michael Porter developed this model and he said, look, a business has intakes. It adds value in the middle and then it has outputs. And that's true, whether you're a distributor who's buying, adding value in some way by availability or transforming the product and then selling it.
Or you're a manufacturer who takes in raw materials and then you put them together and ship a finished good. So that's sort of the general model, little oversimplified, but that was Michael Porter's. Now, you have [00:08:00] you taken the product, you transform it and you ship it. Now, most distributors are focused on the first part of that, which is my customer has a purchasing set of needs and they have a receiving set of needs.
And so I'm going to be really good at shipping material and I'm going to be really good at making sure they get it on time. And maybe if I'm sophisticated, I will help them with bin replenishment or vending. All of which is on the receiving side. My suggestion is go beyond that. If you can. Find out what is your customer's core operation?
So for example, and this is a simple one. If you're selling to a hotel, well, they need soaps and towels and hand lotion and other things that are logo’d with their name on it. So can you provide that if you're selling into a manufacturing company, can you do some type of Kanban operation where you're delivering to the production line?
If you're selling to some other kind of commercial operation, can. [00:09:00] you help them do their core value had activity that's beyond the point of receiving and actually makes you fundamental to what they do to add value for their customers? Because if you can build that kind of value add, then you are doing something way beyond what a pure online seller can do, because they can't do any of that.
There was this notion for a long time with distributors that the key to success was driving up the portion of your eCommerce sales as a percentage of the total. Right. And you saw these big distributors following what analysts in Wall Street were recommending, which is, “Hey, make eCommerce sales, 50% of your sales, 60 and 70.”
And they were, it was like a competition with every quarterly release. And all they really did was make themselves more like Amazon and Amazon Business and thus easier for that company to, to take away your business because you're not going to be better at that than they are. And if you instead, don't formulate your strategy based on what Wall Street analysts are saying, but you start with [00:10:00] customer needs. What are your frustrations? What's working for you in your business? Give me a tour of your plant. Show me what you do. Let me see if there are ways that we can add value. Maybe rather than you putting those cables together, we can put those cables together. Maybe we can assemble those circuit breaker boxes, or maybe a weekend can come in and commission your factory automation equipment and take care of the warranty and all the rest of that stuff.
I mean, if you do that, then you are using your sellers and frankly, your local branches in highly value-added ways and rather than trying to compete on, “Hey, I'm going to have a fantastic website and it's going to be really easy to buy from. And I'm going to make 90% of my revenue digital.” If you do that, you're not going to need those sellers and branches anymore.
And that means you won't have them to help you define and differentiate.
Barrett Thompson: Yeah, I find this very interesting. And Ian, what you described there, it seems to me is preceded by a shift in perspective, instead of thinking here's my offering, I've defined it. Now, let me go find a customer who values it. You turn that around and you say, “Who [00:11:00] is the customer I would like to have?”
And then you look inside that operation and say, “How could I add value to them? What could I provide that would differentiate me and distinguish me and sort of endear me in a customer buyer seller relationship?” And then offer that. What I hear you saying is tailor the offer to the customer based on the things you know, that they need and add that differentiated value that they're not going to get from anyone else, that can't come through that digital channel.
And that's the whole reason and justification to keep around that human selling arm and keep around that face-to-face engagement that they’ve enjoyed already.
Ian Heller: Yeah. And look, I mean, we all know distribution channels are changing and I'll hear distributors complain about, “Hey, my manufacturers are selling direct.”
Well, if they are, maybe they don't see enough value in the work that you're doing for them. But the underlying lesson is that the roles of the participants in the supply chain are changing. And so if the manufacturer feels like they need to do some of the distribution, maybe there are things that you should do that you haven't normally done, that the customer or the [00:12:00] manufacturer did.
And that might be anything. Offering better technical support to taking on value added activities that you can do more efficiently than the customer, particularly if you can find 10 customers to do them for, I mean, if you have a fantastic repair facility and you can repair anybody's electrical products, then you are probably going to be better at repairing products than your customer is.
