Spiegel & Associates - Chemical Sales

Is there a simple procedure to improve performance of sales agents, who are also known as manufacturers representatives? Or put another way, can chemical intermediate manufacturers increase productivity of their sales agents by following some universal formula? Of course, there is no universal formula to guarantee improved sales results. However, it does require commitment from the chemical producer to allocate financial and management resources in support of the field sales efforts of the agents to produce gains in effectiveness.

Often, we hear chemical raw materials executives complain that agents are merely " order-takers" or that agents are not self-motivated to sell "our" technical products. Other criticisms are that agents lack product knowledge or selling skills. Are these justifiable complaints.........or an indictment of sales executives and their management inadequacies? The evidence suggests that, to a large extent, sales management should be held responsible for the lackluster performance of selling agents.

Experience indicates that an array of important actions can positively effect the performance of a sales agent network. These activities range from developing and communicating organizational goals to incentives for the agent to achieve company profit and sales objectives.

As our industry enters the 21st century, sales executives will preside over powerful changes in selling chemical intermediates. At the same time, they will also be under scrutiny as never before to increase profit margins while building sales. Methods of sales management that have been practiced for the past 40 years are changing because the ways of conducting business are changing. Intense competitive forces -- both nationally and globally -- will force companies be more efficient to survive and prosper.

Moreover, dramatic changes in office automation will further impact selling efforts. Superimpose these changes on fewer major buying points in the paint and coatings industry caused by corporate consolidations and mergers. Complicate it more by shortening the lead times for delivery of proprietary chemicals, as well as reduction in corporate work force employment.

All these changes mean that the sales manager must work smarter in the years to come to achieve sales and profit goals.. Boosting the productivity of sales agents is fundamental to success.

Most sales executives, in fact, already have experience with some of the changes that will affect their work in the next decade and beyond. Office automation, in the form of sophisticated personal computers connected with remote mainframes are now being used for just-in-time production as well as purchasing This is shortening the source/customer supply line.

Also, written communications via fax messages and E-mail from customers to vendors, and from field sales to headquarters, are further accelerating the timeliness of information for sales management. Yet automation is not a cure for poor sales management, weak strategy or ineffective sales techniques. Not surprisingly, computers can quickly make a bad situation worse.

Early in the next century, sales executives might preside over a field sales force that has lost its traditional power, effectiveness and prestige. A more optimistic scenario foresees sales management providing guidance to an agent network that is more powerful because it is supported by team selling, database marketing and sales promotion. Innovation, adaptability, efficiency and effectiveness are going to be the operative terms for the forward-thinking sales executive entering the 21st century.

To build a successful manufacturer/agent relationship, a fair rate of commission is necessary to attract and retain good agents. It should also be understood that commissions are paid promptly according to the terms of a particular agreement.

Beyond commission rates and agreement fundamentals (which include the market segments, territory, "house accounts", etc.), the manufacturer's product package is also highly important to an agent. The company must offer a quality product line that is competitive both technically as well as in selling price . Orders must be shipped to customers on time. Quality must be good. Finally, customer service is critical. Good agents look at everything.

Finally, agents are seeking to represent companies who demonstrate integrity and are supportive of agents. Finding good agents is not easy. Once they join the sales organization the manufacturer must enhance the relationship to reap the full gains from sales productivity.

Of all the tools a firm can use to promote its chemical products, personal selling is the most effective. However, selling is also the most expensive form of promotion. the average cost of a sales call is estimated to be about $300. Many small and medium size chemical firms contract with sales agents because the selling expenses associated with direct employment are not charged to company overhead. Thus, commissions are paid only when sales are made. Manufacturers representatives/sales agents, therefore, become an efficient way to lower costs and enhance sales productivity.

For most chemical companies a large percentage of revenue comes from major accounts. Typically, 20 percent of the customer base generates 80 percent of revenue. Hypothetically, if there are 500 buying accounts, then the top 100 are major accounts generating at least 80 percent of the total revenues. Using a team approach, sales agents can be quite effective in selling major accounts. This will be covered later in this article. Furthermore, if properly coached and motivated, agents can increase sales with the remaining accounts if they are motivated and given reasonable support.

Sales agents want the manufacturer to provide direction with objectives. This way, they understand what is required to be a successful member of the sales organization. Team building starts with a personal meeting with each sales agent which broadly outlines company goals, objectives and business strategies. This is followed with discussions about territory business goals both from a profit and volume perspective, by product. It requires forward-thinking sales managers to organize for profitable selling. This is a vital first step.

