To Go With An Inside Or Outside Sales Rep

Determining how to best service customers is imperative. Nearly 70 percent of customers leave a company because they feel the company does not care about them, according to Marketing Metrics. Losing clients can be devastating to a company’s bottom line. A Bain Report found that increasing client retention by 5 percent can raise profits by 75 percent.

These numbers demonstrate that identifying the best way to work with customers is a crucial decision. For distributors, that means determining the type of sales rep — inside or outside — to service clients and nurture the relationship.

“It depends on the distributor and their customer mix,” says Dr. Jonathan Bein of Real Results Marketing, a Boulder, Colorado-based company that works with distributors on demand creation and developing a relevant value proposition. “The level of revenue and gross margin dollars should be key determinants.”

For some companies, that number could be north of $30,000 to $50,000 a year.

Beyond the money component, determining which sales rep to provide could come down to where the client falls in terms of their relevance to a distributors’ clients overall.

“In general, anything outside of top 10 to 12 percent (revenue or gross profit) are fair game for something other than outside sales,” says Bein. Others agree about the importance of matching customers with the appropriate sales rep.

“You can’t treat all customers the same because that would lead to the best customers not getting the service they deserve and need, and they’ll eventually leave,” says Mike Sawchuk of Sawchuk Consulting, St. Catharines, Ontario, Canada. “Analytics and data must rule all decisions in order to know which clients are driving profits. Distributors need to better fill these customers’ demands and treat them more seriously.”

Top customers are determined, in part, by calculating as close as possible the net income by customer, says Sawchuk. This is done by first placing customers into three different categories based on the level of service they require. Group one should be those that purchase online and have no special requirements. Group two calls in or emails orders and demands no special requirements. The third group requires special reports or services, and/or requires extra delivery costs or services.

“Then for each group assign a value to process, pickup, pack and ship an order, as well as to develop reports or services for that order,” says Sawchuk. “For example: $50, $100, $200. Once done, then take the gross profits dollars by customer and subtract the sum representing the numbers of invoices multiplied by the assigned dollar value per invoice for that category of customer.

Of course, coming up with a list of one’s best customers isn’t an exact science. When trying to grade customers, distributors should also consider other factors that can’t be placed into a special equation.

“If there’s a personal connection, such as the distributor has a location in a small town, the companies there might be treated differently as its good public relations,” says Jim Pancero, a sales leadership consultant and trainer based in Carrollton, Texas, who works with distributors and manufacturers to help them with their sales advantage. “Nonprofit groups might also be in a different category as giving them better coverage is also good public relations.”

Another factor that’s difficult to quantify, but very important, is the customer’s potential to drive considerable profit.

“Companies need to consider if the client has the potential to deliver the expected or required adjusted gross profit,” says Bein. “If a client is new but the distributor knows they have the potential, they can send it to an outside sales rep or a proactive inside sales rep to work the account and try to realize the potential.”

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Who Needs Outside Sales Reps