The Evolution of HVACR Distribution's Inside Sales Department
When was the last time you evaluated this crucial department?
Consultants seem to pepper their messages with scary stories that start with the sky is falling and end with some expensive plan for erecting an atomic umbrella. The whole changing-world-of-distribution thing is a bit overplayed; everybody is feeling the impact. Distributors respond to 1,000 changes every week. Instead of calling this a change, let’s call it a metamorphosis.
Like the metamorphosis of the monarch butterfly or spotted tree frog, metamorphosis is best viewed with time-delay photography. Applying some of the same principles of a science channel special, let’s revisit our inside sales groups over the last several decades. I will provide a personal snapshot of the group starting with my first experiences and move forward in time. As you follow along on the journey, I believe the shifts will become clear.
When I received my first territory, inside sales revolved around answering customers' questions pertaining to local stock, price, delivery schedules from manufacturers, and occasionally assisting in the selection of specific catalog numbers.
For the wholesalers under my young charge, cutting-edge technology revolved around building and marking-up tools into each inside salesperson’s personal catalog. To build competitive advantage, we spent a couple of hours nearly every Wednesday night practicing the speedy lookup of products from a few of our major suppliers. Product nuances were deemed important for outside sales but were not a concern for inside sales.
Extending this picture further, there were no computer systems to look up parts. If a part could not be readily found, a phone note was created for the more highly trained and capable outside guys, or you’d place a call to the manufacturer. Pricing was purely top-down with off-list multipliers used to establish pricing levels. Deliveries from suppliers took much longer and should a part need to be expedited, the work was tedious and involved multiple phone calls to establish approximate arrival dates.
Two amazing bits of technology impacted inside sales departments during this decade. First, computer terminals tied to distributor business systems popped up like mushrooms. Secondly, about midway through the decade, fax machines made their miraculous appearance. The combination of these tools, if nothing else, quickened the speed of business. But, the overall view within the department remained otherwise unchanged.
Inside sales was viewed as either a stepping stone to outside sales or the final rusting spot of loyal but somewhat flawed people who lacked the metal required for an important role in front of customers. They’re the human interface between contractors, dealers, and computers and perform tasks like entering orders on the fly while talking to customers and quickly running through the entry of a fax-based order. At the time, sales managers would often mention that inside guys’ skills included the ability to recite common catalog numbers from memory. Following in a close second was their ability to maneuver through the many screens of the computer system, often typing the right buttons to fly from order entry to inventory lists while the computer was still updating.
This decade saw even more orders coming via fax. A few progressive distributors created quasi-clerical positions to simply handle incoming faxes. The rest of the job description was pretty much the same with the possible exception of pricing duties.
Fueled by the economic slowdown of 1991-1992, the practice of the downward list discount began to break down. Desperate to get orders, distributors instructed their teams to never lose orders on price. This was complicated by all but a few distributors’ reluctance to carefully maintain pricing in their systems. The cost of goods was shown prominently and, without a better way, inside teams were allowed to decide a suitable margin. Suddenly, and without training, inside teams were given the power to set pricing. I believe this is still an issue for most distributors.
THE TURN OF THE CENTURY – 2000-2010
Distributors began to switch from pure product sales to a more value-added culture. Additionally, the shift from pure product-oriented technology to a broader scope of products began; HVACR distributors branched into building automation, ice machines, commercial coolers, and many other areas.
Along the way, many distributors discovered an important point — outside sales kept the contractor relationships fresh and occasionally located new customer contacts, but high-quality inside sales teams kept the phone ringing. Progressive distributors have come to further recognize inside sales teams are not just training grounds or, worse yet, dumping grounds. Developing a level of professionalism and training to new standards makes business sense.
Inside sales resources rose in cost, but much of the work remained the same. A substantial portion of inside sales’ work revolved around transcribing orders from phone calls, emails, and, because old habits die slowly, faxes.
We are in a technology-driven state of flux, and it’s mostly customer-driven. Gone are the days of sales people serving as customers’ primary source of new product/technology information. According to experts, 80 percent of people gather information online before making purchasing decisions. Similar research in our industry shows slightly lower numbers for most, but younger, millennial-aged customer contacts are definitely bringing this habit to the workplace.
Contractors, dealers, and other customers are changing their attitudes toward the whole sales process. Further, process, industrial, and institutional customers, along with larger dealers, are growing hard to reach. I sympathize with new salespeople charged with making proactive appointments because customers don’t want to see sellers. At the same time, these same hard-to-reach customers want timely responses to information requests. They want their questions answered instantly. Outside sales people are often engaged in other activities, which throws the onus of instant information squarely into the confines of inside sales.
People capable of and trained in providing this type of information are expensive. At the same time, even the highest-paid members of a team are expected to handle the roles of human interface to distributors’ business systems. Employees touching against the six-figure pay mark and capable of providing massive customer value are twittering away major portions of their day instead of keystroking orders into the system. From my perspective, this is untenable for our industry.
INSIDE SALES TECHNOLOGY IMPROVEMENTS
Nothing bugs me worse than under-utilized resources. As an industry, industrial distributors (and suppliers in general) need to turn their attention inward toward the inside sales group. Let me give you a rapid-fire list of areas that need improvement.
• Incoming order entry continues to be a drain on qualified people. A new study indicates 72 percent of customers would prefer to communicate and send orders by email. The cost of the technology required to automatically enter orders from emails has fallen, giving us the opportunity to automate. Channeling email-based orders straight into distributors’ business systems without human impact makes financial sense. There are a number of distributors, primarily in the electrical line of trade, currently using technology from Conexiom for this capability today.
• Automatic messaging of shipping information and order confirmations have become a standard for purchases made through nontraditional suppliers. It has become expected in most sections of business, yet inside sales teams still fritter away time passing information along to customers.
• Instant text messaging to inside sales has the advantage of allowing customers and inside salespeople to multitask. Customers who text questions into your operation don’t come with the same level of urgency as phone calls. Further, the “text” system allows for an historical trail of information should there be a later misunderstanding.
• A solid pricing process frees inside sales people of many hassles. Close observation of inside sales departments across distributor-land reveals much inside sales time spent on checking and justifying price levels. Often, this includes looking back at the previous price paid by the customer, which is time-consuming, and quickly establishing the right price on the fly when no history exists. Credible distributor enterprise resource planning (ERP) systems have the capability of setting the correct price level for each of the thousands — if not millions — of price permutations. However, you need a process for establishing the right price. Strategic Pricing Associates of Cleveland has an excellent track record for not only freeing up inside sales departments to provide customer value but adding two points of gross margin to the equation.
• Upselling and add-on opportunities in the inside sales department have been the topic of conversation since the 1990s; however, I can only think of a handful of companies in our industry that have made substantial improvements in this arena. I believe it’s not a matter of will as even inside groups with major incentives fall short of the goal. Truth is, it’s darned hard to remember all the upsell stuff during the heat of the battle. Compare this against Amazon, where a search for a simple six pack of motor oil brings up a not only the oil filter but a couple of hundred other sponsored recommendations. Distributors need to employ technology to make it happen. Recently, I visited with a Thailand-based software company, KYKLO.co, which has developed the distributor-focused information for a couple of dozen global electrical manufacturers, so, apparently, this isn’t a North American distributor phenomenon.
• Mobile apps capable of creating and loading orders into distributors’ computers are already in use at dozens of distributors. Contractors like them because they simplify their lives. I suspect the time invested in entering these types of orders in traditional ways provides an awesome return on investment (ROI).
Imagine if, through some unimaginable twist of fate, you had to replace your entire sales organization (both inside and out) over the next week. Who would you hire first? I suspect that person would be someone capable of handling incoming orders. This is inside sales. When was the last time you evaluated this department?
Publication date: 03/29/18