To focus agents on the company's volume/profit goals generally requires a variable commission structure. This way, volume and profit targets can be balanced according the needs of the manufacturer. There is a tendency for company management to resist divulging profit margins with sales agents and thereby not focusing agents on selling more profitable lines. The reasons for this vary. It may be lack of a clear sales strategy or a misguided focus on volume rather than profitability. Often it is simply and unwillingness to share what is perceived to be "confidential" information. We will discuss selling support in greater detail later.

Once territory objectives are agreed upon, the company and agent should jointly develop written, specific, detailed customer and prospect sales objectives . Usually, this is a list of target customers, key accounts and prospects, identified with profit goals by product and sales volumes for each account. On a quarterly basis, this list is used to measure actual sales for a given account against the monetary volume and profit objective. Thus, each quarter actions can be taken to correct any shortfall from sales objectives. This responsibility is assigned to regional sales management.

After the list of target customers, key accounts and prospects has been developed, specific account action plans should be jointly developed with the agents. These plans aim at accounts and prospects which comprise-at least 60 percent of total profit or volume of the agent's sales territory. This document formalizes the actions to be taken by the manufacturer such as joint sales visits, agent training, introduction of a new product, support literature to be sent to the agent, and technical service requirements in support of the agent. At the same time, the agent also agrees to certain actions to accomplish the objectives. These, too, are put into the written plan. Items such as the number of annual sales visits to be made, timeliness of the reports to be sent to the company, entertainment schedule and other expectations. Because a number of people commit to actions in support of sales objectives........this sales effort is usually called team selling.

In developing a target account plan, an informal contract is drawn in which both parties provide agreed upon compensation and mutual responsibilities. The contract conveys to the agent that the company will commit resources and support towards that end. This informal contract becomes an important tactic to improve agent productivity. It establishes an environment which, if nurtured, ultimately forms a long-lasting, mutually profitable company/agent relationship.

Agents view account action plans positively because it shows customer commitment on the part of the manufacturer to attain specific goals. It also recognizes the achievement of the agent with the company management. Essentially, action plans demonstrate that agents are important to the company--important enough to be motivated, trained, and supported as would be expected as if they were part of the manufacture's own organization.

Developing attainable, quantifiable sales objectives with agents boosts sales performance of good ones and helps identify poor performers. This helps make apparent to the entire agent network that company actions are aimed at helping the agent succeed. Additionally, it signals that the manufacturer demands a higher level of commitment from the agent and is prepared to make changes, if necessary, to achieve sales and profit objectives in a particular territory.

Today, many chemical companies -- large and small -- are teaming agent sales people with their own internal staff: direct sales managers, customer-service representatives, product engineers, maintenance people and production/environmental experts. The primary reasons are: that teams add value and build strong long-term relationships with major accounts. Companies which switch from individual to team selling report that the approach improves customer satisfaction and loyalty, increases sales productivity and shortens sales cycles.

Moreover, focused selling allows a company to concentrate resources on accounts that can produce the most gain. Only those target accounts and key prospects with the highest profit and volume potential can justify the time and money that team selling demands. Team selling is expensive and time consuming. Therefore it needs to be used selectively.

When agreement is reached on the frequency of calls on target and key accounts, salespeople commit to these schedules. Regardless of the sales objective, each customer must be visited at least once a quarter. Agents should be held responsible for writing at least a quarterly call report on the action steps stated in the account sales plan. While agents may not always be cooperative about writing call reports, management must be alert to non-performance and firmly require such response from agents. Clearly, the call report makes it easier to uncover problems with an account before it becomes bigger and jeopardizes the company's position with the customer.

Improvement of sales productivity includes:

To achieve more personal time with customers and prospects it is essential that the agent develop a plan for each sales visit. All good sales calls contain four elements: These consist of :

Putting all this together in the car on the way to an appointment is hardly the answer. Yet, that is what many salespeople do, even the experienced ones.

Proper planning will specify who needs to be at the customer/prospect meeting, help prepare participants in advance, insure that significantly more ground is covered and reduce sales call frequency. Preparation of a plan for each sales call is essential and is far more effective within an overall account strategy that would be stated in an account plan. This leads to another cost contributor. Managing prospect expectations by properly preparing the technical or purchasing buyer for the call is a key, and often overlooked, activity. When it is ignored, information interchange is stunted and excessive calls result.