That's just one example out of many.
Barrett Thompson: And I want to pick up on something you mentioned a moment ago. There was a rush a few years ago to move as much business as you could online because some people recommended that, some pundits or analysts or others thought that would be a good thing, the way you described it, that's really a myth, right.
Or it's a prescription that needs to be handled with care or maybe debunked. Are there some other myths that you see right now that are pernicious in distribution or other prescriptions that seem popular or attractive, but you look at them and say, maybe not so much, or maybe conditionally or in a limited way, but not as much as others are promoting it as the panacea.
Ian Heller: Well, I think one is, [00:13:00] and I want to be really careful how I say this, because this is not a bad thing to do, but it's often done wrong and that is activity-based costing as a means of determining which of your customers are profitable, right? And so there's no question that you need to get your hands around your costs and that there are things you can do to make individual customers more profitable at the same time.
If you're in a branch based environment and you go through and ascribe, well, this is how much it costs me to pick a will-call and here's how much a counter order is and how much, well, the problem that distributors ignore in that analysis is that those customer facing operations are not full of people doing individual roles and who are 100% productive all the time. So if you're in a, you're going to traditional, let's say you're in a power transmission branch, and you have a counter operation, you have a warehouse and you have people on the phones. They're probably backing each other up all the time. And so you have labor moving from point to point, and you're not staffing to the troughs of your [00:14:00] activity, your staffing to a little bit below the peak, right?
So some of that labor is idle much of the time. So you might find yourself in a position where you're attributing costs to a certain type of transaction or a certain type of customer that isn't really cost that you can remove. It's more fixed. It seems you're looking at it as variable, but it's actually less variable than you think.
So this doesn't mean you shouldn't do activity-based costing, but when the activity-based costing, people say gross margin is irrelevant to profitability. I would say that's not true, right? I mean, it's a big factor. And when you do your activity based costing, you should be careful about what you assume you can take out because of certain amount of those costs are more fixed than you think you should do that analysis.
You should understand your profitability, be sure that you know how you're going to implement those savings or get help from those companies or from somebody else as you try to yield [00:15:00] those savings. And so that's one, another one. If I can go on, places I've seen most distributors do this where they say, like I said, a minute ago, we've got some idle labor because we don't have the same number of calls coming in every hour.
And so we've got some customer service people that have some spare time. So I'm going to run off a list of mid-size and small accounts, and I'm going to give it to all my customer service people and ask them to call those accounts when they're not busy. I've never seen that work, but it sounds so reasonable
Barrett Thompson:. Yes, absolutely.
Ian Heller: Sounds reasonable. Yeah. Why not? Why does it fail? Well, the primary reason is if you look at the psychographics of people who do customer service versus the psychographics of people who are good at selling. They could hardly be more different. So if I take calls and I take care of customers and I solved their problems, then I probably want that reinforcement in that reassurance, in that positive feedback.
And I have these very positive relationships with these customers and I talk to the same customers [00:16:00] over time and we are sort of friends and that is not the psychographics of a great salesperson. Not that they're not friendly, but it's like, this is a great salesperson who's out to sell stuff. Right. And the relationship is important, but frankly, in a business context, if you're not going to produce revenue for me, I'm probably less likely to continue that relationship.
And the customer service person who probably is super nice to everyone who calls. But these people are hard to distinguish when they're on the phone because they both have headsets and computers and telephones. They look the same, but if you do the analysis 85% of people are really good at one or really good at the other, but not both.
The problem is there's that 15% that is good at both. And they screw us up because we go, “Bob, why can't you make outside calls? Beth's really good at it. She does both. Don't tell me you can't do it.” But Bob's never going to be able to do it. So if you want to create an outbound account management operation then you're [00:17:00] going to have to write those job descriptions, screen for that talent, train separately and not expect that the world's made up of Beth's because Beth is really a unicorn.
