Recession. An ominous, threatening term characterized by tighter margins, slipping profits, pared-down budgets and more than a handful of customers who are more price-conscious than ever.
It’s not a pretty picture. Recent economic events and newspaper headlines do nothing to reassure business owners that the economy isn’t temporarily headed south. Viewpoints vary, but most economic experts agree the question isn’t “if,” it’s how extreme will this downturn be?
In January, the U.S. Labor Department reported that consumer prices shot up .6 percent — double what economists had predicted and the largest increase in 10 months. There was also a 1.1 percent surge in wholesale prices, the biggest jump in more than a decade. Stock market reports are erratic, and consistently disappointing, major industries are laying off droves of workers, and inflation threatens to halt further interest rate cuts.
And all of these factors affect the manner in which jan/san distributors must run their companies. Yet, with all these lingering threats, jan/san business owners and executives are surprisingly optimistic in their outlooks, and confident that their businesses will weather whatever storm comes their way.
They contend there is a “recession-resistant” component to this industry. People need cleaning supplies, that’s all there is to it, they say. And distributors are right in a way. No business or facility is going to quit cleaning entirely. But the fact of the matter is, customers do buy less, and they do buy differently.
So, a harsh economic climate can still spell trouble for the over-confident and unprepared distributor. However, on the other hand, some contend recession offers opportunity.
Either way, if they aren’t already, distributors should be making every effort to further meld relationships with existing customers, examine their product offerings, and prospect for potential customers — in essence, prepare for what could be a bumpy economic obstacle course. Recession-proofing your sales function requires that you have a definite plan in place, as well as a cache of foolproof sales tactics to ensure your customers don’t jump ship when the going gets tough.
“There’s a belief out there that you’re a commodity and we try and say that nobody is a commodity,” says Joe Stark, market director for Business Dynamics Inc., a consulting firm in St. Paul, Minn., that specializes in the customer value perspective of the sales function. Stark says his clients are experiencing some very real indicators that point to an economic downturn right now, such as projects that have been put on hold and cost-cutting measures.
Distributors are correct in the fact that people will always need cleaning supplies, says Jeffrey Edwards, president and CEO of Alchemists International, a consulting firm in Orange Park, Fla., specializing in business organization transformation. “But if they become complacent, they’re going to ignore customer service,” he says.
Cost-consciousness is one of the biggest indicators of economic change among customers, says David Champagne, president of Beacon Distributors in Lincoln, R.I. He agrees that there are signs of tougher times ahead among his customers. He’s had a few file bankruptcy. But what he really notices is increased price sensitivity.
“Just by hearing the word ‘recession,’” Champagne says, “people have become more price conscious. They’re being more conscientious in their decision-making. Their rose-colored glasses are gone.”
But Champagne sees opportunity in the face of adversity. “Actually, it plays into our selling tactics because we feel when people are trying to change price, we can come in and talk to them about systems that save them labor. Labor issues are what they’re trying to deal with, and actually it’s a good opportunity for us when people are looking to make changes. We can come in and show them how to save money,” he adds.
Champagne is convinced of the resiliency of the sales function for the jan/san distribution industry — and more specifically with his company — in comparison to other industries. By looking at the slowing economy as an opportunity, rather than a threat to his business, he’s managed to turn a perceived disadvantage into more sales and a larger customer base by seeking new customers during recessionary times.
“We go after new business in recessionary times,” he says. “There are fewer hands to wash, less square feet to wash, so we might have to supplement that with new customers.
“Our ability to go out and get new accounts allows us to not necessarily be affected by a slowing economy.” Champagne’s business, as of yet, hasn’t experienced any negative effects, he says.
Not So Fast...
But the fact remains, business conditions are affected in recession. It just becomes more important for distributors to modify their sales tactics so that the bottom line remains strong.
Many jan/san distributors have less to fear than other industries during slow times, says Andrew Ellenberg, founder and CEO of Project 518, a business consulting firm in New York. But they shouldn’t become complacent.
“It is less cyclical than other industries because it’s a necessity rather than a luxury. But they’re not immune,” he says. Right now distributors are in a leadership position, but in a year even industry leaders could find themselves running for their lives, Ellenberg says.
Ellenberg is adamant that distributors need to be proactive going into an economic downturn.
“No industry is isolated from macroeconomic events,” he says.
Devising an intelligent game plan is one way distributors can prepare for something that at one time was unforeseeable, but that could upend a seemingly solid business.
