CRM (customer relationship management) has traction with
distributors because it fills a gap — the ability to manage sales organizations
with a disciplined process, using data and metrics to guide effort and measure
success. The most common applications for CRM in the distribution
industry includes dashboards of customer data, integrated contact management
and call planning tools, and pipelines for managing opportunities across a
sales process appropriate to each distributor’s business objectives.
While researching
my new book, I found almost all
distributors’ sales processes had a new emphasis on value selling — a shift
from transactional activities and personality-driven relationships — to actually
helping customers succeed and measuring results using the customer’s own
metrics. For electrical wholesalers, this means serving the diverse needs of
contractors, OEMs and end-users.
Innovative
distributors are applying CRM’s core capabilities to meet unique competitive
dynamics and business objectives. More than 60% of
distributors have adopted some form of CRM, and the majority of non-users are
actively shopping, trialing or launching an initial implementation. This
widespread and growing use of CRM was surprising, especially given strongly
held perspectives of legacy CRM systems as inflexible, hard-to-implement time
wasters hated by salespeople. However, modern CRM tools offer advantages:
innovation achieved through a universe of app developers; mobility gained by
running on tablets and smart devices; and lowered maintenance costs offered by
cloud solutions.
Distributor
executives shared many practical uses of CRM, often uniquely important for
distributors. These include integrated lead-to-opportunity management, new
products and customer education, sales metrics and supplier collaboration, call
centers and cost containment and customer needs and history. Check out the
sidebar on page 22, “Distribution Execs Sound Off on CRM” to read what some
distributors think about CRM.
Experienced CRM
users told us that successfully implementing CRM takes much more time than
expected. Salespeople are resistant to change and worry that CRM will help
manager’s micromanage their performance. Integration with ERP
is necessary to share customer data, but it’s especially hard when information
is shared in both directions. Training should begin at launch and
continue as long as needed to encourage use and drive compliance. And if
implementing CRM is part of a strategic shift towards proactive business
development or value-selling, the existing sales culture and capabilities can
be a drag on change. Said one distributor owner, “We found out that the
salespeople we have are not always the salespeople we need. It took time to
overhaul our sales force.”
Ultimately, CRM is
gaining traction because distributors must find ways to strengthen and automate
their sales processes in response to increasingly competitive market
conditions. Several key findings emerged during our research.
CRM can improve
profitability: Some examples of how CRM does this include accelerating
opportunities through the sales pipeline; increasing visibility to price and
margin pressure in key accounts; proactive response to year-over-year
variations in product purchases; and tracking customer calls associated
with marketing programs or new products.
Implementing CRM
without a plan is a formula for failure: As one distribution
company owner explained, “Strategy comes first. Figure out where to target
growth. Use CRM to give salespeople customer data for a compelling case and to
get them out of the buyer’s office and in front of decision-makers.”
CRM is fast becoming a standard practice: “Our new
salespeople expect to use electronic tools on the job,” said one wholesaler.
“They grew up with games and social media. As we proved that CRM can improve
performance, we made CRM mandatory. It became a condition of employment.”
CRM improves sales
coaching: CRM provides actual customer data for sales managers to use when
coaching salespeople. “Our managers used to tell salespeople, ‘Just do it the
way I did it,’ said one distributor. “Now, we require every coaching
interaction to include review of real-time results and real-world customer
information.”
Start small, then grow: Salespeople will
resist CRM because they fear management oversight and avoid entering contact
information and call reports. Successful implementations focus on the
situations most likely to help salespeople.
CRM can be
transformational: One distribution executive said CRM helps salespeople become
“opportunity managers.” Too many salespeople focus on responding to
customer requests and plan customer calls as a milk run. They see customers
without a plan for each meeting, tailored to each customer’s history and
business needs.
Data-Driven Collaboration
One electrical distributor
was particularly helpful in explaining the future power of CRM. “Facts and collaboration go hand-in-hand,” they said.
“Managing against metrics will help achieve higher levels of sales performance,
but salespeople can’t do it alone.”
“Serving customers
isn’t just the responsibility of salespeople,” added the president of an
industrial distributor. “Everyone in our business contributes. We are using CRM as the primary portal for everyone to access
customer data, and as we roll it out, we are emphasizing the role that each
function and individual plays in driving sales results.”
In all industries,
a trend exists for high-performing sales organizations to manage by the numbers
and leverage analytics for improved results and customer satisfaction. Distributors seeking improved profits and sales through CRM
must involve marketing, customer service, operations and finance from the
beginning. Digging deeper, we found several focus areas for leveraging
data and collaboration across the entire distributor organization.
Account profitability: Many
distributors are segmenting customers on twin dimensions of valued services and
account profitability so they can deliver the right support at the right
customers — and earn an attractive margin in return.
Marketing campaign
effectiveness: One distributor executive paraphrased a popular axiom by
management guru Peter Drucker. “We find that ‘what gets measured gets managed,
and what gets managed gets results,’” he said. “We use this philosophy to break
down barriers between sales and marketing.”
Salesperson
performance: By definition, not every salesperson can be a top
performer — but that doesn’t mean they shouldn’t try. If a distributor can
improve middle-performing salespeople from 60% of top performer results to 75%,
overall organic growth of by 15% to 20% follows.
Customer trouble
tickets: Salespeople are often blind to complaints registered with
the customer service department and fail to incorporate resolutions into the
overall value created for accounts. CRM improves visibility and can promote
teaming for better outcomes.
High-potential/high-risk
opportunities: One distributor customized its sales pipelines to track
opportunities with customers that were designated as high potential or at risk.
CRM enabled improved visibility, enabling management to proactively offer
relationship support, service level commitments and other values beyond
price-only negotiations.
Coordinating sales
efforts with suppliers: We also found that in some distribution industries commercial
teams often trip over each other at key accounts and in local territories,
delivering competing messages. CRM can improve collaboration between
manufacturer and distributors. However, examples of CRM as a tool for improving
collaboration between manufacturers and distributors are hard to come by. One
industrial manufacturer is encouraging its distributors to adopt a common CRM
tool across all markets, including global regions. The long-term goal is to
better allocate resources and improve returns on sales and marketing
investments, although progress is lagging as distributors struggle with the
difficulties of CRM implementation and earning a return on investment.
Some distributors
are using CRM to generate pipeline reports and sharing them with manufacturers,
albeit with mixed results. As one distributor explained, “We share CRM data
with our manufacturer’s channel managers, but they don’t have the freedom to
take action. They are constrained by policies and perceptions about legal safe
zones. Leaders need to get involved, but are generally skeptical about
initiatives that begin with distributors.”
Still, if the
potential for gains is real, CRM will eventually help drive collaboration as it
becomes a standard practice across the value chain. One distributor is
optimistic and found practical, immediate gains simply by comparing
relationships in key accounts with favored suppliers. “We don’t know the senior
management at our key account customers well enough. They might know that they
do a lot of business with us, but we don’t have strong relationships with
them.”
By offering to work together to improve product and supply
chain deliverables, customers pay attention and open their doors. For this
distributor, CRM helped build new customer relationships, and coordinated sales
efforts led to new business.
Mark Dancer is the
founder and president of Channelvation Inc. and author of Getting the Most Out
of CRM: Best Practices for Distributors, available from the National
Association of Wholesaler-Distributors (NAW) Institute for Distribution
Excellence atwww.naw.org/crmfordist. While researching
this book he gathered insights from hundreds of distributor executives,
including many electrical distributors. Dancer can be reached directly at mark.dancer@channelvation.com http://ewweb.com/sales/why-crm-can-work-distributors
