This article first appeared in the November/December issue of Industrial Distribution. To view it in the original format, please click here.
Today’s CRM systems are innovative, flexible, and mobile, and offer considerable value for distributors. CRM can improve salesperson performance, upgrade sales management, and connect sales leadership with real-time data for making better and faster decisions. CRM can strengthen distributor competitiveness and profitability, often by allowing wholesalers to manage their sales organization as they run the rest of their business — with disciplined processes and metrics.
The momentum towards distributor adoption of CRM is compelling. In research conducted for my new book, Getting the Most out of CRM: Best Practices for Wholesaler-Distributors, I found that improving sales effectiveness is a top priority for 75 percent of distributor executives. A majority of distributors are already using some form of CRM, from basic contact management through advanced lead generation, pipeline, and collaboration tools. Among distributors not using CRM, nearly half are shopping for a vendor and more than one in five are in the middle of their first implementation. These findings (summarized in exhibit one) make a very strong case that all distributors should consider using CRM, and if already in use, gains in sales and profits should be improving.
But there’s a catch — a missing ingredient in many distributor plans to select a vendor, integrate with business systems, provide training, overcome barriers, and encourage adoption. After months or years of effort, CRM all too often fails to deliver an acceptable return on investment, with failure attributed to salesperson resistance or a poor fit with distributor business models. In most cases, however, the root cause of failure is more fundamental, and it is a failure of leadership, of planning, or of vision.
Many distributors often fail to account for the simple fact that new results require new behaviors. It’s not enough to target a goal for improved sales or profitability, acquire a CRM tool, and wait for business results to trend upward.
If current sales methods could lead to growth, they would. Business is ultimately conducted by people with people, and sales and profits will not improve if salespeople do not adopt new behaviors. Doing the same sales activities, over and over, and expecting different results is often described as a form of business insanity. Simply automating current behaviors with CRM does not change the diagnosis. It is the responsibility of distributor executives and sales leaders to identify the new behaviors that will lead to new results from the very beginning, before a CRM tool is acquired. And if CRM is already in place but yielding middling results, leaders must go back to the drawing board.
One distributor CEO put it this way: “CRM is a tool, not a solution in itself. CRM will not make a poor salesperson effective, and it will not make a poor sales manager a good sales manager.” This observation is not an indictment of CRM, but a call for proper prior planning. In our research, the inputs of many executives and sales leaders helped us identify the best practices for improving sales effectiveness and the appropriate role of CRM in achieving new results. The best strategies for winning with CRM boil down to a three-step plan: help sales people create success, enable managers to drive change, and manage implementation against specific, measurable goals for improved sales and profits.
Create Success for Salespeople
Distributor sales people are inherently skeptical about the promised benefits of CRM. They worry that using CRM will waste time better spent on productive sales activities, particularly if they are required to enter data in the form of call reports, market activity, or updated sales pipelines. Worse, salespeople believe that CRM is little more than a tool for allowing management to monitor daily sales activity or to second guess their decisions. “Our sales people originally saw CRM as extra work and big brother watching” said one distributor president, “but after providing customer data which improves sales calls, our salespeople moved from managing accounts to managing opportunities.”
This distributor, and many others, found the path to success by mapping the sales process, listing the key behaviors that lead to desired outcomes, and identifying the leverage points where information, provided by CRM, can make a difference. This work is not theoretical. Companies can look to the sales behaviors of top performers for guidance. To gain acceptance of CRM, leadership’s task is to demonstrate for skeptical salespeople that following the practices of top performing salespeople will create new successes which, in turn, leads to happier customers and increased incentive payouts. In the early stages of CRM implementation, or when kick-starting a stalled program, success comes from carefully choreographing successes, letting salespeople tell their stories, and building one triumph on another until momentum is established.
Exhibit two provides three top behaviors for salespeople, each enabled by CRM in the form of customer data, planning tools, or communications. Additional best practices for each behavior include:
• Analyze customer data: the internet is empowering customers with easily available information on product benefits and comparative performance. Buyers can scan websites, read blogs, or simply type a question in Google and receive credible answers. In this environment, salespeople that do not come to a client meeting armed with data are out-gunned. One industrial distributor offered this advice: “We have identified the six most common reasons for a sales call and are training all of our salespeople on how to use customer data in each situation. It’s like calling individual plays within an overall game plan.”
• Manage opportunities proactively: virtually every distributor interviewed for Getting the Most Out of CRM wants to transform their salespeople from reactive order takers or lead followers, to actively identifying opportunities for improving customer results. The best results are achieved when sales training on a value selling process is integrated with a CRM pipeline tool, and when progress is clearly aligned with achieving each salesperson’s sales goals and incentive plan
• Collaborate within CRM: as CRM becomes an essential tool for accessing customer information and managing opportunities, leaving CRM to coordinate support with marketing, finance, or operations becomes a frustration and, worse, leads to slow responses, poor proposals, and bad pricing decisions. As a particularly discouraged salesperson put it, “Email is where opportunities go to die!” Another distributor made its proprietary pricing models available only through CRM, forcing salespeople to follow a value-selling process and giving management real-time visibility to deals, discounts, and concessions
Enable Managers to Drive Change
The know-how of experienced CRM users tell the tale: front line sales managers are critical for driving the behaviors that are mandatory for achieving new results, and for integrating CRM into each sales person’s daily activities for driving sales and managing profits.
According to the president of an industrial distributor, “Our sales managers drove the success of our CRM efforts from beginning to end. They were the first to hear about salespeople push back, and answer their concerns. Sales managers made sure that salespeople attended training, and that CRM and new sales behaviors were used in the field. Sales managers used CRM to track salesperson performance, and they used the data in CRM to provide sales coaching about specific sales opportunities and accounts. We could not have successfully implemented CRM without the support of our managers.”