Barrett Thompson: Yeah. Kind of an impossible exemplar for others. They aren't going to be able to follow falling into that model. Right. Let's keep on talking about the sales team for a moment.
You were comparing the psychographics. I want to come back to that population, the sellers in particular, and while acknowledging that prior recommendation and move all your business online and all of that can have many unintended consequences. I think it is clear from where I sit. There is a transformation happening and sellers need to be adapting to an increasingly digital customer experience, the right digital experience that their own company should be offering out to customers.
What is your perspective on what that digital experience looks like? And in particular, what does a sales rep do to adapt, be ready, support, enable, and thrive in a new digital environment for [00:18:00] sellers.
Ian Heller: Great question. And I'll tell you this, you should enable your customers to buy from you the way that they prefer, you should not provide an incentive for them to place orders online or make them unable to buy through other channels.
I remember probably 1999 or 2000. I was working at GE capital and eCommerce was early. And we had this conference call with Michael Dell that teaches how to do it. And one of the executives asked him, “Michael, at what point do you tell customers you can't buy through other channels? If you want to do business with us, you're going to have to buy online.”
And he laughed and said, “I would never do that. If our customers want to buy through us by smoke signals, we'll learn how to read them.” And so I think first of all, figure out how your customers want to buy and build that. But you're right Barrett. People want to buy digitally in increasing numbers. So I am not saying you don't need a great website.
You absolutely do, but the goal should be to meet those customer's needs. And by the [00:19:00] way, most business customers don't log onto our website, whip out their procurement cart and checkout through a shop. I mean, there are some that do that, but if that's what you're pursuing, you're going to be driving people to procure in a way that's not really how most business customers procure.
So for example, you might need a website that helps customers put together POS, right. They can do a bill of materials and they can do some configurations and they can price the whole thing out. But then when they're done and they want to download that information, put it through their e-procurement platform or send it in via EDI or in an email, because that's really the more natural way that business customers buy through POS.
But you get in this measurement problem with a distributor website. Where they know the denominator of the website, it's the team that they pay for and what they pay for the software and the hosting fees. That's all in there, but then they have this numerator and the only thing in the numerator is shopping cart.[00:20:00]
And they go, “Man, we're losing our butts on this website. The ROI is terrible because the numerator is really small compared to the nominator.” Well, the reality is the numerator’s just incomplete because that's not really the benefit that people are getting from your website. You need to find a way to measure that numerator in a more holistic way, because if what you're trying to do is bump it up, you're going to do unnatural things, like try to get customers to buy online when they don't want to.
Barrett Thompson: To push the submit button right there. Instead of going back out and loading that into EDI, for example.
Ian Heller: Exactly right. What if, instead of just looking at your shopping cart, what if every month you pulled 300 orders out of your system and you had somebody call the person who placed that order back.
You just ask them, did you use our website when you put that order together? And that's not a perfect ROI, but while you're on the phone with them, you can say, how was the experience? What could we do better? You'll get a much more holistic view of what's really in the numerator because [00:21:00] you can make an estimate, “Hey, you know what, actually, $500,000 worth of our orders, the website played some role, right?”
We're going to allocate some of that benefit to the website. And by the way, of the 300 customers, we talked to 140 say they want more product data. 35 of them said this was their favorite competitor. Let's go look at them. You could have an intern do that work. And for $10,000 a year, you get invaluable intelligence about what to do with your website.
And you'd wind up with something that customers actually want, rather than something that you're trying to build a measurement around.
Barrett Thompson: Do you sense that field sales look at these digital tools as somehow competing with them? And is there a way that instead they could become accelerators to what the field person themself is trying to accomplish?
How could they do some judo on that digital tool and have it embellish their relationship with a customer and not compete with it?
Ian Heller: So I think most distributors are past the point where [00:22:00] they do really dumb things, like not pay commissions for online orders. So if you're stuck in that world, then, we need to go back to remedial eCommerce, but there are probably somebody, some distributors out there that do.