“The most important thing to tell people is even in a recession-proof business, certain problems do crop up,” says Mark Tietbohl, senior consultant and partner with TRC Associates, Dublin, Penn. Customers have recession on their minds, and distributors tend to think the cleaning industry isn’t affected, but business can shift to other distributors much more easily.
Customers, no matter how loyal, become price-sensitive when money is tight, Tietbohl says.
“In their mind, they’re in a recession. They still have to buy the stuff, but they’re not happy about it and they’re still looking around for a better deal,” he says.
Tietbohl says volatility in decision-making among customers is what the distributor should be most concerned about. Preparation and planning are key ways to keep yourself visible to your customers and prevent customers from straying.
“You have to be proactive,” says Tietbohl, “and think in advance of how you’re going to respond to that scenario. When a client threatens to go with a competitor, you need to know what your response is and how far you can go. Think through all the possible sales answers.”
Tietbohl suggests thinking of ways to repackage what you have to offer.
“In every industry items need to be sold at a certain price,” he continues. “Everybody who buys it knows what the price is. Accept that and find ways to sell things that nobody will know what the price is.” Selling synergistic groups of products is one way to bypass the extent to which customers know prices, according to Tietbohl.
Get Your Share
Slicing the largest piece of the market-share pie is the greatest challenge facing distributors in tough economic times, but those who do manage to do just that reap the benefits and can sometimes land ahead of where they started out. And distributors can learn — and subsequently adjust — from past mistakes.
A veteran of a few recessions, Bill Nourse, president of Brookmeade Hardware & Supply Co., Nashville, Tenn., says he now actively takes steps to prevent any severe fallout when times get tough.
For one, Brookmeade’s product line runs the gamut from jan/san to electrical supplies to air conditioners. He says the lines have great cross-over appeal.
“We’re very diversified and that allows us to escape a lot of the wild swings in sales,” Nourse says.
Brookmeade’s sales began to lag early last year and the company sensed an impending recession. When Nourse became worried, the company decided to take some measures to make sure it didn’t lose its footing.
“We have changed sales tactics,” he says. “We’re aggressively seeking new accounts and making sure that the service level to existing accounts is very high.” So much so, says Nourse, that competitors can’t steal customers very easily.
Nourse has also backed away from pursuing and selling new products.
“We’re sticking to the basics we know — repeat and repeat and repeat. We’re looking for new customers, not expanding the line at all, and watching inventory much more closely and trying to keep the service level high,” he says.
Giving the customer increased attention ranks at the top of distributors’ list when it comes to selling successfully in tight times. In fact many contend, once they become motivated and more effective at serving that customer, sales actually increase.
“Personally, I think it’s a good time to expand business,” says Tietbohl. “The people who are in tune are still going to do fine. You can potentially pick up market share if you do it right.” The client is open to anything that will make their life easier in a recession, Tietbohl explains.
Customer service becomes more important than ever during tight times, says Gary Edwards, vice president of Mr. Sweeper Stores, Atlanta.
“We stress making sure that we’re completely supplying the needs of the customer. If we don’t do that, they’ll go somewhere else for the product,” he says. Edwards says his company takes extra time and care to introduce new products to the customer, and in their retail stores, they put effort into rotating displays more often to give a fresh look to products they carry.
“You can pick up extra business just by selling more to the same customer,” Gary Edwards says. “What you need to concentrate on is making sure customers are being contacted, and needs are being taken care of,” he adds.
“Ask them what their fears and issues are and use that information to predict what’s going to happen,” Jeffrey Edwards advises. “Determine what impact that will have on their order next month.
“You have to build a solid relationship with those who hold the purse strings,” he adds.
Chuck Micek, vice president, operations, of Mid-American Research Chemical in Columbus, Neb., says his company tailors sales strategies in an effort to provide added value to the customer. He says the bulk of it is education. In leaner times, customers don’t have as much money, so they’re looking for any deal they can get their hands on. Demonstrations are a must to get the idea across, says Micek.
“If you’re not separating yourself out in the marketplace, you’re just another commodity,” Micek adds. “Demonstrate, tell them the price and ask for the order.”
Micek’s company, like many others, has ongoing training programs for its salespeople.
“Our way of selling is to sell a system,” says Beacon’s Champagne, “and that’s exactly what we do. We don’t talk about commodity toilet tissue or towels, but the fact that the overall system aids in appearance and labor.”
