T. L. S. Part I: Tier Level Selling - A Penetration Strategy

A number of sales "Gurus" have promoted the theory that states, "concentrating strictly on your top level premier accounts (some even quantify that by stating your top twenty) will provide you with as much growth and profit as you can possibly handle." This is often stated regardless of individual and corporate strategic initiatives. This position is based on the following facts and assumptions.

? Your top twenty accounts have tremendous growth potential that you have not taken advantage of fully. It is easier to sell an existing account than to generate new business. It is also less costly.

? The total potential of your top twenty accounts equals your S.A.M. (Served Available Market) potential.

? Salesmen are too costly to waste time making cold calls and prospecting.

? Inside sales can handle all other accounts not listed in your top twenty programs.

Although there is some basic truth to those points, there is also some fallacy of assumption in them.

1. There aren't many salesmen in all of distribution that handle twenty true premier accounts. By definition, a top account should be in your highest 10% ranking based on annual revenue, profit margin and potential.

2. Most accounts will not put 100% of their eggs in one basket.

3. Generally speaking, the total volume purchased by an account does not equal your S.A.M. that you specifically can supply.

4. It is a fact that accounts have life cycles. You WILL lose some accounts for any number of reasons regardless of who you are or what you do. Lack of prospecting will eventually cause your territory to die a slow painful death.

5. Vendor relations can suffer dramatically as your salesmen drive by an account while riding with a manufacturer's representative explaining that he is not allowed to call on that account as it is not on his top twenty premier list.

6. What does the salesman do with his spare time - since most accounts don't want to see salesmen more than every couple of weeks? That means seeing twenty accounts every two weeks gives you an average of only two sales calls per day maximum.

7. Salesmen get bored, creativity is suppressed and they even get angry when they have to incorporate too much administrative time into every one of their accounts. The kind of paperwork nightmare associated with this type of program can get out of hand. Unlike the T.L.S. program that differentiates each level of five accounts with regard to administrative time, this type of program requires identical, sophisticated tracking of every account and every activity. That answers the question of what the salesman does with his extra time. Paperwork. Paperwork that often requires trying to document, "What you don't know you don't know." GIVE ME A BREAK! I have actually seen that question listed as a requirement in a program of this nature.

A number of years ago, I actually reviewed a program built on these principles. I looked at the top twenty listing of accounts for 167 salesmen. It turned out that over 30% of the accounts I reviewed were on a C.O.D. status established by the credit department. Another 50% fell way short of logical parameters to be included in a top twenty premier program. Parameters such as total revenue and potential.Don't be discouraged. The basic concept still has merit. There is another alternative that takes into consideration the valid assumptions this type of program is based on and negates the invalid assumptions.

That program is called:

T. L. S. A Penetration Strategy ----------5 + 5 + 5

PROGRAM OBJECTIVE:

The primary purpose and benefits of this Tier Level Selling program is to become and remain focused on your strategic objective in becoming the Distributor of Choice. This program becomes a flexible guide to successful growth in sales.

5 * 5 * 5 CONCEPT

FIVE

ACCOUNTS THAT YOU ARE CURRENTLY VERY SUCCESSFUL WITH BUT YOU HAVE NOT REALIZED MAXIMUM POTENTIAL. (YOU MAY OR MAY NOT BE CURRENTLY CONSIDERED DISTRIBUTOR OF CHOICE)

FIVE

ACCOUNTS THAT YOU ARE CURRENTLY DOING A FAIR AMOUNT OF BUSINESS WITH BUT YOU ARE FALLING WELL SHORT OF THE ACTUAL POTENTIAL OF THAT ACCOUNT.

FIVE

ACCOUNTS THAT YOU ARE NOT DOING BUSINESS WITH AT ALL BUT THEY HAVE SUBSTANTIAL POTENTIAL. (THESE LAST 5 ACCOUNTS ARE LIKELY TO REVOLVE)

BASIC REQUIREMENTS----T. L. S. PROGRAM

* IDENTIFY SALES POTENTIAL BY PRODUCT BY ACCOUNT

* IDENTIFY SALES REVENUE POTENTIAL IN DOLLARS

* ESTIMATE POTENTIAL GROSS MARGIN BY ACCOUNT

* SELECT A COACH

* WRITE SPECIFIC DETAILED ACTION PLANS FOR EACH OF THE 15 ACCOUNTS

* FOLLOW PROGRAM GUIDELINES

I. KNOWLEDGE COMPONENT

The knowledge components listed are the tendons and the muscles, the heart of the T.L.S. program. Each element becomes a building block in the program's foundation. Without good dialog with your 5 + 5 + 5 accounts, securing the information necessary to formulate a meaningful plan becomes very difficult. To ensure maximum benefit from the information you collect, the questions asked and the answers given should be recorded in the narrative. This allows you to understand the subject and the answer. It reinforces your ability to understand the concept and the T.L.S. account.

1. CUSTOMER PROFILE----(HISTORY, OWNERSHIP)

This provides an important snapshot of the T.L.S. prospect. It tells you exactly what kind of company you are dealing with. Areas to explore include: When were they founded? How did they get started? Are they private or public? Is their family still involved in the business? Where are they headed? Do they have a strategic plan? What are their growth expectations? Who are the principals of the company? What are their demographics as it relates to their market, their branch locations?

2. MARKET PROFILE----

(MARKETS-CUSTOMERS-COMPETITION)This is a critical assessment of the factors that affect the customer's business. You need this intelligence to determine and allocate the necessary resources. Areas to explore include: What types of markets are they in? Are their markets growing or shrinking? What is their market share? Are they exploring new markets? What types of customers are they after? Who are their major customers? How do they generate new business? What is their large to small customer ratio? Who is their competition? What price or profit pressures are they experiencing?

3. LEAD TIME FROM THEIR CUSTOMERS----C2

This helps you get a better understanding of their business. By understanding their customers you will be able to determine the time lines from order to delivery. What could be done to shorten the cycle time and perhaps determine what your customer's pain factors are? You must know the top five customers of your customer.

4. TECHNICAL COMPETENCE

What type, if any, technical assistance will they require?

5. DESIGN CYCLES

If it is an O.E.M.----How long does it take to get a typical product prototyped and designed?

6. FORECAST, MRP OR BUILD TO ORDER

What is their ordering practice?

7. VENDOR REDUCTION

Are they implementing a vendor reduction program or any other type of program that has significant impact on their purchasing practices?

8. SPECIAL REQUIREMENTS

Determine any and all special requirements such as packaging, receiving certifications or electronic commerce. Are they seasonal?

9. CREDIT (ABILITY TO PAY)

Do they pay their bills on time? Are there any special terms required?

10. PRODUCT CYCLE

What is their process from the time they receive an order until they ship to their customer? By understanding their process, you can better determine the pain factors and the opportunities to create a hero status.

11. CRITICAL COMPONENTS

What components are deemed to be highly critical in the customer's operation? What if anything has the customer done in the way of preparedness in case of breakdowns or business interruption?

These are suggested questions to get you thinking. Don't stop there; be creative. The more you know about your T.L.S. account, the better prepared you will be to shorten the distance required to meet your objectives. There is a knowledge component form available to help you on your fact gathering missions. It allows you and your selected strategic sales team to review every factor that could be significant in developing your action plan for each specific T.L.S. customer. The first thing that should be documented on this form is exactly where you stand as a supplier or potential supplier right now.

II. S. A. M. POTENTIAL (SERVED AVAILABLE MARKET)

Identify the T.L.S. customers and their actual potential. Total available market, less other channel supply that you do not participate in, equals Served Available Market. This is the actual potential that you have the opportunity to go after. Just because the customer buys a total of $XX does not mean his total purchase is realistically available to you. We have now entered the age of multi-channel distribution. Your S.A.M. must be a big enough potential with a high confidence for success level to warrant engaging the resources necessary to capture the account. This candidate should match the abilities of your company to perform. You must understand and be capable of performing under their "Rules of Engagement."

III. RULES OF ENGAGEMENT

Rules of engagement are simply the criteria that the customer defines as to how you must do business with them. They often involve many if not all of the following factors.? INVENTORY REQUIREMENTS

? CREDIT TERMS

? CONTRACT PRICING

? QUALITY PROGRAMS

? INTEGRATED SUPPLY

? SPECIAL SHIPPING AND HANDLING

? DROP SHIPS

? EDI-INTERNET

? CREDIT CARD SALES

? TRAINING

? STRATEGIC ALLIANCES

? CONSIGNMENT

IV. FORECASTING (by product, by quarter, by revenue, by margin)

This is not "pie in the sky" guessing. You should be able to back up your forecast with solid data and a reasonable thought process to the degree of your anticipated success. In other words, why and how do you feel you can accomplish this goal? A well thought out action plan must accompany the forecast.

V. IDENTIFY ALL KEY PLAYERS

Identify key players at the T.L.S. candidate's company as well as prioritizing the key players at your company that must become involved to ensure success. Remember this is a tier level selling program designed to penetrate all levels of the organization. This penetration includes corporate headquarters all the way down to the shop floor. Prioritize each player's involvement on a scale of 1 to 5 with 1 being the highest. The idea is to record the key players you have identified at your target account. List all the individuals by department recording their phone number, fax number and e-mail address. Sometimes obtaining this data can be an adventure. Next, you need to determine the key player value. What are their personal interests? What are their hot buttons? How do they define a good supplier? What is their communication preference? And most importantly:

? What keeps them up at night?

