From Foes to Friends

It’s not only TVs that offer more channels these days. Many marketers have found that using several channels, including sales teams, catalogs, and the Internet, is the most effective way to sell their wares to other businesses.

Providing multiple sales channels, as you no doubt know by now, can help boost both your top and bottom lines. Revenue increases, as it’s easier for customers make purchases, which may prompt them to buy more. And income gets a lift as customers move from costlier channels, such as personal sales calls, to less expensive ones, such as the Web.

All the same, operating multiple channels brings on other challenges. When a cataloger uses direct mail and other marketing initiatives along with its Web presence and personal sales calls to capture a customer, it becomes difficult to determine the role each played in clinching the deal. This can lead employees, particularly those in outbound or field sales, to worry about their compensation and even about job security.

How can catalogers get their employees and sales channels working together to cost-effectively and productively serve customers? “There isn’t one simple answer,” cautions Mitch Goozé, president of Customer Manufacturing Group, a sales consultancy in Santa Clara, CA.

Taken together, however, several steps can help you get the most from each sales channel, separately and together. For starters, management needs to foster a culture that recognizes the value of each channel and removes the incentive for channels to compete.

Designing an appropriate sales compensation system also is critical for multichannel marketers. In many cases, employers are finding that it makes sense to reward employees for their work in developing and maintaining client accounts, rather than focusing on the channel through which the customer transacts business.

Finally, you should analyze your customers’ buying habits to determine through which sales channel you can best, and most cost-effectively, serve them.

Culture exchange

Managers at many companies have long encouraged competition among employees in different sales channels. Some organizations base employees’ paychecks or bonuses on sales completed within their channels. The rationale is that this strategy will spur employees to work harder to capture sales.

That may happen. But just as often, the consequences run counter to the company’s interests. For instance, outside salespeople may dissuade customers from placing orders online, even when it would be more convenient for the customer and less expensive for the cataloger.

Channel competition also encourages unproductive disputes among employees in different channels and promotes the idea that a particular channel “owns” the customer. “The single biggest mistake is trying to decide who owns the customer,” says Goozé. “The customer is owned by the company, not the salesperson.”

Instead of promoting competition, some companies are pairing up channels, particularly inside and outside sales. That’s the approach that Interline Brands is taking, says Pam Maxwell, vice president of marketing for the Jacksonville, FL-based company. Through its multiple catalog brands, which include Wilmar, Barnett, and Hardware Express, Interline Brands distributes professional maintenance and repair products. The company drops approximately 8 million catalogs annually.

Interline’s Barnett brand has been creating two-person teams with several of its inside and outside salespeople for the past five years, says Maxwell. Barnett currently has four teams in place and will add three to five more this year.

The two people share responsibility for prospecting for leads and developing and growing accounts within their geographic territory. Each salesperson takes on different tasks, however. The inside salespeople spend more time prospecting. “They can dig up more leads than the field salespeople can do by themselves,” says Maxwell. The outside salespeople then are charged with signing the deals.

Both salespeople earn the same commission on each sale, says Maxwell. She adds that the company has found that paying the outside salesperson more — standard practice in many companies — undermines the effectiveness of the team. “They need to be equal and just performing different functions,” she says. The team members’ base pay does vary with their experience.

To be sure, the approach works better with some employees than others. As Maxwell puts it, “Some salespeople may not feel comfortable sharing the spotlight. They want to be the star.” When that’s the case, you’re best off finding other employees who take to the team concept more easily, she adds.

Another problem is that some outside salespeople view their inside counterparts simply as administrative assistants. “If the inside person takes on that role, he minimizes his own effectiveness, vs. really developing the potential in the territory,” Maxwell says.

When team members view their jobs as equally important and work well together, the approach really pays off. Interline Brands has found that good teams can grow business about 20% more quickly than salespeople working solo. “They can more effectively penetrate the territory,” says Maxwell.

Fair compensation

As the Interline team approach demonstrates, compensation is a critical factor — perhaps the most important one — in getting employees to support all channels, rather than just the one with which they’re most closely aligned. “If it’s more profitable to serve an account in a certain way, it should be in the salesperson’s interests to behave in a way that encourages this,” says Stephen Horne, president with Analytici, a New York-based marketing consulting firm.

Restek Corp. pays a commission to its eight salespeople for “anything that ships into their territories,” says Don McCandless, vice president of sales and marketing for the $25 million Bellefonte, PA-based marketer of chromatography equipment. (Chromatography is a method of separating the substances that make up a liquid or a gas.) This way, salespeople focus on growing their territories and winning business from competitors, rather than on the particular channel a customer uses.

