Break Free from the Constraints of Traditional Gross Margin-Based Sales

Distributors can break free from the constraints of traditional gross margin-based sales models and liberate their salespeople to achieve breakthrough performance. Leaders can leap ahead of disruptors by transforming customer experiences. Executives can invent new sales models that are by distributors, for distributors. This is the crux of my talk at MDM’s Sales GPS Conference on Nov. 2 in Chicago.

I have seen virtually every sales model — from hunters and farmers, to challengers, to global, strategic, national and territory account management — across more than 25 years of channel design and sales optimization work as a consultant. These models have one thing in common: They are not conceived, implemented or optimized for distributors.

Also see: Interview with Mark Dancer.

Every example of best-in-class implementation that I studied as a consultant was about some other business model — maybe a manufacturer, service provider, commodity producer or content creator, but never a distributor. When distributors adopt these models, they are wearing hand-me-down clothes. My talk is about recognizing that distributor business models are unique and deserving of a sales model designed for distribution’s exceptional challenges and opportunities.

When it comes to sales, it’s high time distributors think for themselves!

Toward a sales model by distributors, for distributors

Full disclosure: I am not a distributor. I have never held a position at a distributor, nor have I acquired, owned or sold distributors. At the start of my consulting career, manufacturers hired me to meet with their distributors, understand their business models and goals, and create win/win strategies and partnerships. I gained respect for distributors as entrepreneurs and businesspeople competing from a demanding and constrained position as an intermediary between suppliers and customers. Later, I started writing for the NAW Institute for Distribution Excellence and became a NAW Fellow. My work with NAW is about digital transformation and business model innovation. I’ve written five books and numerous papers, continuing my tradition of understanding distribution from the distributor’s perspective.

In my latest NAW book, Innovate to Dominate: The 12th Edition in the Facing the Forces of Change Series, I added something new. In every conversation with distributor leaders, I asked if they are innovating their business, how far they have gone, and why they can’t go further. Then, I reached out to experts and practitioners of innovation, found solutions, and brought them back to distributors to discuss how they might apply. Working together, I have started building an innovation discipline that is by distributors, for distributors.

My talk at MDM’s Sales GPS Conference is very much in the same vein. I will introduce three concepts for building fundamentally different sales models for distributors, explain how they might work, and engage the audience in a discussion to try them on and see if they fit. The new sales models represent a journey, and my talk is perhaps the first step. If you are attending, I encourage you to bring your ideas and questions.

Eliminate the constraints of traditional gross margin-based sales

The sales models I will discuss at MDM’s conference are a blend of innovation ideas from trends around the future of work, learning, economies and life, and discussions with distributor sales leaders and innovators. They are far from a finished product, but looking at them, I have noticed four common characteristics that might serve as a foundation:

1. Stories vs. models. Reading Will Storr’s excellent new book, The Science of Story Telling, I learned that our brains are wired for stories. Our brains don’t see reality, but construct a model of the world, looking for changes to what it has learned is normal. Our senses deliver only limited and partial data, and it is through stories that we make sense of what we perceive, leading to actions. As we consider new sales models, we might better formulate them as stories, so they are actionable, and so we can communicate them most effectively to others. I use the term “sales story” for the rest of this article.
2. Systems, not processes. As a long-ago engineering student, I studied systems analysis. I remember it as an approach that sought to understand goals and purposes, then explored how things worked together in an interconnected way. And, crucially, how one system interacted with others. For sales, this approach is almost the polar opposite of working through a linear sales process. Processes are about a known sequence of activities that lead consistently to a desired outcome. Systems are about understanding how things work, putting people and assets in motion, and striving for the best. Processes assume one is in control. Systems work toward achieving influence.
3. Linchpin activities. At the core of a system approach is a linchpin activity that can be done repetitively and with excellence, serving as a catalyst to make other things happen. Years ago, I learned that Norton Company did tests with manufacturing engineers on the shop floor to optimize the use of abrasives while steering business to distributor partners. Similarly, Loctite worked with customer engineers and scientists to design adhesives not to compete with other adhesives but to replace other fastening technologies. Both of these examples meet my definition of a linchpin activity — they are done with excellence, they influence systems, and they lead to more and more business in ways that are both predictable and unexpected. They enable system-based sales stories, albeit in these examples for manufacturers, not distributors.
4. As humans, for humans. Distributors have always been “here to help” their customers (and their suppliers). Thirty years ago, “helping” meant stocking a line card of products and brands in a warehouse to serve local demand. Today, distributors are evolving to become front-end businesses, competing on customer experiences. Although distributors are increasingly powered by digital technologies, artificial intelligence and robotic process automation, their “here to help” mindset remains distinctly human. Helping is a human attribute that requires human relationships measured by purpose, trust, commitment and loyalty. Sales models designed by distributors, for distributors must, at their core, operate with human-first capabilities, enhanced by technology.

