2006 IMDA Conference
Keynote rouses crowd
Who's to blame when sales reps don't perform to
full potential?
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ASHEVILLE, NC—June 8, 2006 -- In what could best be
described as a rousing keynote presentation at the
recent IMDA Annual Conference and Manufacturers Forum,
Robert Nadeau of the Industrial Performance Group
presented his outspoken perspective on why sales reps
often fail to perform at peak levels. As he did so, some
members criticized him for failing to understand the
nuances of medical specialty distribution. Others,
however, bought into what he said – namely, that
salespeople often under-achieve because of the
dysfunctional systems in which they operate.
Peak-performing sales reps spend as much as 85 percent of their
time on revenue-generating activities, including
prospecting for new business, trying to get more
business from existing customers, and making sure that
products are properly implemented, said Nadeau. Such
reps spend the remaining 15 percent of their time on
non-revenue-generating activities, including travel,
general sales administration, report-writing, etc.
But in reality, few salespeople are peak performers, he said. They
don’t do enough prospecting. Rather, they spend too much
time dealing with problems, expediting orders, sifting
through information associated with the resolution of a
problem, etc. Common problems include inaccurate quotes,
or purchase orders and invoices that cannot be
reconciled. Others are delivery delays or mistakes,
picking errors, short ships, damage, etc.
Some sales reps are content being problem-solvers, but most would
prefer to be peak performers, maintained Nadeau. But
they can’t, because of barriers presented by their own
companies, including:
- Lack of direction. Management fails to clarify how much time reps
should spend prospecting for new business vs. maintaining existing
accounts.
- Too little or too much information. Today’s sales rep carries as
much electronic equipment as a 1960s astronaut, said Nadeau. But more
often than not, that equipment fails to give them the information needed
to serve the customer.
- Outdated skills. The typical rep receives plenty of product training
throughout the year, but very little training on how to identify and
articulate their value to the customer. “If you don’t give your reps
that skill, when a customer asks for a lower price, they will get
hammered,” said Nadeau.
In his defense, Nadeau had attempted in the months before
the Conference to survey IMDA members about their particular businesses, so
he could incorporate their perspectives into his presentation. But response
was light, forcing him to rely exclusively on general industry research
compiled by his company.
Failure to align goals
That research indicates that many supply-chain problems and mistakes occur
because manufacturers and distributors fail to work in tandem, said Nadeau.
In a study of 750 manufacturers and 500 distributors, his firm found that 67
percent said their working relationships lacked clear and common goals.
“They had quotas and sales expectations, but no goal statement that defined,
‘Why are we in business together?’” he said.
Typically, distributors and manufacturers fail to define their
respective roles and responsibilities. Consequently, in most cases, they act
in their own self-interest. “The chances are slim that what they do is
mutually beneficial,” said Nadeau. Eighty percent of the manufacturers and
90 percent of the distributors surveyed said that this lack of alignment was
negatively affecting their businesses.
The bottom line? “If you have never defined the purpose of your
working relationship with your trading partner, or set specific goals, you
haven’t defined who needs to do what to accomplish goals, and that
constitutes ambiguity,” said Nadeau.
One key area of ambiguity – and one which raised the blood pressure
of several IMDA members – is this: “Who exactly is the customer?” Some
attendees were clearly irritated when Nadeau suggested that the distributor
is not the manufacturer’s customer, but rather, that the distributor
and manufacturer share a mutual customer – the hospital. (Some discussion
ensued – without resolution -- as to whether that mutual customer was the
clinician or the patient.)
The value proposition
More discussion – and disagreement – ensued when Nadeau proposed the
following five parameters customers use to define value:
- Products. Are the products you sell commodities or not? Are they
highly configurable and customizable, or are they fairly
straightforward?
- Access. How easy is it for the customer to get the product itself,
as well as information about the product? If a customer calls for
information and doesn’t get a response for several weeks, access is low.
- Price. How are you pricing your products and services? Are you
offering the “everyday low price?” If not, can you justify why your
prices are higher?
