SALES & MARKETING
How to Reduce the Cost of Sales to Thrive in a Post-Pandemic Market BY MIKE MARKS, INDIAN RIVER CONSULTING GROUP
T Mike Marks is co-founder and managing partner of Indian River Consulting Group, a consulting firm to distributors and manufacturers. He specializes in helping distributors and manufacturers accurately diagnose problems and identify risk-bound alternatives. Contact him at mmarks@ircg.com or visit ircg.com.
he world of distribution has proud roots dating back to the end of WWII. But making historical assumptions on the journey of transforming sales models can result in costly pitfalls, especially in a post-pandemic world. The market is changing too quickly. Now, more than ever, is the time for leaders to evaluate selling costs. Distributors must ask the following questions: • What is the difference between a sale and a transaction? • Is our current sales system reflecting how customers are actually buying product? • Are costly resources being wasted with outside field reps ultimately performing customer service tasks instead of initiating new business? It may be uncomfortable at first to challenge long-held beliefs. For instance, some distributors worry that if a field sales rep is removed from a territory, that volume will disappear. But our research shows that around 90% of sales to existing customers are repurchases rather than new sales. Data-driven insights like these can lead to thoughtful cost-cutting redesigns like replacing generalist sales reps with positions more suited to what the customer really values to save big money down the road – while maintaining or even improving customer service.
LEADERSHIP DRIVES TRANSFORMATION Remember, academic research runs about five to 10 years behind what you are currently doing. The pandemic has incited five years of 90 • Summer 2021
digital transformation in a matter of months, only widening the gap between the leaders who have been innovating and those who haven’t. The most successful distributors in this moment are able to: • Analyze big data: Detail-oriented leadership actively fights for clean data to make sure it’s usable for guiding transformation processes to cut sales costs. For instance, segmenting customer data can help reveal customers who do not need the economic investment of a field sales rep, leading to a more productive territory design. • Effectively implement change: Leaders who have been using project management tools in transforming business process design for years are well positioned to face the kinds of exponential changes happening today. Those who have responded by hoping that those market changes are linear are facing a severe uphill battle of playing catch up. Lifestyle leaders often choose to take the path later while professional managers know the journey to building these skills is long, but that it’s well worth the payoff.
4 WAYS TO REDUCE SALES COSTS Ultimately, earning a higher financial return than your competitors comes down to two things: price advantage or cost advantage or both. While the wholesale distribution market rarely has control of setting prices, the landscape is wide open for building a strong competitive advantage by reducing selling costs without sacrificing service. Here are four strategic levers successful distributors use to lower sales costs:
