A distributor's business is not this month's sales volume, but the number of active customers multiplied by the number of items. Is your business being destroyed?
What is a distributor's business? It looks like sales volume, but it's not.
How is sales volume generated? It comes from two indicators: the number of active purchasing customers and the number of items each customer purchases.
Business = Active customers × Items per customer.
As a distributor, think from the boss's perspective: Is this month's sales volume more important, or is the number of customers and product varieties more important?
If you are a salesperson, you would definitely say sales volume is important—because salespeople earn commissions. From the boss's perspective, customer count and product variety are more important.
What is sales volume? It's just running a promotion within your existing active customers and existing product varieties. If you have 300 active customers and mainly sell one product, while I have 700 active customers and mainly sell three products, let's see who has the bigger volume when we run a stocking promotion!
A distributor's business is not this month's sales volume, but the number of active customers multiplied by the number of items.
Distributors, your customer count is decreasing
I once accompanied a distributor's salesperson on market visits. He only visited stores he knew. After finishing the first store, he skipped the second store next door and went directly to the next street.
I asked, "Why don't we visit this store?"
He replied, "This store doesn't want goods, and I'm not familiar with them."
I said, "If you're not familiar, how do you know they don't want goods? Whether they want goods or not, you must go."
The salesperson reluctantly went in and asked, "Boss, do you want any goods?"
Since he rarely visited this store, it was a new relationship, and on the first visit, the owner naturally didn't want goods.
The owner said, "Leave your card, and I'll contact you if I need anything."
The salesperson came out and glanced at me, as if to say, "See? They don't want goods."
After finishing the third store, he tried to skip another store, but I stopped him: "You must visit every store one by one."
The salesperson said, "This store won't want goods, believe me."
I said, "Whether they want goods or not, you have to go. That's your route, and you must visit all your stores."
The salesperson had no choice but to go in again...
We spent the whole morning like this. At lunch, the salesperson said to me, "We earn money by selling goods, not by giving lectures!"
Think about it: Is he right?
Absolutely right!
When the boss evaluates salespeople based on sales volume, the salesperson's only task is to turn the goods in the truck into cash. So distributor salespeople naturally prefer to visit large stores that generate volume, not small stores. They visit familiar old stores where deals are easy, not unfamiliar new stores.
A distributor once told me, "I guarantee this area will be well covered. It's just a small county town, and I have ten trucks running."
In a small county-level city, ten trucks running—do you think that's enough? It sounds like it might be.
But will those ten trucks visit large stores and skip small ones? Will they visit old stores and skip new ones? Will they skip places that are far or hard to park? Will they skip areas under road construction? Will they skip stores where the owner is slow, orders little, and talks too much? ...
Even with ten trucks in a county town, with high investment costs, there are still many unvisited corners.
The manufacturer assigned the Baoding market to distributor Mr. Wang as the general agent. There are 2,000 stores in Baoding, but Mr. Wang's driver and salespeople always visit the 1,200 old stores they know, and never visit the other 800 stores.
So, is it possible that some of those 1,200 old stores will close, go bankrupt, or be transferred?
Is it possible that if you deliver late or provide poor service, they'll stop selling for you? If you cut prices and they lose profit, they'll stop ordering from you...
Will you lose old customers? Definitely!
Are you developing new customers? No!
So the number of active customers decreases.
Additionally, many distributors still give their employees sales commissions. With sales commissions, new products will never sell well!
Why? With sales commissions, whether selling old or new products, the commission is 3%, so I'll definitely sell old products!
Old customers are lost, new customers aren't developed, and the customer count decreases. Without selling new products, the item count also doesn't increase.
Distributors, your business is being destroyed
▊1. Daily management and guidance
When distributors assign tasks to employees, employees usually say, "The task is too high!"
The next time an employee says "the task is too high," flip through the terminal customer purchase records.
The boss asks, "Last month, I asked you to visit 300 terminal customers in your area. Check last month's purchase records: Of the 300 customers, 45 purchased more than twice, 180 purchased at least once, and 120 didn't purchase at all last month. Why?"
The salesperson replies, "They said the economy is bad."
The boss asks, "You go out and visit large stores, not small ones; old stores, not new ones. You skip around. You didn't visit those 120 customers at all, right? Let's revisit the street you visited yesterday right now."
The salesperson admits, "I admit it. I'll correct it next month. I'll visit every store one by one next month. By the way, how did you know?"
The boss replies, "I did the same thing back in the day."
Next month, the salesperson visits large, small, old, and new stores one by one.
The salesperson says, "This month, I visited all stores, large and small. Of the 300 terminals, 236 purchased, but I still didn't meet the sales target."
The boss says, "Last month, you had 236 of 300 terminals purchasing, with an average of 1.03 items per terminal (total items purchased / purchasing customers). What does that mean? You sell old products but not new ones. What will you do next month?"
The salesperson says, "I'll change. From now on, I'll recommend both old and new products in stores and try to get them to order more varieties."
Next month, when the salesperson returns, first, the number of purchasing customers has increased; second, the number of product varieties purchased has also increased.
Do you think sales volume has increased?
▊2. Data analysis and business tracking
B2B companies have an advantage over traditional distributors: they have online APP ordering and IT support in the backend, allowing real-time data analysis. Almost all B2B companies track and analyze these numbers daily, weekly, and monthly:
Daily active users = number of active customers per day
Effective daily active users = number of customers with daily purchases over, say, 200 yuan
Monthly active users = number of active customers per month
Effective monthly active users = number of customers with monthly purchases over, say, 5,000 yuan
Total items purchased = sum of items purchased per store per month
Average items per store = total items purchased / number of purchasing customers
Traditional distributors have relatively primitive data systems, but that's okay—taking a small step forward is a new height.
