Industrial Distribution

Lean is a sound business philosophy, even in good times. And it’s a great prescription for tough times. The value-added philosophy has always been about lean: add value, not cost.

A tough-times lean philosophy applies to customers as well. Companies have three types of customers: High-Value Targets (HVTs), equity and profit piranhas. HVTs contribute most of your profit. Equity customers are break-even. Profit piranhas (the 10 percent least-profitable accounts) suck the profit out of your coffers.

In tough times, you cannot afford profit piranhas. Purge your account base of these and redirect your resources to those accounts whose business supports your business.

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I remember a literature course in college in which the professor told us that any word could be made a verb. For me, this opened up another dimension to my writing. I could “Reilly” any topic, putting my unique and personal spin on it.

Imagine the transformation that took place when FedEx, Xerox, Google and TiVo became verbs. Their names became mainstream verbs. How do you earn that type of word-of-mouth?

Many companies could achieve this recognition when their total value becomes the standard for the industry. Imagine your service being so good that the customer accepts the fact that they have been “Reilly-ized.” You might respond to the customer’s request for quick delivery by saying, “We will ‘Reilly’ this over to you.” Or, your salespeople need training and you say, “We need to ‘Reilly&...Read More

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Imagine you’re sitting on an airplane and the air gets a little choppy, then downright turbulent. You reach for the armrests and your white knuckles tell plenty about your reaction. The captain speaks on the intercom: “Well, folks, sit back and relax. We’ve run into a few bumps up here and will be through it in a few minutes. This is predictable this time of year in this area. Tighten up the seat belt and enjoy the ride.” His calm demeanor and gray hair reassures you he’s been here before and it’s no big deal.

This is exactly what employees need from their leaders in tough times. They need to know everything is okay—that this, too, will pass. A leader who has experienced tough times in the past and knows it’s cyclical can reassure employees that there is a time limit on tough times.

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Is there an upside to a down turn? Absolutely.

In a down turn, those businesses that need to be purged from a market are purged—an economic Darwinism. Some businesses so poorly serve their customers that they really need to go out of business and make room for those that serve customers well. Sometimes this happens in a good economy; most assuredly it happens in a tight economy.

In a down turn, those businesses that embrace innovation and efficiency seek ways to function profitably in their new reality. This can change the market in a positive way and these suppliers emerge stronger than they were before the down turn.

In good economic times, companies have more cash than time and are less vigilant how they spend it. In a down turn, there is less cash and more prudence in how they invest it. If the business learns the lesson from a d...Read More

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Paul Samuelson, Nobel laureate, said, "Economists have accurately predicted nine out of the last five recessions."

What’s the point? In a recent seminar of 18 salespeople—16 industrial and 2 construction—the industrial salespeople said their business was fine and the construction salespeople said their business was tough. That pretty much sums up the economy. If you’re in industrial sales and tied into exports, you’re probably okay. If you’re in the construction industry, you’re hurting.

This will probably continue as long as the dollar remains soft in the global economy. Exports are pumping fuel into our economic engine. We don’t know if we’re in a recession without looking in the rear view mirror. All the experts have opinions right now, and you can find many lining up on either side of the recessionary issue.

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I read the other day that in the last recession 15 percent of companies that had not been industry leaders before the recession vaulted to those positions during the recession. No doubt it had to do with business practices, management and preparation. But I do believe part of it had to do with attitude.

I know from our own research on tough times that half the battle is in your head and the other half on the streets. To win the battle on the streets one first must win the battle in one’s head. To excel one must first believe one can excel.

That some thrive in tough times while others merely survive fascinates me. It seems to validate something I read years ago: Adversity doesn’t build character, it reveals character.

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I wonder how many companies need to raise prices now because their costs have increased due to soaring energy prices. But they have this great fear that you cannot do this in tough times.

When your costs increase and you fail to pass this along to customers, you have effectively discounted. This may even be a compound discount—the customer negotiated sharply a lower price to begin with, you threw in some value added to sweeten the deal, offered payment terms which they take advantage of but don’t comply with and you forego the increase. How many ways can you discount and stay in business?

There may be a more fundamental question to ask before raising prices: Are there unprofitable customers to whom we could reduce the number of services that we offer to stop the bleeding? I call these customers profit piranhas—customers that chew away at the botto...Read More

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We are neck-deep in political advertising. And it will be this way for several months. Whew! That’s a depressing thought. As a sales trainer, watching political ads is a real challenge. Why? Because of the negative ads.

As someone who is committed to teaching salespeople to take the high ground and not bad-mouth the competition, it is frustrating to watch candidates for the highest office in this land trash the competition. The reason they do it is because it works.

Before you burn up the keyboard disagreeing, let me share something with you. I didn’t say viewers like the ads. I simply said the ads work. They work because researchers have discovered that viewers remember negative ads more than they remember positive ads. So, for recall purposes only, negative ads are more powerful.

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Does your company suffer from market-share mania? This is an excessive preoccupation with market share. Maybe it’s driven by your suppliers, who are constantly pushing you for volume because they have capacities that cannot idle. Maybe your management team is focused on growing by acquiring new markets. Maybe it’s simply a source of pride to say that you’re the biggest in your marketplace. All of these seem reasonable. But what happens when your preoccupation with market share prevents you from capturing full value from your existing base of business?

Consider a distributor that keeps prices at a lower level out of fear of losing some market share by raising prices. The question that distributor must ask is, how much more value could we extract from our existing customers by raising prices, but we’re unable to extract that value because of excess...Read More

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I have finally joined the smart phone age, not that I’m a technophobe. I use technology and a lot of it.

It’s just that I have always been a scribe. I love writing down things in my organizer. I run my business out of it and that’s the problem. It’s gotten out of hand—an 8 ½ x 11, four-inch thick, five-pound anvil that I carry everywhere. Add to that a laptop, travel files, casual reading material and my briefcase feels like a bag of bricks.

My wife, who is a technophobe, said to me, “Aren’t you tired of carrying all that stuff?” Yep, I’m tired of carrying it all.

I bought smart phone, linked it my ACT database, calendar, document files for all my business stuff, entered all the contacts I could ever want to call, figured out (after 8 hours of trying) how to get e-mails from bot...Read More

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The stock market is crazy (crazy good and crazy bad), banks are suffering the effects of bad loans and the media grubs this stuff up and serves it to the public as a daily dose of doom and gloom. The problem? Some people start believing we’re headed for another recession. Heck, I’m writing about it.

I work across industries and the only soft spot I see right now is housing starts, but housing retrofit and rehab is a boom business. The auto industry always has soft spots, so if it’s down that’s not news. Harley Davidson is shutting down for two weeks to control supply so that demand can catch up. Having worked in that industry, I know that it always slows down this time of year. RV sales are down. Hello! Oil is at $100 per barrel.

There are some soft spots, but this is not a soft economy. The majority of industrial suppliers I work...Read More

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Giving salespeople the authority to change price is not the way to improve margins. Numerous studies, including my own, have demonstrated that salespeople will discount when the buyer says, “Your price is too high.”

Over the past 18 months I have studied top-achieving salespeople, those in the top 10 percent of their company’s sales forces, and found that nearly half of them will discount when the buyer resists. In a separate study I conducted of 1,769 general-population salespeople and their managers, nearly 70 percent cut the price when they encountered price resistance.

Soliciting input from the field helps in pricing. Teaching salespeople and field-level managers how to develop a discount discipline is a good move. But deluding yourself into believing that salespeople will protect margins is naïve and dangerous for your profitability.

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