Sales methodologies in the building products market hasn't changed much in the last 50 years. With the exception of sales reps now being armed with smartphones – and before that adopting the use of fax machines to transmit orders – the basic methodology and coverage model is still the same. The challenge is field sales alone are not enough. The model is not scalable across all types and sizes of customers, and is often relied on to a point that exceeds the law of diminishing returns.
The reality of this new marketplace is economic rules dictate the behavior of the field sales representative. With only a fixed number of hours in a day, every rep must strive to get maximum value out of their assigned accounts with the least amount of time or effort. This reality may be good for per-person efficiency, but ultimately it can detract from top and bottom line sales.
Following are two consistent rules for sales in the building products market, as well as some suggestions on how the paradigm can be changed and performance can be improved.
THE 80/20 RULE
The limitations of field sales can be seen in a principle referred to as the 80/20 rule, which states 80 percent of a company's revenue comes from only 20 percent of its customers. This is true in almost every business, but the reality is much harsher in the building products industry where that number is actually closer to 87/13.
As a result of this phenomenon, field sales forces are assigned to spend most of their time, energy and ability on the "high-value" accounts that make up the top 20 percent of their customers. Deploying the most expensive resources to manage your most valuable accounts is a valid strategy.
However, the unintended side effect is it also creates a large population of underserved, often unmanaged "house accounts" that generally leads to attrition, lost sales and often lost customers. For a typical building product company, these low-value accounts decrease significantly each year, eroding the gains made by field sales in managing high-value accounts.
Reaching every client through field sales is simply an economic impossibility. There are a finite number of accounts a rep can realistically reach, so time must be spent growing those with the highest value. As account levels decrease, especially in the low-value accounts in the bottom 80 percent, less time can be spent servicing those accounts. Even when able to commit time, there is a law of diminishing returns. At some point, the low-value account revenue will not be able to justify the rep's time. Simply put, the smaller the account, the less time and attention it gets.
THE RULE OF THIRDS
The rule of thirds is another observation of a dynamic that is often seen in field sales organizations. It has its roots in a common problem: The vast majority of field sales are assigned more accounts than they can physically manage effectively. As a result, even in the high-value customers assigned to field sales, the account value and performance sees a steep decline as account size shrinks.
When looking at a rep’s assigned accounts, a rule of thirds can be shown. The top one-third of accounts receive a majority of the rep's attention, and these accounts' sales regularly grow. The middle third of accounts receive periodic check-ins and issues are addressed, but a consistent sales schedule isn't maintained, resulting in flat revenue. The bottom third is not reached effectively, resulting in consistent double-digit attrition.
Another side effect of the rule of thirds is often seen in the types of products being bought and sold in a given customer portfolio. Diving deeper into an account base will show more unrealized opportunities for cross-sell up-sell and the adoption of new, often higher-margin products. When sales reps don't have the bandwidth to reach and create awareness in these areas, performance lags their more frequently managed accounts.
However, there is a silver lining. First, these lower value accounts often represent an opportunity for growth, as they generally are large enough that they merited field sales assignment in the first place. In many cases, they may even be your competitor's high-value customer, making the challenge share of wallet as opposed to size of opportunity.
Also, to succeed with these customers, field sales coverage generally does not need to be revamped, it needs to be supported and augmented with other resources and tools. When this is done, attrition can be stemmed and growth from the low value segment can outpace the top third accounts, providing valuable revenue from an unexpected source.
Today, the economic reality of the building products industry has shown that field sales alone is not enough to consistently grow sales and maintain customer relationships with all customers. Instead of only relying on field sales reps, it is necessary to undertake a new approach to marketing that complements the field team's efforts on high-value accounts.
The most effective way to supplement and support field sales is through the intelligent integration of data, analytics and multi-touch, multichannel marketing that is composed of a blend of email, direct mail, remote rep voice and digital. Data is key to multichannel; by analyzing customer behavior and sales data, it is possible to create an optimal mix of channel and message to reach the right targets with the right message at the right time.
While multichannel marketing provides significantly increased reach and frequency of advertising compared to field sales alone, the benefits don't end there. Messaging can change frequently and focus on specific content to launch a new product, provide cross-sell product suggestions, or suggest and promote an up-sell of a product line. By employing these tactics in conjunction with field sales, overall top line sales can increase dramatically without drastically shifting the current sales force model.
Though it is impossible for field sales alone to adequately manage the vast array of accounts, new methods of multichannel marketing can help reach all account types and values. By employing these tactics, significant growth can be achieved in the 80 percent of customers currently not being reached–stemming attrition and growing sales while also lowering the overall cost of sale.