Mega-Manufacturers continue their proven strategy to sustain profitability in a slow growth economy – tighten up their supply chain. While this is not the first time for many distributors, unfortunately a good many sales managers have forgotten the lessons. Excerpts of the article authored by Frank E. Hurtte Jr. who has 28 years of distribution industry experience and a lifetime in sales follow.
“this is another page from the playbook of previous recessions”
Distributors have been through this a couple of times before, but unfortunately a good many sales managers have forgotten the lessons. Many of our Millennial-generation sellers were still in school. But, this is another page from the playbook of previous recessions. Recalling the pain of the mid-90s, 2001-2002 and the Great Recession, allow me to review.
“Midway through the conversation, the kind words turn sour”
Our largest customers jauntily inform us they “love” doing business with us. They want to formalize our partnership and do more to strengthen the ties. Mostly, it’s a love-fest. Midway through the conversation, the kind words turn sour. Being a partner requires efficiency, effectiveness and lower supply costs for the customer. If you worked with anyone in the Automotive sector back in the 90s, you heard the pitch followed by a directive to immediately drop prices by five percent.
“Business Day ran an article outlining the new strategy of delayed payment”
After a three-year reprieve, the practice is back in play. Here are a couple of examples: In April 2015, Business Day ran an article outlining the new strategy of delayed payment. Here’s a juicy tidbit:
“Adopting a tactic widely used by 3G Capital, the Brazilian private investment group behind the recent merger of Heinz and Kraft Foods, a growing number of the world’s largest food and packaged goods companies are asking their suppliers to give them as much as four months to pay their bills – even though they typically require payment from their own customers in 30 days.”
“Distributors will find themselves facing off in negotiations with some of their largest customers.”
Distributors will find themselves facing off in negotiations with some of their largest customers. In many ways this is a combination of the strategies carried out during previous downturns. Strangely, very few distributors have equipped their sales teams for the battle.
Negotiations are going to be tricky and mean. In some instance, the Purchasing Dude (or Dudette) will imply there is no option, our way or the highway. Procurement teams will practice their lines. Implications will be made: Everybody provides the same stuff and exactly the same service as you. Or my perennial favorite, suppliers like you are a dime a dozen, say no and we’ll just go down to the mission and pick up another.
“Practice your value pitch now. Train your salespeople on the unique stuff you provide and why it would be darned hard to replace ”
Don’t wait till you hear the message from the customer. Practice your value pitch now. Train your salespeople on the unique stuff you provide and why it would be darned hard to replace at the customer. Teach them to make conditional price concessions. Stuff like, “I will give you a discount but if I do you will need to begin paying for my specialist’s time” or “If we provide you with the additional payment terms, what added business will you provide to me?”
At the very least, you need to get your team some negotiations training. Last month we said, “Don’t send your sellers into a knife fight armed with a fingernail clipper.” In my opinion, this is not an optional investment.
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