For your consideration, three beginnings

Below, I offer initial concepts for designing new sales stories. (At Sales GPS, I will add a few more details and provide explanations and rationales. If you are not attending but would like to share your ideas, please reach out to me at mark.dancer@n4bi.com.) Three beginnings for your consideration:

1. Customer engagement. “Here to help” strategies are easy to say but hard to execute. Every “help” requires customers to share (or recognize) their problems, embrace them without shame and work with a partner to achieve a solution. Distributors may create the opportunity to help by engaging customers through digital marketing, social media and traditional methods. In Distribution Leans In: Stories of Resiliency and Innovation During the COVID-19 Pandemic, Joe Nettemeyer, president and CEO of Valin Corporation, predicts that customer engagement will drive the deployment of salespeople. In this sales story, the age of the autonomous, self-directed salesperson is coming to an end.
2. Physical store. In an earlier newsletter edition, I explored opportunities for innovating physical stores in the real world, inspired by an article from MIT’s Ideas Made to Matter. The article was about how retail stores can survive against the odds and compete against disruptors. MIT’s article offered insight from noted experts, including Sharmila C. Chatterjee and Michael Schrage. I added perspectives on loyalty from Doug Press, CEO of The Incentive Group. I’m name-dropping because I want to introduce a radical idea as a linchpin — every distributor’s success in the digital age may ultimately depend on repurposing physical stores for strategic advantage. The key is to make your stores a place where your customers can do their work, not yours — and not just contractors stopping at will-call on their way to a job site. As hybrid work practices take root, distributors have an opportunity to invite their customers’ leaders, engineers, facility managers, manufacturing engineers, finance managers, warehouse workers, marketers, salespeople and more to do their work in the distributor’s store. In this sales story, physical stores trump virtual innovations.
3. Viral meme. In Innovate to Dominate, I explore how to avoid the “tree falling in a forest” syndrome. That is, if a distributor innovates and doesn’t get the word out, have they innovated? Storytelling is a critical core competency for competing on innovations. And storytelling is not just a marketing or sales responsibility. Every leader, manager and customer-facing role must be an accomplished storyteller. Now, imagine that a distributor’s leaders, managers and workers are building their personal brands, sharing innovation stories and going viral. Or, imagine a digital marketer’s message put out through MDM or TikTok goes viral (like this one by Shaohua Fang of Henkel Loctite.) Now, imagine a virtual meme strategy, executed consistently with excellence, that drives sales to unprecedented heights, or powerfully repositions a distributor’s brand. That’s a “viral meme” linchpin. It works for consumer-focused Instagram influencers. Can it work for distributors? In this sales story, distributors become accomplished meme-ists. (Don’t ignore that hyperlink. It’s fun!)

Join our innovation community (by asking questions)

This article was previously published in my Substack newsletter, Mark Dancer on Innovating B2B. I almost always end each edition with questions because my idea is to find ideas from the furthest frontier of innovation, bring them to my B2B readers, suggest a few ideas and ask questions about how we might take them further together. I suggest the following questions for each potential linchpin and sales story:

• Is the story powerful? Under what circumstances? Why?
• What is the best linchpin for your story? What capabilities do you need to execute the linchpin consistently and with excellence?
• What are the customer or supplier systems that the linchpin would influence? (For example, procurement, strategy, operations, new product design, the customer’s customer engagement, and so forth). Would it influence any of your systems?
• Would you judge success as building your brand, improving supplier partnerships, selling more, improving margins, or something else?

I hope to see you at MDM’s Sales GPS Conference. But in any case, don’t be a stranger. Send me your answers! Share your thoughts in the comment section. If you prefer, send me a note at mark.dancer@n4bi.com.