Death of a Salesman (person)
It doesn’t seem long ago that the title of salesperson was a career choice that required skills across many different and varied disciplines. A good memory, understanding sales metrics, deep product knowledge, record keeping, interpersonal skills, self-motivation, and teamwork being just a few. There was a time when a person would choose this career to satisfy their inner extroversion and go out and meet new people and build relationships rather than being satisfied in doing the same tasks at the same location. And by choose, I mean it didn’t require much more than a strong desire and an understanding of products at a technical level. This is where the concept of sales and marketing split off. Marketing was a university qualification whereas sales was a simple career change, in many instances. Now I want to clarify that the type of salesperson I am defining here are those that are selling technical products, this could be electrical, automation, mechanical and so on.
It was not uncommon to see the salesperson’s vehicle loaded up with product samples and brochures plus all the client records, sales information and the odd precious giveaway that were reserved for either loyal clients or to swing new over new ones. There were expectations set on how many clients a salesperson was expected to call on by customer classification, call rotations and business development activities. Monthly sales meetings were held to discuss new products, sales figures and to go through sales plans to make sure targets were being met or what actions were required to get back on track. And yes, there were the occasional golf days with clients, regional trips, lunch catch ups and other social activities that took salespeople away from their families as they worked hard to build up a legacy of clients and represent the businesses that employed them.
However, like many industries and careers, technology played a big role in how the more traditional technical sales would evolve over time to be more data focused and remove some of the human decision-making process out of the role. What does this mean? The broad use of a plethora of sales analytics would point salespeople in the direction they need to take to be more efficient and effective. This had a twofold effect in reducing the number of salespeople companies employed and reducing the quota approach that was adopted previously. Reduction of salespeople was also somewhat systemic of the rise over time of competitors that have entered a variety of market spaces. This puts downward pressure on revenue and margins and means that organizations need to move from a blanket industry wide coverage by sales teams to a focused approach based on opportunities for broader product offerings and higher margin sales. Doing more with less become the modus operandi for businesses as they not only competed for sales in a more competitive environment but also saw the talent pool of quality salespeople become dispersed to competitors.
As sales analytics become even more prominent, it also started to change how the previous separation of sales and marketing started to remerge as more marketing activity was undertaken to appeal to buyers who may swing their loyalty away from their preferred brands. To dig deeper into this concept, I will look at the electrical manufacturing and distribution industry. This is made up of local manufacturers of product that are either supplied to the broader industry via electrical wholesalers or sold directly to the end user. There is also a large group of equipment distributors in this market that consolidate similar brand and product offerings from overseas manufacturers and supply the market the same way manufacturers do. This is a complex ecosystem that sees electrical wholesalers controlling a significant portion of the electrical products being exposed to end users and limiting opportunities for new entrants. This is done through a strategy of having wholesaler branches dispersed throughout the country and clustering in high density industrial zones. Their value proposition to clients is somewhat limited as they have become homogenous across competitors as far as product offerings, staff knowledge and buying experience is concerned. Loyalty from clients does exist and they do make sourcing the required product easier for end-users as the mix of products that are required to carry out jobs may need to be sourced from multiple manufacturers and distributors.
The value they offer their suppliers is product exposure and consolidation of multiple smaller customers buying through a single location, in effect, they carry the risk of exposure to bad debts and small transactions. The growth in the number of wholesalers has also played into the reduction of salespeople being employed as products are now on display or available to end users at a vast number of outlets. The trade-off for manufacturers though has been the need to increase the number of internal sales personnel as the business model utilized by electrical wholesalers is broadly based on getting quotes for nearly all transactions. The industry has moved significantly from staff at electrical wholesalers pricing clients on a quote when they want multiple different items to now seeking a quote from manufacturers for items that are sometimes, and often, less than $100. This is due to the perceived margin pressure the industry is under to deliver returns as the expense of employing individuals that are technically competent and problem solvers.
