Developing Different Sales Channels in Manufacturing
Rapid technology innovation, globalization and expanding product portfolios are causing major disruptions in manufacturers’ traditional routes to market.
For many decades, there have always been two straight-forward coverage channels: indirect partnerships; and direct, field-based sales teams. The indirect channel consists of Distributors or External Manufacturing Reps who “own” the end-user relationship and often exclusive contact with end-customers. The direct, field-based channel deploys a ‘Generalist’ account manager in a set geography and with the expectation to cover a wide variety of buyers.
Alexander Group’s experience, backed by our recently completed Manufacturers’ Trends study, clearly shows that this historic, two-channel model, is under tremendous stress ̶ leading manufacturers to invest in more sophisticated channels to optimize routes to customers.
All signs point to four key focus areas:
- Driving more ‘direct sales’ through indirect channels
- Greatly expanding the use of inside sales
- Investing heavily in online channels, especially for early phases of the sales process
- Creating true Global Account Management teams to better manage the largest, international customers
Driving ‘Direct Sales’ in Indirect Channels
Manufacturers continue to rely heavily on a variety of partners to reach end-users. Of the 40+ leading companies we recently surveyed, 75% rely on Indirect Channels for a significant amount of revenue. Unfortunately, Indirect Channels are not seen as all that effective when it comes to key strategic imperatives like ‘Gaining Access to Key Market Segments’ or ‘Increasing Influence on the Largest and Most Strategic Accounts.’ While companies are not moving away from Indirect Partners, they are investing more in accessing and influencing end-users.
Specifically, many leaders are adding or expanding end-user pull-through teams. Channel partners continue to be involved in the sales process, but often only after an internal sales team has qualified and created the specifications for a large project. Several companies are actively migrating large, national accounts to direct account management. Others are selectively replacing low-performing distributors or manufacturing reps with direct sellers, while continuing to support more effective indirect partners with enhanced programs.
Expanding Inside Sales
Nearly two-thirds of the companies we surveyed are expanding the use of inside sales teams. Inside teams already account for 15% total revenue where they are utilized. Reasons leaders provided for investing in inside sales include:
- Allowing for field reps to focus on larger accounts and a broader product portfolio
- Increasing customer touch point frequency, especially in low-coverage territories
- Decreasing overall sales investment by limiting expensive on-site visits
- More efficiently leveraging time-intensive, upfront prospecting and buyer qualification activities currently conducted by field sellers
- Creating bench strength and a source for field reps
Harnessing Online Channels
Around 20% of companies we surveyed actively use the Internet as a sales channel and generate 7% of all closed opportunities from it. Over the next three years more than 60% of surveyed companies will be utilizing the Internet as an active sales channel. In our experience, this is one of the fastest industry channel evolutions we have seen and will require significant investment, planning and coordination. Key online goals for executives include:
- Ability to complete basic orders and account maintenance online
- Moving significant volume, 20+%, of orders from rep-initiated to customer-initiated
- Providing comprehensive product demo capabilities and triggering automated follow-up from a live seller
- Greatly enhancing and automating a lead generation and prioritization engine
Building Out Global Account Programs
By far the top initiative of large, global manufacturers is to aggressively invest in and build out Global Account Management programs. In conjunction with these efforts, many companies are also standardizing global sales programs and processes.
Ironically, many top international customers are also manufacturers with tightly linked global supply chains. They highly value coordinated, well-structured and consistent global suppliers. They need partners with whom they can plan for the long term. Only a robust, accountable and well-resourced Global Account Management program can meet the needs of some of the fastest growing and most valuable international customers.
How is Your Company Reacting to Major Channel Shifts?
If you are a large manufacturer and have not undertaken major initiatives to improve or expand your sales channels, chances are your competitors have. They are driving more business by engaging with specifiers and end-users on large projects. They are increasing efficiency by expanding inside and online channels. And they are partnering with and growing the most lucrative customers through Global Account Management Programs. Whether you are currently undertaking major channel initiatives or trying to determine where to invest, the Alexander Group can provide expert and unparalleled guidance on how to optimize your sales channels.
For additional follow-up on this topic, please feel free to reach out to one of our Manufacturing Industry Leaders.