What I would say Barrett, is that what most salespeople see is that because of the websites that, that some distributors have built, they're just not that valuable to their customers. I see more disinterest than anything else. When I ride with account managers, they're like, yeah, we have a website. Customers don't really use it. Let's talk about something else.
Barrett Thompson: When I think about the dollars invested and the amount you read these reports on what's happened with the eCommerce platform and the scope and size of some of these projects and the data problems they solve to get ready. And then to hear that the summary experience might be lukewarm at best, both for customers and for the account reps, pretty shocking, but go on.
Ian Heller: It varies a lot, right? So if I'm a, if I'm a distribution center and call center, distributor in the nature of [00:23:00] my product is it's standardized, shrink-wrapped on a shelf and I deliver it via common carrier or a common carrier, like fleet. It's a different story. And so, but in that kind of model, the outside sales rep usually has less bearing on the customer results.
So if you really are a distributor who’s account manager driven, then I think you're absolutely right. You need to get those account managers. And as part of the dialogue they have to make, you have to make sure they don't see the website as a, or any digital tools, not just the website as a competing set of channels, but they should be getting involved in figuring out, well, how can you, how can we deliver more value to my customer digitally?
Is that in managing RFPs and bid submittals electronically, is that in giving them more access to account information and looking up orders and, can I check in real time where my delivery truck is, which has a really highly value add. For a customer that they frankly expect because of their experience in the consumer world.
Is there something [00:24:00] I can do to get configuration pricing, which I know is the kind of thing that you guys get involved in. So, what if I can create different versions online and understand what the pricing is going to be and start making trade-offs between features and costs.
So there are all kinds of ways that a website can add value, but know the account managers need to be part of the dialogue. Right? And because they have expertise because they see a lot of customers and customers need to be a part of the dialogue because they have expertise and they see a lot of different websites.
But that's where the specifications should come from. Not based on this simplistic, “I want 60% of my sales to come from online.”
Barrett Thompson: It’s a very different mindset. I appreciate you sharing that with us. Ian, I want to touch on one other topic here. I've been hearing recently about the distinction between shopping and buying.
Think about customers do some of each, I think both are expected and valid activities. What's your view on how sales reps can insert themselves into each of those processes?
Ian Heller: So, yeah, my [00:25:00] business partner, Jonathan Bein really is the one who's I think, done the best work on the difference between shopping and buying.
It gets back to what we're talking about, right? So people often shop with the website, but then they buy through some other channel, for example, and I think you need to give customers access to the shopping resources that they need to do business with you more efficiently and more productively. Through other distributors and that might be, “Hey, I need a technical support person to call. I need online chat. I need to be able to put together a bill of materials online and then download it and put it into another purchasing system” which is the example that you gave earlier. And then when I go to place my order, I want to do it in the way that makes sense to me. So I might call somebody and read off a PO. I might email it and I need a confirmation.
I might say, look, I want my account manager to take a look at this before it happens. So I think creating that distinction and realizing that you can have fantastic shopping tools and still be hard to buy from, or you can have poor shopping tools, but you know, be really easy [00:26:00] to buy from for people who know what they want.
They're not the same thing. And you need to understand the specifications that you have to achieve to be competitive, and also to meet customer requirements in both ways.
Barrett Thompson: Are field sellers typically attuned to the shopping piece anyway, or are they maybe a bit more myopically thinking about buying and I'm here to support the buying even before the digital channels and the rise of that.
Is there any aspect of shopping and buying either now with the digital channels or before? Is there some aspect of shopping that has always been the proper domain of field sellers, and we want it to continue to be, there's a way that they add value in the shopping process.
Ian Heller: First of all, with long-term agreements. Right? So that's part of shopping, right? So if I'm looking for a supplier to provide my MRO products or my plumbing products or my electrical products, that is a very strategic shopping type of experience where I'm shopping for a supplier not just a product. And that is [00:27:00] where account managers can make a huge difference.