Salespeople have now gone from a broad knowledge of their territory or market to managing wholesaler accounts. It could be argued that they are not even selling anymore as prices are based on lowest price, highest margin and /or availability. Or a combination of all three. This is where the marketing has now come to the fore. Visit any electrical wholesaler on any given day and you will find an endless amount of opportunities for giveaways, whether merchandise through to PlayStation’s and cash. What you won’t find when you look in a wholesaler are any prices on the shelf. Pricing is done on an enquiry basis only and determined by monthly spending, loyalty or new business opportunity. Manufacturers that deal through wholesalers have lost all ability to discuss price with end users as they have no idea what an individual could or would pay for their items. The wholesaler even has the ability to lock out products of manufacturers or salespeople they may have a personal bias against.
This lack of price transparency is also a reason that the traditional bricks and mortar electrical wholesaling companies have struggled to transition to a relevant online presence. If pricing is so variable across a single branch, how do you effectively control this at a state or national level for hundreds or thousands of accounts? There are a number of small independent electrical wholesalers that do have an online presence, however, most of their product offerings are not national brands but rather cheaper imported products. There is room to grow this sector, but it will take one major manufacturer to change a very rigid business model and the industry doesn’t appear to be ready for this yet. Of course, online selling removes the need for any sales team as the audience can be highly dispersed. The products that are often imported have little to no presence locally and the sales tactic used by these online stores is to win on price.
There is also a never-ending amount of breakfast barbecues and other functions that are designed to show end users new products and give a false belief that the loyalty of the wholesaler and client may be enhanced, yet this is not proven as brands are predominately determined by head office groups who negotiate buying prices and rebate structures directly with the manufacturer. This unending stream of gratuity in the marketplace is subsequently funded by these manufacturers, and note that I include distributors in this term, as a way of marketing themselves to the industry at large. But it is a flawed approach to carry this out en masse. What signal does a wholesaler send their customers if a continued procession of manufacturers of similar products keeps getting paraded through their showrooms? Add the other marketing tools manufacturers are using by supporting wholesaler buying groups, industry magazines and systems in their own businesses to capture sales data, and the cost of keeping a sales team on the road can be significantly reduced. It is the ongoing commodification of products that has resulted in very little to no differentiation and therefore a reduced need to have salespeople promote them.
So, who is at fault here? Why are we seeing less salespeople being employed by individual organizations, although we do see a lot of total salespeople as some companies enter the market and look to grow a client base. It is hard to see where this power comes from in terms of buyer or seller power and whether skewed in one direction. What is not uncertain though is the low barriers to entry for new products to enter the market. There is no doubt that seller power exists between the manufacturer and the wholesaler as the electrical wholesaling industry is one that flies in the face of modern retail and product marketing methods. Products are grouped by brands and not by product type. This is because the manufacturers tacit demand for premium showroom space via trading terms that can include significant marketing rebates, although these are often just a proxy for better bottom line pricing despite the fact, they are to be used for marketing activity. Ultimately, the least power is left to the end user who has no indication of pricing unless quoted, limited amounts of new product and industry innovation from wholesaler staff and limited access to manufacturers who have reduced their blanket coverage of this sector. In this day and age of vast amounts of data and information available to salespeople, they are more often than not being managed poorly by company’s who have a fear of missing out on a sale, which in reality, is not even that but a chance to quote the client.
A great salesperson is an asset to a business in what they are capable of, they are also a vital link for their clients and end users in the knowledge they have about industry trends and product development. But getting from good to great is a huge task. CRM’s are driving a behavior that makes it hard to capture the human factor in a transaction. Long term client development is giving way to results based on short cycles. The selling culture and whole manufacturer to end user ecosystem for the majority of electrical components works but has multiple flaws that are ultimately reducing the level of service that customers should be demanding. There is room for disruption in the industry if we look at the dilution of value being offered to end users who still have no access to pricing on items. Why do they continue to buy in this fashion? Maybe the multitude of marketing activities does have some stickiness, but this could be debated as people get overwhelmed with the seemingly endless supply of giveaways going on. I hold out hope for the continuation of great salespeople that can connect people through their vast networks and can be a source of industry information as well as a problem solver.
