Bruce Merrifield, President — Merrifield Consulting
•competitive strategy •order fullfilment •distribution management best practices •sales practices •QPM •management strategies •sales management •sales management styles in distribution •distribution industry sales management •distribution industry intelligent pricing •cost-to-serve math •cost-to-serve in distribution
Wednesday, January 3, 2018—Whatever happened to the art of negotiation? In this video interview, Randy MacLean and Bruce Merrifield sit down to discuss how distributors have limited their salespeople's ability to negotiate and, in the process, either forced or incentivized them to negotiate on elements that can dramatically impact a sale's cost-to-serve (CTS).
"Negotiation has become something of a lost art in the distribution industry," Randy said. "Distributors changed the nature of how the sales force operates by bringing in a lot of restrictions and controls. This includes things like setting pricing, terms, and so on."
"The end result is that salespeople have lost their ability to negotiate in the traditional areas," Randy continued. "Because the salespeople still need something to offer customers, they wind up getting creative. They might volunteer last minute deliveries, to break shipments up, or to run multiple deliveries a day. All of these things drastically increase your CTS."
"And if you pay salespeople just on margin dollar, they don't see the service activity costs," Bruce added. "If you have trucks in the area, they might not see the harm in adding a few extra deliveries. They might not see the issue with providing these last minute orders or giving customers an extra 30 days on receivables."
"However, even if they do realize that it costs the company money, it often doesn't affect their compensation," Bruce continued. "They're winning margin dollars on these sales and aren't being held accountable for the CTS. We're effectively paying them to ignore or give away our cost-to-serve activity."
"Here's the real area where you want to negotiate," Randy said. "When a typical client starts using WayPoint Analytics, they find that 65% of their sales are unprofitable because the CTS is greater than the gross profit. If a salesperson can't negotiate on price, they give away CTS. However, if a salesperson only negotiates on price, your margins will gradually shrink over time. The solution is to blend these two ideas: Let the salespeople negotiate on price, but in return the customers have to help you work on improving the CTS."
"This process requires an understanding of CTS math," Randy continued. "Luckily, Bruce recently put together a wonderful CTS math course with iKlarity which can help you introduce this idea to your sales team and get their priorities straight."
"You also need to be able to go to the customer with very specific activity insights," Randy said. "For instance, you can ask them why they may have bought a AA battery 400 separate times."
"In many cases, you'll find that the distributor is shocked by these inefficiencies," Randy continued. "We had one distributor who sat down with a customer to explain that they wouldn't be breaking up multi-packs of items any more. The customer wasn't sure why the distributor had been doing it in the first place! The individual items had been coming in dirty – because they lacked the packaging – which was posing issues for them as well. This had been going on for years and was likely the result of somebody making a decision a long time ago for reasons nobody can remember."
By trading pricing discounts for improvements in CTS, you will often find yourself leaving the bargaining table with a significantly improved bottom line. It's a win-win scenario where your customer is getting a better price and you're making more money for it. This is the kind of negotiation that you should be encouraging your salespeople to conduct. By not cultivating this approach, you risk having salespeople get you the pricing you want at the cost of a far higher CTS, which often means that you're most likely losing money in the long run.
For more information about Bruce Merrifield, visit: www.merrifieldact2.com
The 3rd of 3 lists defining the markers of Distribution companies outpacing their peers.
The 1st of 3 lists defining the markers of Distribution companies outpacing their peers.
Randy MacLean explains the differences in business intelligence systems, and how to know what you're getting with each kind.
Steve Epner and Randy MacLean discuss topics from Steve's book. In this video: How to Innovate.
The top business know not only how to innovate, but where to spot opportunities where innovation will bring the greatest results.
Randy MacLean and Bruce Merrifield of WayPoint Analytics discuss different levels of cost analysis, and why deeper analytics can bring much greater benefits.
Companies are developing more and more sophisticated approaches to sales compensation and here Bruce Merrifield and Randy MacLean examine the trends.
Webinar: Quantum Sales Compensation - How to Create a powerful new kind of sales incentive plan
Use profit analytics to help drive radical profit gains by balancing volume, margin and service costs for every account, doubling and tripling territory profits
Discussion of how the most successful companies are adopting specialized sales functions, achieving superior results.