Sales managers should spend more time in field with marginal sales people. Like good athletic coaches, managers should constantly remind the sellers of the fundamentals, constantly encourage and constantly praise effective performance.

Recent research indicates that sales productivity can be substantially improved when more emphasis is placed on sales training. Training agent sales people-- both in product knowledge and in selling skills--pays off in many ways. It is vital that agents be trained in understanding the structure of a sales call because the situation is dynamic and critical to success. Agents will then be better equipped to plan their sales presentation to meet the needs of a specific selling situation.

When sales people are trained to more accurately perceive customer needs, the better they become at adapting the presentation to specific customers and the better they become at selling. Skills training and product knowledge are important factors if a company expects to increase sales productivity. Annual training is a key tactic for building agent commitment and in motivating sales people to higher levels of achievement in selling the manufacturer's products.

Chemical suppliers need to consider all the marketing tools at their disposal if they intend to boost sales productivity. These tools can uncover new prospects in existing markets, can reveal new prospects in new markets and can help retain current customers. Earlier it was mentioned that the forward-thinking sales manager currently harnesses the power of the personal computer. The PC also facilitates other marketing tactics.

Sales experts have long advocated the development of marketing databases to improve productivity. These databases can help maintain customer/prospect records and provide mailing lists. Some database programs interact with other office tools so that sales people can keep a separate appointment calendar and use computer's word processing program for correspondence.

This correspondence/list maintenance capability offers a powerful potential benefit to the producer who is seeks to strengthen sales agent efforts. Personalized, direct mail selling to customers and prospects can enhance productivity by reducing the selling cycle. This can help to make the prospect aware of the producer's products in advance of a sales visit. It can qualify sales leads and can reinforce the image of the company, its products and its customer services. Chemical marketers who fully exploit this cost-effective tactic to complement direct sales efforts gain big sales rewards.

In addition to regular direct mail, a marketer can increase agent commitment and effectiveness with a technically oriented, professional looking, quarterly newsletter. Such newsletters can be given to sales agents for use as a leave-behind piece when calling on accounts and can be used as a direct mailing to customers and prospects to convey industry news, product information and other information.

An integrated, focused marketing communication program in support of field sales efforts does not require a lavish investment. Yet money spent can be ineffectual if the sales organization is not trained in the use of these sales support efforts. Therefore, it is crucial that agents be provided training with these support tools to assist them in achieving goals and objectives. These tools could include:

The cost of developing these sales tools can prove negligible when prorated for each sales agent on a per month basis over a reasonable number of years. However, by providing agents with the tools to do the job of gaining sales, will prove to be the best way to ensure your marketing success.

Although a common way to generate more sales is to add to the sales force, the relationship between the size of the sales force and total sales can be deceptive. Often, it can be more

cost-effective to increase productivity of the existing sales network than to expand the size of the sales force. Thus, a sales manager should explore a variety of options for increasing sales productivity and annually recalculate the cost of each initiative while estimating the benefits. A comprehensive program based on sales efficiency will provide standards against which the costs and benefits of adding direct sales people in the support of agents can be weighed.

In instances where additional sales personnel are truly needed, this information can help build a stronger case to convince upper management. When increasing sales force productivity, the sales manager should consider use of inside sales clerks and newly hired trainees for personal selling by telephone the company's smaller accounts. These "telemarketers" can be highly cost-effective if provided with sales skill and product training. They can also be used to qualify prospects for senior sales personnel who are most productive when focused on more sophisticated tasks.

When supported by sales skill, product knowledge and appropriate literature, telemarketing is becoming an important channel for selling products to small accounts. Surprisingly, when viewed as a group, small accounts often generate higher profit margins than the major account group. Thus, innovative sales management steps should constantly be alert to any measure that can increase profitable sales to these smaller accounts. Telemarketing is one cost-effective tactic that chemical manufacturers can exploit.

As coatings and chemical companies confront an increasingly competitive future, those who deploy agent networks can improve sales results with a focused management process. With dedication to the action steps outlined below, forward-thinking sales management can help produce solid profits.

As the 21st century nears, top performing chemical companies will adapt to accelerating changes in the business world by initiating efforts that constantly increases sales agent productivity. These efforts also offer great promise for the future of your company.