Yeah, yeah, yeah I know-sell more. OK, end of post! Obviously that is the goal for any small business. Increase sales, control the cost of doing business, provide quality service. Seems easy doesn’t it? If any consultant tells you that it is, fire him or her because they probably have their head up….You get the idea.
If a company is national in scope and they sell into a specific market segment it makes sense to sell the product through a more local distribution network. This will work, given the following:
- The distributor’s product offerings are sold only into the specific market segment of the manufacturer.
- The distributor sales organization has feet on the street.
- The salespeople understand selling concepts and are not order-takers.
- The distributor organization has a proven sales track record.
- Even though the product involves a complex sale requiring in-depth knowledge, the distributor reps have the ability and desire to learn the complexities of the product and the sale.
- The manufacturer requires specific revenue goals from the distributor.
- The distributor organization fits the “culture” of the manufacturer.
These are six very deep “givens”. Over the next several weeks I’ll cover more information pertaining to each of these beginning with number one.
The more markets a distributor organization (DO) sells into the more diluted their sales will be in any one market. I define different market segments as ones where the product is used for completely different applications. Adjacent markets are ones where the product is used by different end users but within the same general market. For instance I used to sell catheters. In most hospitals a variety of catheters can be sold into different departments within a hospital. If the auto industry had uses for catheters that would represent a completely different market.
Back to the salespeople. As a general rule of thumb salespeople will always travel the path of least sales resistance. Salespeople make more money off commissions than they do from their base salary. Ergo, they will sell the product offering the fastest turn and the most use at the best margin. Translate margin as the product that offers the best commission dollars.
Why bother spending time on a product that requires a month to close, has multiple decision makers, and offers low commissions? Tough to sell that concept to a bunch of grizzled peddlers.
The temptation for the manufacturer is to go after as much business in as many markets as they can. The potential danger of that philosophy is dilution of effort and revenue, especially for a small $10M company. As one marketing guru from my past mentioned to a group of hungry salespeople, “We are going to sell deep into the market.”