? What gives them pain?

Take away their pain and becoming Distributor of Choice becomes much easier.

VI. INTERNAL----Company Key Support Players

Identify key players at your company that must support efforts to accomplish the objectives established for this particular T.L.S. candidate. You must establish the who's who of your T.L.S. program. There should be enough detail in creating task descriptions for each player to explain exactly what this person's involvement will be in the program. In addition, hierarchy should be noted so that you can mentally put together an organizational chart. This must be kept up to date.

VII. PICK AND IDENTIFY A COACH

There is usually one person in their organization (not always the buyer) with which you can develop a special relationship. This person can become your coach. Often times this person can run interference, supply competitive information and even tell you how to become successful at this particular account. Who are they??

VIII. T.L.S. CANDIDATE

You must develop a quick numerical snapshot of the T.L.S. candidate. Determine the actual potential of this account as well as historical data relating to past performance.

IX. CURRENT ANALYSIS-KNOWLEDGE COMPONENTS

The current analysis knowledge component is the baseline that allows you to understand your current position with the T.L.S. candidate. It provides the starting point of where you are and where you want to go. (Your Goals---Distributor of Choice). This information will help you understand the customer's "Rules of Engagement." Look at all opportunities to prove your value as D.O.C. This includes product related issues, service related issues and even e-commerce. Keep this information current as opportunities come and go.

X. MASTER ACTION PLAN

Your Master Action Plan should develop naturally from the knowledge you gain from your research and customer contact. You should develop one plan for each of the 15 T.L.S. candidates. Of course, your top five may be more extensive than your bottom five. However, your middle five may be the most developed and extensive of the total. This plan must determine how to match your company resources to every opportunity that exists within that account.

This plan should encompass the entire year, a twelve-month period, with time lines, action requirements and accountability by assigned responsibility. Keep it manageable. Make sure you have the resources to accomplish each specific assigned task and the time necessary to deliver what you promise. Details are essential for every step. Clearly defined goals containing specific action items with assigned responsibility are essential.The idea of this entire program is to provide focus on your "plus" accounts. Those are the accounts with the most potential. The 5 + 5 + 5 analogy simply points you to the five largest accounts you accountability are a must. Each participant in the plan must acknowledge and accept responsibility for their portion of the plan. Definitive action plans are more than personal account visits once a month. They are more than introductions to upper management and they are more than a commitment to work with management to submit the lowest bid. Action plans must be precise, definitive and measurable. You start by establishing specific objectives for each T.L.S. account and continue with objectives for each personal contact. You must identify specific participants necessary to meet objectives and develop strategies to accomplish those objectives. Each plan should address the questions, Who, How, When, Why and What For. Who should call on whom, etc. Develop entertainment strategies where necessary.

XI. MONITOR AND RECORD PROGRESS FOR ALL TO SEE

Establish charts listing all fifteen accounts. Review the progress and the plans monthly. This review should occur openly in monthly sales meetings. Peer acknowledgement can be very motivating. This chart should track forecast versus actual. Each salesman should explain his action plan and his progress to date. Stumbling blocks should be identified and ideas shared.have with the most growth potential without ignoring growth potential from medium sized accounts. Additionally, it allows you to focus on new account development by listing five target accounts that you currently do no business with. The target account list is expected to revolve as you add and delete accounts. This doesn't mean you now only have fifteen accounts. You still must service your entire account base. These are just fifteen accounts that have high growth potential that you have identified to receive proactive, aggressive focus on growth. There are a number of forms (not nearly as many as the top twenty program) associated with tracking your progress in this program, but it's not "Rocket Science," you can create your own. However, you can e-mail rick@ceostrategist.com if you would like copies.

Dr. Eric "Rick" Johnson (rick@ceostrategist.com) is the founder of CEO Strategist LLC. an experienced based firm specializing in Distribution. CEO Strategist LLC. works in an advisory capacity with distributor executives in board representation, executive coaching, team coaching and education and training to make the changes necessary to create or maintain competitive advantage. You can contact them by calling 352-750-0868, or visit http://www.ceostrategist.com for more information.

Rick received an MBA from Keller Graduate School in Chicago, Illinois and a Bachelor's degree in Operations Management from Capital University, Columbus Ohio. Rick recently completed his dissertation on Strategic Leadership and received his Ph.D. He's also a published book author with four titles to his credit: "The Toolkit for Improved Business Performance in Wholesale Distribution," the NWFA & NAFCD "Roadmap", Lone Wolf-Lead Wolf-The Evolution of Sales" and a fiction novel about teenagers called "Shattered Innocence."