In part 1 of this three-part series, we discussed the evolving buyer journey—as customers’ expectations continue to grow, they expect frictionless digital purchase capabilities that make it easy to navigate and buy desired products for routine transactions. However, clients also need customized offerings and rely on manufacturers’ and distributors’ knowledge to offer much more than a self-serve experience. Part 2 of this series will explore the new sales model to support the evolution of customer purchasing behaviors.
As the buyer journey evolves, so do the sales motions required to support their new path. The software industry was one of the first to adopt a Software-as-a-Service (SaaS) model, later evolving to an Anything-as-a-Service (XaaS) model. This model reflects that selling is no longer a linear “access, persuade, fulfill” model of order to fulfillment but a circular model that allows sellers to embed their products into the buyer’s operations. Instead of a one-time sales or renewal motion, sellers are encouraged to Identify → Land → Adopt → Expand → Renew products, or the ILAER approach.
The shift from the traditional order-fulfillment model to the ILAER model is a good fit for software, service and products that are “sticky,” provide value and are integrated into the buyer’s operations. Because of the model’s widespread success, manufacturers and distributors have adopted the concept of ILAER and adapted it to create highly efficient sales models that drive recurring revenue or increased customer lifetime value.
Recurring revenue and customer lifetime value are benefits of the ILAER model. As software companies switched from legacy, server-based systems founded on long-term renewals with a high CAPEX outlay, they adopted a subscription-based approach that makes costs more predictable for buyers while creating recurring revenue for sellers. The Adopt – Expand – Renew cycle of subscription software sales led to expansion through upselling and cross-selling, resulting in increased sales and value proposition.
Manufacturers invest in the ILAER model to create valuable end-to-end service propositions with sellers, supporting the model by deploying targeted resources that enhance customer relationships while revealing new expansion opportunities. The ILAER sales model is highly efficient, helping to build service offerings and expansion opportunities. By strategically deploying resources, companies have been able to achieve a gross margin of 40% for traditional manufacturers and 43% for advanced manufacturers, and experience a 4% to 8% expense-to-revenue ratio.
Chemical manufacturers use the ILAER model to land an account with a leading product while providing resources to ensure adoption. During the expansion phase, manufacturers deploy specialist resources to sell additional applications while still driving product usage. These advanced manufacturers staff a ratio of 6.6 sellers per product/vertical specialist, a 10% greater investment than industry average. Engaging with end-users at plant sites is critical, helping to create and maintain the “sticky” relationship that fuels the Adopt – Expand – Renew cycle.
Applying ILAER is a viable option for manufacturers and distributors willing to optimize their value proposition. To accomplish this, they will have to rethink their coverage models and the resources necessary to support the ILAER model.
The growing spectrum of buyer expectations coupled with the expansion opportunities of the ILAER sales model requires manufacturers and distributors to develop more diverse sales and support roles.
Digital engagement is here to stay. Not only do buyers require self-service e-commerce options, but sellers require digital marketing investments to monitor buyer purchases while recommending sales expansion opportunities. Value-added services and seamless manufacturer and distribution collaboration are advantages of digital sales and marketing. Our research shows that 18% of manufacturers and 53% of distributors are making digital investments that include end-to-end customer tracking and fluid cross-departmental data sharing. Customer success and lead generation representatives are the most prevalent roles in managing this approach, helping manufacturers and distributors sell and gain qualified leads using this cost-effective sales model.
However, what is crucial for the chemical manufacturing model is application knowledge, an expertise unique to the industry and unavailable in an online environment. Overlay specialists are critical to both the manufacturer and the customer, providing as a valuable and knowledgeable support function that ensures adoption. The complexity of this sale requires this application expertise in addition to the efforts required to manage the diverse types of stakeholders involved in the agreement.
Both digital and traditional buyer journeys require more roles to support initial and recurring sales. Highly leveraged roles include enterprise-level account managers (AMs) who have multi-functional expertise to assist at various levels of sales and adoption roles. In addition, industry specialists can help craft unique solutions and value propositions while product specialists offer focused expertise. Both manufacturers and distributors frequently use these specialist roles and may include a specification seller who influences early-stage buyers, including OEM sales.
Service reps are another key overlay role that supports sellers. Their knowledge of customer pain points, daily product use and other solutions enhance CX while helping sellers to remain on the lookout for expansion opportunities. Service reps create relationships at the plant site, earning the trust of customers while providing ongoing information that is valuable for the entire organization.
These overlay and specialist roles have a decided advantage in the manufacturer-distributor relationship. Manufacturers may provide dedicated or overlay specialists, while distributors can provide complementary roles and expertise. Manufacturers offer training and technical specialists that benefit distributors who then use the information in the field as they coordinate sales processes and product introductions. The combination of valued partnerships and specialist expertise provides value-add for buyers at any stage of the journey.
Digital offerings, overlay roles and customized buyer journeys are the way forward for manufacturers and distributors. But they do require investment, coordination and partnership to be successful. Part 3 of this three-part series will discuss rethinking of the economic model to coordinate motions around value propositions and the balancing of sales and coverage to support the new buyer journey.
For more information on how Alexander Group can assist you with your commercial strategy, please contact a Manufacturing or Distribution practice lead.