This is the 14th in a number of articles serializing The Sales Force — Working With Reps by Charles Cohon, MANA’s president and CEO. The entire book may be found in the member area of MANA’s website.
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Maria Gonzales was a welcoming and gracious host. She ushered Jim into her conference room, invited him to help himself from the coffee pot, and sat down to hear his concerns. Maria always had been very direct with her advice and suggestions, so Jim didn’t pull any punches when he detailed the flaw in their salaried sales force system and asked her if she and Troothe’s other distributors could provide the feedback Troothe needed.
True to form, Maria’s reply was frank. “Jim, I never have been bashful about letting your company know when it’s not performing to market standards, and I’m happy to continue to do so. Based on our current arrangement with Troothe, however, I don’t know if you can expect me to supply the kind of vigorous, sustained feedback you are describing. Let me be blunt. You’ve been out of catalogs for three months, and I’ve complained to my salesman from your company several times. I have my own business to run and my own commissioned sales force that is not going to stop making sales calls while they wait for Troothe to reprint its catalog. My salespeople may feel that Troothe is our emotional favorite among the brands of flanges we have available to sell, but if they can’t get a Troothe catalog and their customers ask for a flange catalog, they’ll give their customers whatever flange catalog they can get.”
Maria paused for a sip of coffee before continuing. “We may prefer selling Troothe flanges to selling brand X, but if the only catalog we can get is brand X, then that’s the catalog we pass out to customers. Please don’t take this the wrong way — we’re more than happy to give you feedback, but once we’ve let Troothe know how we feel several times, we move on and sell the brand of flanges that gives us the tools and products we need to be able to do our jobs. I guess what I’m saying is that we always will provide you with feedback, but we’d take the position that we do so as a professional courtesy, not as a responsibility. After we’ve shared our opinions we have to go ahead and conduct our own business — we can’t take responsibility for nagging you until you get things right.”
Jim knew he could rely on Maria to be painfully direct, which was why her opinions were so valuable. “That’s not what I was hoping to hear,” he said, “but I certainly can see your position. For you, the path of least resistance is to sell whichever brand of flanges makes your offering most attractive to your customers, and if I remember correctly, you are franchised to sell three different brands. So the only way we could count on you to make your feelings known with real force and tenacity is if you only had one brand of flanges to sell.”
Maria nodded, and Jim continued. “Let’s talk about that for a minute, if you don’t mind. I guess I’m wondering why you have three different brands of flanges, and what it would take for you to handle only Troothe’s flanges?”
Maria’s forehead wrinkled briefly as she considered her reply. “I suppose one reason is that even though flanges are pretty much interchangeable, some of our customers have developed a preference for your product and some prefer other brands. If we have access to most of the major brands our customers want to buy, we can avoid the time-consuming chore of convincing those customers to change their brand loyalty. Another benefit is that there are some oddball, low-volume items that only one flange manufacturer offers, so if we didn’t have access to each of those manufacturer’s products there would be some customer requirements we couldn’t serve. To be fair, those come up so infrequently that we probably could source those from another distributor if we had to — so that’s not the major reason to be franchised for multiple brands. It could be the major reason is that this is the way it’s always been done between flange manufacturers and flange distributors.
I’d say my trading area is about a 100-mile radius from my office. You have five franchised Troothe distributors in that area. Distributors have multiple lines of flanges, and manufacturers have multiple distributors in the trading area. I’m not sure if that’s a good thing or a bad thing, it’s just the way things always have been in our industry. If you really were serious about getting the kind of vigorous feedback you’re talking about, it would have to be from a distributor that sold only your brand and was captive to your performance. I’m not necessarily proposing it or even saying I’d do it, but the only way we’d even be able to have a discussion about dropping our competing lines of flanges would be if we were the only Troothe distributor in our trading area. It seems to me that even discussing that topic would be an exercise in futility — I can’t imagine you’d offer to drop four franchised distributors in exchange for having me drop two competing lines of flanges, would you?”
Maria’s tone left Jim thinking that she might very well be interested. “Maria, that would be a whole new topic of conversation. I really appreciate the time you set aside for me today, and I’ll continue to look into this subject and let you know what I come up with.”
In the car on the way back to the office, Jim wondered if an exclusive distribution agreement with Maria’s company would get him the feedback he sought. He also wondered if the reason exclusive distribution in the flange industry hadn’t been done before was because no one had thought of it, or because there was some pitfall he’d missed. As he drove, he phoned Harold to discuss the topic, but neither of the two men could make a strong argument for or against an exclusive distribution program.
Finally, Harold brought the conversation to a close. “Jim, I don’t see any huge problems, but of course we’re only looking at this issue from the manufacturer’s side. Why don’t you visit our purchasing manager and find out what kind of experience he’s had as a customer of exclusive distributors, and then we can take this up again in a day or two?”
As he drove, Jim became more and more excited about establishing a stronger bond with distributors through exclusive territorial arrangements. When he arrived back at the plant, he made a beeline for the purchasing manager’s office. He knocked on the doorframe, stepped inside the office and said, “Pete, can I ask you a question?”
When Jim told Pete about his plan, Pete grimaced and then replied, “Jim, that would be a disaster.” With a shrug to acknowledge Jim’s surprised look, Pete continued. “You know that some customers prefer to receive complete flange kits so we supply some accessory pieces in a box with our flanges. Acme makes a high-quality line of accessories, and for years we’d buy their parts through local Acme distributors. Some of our customers specified that they’d only accept Acme accessories, so between that customer preference and the good job Acme distributors did for us, we put nothing but Acme accessories into our kits.
“Acme went to exclusive distribution about two years ago. When there were several distributors competing for our business, we were getting a fair deal. With only one source of Acme accessories, prices went up immediately and continued to creep up a little bit every time we ordered. We complained to the distributor and to Acme, but it didn’t do any good, so the first thing we did was to move all of our discretionary business to another vendor. We had to pass the price increases along to customers who still specified Acme accessories, and our sales force is actively working to convince the stragglers to accept non-Acme accessories. Between what Acme lost in our discretionary business and the customers we’ve converted to non-Acme accessories, our business with Acme is down at least 75 percent and it’s still falling. I’m sure that the distributor makes great profit margins on the Acme parts we still buy, but if I have my way we’ll be 100 percent non-Acme in the next 12 months.”
Jim’s jaw had dropped open in disbelief as Pete told him the story about Acme. The two men were good friends, so Pete felt comfortable saying, “OK Jim, you can close your mouth now. Sorry to take the steam out of your idea, but if you don’t want our customers to hate us the way I hate Acme, don’t even think about exclusive distribution.”
Jim was crestfallen. He’d been so enthusiastic about the exclusive distribution idea that it was difficult to have it shot down so quickly. When he got back to his desk, he called Harold to bring him up to date. “Ouch,” said Harold. “I see Pete’s point, but I don’t know where we are going to go from here. If distribution isn’t our answer, I don’t see any way to fix that problem within our existing sales channel. If we have exhausted all of our options within the current structure, then the solution would have to be something new, different and innovative. Why don’t we schedule a brainstorming session next week — and it probably wouldn’t hurt to get some input from outside the company. Your wife is a pretty highly placed executive — why don’t you see if you can schedule a time when she’s available and the three of us can sit down uninterrupted for a couple of hours?”
To be continued next month.
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