Consultative salespeople are motivated by staying current and maintaining expertise in their field.
Consultative selling has been a mainstay of industrial sales forces for more than 30 years. The idea is that the salesperson (usually outside) is a consultant for the customer. Typically, the consultative salesperson has a particular technical or process expertise that allows for increased customer value. These abilities include (but aren't limited to) application expertise, technical troubleshooting, design and layout services, and supply chain or information sharing services. Consultative selling is found in a variety of applications, and sales management texts advocate the method to overcome the route selling that often dominates distribution sales forces.
There is a growing problem with consultative selling, however, and it needs to be addressed before distributors waste their salespeople. Foremost is the problem of the service trap, which Electrical Wholesaling explored in a series on Fee-based Services (April 2000, p. 48). The service trap is especially brutal to the consultative sales force. In the service trap, distributors add value to commodity products only to have the value denigrated by the customer who shops for price and does not really understand the service value.
There are several reasons not to price the product with the service. They include: muting unique service with a commodity product, conditioning the customer to expect “free” services, accepting warranty risk without the physical product sale, an inability to advertise and market service and the inability to measure the unique market value of the service.
If these reasons aren't enough to cause worry about consultative selling, consider the following. Most distributors go to market in a “one size fits all” fashion. In essence, most customers get the same or relatively same batch of services and products. This undifferentiated approach causes distributors to overserve some customers and underserve others. Rolling a consultative salesperson into a “one size fits all” service platform eventually leads to the salesperson delivering value to customers who don't want it, don't appreciate it or can't afford it. A recent survey by Pfingsten Publishing, Cleveland, of industrial MRO and OEM buyers on sales value added found that 48 percent did not want to see distributor salespeople. There is no doubt that many of the salespeople who visit customers are consultative, but their services are largely wasted due to the “one size…” method of going to market.
If you are convinced that the preceding is rubbish and you cover industrial customers, then according to that survey there is a 52 percent (100 percent minus 48 percent) chance that their efforts aren't wasted. Another way to look at the survey results in monetary terms is the following: If the consultative salesperson costs $100 per hour and calls on industrial buyers, then $48 (48 percent × $100) is wasted on an undifferentiated sales call. If the distributor has 10 outside industrial salespeople who average 1,200 calls per year, then the wasted assets for consultative salespeople are (10 salespeople × 1,200 calls × $48/call) or $576,000 per year.
Tangibilizing and marketing the consultative service. Matching the consultative salesperson's skills to customers who value those skills requires separating the service from the sales call. Although understood by distributors, this fee-based service concept is not widely practiced. Still, having seen the concept practiced and witnessed its power, I believe it is one of the new models of distribution sales and marketing.
To make a service tangible requires giving it a name, a value proposition and a price, but not all services can be done this way. It's a relatively safe bet that if you are consistently rolling services into the product price, it will be difficult to extract those services. Unique services, however, can be separated from the product and priced separately. It's also important to realize that much of the consultative services that can be positioned as products are knowledge based. And, the knowledge is either product or process specific.
To understand the variety of services and skills to sell them, refer to Figure 1. The figure divides the type of service into technical (product) or process. Examples of each service are given under the column of that heading. Examples of technical service include application assistance, design and layout and start-up service. Process services include process redesign for a customer's manufacturing process and EDI or Internet links for purchasing or payables processes.
Technical salespeople generally have an in-depth knowledge of products and services. Often they have engineering degrees specific to their discipline. Many technical salespeople are from top-tier manufacturers; they may have product development or application engineering experience with complex products. Technical salespeople often offer application or start-up expertise. If these services are unique in your markets, be sure to put a price, value proposition and brand to the service. These actions enhance the ability to market the service through other media and help limit exposure to warranty risk without making the product sale.
Process salespeople differ from technical salespeople in their familiarity with the tools of process redesign and implementation. Process salespeople often have Quality or IT backgrounds where their jobs demanded process documentation and streamlining. Much of process selling and service development between distributor and customer or supplier involves an advanced knowledge of information systems, programming languages, hardware and software capabilities. Process selling and service can be as powerful or more powerful than technical sales and service.
Consider the software link between an electrical distributor and commercial contractors that allowed the contractors to download job pricing for estimating and cataloging. The service made the quotations, estimating and cataloging of job estimating considerably easier. Through branding and pricing the process capability, the distributor captured significant share that literally had nothing to do with the technical features of the product.
Finally, the compensation schemes between technical and process salespeople tend to differ. Technical salespeople should be given a high base and little to no commission on product sales. Many of the technical services can be separated from the product sale, so rewarding on product sales doesn't make sense. For instance, a start-up service could conceivably be done on a competitive sale, but how could the salesperson be rewarded on a product they did not sell?
Consider rewarding technical salespeople on sales of technical service or customer goals for service usage. Alternatively, process salespeople and their services are often account- or supplier-related. Process redesigns for an OEM production line or a process link with a customer's estimating software often have visible effects in increased product sales. For the process salesperson, consider rewarding variable pay on penetration of large accounts or large potential accounts. Remember that both the technical and process sale have longer sales cycles than the traditional product sale and the compensation system should reflect this reality.
