The giants of the industry are announcing sales figures ranging from flat to down, to fading sales growth in distribution. Further, if any of the economic bubble(s) around the world pop, then sales and profits will be pressured even more. It seems like a good time to innovate. But, how?
Earn a Larger and More Profitable Share of Your Biggest Accounts
You already know that your customers’ most urgent need is to stop profit erosion. Their reflexive solution is to shop for lower prices, which of course leaves you on the losing end. However, successful businesses are taking some lessons from judo and learning how to harness this customer desire to create a win-win for fading sales growth in distribution.
Your Pitch Would Go Something Like This:
“Lower prices are possible, if we work together to reduce our high, parallel activity costs that occur with 20% of our shared smallest-dollar orders. If you say “Yes”, then here’s what we’ll do.”
- We’ll put our new line-item buying statistics to work. We can zero in on the 20% of our shared transactions that typically contain 1% of your dollars spent.
- We will perform an onsite process review to find efficiency fixes, give you a report that you will own, and then we’ll help you implement the fixes for an acceptable fee.
- We’ll set an overall goal to reduce 20% of the smallest-dollar PO’s by 15 percentage points.
- If our savings are enough, then we will also lower prices.
Your customer simply wanted lower prices, but you are now offering three ways to improve profits:
- Lower total buying costs
- Increase efficiency
- Lower prices
Customer Audits (Like a Trojan Horse) Win Share-of-Account Wars
During the onsite review, you will follow both your product and paper flow through a customer’s operations to find inefficiencies. As a byproduct, you will likely find more products you can sell them, cementing yourself deeper into the customer relationship. Every supply chain vice president wants to consolidate minor vendor purchase orders. Oblige them!
With an improved buy-sell relationship, you should then ask for 100% of the business. Here are some likely objections and some winning replies:
Objection: “We need competitive price-checking to keep you from sneaking up prices.”
Response: “Let’s use open-book selling (like McDonalds does with its distributors). Then we can continuously work on improving and sharing win-win cost reductions.”
Objection: “You can’t deliver everything perfectly; we need fall back suppliers.”
Response: “We will improve service levels and guarantees. You will get our three new profit benefits on the switched volume, and competitors will always welcome the chance to resell you.”
How Do You Practice Judo Selling for Fading Sales Growth in Distribution?
Get the enabling analytics. You can’t take any of these steps without the right data, and WayPoint Analytics has the reports you need.
Contact me to set up an online tutorial and demo either by hitting reply to this email, or writing to me directly at: bruce@merrifield.com.