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8 Strategies for Making Money with Value-Added Services

By Bridget McCrea

Whether they are kitting products, modifying equipment, training customers on how to use the latest electrical products, or offering vendor managed inventory (VMI), today’s electrical distributors are providing high levels of value to their clients. This value can easily get lost in the translation when it comes time to examine the distributorship’s bottom line – which doesn’t always reflect the added services, support, and training that customers expect and even demand.

This financial gap can often be traced back to the distributor’s sales team. If not properly trained on the merits of asking for compensation for value-added services, for example, sales reps can quickly wipe away any profitability that’s been built into the actual product sale by “giving away” too much. To make sure your own sales team doesn’t fall into this habit, try using some or all of these tips for creating a value-added sales team:

  1. Help reps understand how their products help solve customer pain points. It’s not enough anymore to simply go in, quote an order, and deliver products. Today’s sales teams have to be sharp enough to understand exactly  how those products are helping the customer and then wrap value-added services around those items. “If the sales reps don’t see the value in the products being sold,” says Matt Middendorp, owner of Durand, Wis.-based Sales Math Consulting, “then they’ll start giving stuff away instead of creating an environment for selling an even bigger package that includes both products and services.”
  2. Focus on relationship building versus the “big sale.” Big orders may boost a distributor’s bottom line temporarily, but it’s the long-term bonds with customers that keep the lights on. When reps ignore this fact, their efforts to earn revenues from value-added services can diminish quickly. “Only when you have a strong customer bond can you really get in there and start selling services that either complement your products or fulfill a specific customer need,” says Middendorp. “Only if you take time to build relationships can you truly understand what customers value and what they’re willing to pay to get that value.”
  3. Offer reps incentives to charge for value-added services. Sales reps are largely driven by the commission checks and/or paychecks that they earn, so why not tie your value-added approach into this very important aspect of their jobs? “If you aren’t getting the results that you want, change your compensation structure,” Middendorp advises. If, for example, you want to drive a sales culture that’s centered on earning profits from value-added services, then incentivize your reps to think and operate in this manner. “If you offer incentives based on this approach,” says Middendorp, “then you’ll get the behavior you’re looking for.”
  4. Figure out your firm’s differentiation points. With electrical products available online and offline from myriad sources, smart distributors are doing everything they can to stand out from the crowd of non-specialists that have infiltrated the industry. This focus on differentiation works equally well in the value-added space, where marketing messages and sales pitches should always answer the question:  Why should my customers do business with me over anyone else? “Think about what makes your company superior to the competition and how it adds true value for the customer,” advises Scott McKain, president of McKain Performance Group, Inc., in Henderson, Nev. “Once you’ve outlined these key points you can come up with a solid – and profitable – value-added offering.”
  5. Understand the “new” sales fundamentals. Before the Internet and search engines like Google came along, distributor sales reps were the keepers of the information. Today, the same reps are being called up to curate and make sense of all of the data that customers have at their fingertips. “Customers are overwhelmed with information,” says McKain. “The best reps are the ones that can sit down with those clients and help them gain insights and make the best possible business decisions.” As part of that re-positioning process, reps can also reinforce the real value in their company’s value-added offerings and why compensation is in order. Using messages like, “Here is how our value-added services are going to deliver more value than what you will pay for them,” for example, reps can drive home the idea that such services indeed warrant additional fees.
  6. Turn your reps into storytellers. Most sales reps are very good at conveying the features and benefits of the products that they sell, says McKain, but they’re not as proficient at weaving stories into their sales pitches and presentations. Tell the story of how another customer in a similar industry selected your distributorship, for example, and how the training that you provided (for a fee) led to better utilization rates or reduced costs. “Today’s customers want a narrative,” McKain says, “that includes not only the product information and the facts and figures – but also the story around the products and services that they’re buying.”
  7. Focus on the customers and the money will follow. According to sales consultant Russ Lombardo of PEAK Sales Consulting, value-added selling boils down to a few simple, yet critical, points. Be a strategic partner who consults, not sells. Be easy to do business with by being creative and flexible and by making other resources in your company available to your customers. Help them make the right decisions by showing them how your product or service will address their needs. “Also, be viewed as a value-added problem solver who your customers actually want to work with and, therefore, purchase from,” writes Lombardo in Value-Added Selling: Engaging the Customer. “Be part of their team, as someone who genuinely cares about their wellbeing and what’s best for them. When you engage yourself in the business of your customers, you’ll stand a much better chance of getting the sales. When that happens, you’ll make your money. Focus on the customers and your money will follow.”
  8. Professionalize your sales reps’ images. Dressing for success sounds simple enough in theory, but some of this concept’s fundamentals fall by the wayside when reps visit customer locations dressed in polo shirts and jeans. “If your reps want to get paid for the services that they’re offering, they have to look the part,” says Kyle Everson, distributor sales manager at LEDtronics, Inc., in Torrance, Calif. “The quality of the work (i.e., the value-added that the distributor is selling for a profit) correlates directly with the quality of the presenter. “Show up in appropriate business attire – and armed with quality presentation materials – and you’ll have a much better chance at being compensated for your value-added services.”

McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

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