Naked solutions marketing. A relatively new concept regarding service provision is that of “naked solutions marketing.” Historically, service providers in high-transaction businesses have rolled services into the product price and priced the product. As the industry matures, the service providers create new services and continue including them in a “one size fits all” offering. Over time, the firm covers new customers and segments with an undifferentiated offering; the range of services are needed by some but not others. The solution for this dilemma is the concept of “naked solutions.”
Simply defined, naked solutions are the most elementary range of services acceptable to the customer. For example, suppose institutional customers want the following services: product knowledge, broad range of products, paper catalog and designated inside sales expertise. Also imagine that Ellicott Supply (fictional distributor) serves institutional customers with these services but calls on them with outside salespeople, delivers next day on their truck, but doesn't have the paper catalog. Using Satisfaction Research and other market research, Ellicott discovers that the institutional customer will trade UPS delivery for delivery on their truck and an outside salesperson for a paper catalog and a designated inside salesperson. To compete in the institutional market, Ellicott begins to move the outside salesperson away from the accounts, designate inside salespeople, print a catalog, and ship UPS. Of course the rearrangement of the service basket has to be accompanied by changes in pricing policy that reflect the changes in service cost. If the internal freight costs are 2 percent of sales and outside salespeople 4 percent, the combination of catalog, inside salesperson and UPS should be the same to maintain the same amount of business. If the new service costs are more, and product costs go up, the customer may not be willing to pay for the new services unless they value them more than the old method of business.
Carefully modeling the lowest degree of service and slowly adding services valued by the customer is the crux of naked solutions marketing. In essence, service solutions that are the minimal acceptable to compete in the given segment are “naked.” Once services are added, however, pricing policy should reflect the newly created value.
Naked solutions marketing requires careful service research and planning with the customer segment. Sending salespeople out to ascertain service offerings and develop price-to-value service propositions doesn't cut it; I don't advise distributors to begin the process without proper instruction. Good naked solutions marketing, however, can help align services with customer segments and diminish overserving or underserving customers.
Managing the consultative professional. To bring the consultative service firm to life, two things must happen. First, the firm must be willing to develop, brand and market service separate from the physical product. Second, the firm must understand how to select, evaluate and motivate the consultative professional.
Consultative professionals are experts in a technology or a process. They are motivated by staying current and maintaining expertise in their chosen field. Hence, their loyalties are to their discipline and not necessarily the employer. In this sense, the consultative professional is a knowledge worker bound to the knowledge of their discipline. Many distributors don't understand this basic raison d'etre of the consultative worker. Too often family-managed distributors put family in the top of their business and try to “manage” all of the strategic decisions. Having a consultative expert in the firm requires understanding that there are professionals who know more about strategic aspects of the business than family members or corporate officers.
The consultative salesperson must be managed, given goals and motivated. The family-managed distributor can maintain the consultative salesperson's loyalty by providing training in his or her chosen field. An open mind and a reasonably open wallet is required to keep a professional current. Manufacturer co-op dollars can be used to offset product-training costs, but much of the education needed comes from outside the manufacturer and incurs nonreimbursed costs.
Crucial to evaluating a consultative professional is good goal setting. Goal setting or management-by-objective is a decades-old method of evaluating and rewarding consultative professionals. Goals for consultative salespeople can be project, account or segment driven. They should include defined inputs, outputs, regular progress reports and financial objectives. Distributors with consultative professionals often have poor or nonexistent goal-setting structures. To understand the key components of a goal-setting evaluation system, see any number of texts on organizational behavior.
Keeping consultative professionals is a challenge. They work best in atmospheres where time spent is less important than goals accomplished. Consultative professionals are self-taught and largely self-motivated. They are not good candidates for rote work, large numbers of direct reports and day-to-day asset management. The best way to keep the consultative professional is feedback through review of goals, reinforcement of accomplishment by good compensation and commitment to their education.
Consultative salespeople are often pegged as the “fly boys” of the firm. Their calling is to a clock that is not necessarily a part of the standard day. One consultative salesperson preferred to work at home, often during the evening, and showed up at the office sporadically. Too often, “fly boys” gain the enmity of others in the firm because of their “freedom.” The firms who seem to do the best with this problem are those who don't worry about the internal complaints about the “fly boys.” Top managers realize that the consultative professional does what few others can do, and properly motivated and managed, can enrich the shareholder's equity. Grounding the “fly boys” with internal squabbles just puts them in situations where they are not effective.
Scott Benfield is a consultant on marketing and sales strategy for distribution and has penned three books on distribution. He can be reached via phone at (630) 428-9311 or via e-mail at [email protected].
|Service Type||Examples||Salesperson Skills||Compensation Type|
|Technical||Application assistance, design and layout service start-up service, troubleshooting.||Knowledge of products and systems, certification for application, including engineering assistance.||High base. Low to no commission.|
|Process||Process redesign for OEM line, EDI or Internet link for purchasing, EDI or Internet link for payables.||Understands flowcharting, manufacturing operations. Quality guru. Understands IT technology and its application to supply chain process.||Reasonably high base. Pay on sales/account penetration.|