When Wholesalers "Lie"
If an editor receives an incendiary headline for a proposed article like the one above, it is almost guaranteed to get their attention.
I received an email with the beginnings of an article that the author was interested in being published without his byline appearing. A simple truth: No one gets an article published unless they identify themselves. However, I was intrigued enough by the assertion AND the verification of his survey that it interested me. It was a novel approach for a trade publication, but no name, no byline. The result is that I decided to write an article about the article because it sheds light on one of the most constantly vexing issues in the wholesale business: price.
While I’m not identifying the company, I will say they are a manufacturer, they’ve been around for a long time (you would recognize their name) and the person who sent me the email is known both in the industry and to me.
After conducting a survey of a poll, shown below, this manufacturer felt flummoxed. He told me in a telephone interview that the poll clearly demonstrates that price is No. 3 or No. 4 on the list of important reasons when wholesalers or contractors make a buying decision. “Then why do I always hear from salespeople that it’s all about price when it comes to making a buying decision,” he told me. The manufacturer saw the poll results, which conflicted sharply with what he, or more accurately his sales team, was reporting back to him. Hence, he decided to write the article with a firestorm headline.
Does the manufacturer actually believe that the “wholesaler lies”? I don’t think so in the context of a lie being a deliberate, conscious effort to evade, conceal or mislead. (That’s my definition, not the dictionary’s.) What I do believe, however, is that he sees data that are reliable [I vetted the origin of the poll and was satisfied with authenticity] in contrast to what he’s witnessing in the real world.
This led him to write a headline that he probably knew would catch an editor’s eye. Covering the HVACR industry certainly makes me a well-connected insider, but I’m not in the trenches selling. But his assertion, even to a non-HVACR seller like myself, raised some obvious questions.
First, there’s a degree of politeness that exists in most business transactions or relationships (around which we maintain a conversation). We rarely give a direct no, but offer a refusal with polite language. Honestly, when was the last time someone just said “No” without any further explanation (there are actually books that teach you to say No in a somewhat less harsh style)?
There’s the timing issue. We all know that in many sales situations, especially if a specific meeting hasn’t been set up where the potential buyer is going to concentrate on the issue, there’s an attention deficit at work. The wholesaler is harried, worried, his wife yelled at him over breakfast, the reasons are almost limitless, but it’s the focus that’s missing. The price objective becomes a throwaway line to rid them of the salesperson, at least for the moment.
Then there’s the obvious. The sales team needs something or someone to remotivate and teach them a new, more effective approach. And then there’s the most brutal, basic assessment. You need either more effective salespeople or there is some fundamental flaw in your sales process. A starting point for this, of course, would be to seek out an expert(s) on sales, especially if they have experience in our industry. I can’t think of a more insightful approach than by attending the HARDI Focus Forum on Sales & Marketing in San Diego, March 20 to 22 (http://bit.ly/1lIuK8l). You’ll have eight sales experts in one room with a different view of the sales. Surely one can help your company. In addition to the sales manager, it might make sense to send your best and worst performer, too. The best will improve, and the worst performer, after attending the conference, will either get better or give you the impetus to let him go. All possibilities.
Let’s see what several experts say.
Larry Trimbach, owner of Dayton, Ohio-based 2J Supply, is ever polite but was also direct when I asked him about this issue of lying and the pricing excuse his sales team often hears.
“You know full well that you can only offer two out of three things,” he told me in a recent interview. “You can’t offer all three. You can’t have low price, you can’t have quality and you can’t have service. The most you can do is two of those three. He should be asking, ‘Is our service level as high as it can be, and is the quality what it should be?’ It might be helpful to hold up a mirror and ask yourself if any of those fit before you begin faulting someone.”
The one word that keeps cropping up in the interview with Trimbach is value. For him, that is an enormous differentiator that makes or breaks a sale. He puts it this way: “I say to my sales rep, if your customers are not willing to pay 3 percent to 5 percent above the rock-bottom price, if you’re not worth that to them, then I’ve got the wrong person in the [selling] position. I need to find somebody better than you. It pretty much shuts them up and lets them know that we all have to bring value. If we’re not bringing value, then that excuse [price] is the oldest and simplest and easiest excuse in the world as to why someone isn’t buying from you.”
When asked if there was a really hot contractor that he wanted to gain as a client, did he do anything different regarding adjusting the price to woo the contractor. There are two way to look at this, says Trimbach. “It may very well be about price. If that’s true, I tell my salespeople to move on,” he says. “Go find somebody else. If that’s true [buying only on price], then they’re not 2J material. When we interview salespeople, I’m very adamant and tell this upfront, ‘we don’t sell on price.’ We are not the lowest price, we will never be the lowest price. If that’s something you need to be a top salesperson, then we’re probably not the fit for you.”
Trimbach also stresses that you can measure the mettle of the salesperson when they uncover the real reason for not buying, despite the price excuse. He describes price as an often-used smoke screen. You haven’t convinced them of value, he says. And the value rests with other components of the sales, the services you provide, for example, that enable them to see why 2J Supply [or any wholesaler] is worth the price. For example, he says, “Contractors have a short memory.” (He later adds that wholesalers do, too.) You’ve got to remind them of the time you bailed … out. You’ve got to remind them that you’ve gone above and beyond and you have to occasionally bring that up to remind them [of that exceptional service], especially if price gets involved. You have to be subtle but you also have to remind them.”
“Price is obviously a very difficult area to deal with,” says Lloyd Larkin, president, Burlington Township, N.J.-based P&N Distribution. “There are many factors that can come into play when looking at how price drives the decisions. For instance, on a commodity product like PVC and copper, the price and availability rise to the top. A product like ‘big brand thermostats’ where the brand is dominant and almost all distributors carry the line and have availability, price is a major factor pitting one distributor against the other on price for the same brand. In this case, having the right product line and availability are the top factors, which is almost a given. Then in many cases, price is what drives the decision. The decision is hard to rate in a straight line of what’s most important. First you must have the ‘right brand’ and availability of the thermostat or you are out of consideration; then price moves way up the decision process.
“Many times, it is a two-step process that can’t be ranked 1 to 10 or on percentages. If you don’t have the ‘right brand,’ the price does not matter. If you do have the ‘brand,’ then the question is, ‘What’s your price?’ This is what happens in many cases with contractors. They want a certain brand and then shop on price.” Also, in many cases, a contractor will have a preference of buying from a certain distributor who offers many value-added services (training, service assistance, quick delivery programs, 24/7 access) and will even pay a premium to work with that distributor.
Brand-driven products versus commodity products have different factors, according to Larkin. If a certain brand can command a preference over other brands, there still can be significant price pressure when contractors shop the brand from multiple distributors for that same brand. This causes the distributor to come close or meet the price and then complain to the manufacturer that they need a better price because margins are declining.
“A distributor will usually have spent a lot of effort promoting a certain brand,” says Larkin. “In order for the distributor to make a change there must be a significant price advantage that results in improved margin or there must be other advantages that will result in significant sales increases.”
Larkin’s no-nonsense approach suggests that brand, the distributor and the availability are the starting points. You must have availability, because if you don’t have the product, then there can’t be a sale, and price evaporates as an issue, he says. Then comes the minimum quality issue that everyone wants. If you don’t have both, price simply won’t matter.