The same thinking with regard to compensation can apply to companies that work with independent sales representatives. “Regardless of how the customer hears about us, we pay the rep a commission if it’s in his territory,” says Bob Wersen, head of Panel Components Corp., an Oskaloosa, IA-based producer of power-system components for electrical-equipment manufacturers, Panel Components, which does about $13 million in sales, works with 20 independent representative agencies across the country.

“You never really know how the customers have heard about you,” Wersen adds. “It’s usually multiple impressions anyway: marketing, advertising, trade shows, the Web, personal introductions, etc.” Trying to pinpoint the exact source of introduction would be next to impossible, he notes.

Wersen says that he probably would lose representatives if Panel Components’ management decided not to pay commission on some sales on the grounds that it was the company’s marketing efforts that captured the account. And since it can take two years for new sales representatives to produce results, maintaining good relationships with existing reps is important.

Until a year ago, Universal Cos. didn’t worry about compensation for outside salespeople: The $20 million purveyor of products for spa operators didn’t have a sales team. It sold only through the approximately 100,000 catalogs it mailed each year.

But last year Universal hired its first field sales rep, and it’s hiring several more. “We’re finding that they’re capable of bringing in really big business that as a catalog we’re not able to capture,” says Marti Morenings, president/CEO of the Bristol, VA-based marketer. “It’s because of the relationship that they’re able to build face to face.”

Because Morenings has a good idea of the sales volume that Universal can expect from its catalog mailings alone, “we’re looking at paying a commission on the growth in a particular territory,” she says.

Classifying customers

Being democratic sorts, most of us like to think that all customers should be treated equally, notes Analytici’s Horne. “It sounds wonderful,” he adds, “but it’s not pragmatic.”

Instead, catalogers need to analyze their customers to determine how to most cost-effectively serve them. The analysis usually follows some variant of the 80/20 rule, which holds that about 20% of a company’s customers account for around 80% of its business. From there, “you put your most expensive resource against the highest-value account,” says Ruth Stevens, president of eMarketing Strategy, a New York consulting firm. And when it comes to transacting orders, outside sales reps are more expensive than call centers or the Internet.

To encourage less-profitable customers, who purchase only small quantities or buy primarily low-margin items, to buy via the catalog or the Web, you can offer an incentive, such as free shipping for orders placed online. The difference in the cost of handling the sale should at least make up for the added expense of the incentive.

Segmenting customers by size works for Keithley Instruments, a Cleveland-based manufacturer/marketer of test and measurement equipment. The company, which does about $130 million in annual sales, mails roughly 500,000 catalogs a year.

Keithley’s products range in price from $300 PC plug-in boards to semiconductor testing equipment that runs about $500,000. The volume of business from the company’s accounts also varies widely. Keithley’s top several hundred accounts, out of a customer pool of about 9,000, account for 50%-60% of its revenue, says Ronald-Stephane Gilbert, the company’s manager of direct and Internet marketing.

As a result, Keithley’s 35 field salespeople concentrate on those accounts that are likely to do more than $10,000 annually, Gilbert says. While they receive commissions on all sales that originate in their territories, the salespeople also have to meet annual sales quotas. “The quotas are sufficiently aggressive that they need to address the larger opportunities to meet them,” he says.

Smaller opportunities are either handled by inside salespeople or conducted over the Web. Many of these purchases are fairly straightforward. “These customers just need to fill a requirement and are better served by the more expedient channels of the phone or the Web,” says Gilbert.

Of course, one risk in classifying customers by size is missing some small orders that actually are part of a much larger sales opportunity. At Keithley, if an inside salesperson determines, through conversation with a customer, that this is the case, he forwards the information to the outside salesperson. The company’s inside salespeople receive commissions both for orders completed on the phone and for orders they refer to an outside salesperson, reducing their incentive to hoard information.


Minnetonka, MN-based writer Karen M. Kroll has been published in Inc., IndustryWeek, and Stores magazines, among other publications.

Seeing the big picture

For customers to easily buy through various channels, they need to know what they’ve purchased in each. Customers of Framingham, MA-based office supplies cataloger/retailer Staples can do just that. “Before, we could only show customers who ordered online their order status,” says Lisa Hamblet, vice president of business-to-business e-commerce. Now larger business customers (typically those who spend more than $1,000 a month with Staples) can head to StaplesLink.com to see their spending with the company from all channels — online, via catalog, and in the stores. The reports also reflect any pricing and other special terms customers have negotiated with Staples.

This new capability, based on IBM Websphere, went live in mid-February, making it too early to obtain specific feedback on it. But the feature was added in response to customer comments and requests, says Hamblet. And comments so far reveal the customers are very happy with the changes.
KMK

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