And what's funny to me, Barrett is that before I worked in the construction supplies industry, my assumption was since that's a lot of bid and spec and it's very price oriented, much of the time, that would be pretty cut and dry. Less relationship oriented business. When I got into it, I found that I was completely wrong and that relationships are more important in that kind of industry.
And the pricing is something that gets worked out in the context of the contractor, choosing who they want to do business with first. So I think the account manager has a critical role to play in building our relationship because that affects which supplier they shop for. And then you need to make sure that the transaction shopping is something that you're good at, which means your company better have great service over the phone.
Great will call shopping, if you will, a great website that [00:28:00] delivers customers what they need, which may not be transactions. And that, you're available to make sure that if there's a service recovery or problem of some kind, you're better at that than your competition, because that's worth as much or more than the initial order performance.
I think that's where account managers become essential is in long-term large relationships for sure. I think when it comes to buying for the most part, you want that to be so well executed, so operationally excellent at your distributor that the account manager really doesn't have to worry about it.
I mean, there's always going to be some customer who says “Barrett, I really trust you. So I'm going to call my orders into you.” And even if you don't want that person to do that, and there's, better for him to call the inside sales rep, you're still going to say, oh, “Okay Susan, if that's what you want, I'll take the orders from you.”
But you really want your salespeople dealing in the relationships and assessing needs and looking for opportunities and not [00:29:00] processing orders. So the buying you want to have through operational excellence for the most.
Barrett Thompson: I just want to highlight again, because I think it's so excellent that characterization you gave that, that a customer is shopping for a partner they want to do business with first, the first activity is shopping, but it's not shopping for product it's shopping for partner and field seller has a huge influence on that and will always, I think, have a huge influence on that. So I think that's a great call-out. I appreciate that distinction. As we wrap up Ian, I would just value your predictions on the future of distribution sales along any dimension that you're thinking about.
Ian Heller: Well, I agree with you the outside seller's not going to go away. I will say that the number of times that I have seen a great rep take over an account that disliked a distributor and rip it from the claws of a competitor in six months or a year. I couldn't possibly put a number on the times I've seen that happen and [00:30:00] there are account managers who can do that.
They're very hard to find. They make a lot of money. You can argue about the moral justice of the amount of money that they make. But financially they earn it. And there's a reason that in a lot of industries, you're terrified of losing those reps because they can take their business with them.
Right. So, I mean, if you're running a distribution company, you want to have more connections to those customers. So you're not quite at the mercy of those account managers. And I think some of that's around building services. So there's the strategic problem where you don't want to be, like I said, held at gunpoint by your own sellers, but at the same time, those sellers are never going to go away.
At least not in my lifetime, or, most people on this call. And if you believe that you could keep that business without that person who can build those relationships, I would tread very carefully because unless something has really changed in your market or your value proposition, it's easy to underappreciate sellers.
And something [00:31:00] it’s one of those activities. And everybody thinks it's easy until it's their job. And, if you gotta go out there and win that business and build that relationship, just how difficult it is to get that business. So I don't think that's going to change.
Barrett Thompson: And this has been a great conversation today.
You've given us a tremendous insight, wonderful ideas on how to make the distribution of business and the field sales experience wonderful today and in the future and ways to improve that. So thank you for sharing your perspective with us today.
Ian Heller: Well, thank you Barrett, it's been a pleasure to be with you as always. I always enjoy talking to you and it's been an honor.
Barrett Thompson: I want to thank each of our podcast listeners for being with us today. Please see the show notes for a link to our upcoming July 15th webinar with the Distribution Strategy Group, we're committed to your success. And if you need any assistance, please reach out to us at Zilliant.
Would you take a moment to rate or review the show? It will help us continue to put out great free content. This concludes our podcast, and until next time have a great day.