- Experience. How are your customers treated before, during and after
the sale? Keep in mind that the primary reason for customer migration is
a bad experience. “Customers don’t leave for nickels,” said Nadeau.
“It’s because somebody dissed them. They had a problem and nobody took
care of them.”
- Service. Service constitutes everything a seller bundles with the
product that helps reduce the customer’s overall cost, or that makes the
customer’s environment healthier and safer, or that improves their
productivity.
IMDA members need to find out where they are on the scale in
relation to all these parameters, and then price their products and services
accordingly, said Nadeau. “Where people get into trouble is that they try to
be all things to all people,” he said. “Then they wonder why they’re not
making money.”
Changes brewing?
Panel addresses how IMDA members can react to
impending changes in their relationships with
manufacturers
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Has one of your manufacturers presented you with a
Parker pen and pencil set lately? If so, it might be
time for you to start seriously scouting a new line.
That was one IMDA member’s facetious advice during the
panel discussion on “Is a Buyout Looming?” at the recent
IMDA Conference.
Chaired by Shawn Walker of Bay State Anesthesia, the panel featured
Jeff Syrydiuk of Vitaid, Mike Harbinak of Vital Care
Products, and IMDA legal counsel Mitchell Kramer.
Avoiding catastrophe
Although some business relationships last indefinitely, many do not,
particularly for specialty sales and marketing companies. As products
mature, they become commodities and may no longer fit in the IMDA members’
product mix. Conversely, the manufacturers of such devices may look for
other outlets, such as general-line distributors, or they may choose to go
direct. In many cases, manufacturers of innovative devices have one goal in
mind: to sell their company.
For all these reasons, the time to start thinking about the end of
your relationship with a manufacturer is at the beginning. The panel members
offered these tips:
- Make sure your contract contains a provision stating that you can
only be terminated for cause.
- Include in the contract a provision stating that the distributor
must be compensated if the manufacturer is acquired or merges with
another company. (Some IMDA members negotiate to acquire stock in the
companies they represent.)
- Don’t sign a contract that says you can be terminated with minimal
notice (30 days, for example).
- Don’t sign a contract that forbids you from representing a competing
product line should the relationship be terminated.
- Include non-compete clauses in your employees’ contracts, stating
they cannot go to work for any company you have represented for one year
after they have left your employ.
Another word of advice: Keep the lines of communication open
from Day One. Schedule annual visits to your manufacturers’ corporate
headquarters. Schedule meetings with their executive teams “so you know
where their heads are, and to look them in the eye and determine if you have
a friend or if you have to make other arrangements,” advised Harbinak.
Beware quotas
IMDA members should tread very carefully if the manufacturer wants to
incorporate a quota in the contract. The reason is that “failure to meet
quota” sometimes serves as an excuse to terminate the relationship, when the
real reason may have more to do with the fact that the company hired a new
sales manager who has a point to make.
The distributor is usually in a better position to predict how a
particular product will perform in the market than the manufacturer,
according to the panel members. So be assertive, they said. And if the
manufacturer presses for a quota, insist that none be set until after the
product has been on the market for awhile.
Warning signs
Aside from the Parker pen, the panelists offered these warning signs that
your manufacturer may be about to cut off its relationship with your
company:
- You start getting letters criticizing your performance.
- You get a letter asking for the contact information of your
customers.
- You are asked to hire a specialist to manage the manufacturer’s
product line. (That person may very well become the sales manager for
the product when the manufacturer takes the line direct.)
What to do
If the writing is on the wall, the specialty sales and marketing company
still has some options. “”Even if you can delay [termination] for a year or
two, it’s in your best interest to do so,” said Harbinak. The IMDA member
might suggest a change in its relationship with the manufacturer, to that of
a manufacturer’s rep rather than a stocking distributor.
Once the manufacturer has served notice, the IMDA member should
seek legal counsel to make sure protocol is being followed, said the panel
members. They also suggested that the owner of the specialty sales and
marketing company immediately assemble his or her management team to discuss
such questions as, Will personnel changes be needed? Are replacement lines
available? It’s inevitable that everyone in the company will first and
foremost try to assess the effect of the termination on their own job. The
owner will simply have to deal with that fact.