It is a standard best practice, across all industries and for companies of all sizes, that sales managers should spend at least 50 percent of their time coaching the salespeople that report to them. Distributors find it particularly hard to achieve this objective. Most often, sales managers are promoted because of sales prowess or market knowledge, and have no real management experience. Distributor sales managers often retain responsibility for customers and carry their own number or sales goal. The manager’s own boss, the sales leader, may not invest in a coaching tool or support sales coaching as a sustained process. In these situations, sales coaching is, at best, a “flavor of the month” effort.
Exhibit three provides three top behaviors for sales managers, enabled by CRM information in the form of customer data, team dashboards, and sales performance. Additional best practices for each behavior include:
• Set development goals: “I start by figuring out what each of my sales people is good at, and then encourage them to do those behaviors more often. Next, we work on development goals – better product pitches, expanding customer relationships, responding to price pressure – whatever each salesperson needs,” offered one experienced sales manager. “We use CRM to estimate results that come from following the behaviors of our best salespeople.”
• Monitor team dashboards: many sales managers customize their dashboards to track sales effort and outcomes, and measure against commitments made by salespeople. For distributor salespeople, effort often comes down to well planned and executed customer visits. Salespeople make commitments to call on customers, and CRM enables sales managers to track follow through and correlate effort with results.
• Coach with data: experienced CRM users frequently share two rules for successfully adopting CRM: “all sales management meetings will begin with a review of sales performance data” and “the only data that is allowed is information from CRM.” By extending these rules to sales coaching, sales manager improve results by focusing on actual selling situations. Anecdotes, generalizations, and excuses are eliminated, improving the conversation between manager and salesperson, and leading to better performance.
Manage Sales with Metrics and Goals
Once high performing behaviors are put in place for sales people and sales managers, sales leaders can do what distributors do best: establish metrics, set goals, and continually improve results. Sage advice recently offered by the president of an industrial distributor explored this: “As a distributor, we excel at execution. In sales, we lack the data to direct sales activities and manage results against expectations. We have worked hard to get the right data in CRM, and also to make sure that it is acted on in the right ways at all levels of our sales organization … from salespeople, to sales managers, to sales leaders. When we do the right things, consistently across the entire salesforce, results improve … often in a big way.”
Over the years, I have seen successful leaders execute a strategy for driving organic growth that is a particularly good fit with distributor business cultures. The approach is to focus on middle performing salepeople, providing them with a disciplined sales process based on the behaviors of top performers, setting goals around sales activities and outcomes, and enabling sales managers with performance management and coaching tools to guide middle performing salespeople to success. In a way, a “move the middle” growth strategy is analogous to managing earns and turns by product category. As the results of middle performing sales people move closer to the results achieved by top performers, the profitability and sales of the overall business improve, often dramatically. As one sales leader taught me, “every sales person can’t be a top performer, but that doesn’t mean they shouldn’t try.” Exhibit four demonstrates the core concept of focusing on middle performers.
In any organization, there is a statistical distribution of top, middle, and bottom performing sales people, often close to a 20% / 60% / 20% mix. In my experience, middle performing salespeople typically average ~60 percent of top performer results. If performance is improved to ~75 percent of top performers, overall growth of sales or profits must increase by 15 to 25 percent — it has to. Your performance statistics will vary, but it is ultimately about math; a game of numbers. Results can take time, often two or three years, but five to eight percent growth, year-over-year, is an attractive outcome, especially when the growth is purely organic. New products, territory expansions, or acquisitions are not required. Results like these can be career makers. In fact, I first learned of this approach from a sales leader that had used the growth model in one assignment after another, each time trading up to larger and larger sales teams and business. Exhibit five provides the basic elements of a growth calculator for your own use.
Why Does CRM Fail?
There are several reasons. First and foremost, the experiences shared by distributors point out that, all too often, CRM is implemented as a kind of magic bullet, a cure all for sales effectiveness issues. It’s as if the automation of bad sales behaviors or the compilation of customer data in yet another information tool will lead to better outcomes. Moreover, CRM vendors stress the benefits of CRM without reinforcing the strategy, process design, and competency development that are the foundation for improved results, accelerated and multiplied through CRM. All of this reaches willing ears, because sales leaders and distributor executives know that something is missing in the way that distributors manage their sales organization. Hope sells.
Other reasons exist for lackluster results that CRM alone cannot fix. Customer relationships are left to salespeople to develop and manage — delivering a customer experience that may or may not be in line with the distributor’s differentiation and brand strategies. Salespeople are hired for their industry knowledge and professional sales expertise, so the need for basic sales training or a documented sales process is not recognized. The road to success after initial implementation is long and hard, not only because positive, high-performing sales behavior must be adopted by salespeople and managers, but because CRM itself presents a series of obstacles and barriers. More than one distributor executive advised that implementing CRM is ultimately about change management and success only comes through overcoming cultural barriers and undoing bad management practices throughout the organization.
Ultimately, success starts with identifying the new behaviors that are essential and mandatory for achieving new results. Without new behaviors, new results are not possible. But once they are identified, CRM can play a productive role in communicating, reinforcing, measuring, and tracking successful execution and ultimately, growing sales and profits!
Mark Dancer is the Founder and President of Channelvation, Inc. Mark helps clients generate ideas and actions that drive growth and profits in complex and changing markets. Mark’s book, Getting the Most Out of CRM: Best Practices for Wholesaler-Distributors, is available from the NAW Institute for Distribution Excellence at www.naw.org/crmfordist.