Distributors should analyze the following indicators at least once a month:
Active rate = number of terminal customers purchasing this month / all terminal customers ever
"Dying stores" list: stores that haven't purchased for, say, 60 days
"Dead stores" list: stores that haven't purchased for, say, 90 days
If the active rate declines over several months, the boss should quickly visit those "not ordering," "dying," and "dead" stores to find out why. What's happening?
Is it because salespeople aren't visiting, so you need to manage visit rates?
Is it because there are damaged or expired products in the store that haven't been exchanged, so you need to handle customer complaints?
Is it because consumer promotion gifts are being intercepted, so you need to post promotional posters?
Is it because poor display leads to slow sales, so you need to enforce display standards with rewards and penalties?
There must be a reason. Find the cause and solve the problem from personnel management, visit rate management, promotion policies, complaint handling, price management, etc., to increase active customers. "Rescue" the "dying" and "dead" terminals.
Otherwise, more and more "dying" customers will become "dead."
▊3. Performance assessment: assess stock, not increment
First, correct a common mistake: don't assess "increment" but "stock."
What does assessing "increment" mean?
For example, tell employees: the daily new product distribution task is ten stores. For every store beyond ten, reward 10 yuan per store. For every store below ten, penalize 10 yuan per store.
When distributor frontline salespeople are pushed to the limit, they have ways: they'll break cases to distribute, sell on credit, use display rewards to distribute...
Wow, they distribute to 100 stores and earn 1,000 yuan in distribution rewards. Next month, they distribute to 60 more stores and earn 600 yuan. The third month, another 60 stores and earn 600 yuan. Then you go to the market to check the new product distribution rate: in his area, only 120 stores still have the product. That's not right—100+60+60 should be 220 stores?
This is the result of assessing increment.
They only focus on distributing new products, without key follow-up visits to those stores. They still visit large stores and skip small ones.
As a result, won't the new product stores just throw the goods in the store without maintenance, shelf placement, or display? The new product won't sell, and the terminal won't order again.
Won't the store intercept the consumer buy-one-get-one gifts for our new product, making it unsellable, and the terminal won't order again?
Won't some stores in the market cut prices on the new product, making the terminal unprofitable, and they won't order next time?
Won't there be damaged products in the store that need exchange, but our salesperson doesn't visit, making the store owner angry and stop selling for us?
Similar to this, in three months, they distribute to 220 stores, but by the fourth month, only 120 remain. This phenomenon is too common.
Distributors, your assessment needs to change
Manufacturers have a hard time assessing salespeople because they don't have terminal order data, so they assess distribution rate, which salespeople must calculate monthly—very cumbersome.
Distributors can assess salespeople more simply: use the "purchase rate" for each item to replace the distribution rate.
▊1. When market coverage is below 50%
When market coverage is below 50% (purchasing terminal customers / total market customers), the distributor's customer base in the area is insufficient. Then assess only one dimension: "number of purchasing customers."
Each sales rep's "purchasing customer maintenance target" = X + Y + Z
X = number of terminal customers who purchased last month
Y = number of additional purchasing customers required this month
Z = number of purchasing customers lost last month (those who purchased before but not last month are considered lost)
For example, a sales rep had 80 purchasing terminal customers last month, this month requires an increase of 20, and lost 5 customers last month. So this month's target is 125 purchasing customers. If the month-end purchasing customer count exceeds 125, reward 20 yuan per customer. If less than 125, penalize 15 yuan per customer. If less than 80, penalize 30 yuan per customer.
Effect: Salespeople will not only visit large and familiar stores but also small and unfamiliar stores. They'll handle customer complaints promptly... for fear of losing "purchasing customer count" and not getting paid.
Reminder: Salespeople may cheat by splitting large orders into small ones (one customer's order split into eight customers' orders).
Monitoring: Implement an order-taking and pre-sale system where salespeople take orders and drivers deliver, monitoring each other. Also, the boss should make daily phone and field checks to see if orders are split to inflate customer count, with tenfold penalties.
▊2. When market coverage exceeds 50%
When market coverage exceeds 50% (purchasing terminal customers / total market customers), you can assess two dimensions simultaneously: "purchasing customer count" and "item count."
Each sales rep's "purchasing customer maintenance target" = X + Y + Z (as above).
Each sales rep's "purchasing item maintenance target" = A + B + C (items can be total items purchased or a specified new product; here we use a specified new product as an example).
A = number of customers who purchased the specified new product last month;
B = number of additional customers required to purchase the specified new product this month;
C = number of customers lost for the specified new product last month (those who purchased the specified new product before but not last month are considered lost).
▊3. Simplification
Distributors have different levels. The formulas and numbers in this article are examples; don't argue about the numbers. Reports, details... are all fleeting; thinking is most important. Finally, here's a simplified plan based on the above assessment ideas to inspire thinking.
Keep the original sales commission system unchanged. If an employee's daily purchasing customer count exceeds 15, reward ... yuan that day. If new product purchasing customer count exceeds 10, reward ... yuan that evening. At month-end, for every purchasing customer lost compared to last month, penalize ... yuan.
Refer to the four dimensions I mentioned—daily management, data analysis, assessing stock, and assessment plans—to develop your own methods and manage your business well.
Source: Wei Qing Training (ID: weiqingpeixun)
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