“If you keep a cool head, relax and think about it, in a year
you’ll be better off than when you were terminated, because you’re good at
what you do,” said Kramer. “At least that’s what I’ve seen.”
Acting as a master distributor
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Acting as a master distributor can help you build
your business, take advantage of excess capacity,
strengthen your relationships with other IMDA members,
and take you to exotic locations for sales meetings,
such as Paris or Thailand. It can also be a lot of work.
In a panel on “Acting as a Master Distributor,” three IMDA members
talked about their experiences: Jim Herrmann, Med
Alliance Group, which acts as a master distributor for
Peters Surgical, a French manufacturer of specialty
sutures for mitral valve replacement and other
applications; Jim Brandt, whose company, Bemes Inc, acts
as master distributor for Sentec, a Swiss manufacturer
of patient monitors; and Walter Martin, Care Medical,
which acts as master distributor for Silverlon, a
manufacturer of antimicrobial dressings.
Seizing an opportunity
Prior to getting involved with Med Alliance, Peters Surgical approached the
U.S. market slowly and deliberately, said Herrmann. An accomplished French
surgeon would travel several times a year to this country and give
presentations to small groups of U.S. surgeons on the application of the
company’s suture in mitral valve replacement. Med Alliance Group stepped up
the pace, however, making followup phone calls and visits. “We saw the
business grow,” said Herrmann. “Now we’re adding an inside person, we’ve
added significant independent reps around the country, and we think our
business will double this year because of the extra effort.”
Bemes found Sentec about 2 1/2 years ago. One of the company’s
customers had just been approached by the company to serve as a consultant
while the company ushered the product through the Food and Drug
Administration. Brandt approached the company and discovered it was
reluctant to set up relationships with multiple distributors in this
country. “So I sold them on the concept of using one master distributor,” he
said. “Bemes is about 30 years old. We knew we could identify key players in
the United States, frankly, through IMDA. Most of our distributors are IMDA
members.”
Meanwhile, Care Medical fell into its role as master distributor
for Silverlon by chance, said Martin. The person whom the company had hired
to find distributors suffered a massive stroke. Convinced of the product’s
effectiveness, Martin and CVC’s Richard Manley took over the role, even
bringing the product to the IMDA Manufacturers Forum. Ultimately, Care
Medical became the de facto master distributor. The manufacturer experienced
some internal management difficulties, but has worked most of them out, said
Martin. Recently, the company won a national contract and, at press time,
was awaiting word on a second.
The upside and downside
Acting as a master distributor can help specialty sales and marketing
organizations make use of any excess capacity (e.g., warehouse space,
people) they may have following loss of a line, said the panel members.
What’s more, representing non-U.S. companies in this country provides a
buffer for IMDA members who are weary of losing U.S. manufacturers to
acquisition or merger.
Said Herrmann, “The relationship [with Peters Surgical] is great. I
believe relationships with companies in Europe who have been around for a
while are quite stable. There’s not as much changing channels of
distribution as we see in the United States.”
Brandt added that acting as a master distributor represents a big
opportunity for IMDA members. “It allows a small regional company to
participate on a national scale,” he said. “As we partner with other
regional companies, we learn more about their markets and opportunities.
Down the road, I can see them doing the same thing [that is, acting as
master distributors]. Our network will grow and grow, and we can all take
advantage of the national exposure.”
But, as with any business venture, acting as a master distributor
can be rough sailing at times. Much has to do with the nature and internal
workings of the manufacturer itself. “The downside has been an
underestimation on my part of the amount of time and resources it requires
to support and do the back office work” for the manufacturer, said Martin.
Considerations
Some questions to answer before committing to acting as a master
distributor:
- Who will pay the import fees (if it’s a foreign manufacturer)?
- Who will pay for your attendance at national clinical shows?
- Who will pay for national advertising, brochures, etc.?
© 2006 IMDA
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