Waypoint Analytics uses line item profit analytics to dig deep into the numbers, and Waypoint users learn both bad news and good news about their customers.
Managing Product Line Profits shows how operations can have a significant impact on net profit and examines Peak Internal Profit, accumulated profit and more
Discussion about a 9-step process aimed at transforming a transactional relationship with an account into a partnership.
Many naturally occurring, high gross margin percentage accounts and high gross margin percentage SKUs are operating profit losers.
A discussion of the benefits of segmentation and how this approach can help distributors achieve far greater levels of profitability.
Top companies like Amazon can leverage big data to predict consumer buying habits. Bruce Merrifield discusses how you can do this too!
Most distributors have naturally occurring, high gross margin percentage accounts and high gross margin percentage (small dollar pick) SKUs.
How to identify and protect the accounts at the core of profits.
Randy MacLean and Bruce Merrifield sit down for a talk about the issues and opportunities, tactics and strategies for increasing profit performance.
Here is a case study in which the lowest gross margin percentage niche was the most profitable and the highest gross margin percentage was the loser.
Continuance of the Enterprise Account Selling Model video series. Refers to a preceding video. Drawn from Bruce's presentation at APIC on March 1, 2016.
A continuation of the discussion between Bruce Merrifield and Randy MacLean over Bruce's Enterprise Account Selling Model (part 2).
Bruce Merrifield and Randy MacLean discuss Bruce's Enterprise Account Selling Model, as presented at APIC on March 1, 2016.
Customer whale curves are a great opportunity to view the overall picture of your customer profitability and apply appropriate sales models to each
Bruce Merrifield discusses the Wheel of Learning and how this simple tool can catapult you forward with innovative thinking.
This video by Bruce Merrifield and Randy MacLean describes why you can't rely solely on gross margin to determine profitability.
An in-depth look at some historical limitations to sales compensation, and why those factors no longer apply with the availability of LIPA.
Randy MacLean discusses the value and utility of segmenting your customer accounts.
A fixation on gross margin – without looking at cost-to-serve (CTS) – has blinded countless distributors and limited their ability to achieve profitability.
See why your most profitable 200+ items are typically popular commodities with lots of picks for lots of customers with a high average sales dollar per pick.
Learn how this distributor was able to massively ramp up its profitability even as it lost many of its customers.
Learn why distributors can't simply rely on gross margin when determining whether a sale will add to the bottom line.
Randy MacLean talks about the emergence of a new sales strategy.
A discussion on how little extras can sometimes add up to a lot of infrastructure cost in wholesale distribution companies.
Learn how to boost your company innovation IQ by adopting the Anti-Nitpick Rule and the Wheel of Learning Tool.
Randy MacLean discusses key profitability metrics for QPM.
Randy and Bruce explain why it's important to optimize inventory in the same way you optimize personnel and other resources toward the best profit opportunities
In this video, Bruce Merrifield turns the tables on Waypoint President Randy MacLean, and asks Randy to strategize on how to beat the competition.
Randy discusses the benefits of the extraordinarily valuable High Volume Account Report.
A discussion of the perils of a cookie cutter approach when it comes to sales and service in the wholesale distribution industry.
Bruce Merrifield of WayPoint Analytics teaches the importance of customer segmentation and the insights it can offer your distribution company.
It's not necessary to compete with AmazonSupply on pricing when you've got your ordering and delivery systems, fill rates and customer service at a high level.
Randy MacLean introduces the core principles of QPM and illustrates how it's the most effective way to run a business.
Have you had trouble conveying the importance of CTS to your team? Learn how this course provides an affordable and convenient educational solution.
What is the value of the APIC conference for a business, and why does it stand out above other education programs?
Bruce Merrifield and Randy MacLean discuss profit strategies for wholesale distributors that will raise their cost-to-serve and profits.
Webinar: Quantum Sales Compensation Plan Part 2
Webinar: Quantum Sales Compensation: Designing Your Plan
Webinar: Quantum Sales Compensation for the Wholesale Distribution Industry: Launching Your Plan