Sales Laundry

Archive for April 10th, 2009

I found myself in Walmart today finishing up some pre-Easter shopping and as I was waiting behind a lady with 27 items in the 20 item checkout lane I started thinking.

 Walmart is still making money and growing when the majority of their competitors’ sales are down by double digit percentages.

 What immediately comes to mind is the fact that they are the perceived “low price leader.”  That can’t be right though, because I have long accepted as fact that a strategy of being the “low price leader” is not a strategy that can sustain a business in the long run because low price strategies only hold up until the next guy shows up with a lower price.

 She still has 15 items in her basket.  How did she cram so much stuff in that little carry around basket?  No barcode on the Easter apple cover looking thing… 

 Walmart uses a host of strategies to be sure, but there are at least two that came to mind that are worth copying, and neither involve cutting your prices and praying for volume sales.

 1.  Walmart puts a relentless focus on finding any efficiency they can to get a product from the manufacturer to their distribution centers and ultimately their stores.  (They forced the issue with Electronic Data Interchange, or EDI, now an industry standard, and have recently nudged cereal companies to make smaller boxes that hold the same volume to reduce shelf space and paper waste among other things.)  As a result, it costs Walmart less to get a product on their shelves than it does their competitors, so an item for sale for $9.95 at Walmart and X Brand stores will likely have a lower true cost at Walmart.

Where competitors cut their price and profit to get in line with Walmart prices, Walmart cuts their cost, sells it for less and still makes more money doing it.

 
2.  When Walmart began, Sam Walton had a radical idea of putting stores in towns that were deemed too small for other major retailers, effectively going where the national competition was not willing to go.  This strategy continues to pay off even today as major retailers fight it out in every major metropolitan market, including Walmart, but Walmart has hundreds of stores in markets where there is no real competition and where future major competition is unlikely. 

 She has 7 items left in the basket, looks like egg dye, bubbles…

 Where can your costs be cut or efficiencies found between the idea stage and final sales/delivery? 

 Can you buy from your manufacturer/distributor differently to garner some savings?  Can you consolidate to a single distributor or is it time to see how hungry your distributor’s competitors are?  Maybe join a larger buying group?  Partner up to buy bigger shipments to get to the next break in tier pricing?

How many hands have to touch the products you sell or the orders for those products?  Is there an opportunity to negotiate, automate or eliminate some duplication?

 Look at your Cost of Sales.  Without damaging customer service, what is the most efficient, least time consuming way to sell each of your products?  Now, how are you selling each of your products?  Any appreciable room for improvement?  What admin tasks could you off load from your sales team to get them more customer face time?  Click here if you would like to go a little bit deeper discussing Cost of Sales.

 2 items left.  Why do they always put the slow Checkers on the Express lane?

 How can you follow Walmart’s example of having a presence where there is no real competition? 

 Is there a niche where you can plant your flag, dominate, and protect your margins?  Can you create that niche by building a rabid referral customer base like Joe Girard did?

 She is helping the Checker sack her goodies.  Finally.  At least she is helping sack the items.  There should be a faster way to check out when you only have a handful of things.

*beep*  *beep* *beep* Scanned, paid and done.

 “Sir, next time you could use one of the self check out stations if you are in a hurry.”  My Checker said.

 Guess that is a sales lesson I won’t be blogging about.  Too busy thinking.

 “Thank you for shopping at Walmart!”

Image courtesy of RichSellsHomes

Q&A’s are excerpts of questions I have answered as part of Sales Laundry or other forums that I am apart of.  If there is a relevant sales message for the masses I post it here to share, gather feedback and discuss.

Q:  Channel Sales & Direct Sales Teams:  What are your thoughts on best practices for structuring a sales team that maximizes sales for both groups and minimizes/avoids conflicts.

A:   I don’t know your specific industry,  but my experience comes from technology, so that is how I have framed my comments.  Here are my general thoughts:

The Direct Sales Team

 Dividing the loyalties of your direct sales team between their own numbers and helping out the channel sales organizations can be a recipe for disaster.  If times get tight, I have seen direct guys pull all sorts of tricks to take a juicy channel deal direct.  The hedge to that is a partner deal registry and clear rules of engagement, neither of which is ever a bad thing.  On the other side I have seen channel partners act like blood sucking leaches, draining a manufacturer of resources and continually begging for leads.  It can get ugly either way.

 I would seriously consider putting a dedicated sales resource in your office supporting your channel partners exclusively. 

 You need your channel organization to spend the time and money needed to get trained up on your products and dedicate enough mindshare to them to get them heard above the noise of their other offerings.

 Use your internal dedicated sales resource to go on sales calls with them and help them put sales proposals together and nudge them along the sales funnel.  Force the dedicated channel sales representative to drive all revenue through the partners.  That way you have someone other than your Channel Manager working in the channels best interests on a daily basis.  Put a smart sales person in that role that can leverage the legitimate leads and deals that he uncovers in his patch into incentive for the partners to get up to speed and stay current.  You can use the leads to reward those partners that are moving the needle for you, for priming the pump for new partners or as needed to help steer your channel sales force.

 This dedicated sale representative can also be a good entry level sales position for your company in more established territories that you can develop into a direct role if the compensation model works like that for you.  That way they have your channel supporting them a bit as they come up to speed so you don’t have the huge dips in productivity when a new guy takes over a territory.

 Your dedicated sales representative should support your best partners and their best reps to keep the pipeline full, then spend time working your best partners second tier reps, other partners and finding new partners that are not going to stomp all over one another in a given geography.  Cut the bottom 20% of your partners and all those 1-off deal guys that pop up.

The Channel Sales Team

 Channel organizations are often times the whipping boys of the direct sales team and feel they drive product sales but have no real line of communication with the manufacturer to discuss strategy or to communicate feedback they get from the field.  Listen to your channel.  Typically the top 20% of the reps at the top 20% of your channel partners are driving the majority of your business.  You need to talk to them and understand their challenges with your organization if you want the real scoop.  The execs are usually not as helpful in the day to day stuff and Sales Managers are sometimes in the weeds because they were great reps that got promoted without any training.

 Give the channel a mechanism to register their deals and be protected from your direct reps.  Give them ready access to sales and support until they have their own resources trained and representing your brand well in the field.

That is about 1% of the topic.  You can check out The VAR Guy for dedicated blogging on technology channel sales.