Getting customer opinions, polling, and spending more time than usual talking with customers will lead distributors to a relationship level that will prove fruitful in recessionary times.
“Go out and talk to clients,” says Tietbohl. “Call up 10 of the best clients and look at what they buy. What do you think goes together? The point is if you can find ways to creatively put together packages that your competitors aren’t, and promote those to your clients, that will overcome some of your margin erosion.”
Distributors want to be able to offer them a savings in time and money, Tietbohl says.
“The biggest thing is to recognize that they’re in business to make their customer successful,” says Alchemists’ Edwards. “They should focus on their customer and the fact the customers are frightened. If they’re going to do something that will make their [the customer’s] employees lives a little better, then they’ve got a friend for life.”
“Solution selling is something that’s really important in a recession if you can teach people that buying your products in a certain combination will save them time; that’s going to mean something to the client,” Tietbohl adds. Look outside your given geography for prospects, too, he advises. Don’t limit yourself in any way.
Being diverse in your product offerings is another way to keep your head above water during tight times, distributors say.
In the ‘70s, Gary Edwards says his product line was very equipment-intensive, and during one of the first recessions in the company’s history, it proved costly when equipment sales dropped drastically. “Not only did we expand the line, we diversified our customer base.” Product diversification allows you to fulfill every customer need. Distributors can sell systems or packages, plus ensure customers are — at the very least — buying mainstay necessities. They then have the opportunity for the upsell.
During economic hardships, some business aspects definitely have to suffer, especially when your salespeople’s attention rests so heavily on meeting the needs of the customer. Cost-cutting among distributorships comes in a number of forms. For Nourse, Brookmeade cut back on their new-product pushes, and stuck with the tried-and-true. They also switched cell phone plans, postponed buying new delivery trucks and computers, sent fewer people on costly business trips, and cut out a lot of expenses that could be considered perks or unnecessary expenses. But he made sure to keep his service and inventory levels high, he adds.
Tietbohl says ignoring technological investments during any economic climate is scary, but he says most businesses don’t back off once they begin to see its importance and adopt new capabilities accordingly. And he says they shouldn’t, since technological advances are devised to drive inefficiencies out of systems.
“There are going to be gradual increases and you will find people are going to spend money to maintain their relative position [of technology level compared to others].”
Another recession sales strategy Nourse used last year was adding two new salespeople whose only focus is on procuring new accounts.
“We’re also experimenting with the idea of using Fridays for blitzing new people — or having [salespeople] go out and see only new people. We’ve picked up some sales from that,” Nourse says.
Tietbohl advocates giving salespeople more freedom. “Somebody on the front line needs to have the ability to make immediate decisions within a certain scope,” he says.
As with many business facets, planning and preparation may set your business apart from the competitors, and it’s especially important in turbulent times. Identifying your strengths and weaknesses is part of that forethought.
“[Distributors] need to make an assessment of who their logical competitors are. They need to look and think about who are the stronger players and the weaker players,” says Tietbohl.
“Take a good look at your clients and make an effort to figure out why your clients have bought from you in the past and why they buy from you now,” he continues. “Buying from inertia is not a good thing going into a recession.”
Maintaining operable inventory levels is also very important. Nourse believes in keeping inventory levels fairly stable, regardless of the economy, to keep up the customer service aspect. Cleaning out excess products that are just taking up space is also important in maintaining efficiency. It’s a fine line, but when times get tough, customers purchase on a more erratic basis. Distributors need to be prepared to accommodate them.
The distributors SM interviewed say that although they realize business has its share of ups and downs, that for the most part, this most-recent economic stumble has barely affected them. They say their businesses remain strong, and they will continue to employ many of the sales tactics that have landed them in their current position, and take the ups and downs as they come.
However, the prospect of sunny skies suddenly turning gray is certainly out there, and distributors best keep a watchful eye and a strong grasp on where their businesses stand. To recession-proof sales, distributors need to do some legwork. To assume their business will run uninfluenced, regardless of economic environment, is a mistake.
“Certain things are fairly constant and you can anticipate this downward spiral of perceptions that makes it sound worse than it is,” says Tietbohl. “The saner heads realize things are a little tough right now, but the reality is that it’s not that bad.”
• Alchemists International
Results-driven organizational transformation
• Business Dynamics Inc.
• Project 518 Inc.
• TRC Associates
Client and opportunity development
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