As more businesses buy more things online, particularly commodities, the role of sales reps will evolve. B2B commerce veteran Scott Benfield shows what’s ahead for sales reps and how they will bring value to customers.

Avon Products, the well-known cosmetics company, has been in a stock dive for the past decade. Ten years ago, the stock listed around the $45 range. It recently closed at $4.74.  Arguably, the stock’s decline was signaled decades before its fall. 

Avon Products came to prominence in the 1950’s and 60’s with the door-to-door sales call to the American housewife. However, as more women entered the workforce in the decades that followed, the sales force was, to a large degree, obsolete. More efficient models of distribution and solicitation emerged: department stores, grocery and drug stores, and eventually e-commerce. Avon was far too dependent on a go-to-market presence—the personal sales call—that was too expensive and had to be synchronized with the buyer who, increasingly, was not at home during daylight hours.

The B2B seller in a growing e-commerce world shares much with the Avon sales force. Today’s industrial buyer role multi-tasks with less available time to perform the purchasing function and see sellers. Moreover, many B2B products are price-sensitive commodities where there is a finite number of acceptable vendors with nominal distinctions in performance. Hence, e-commerce, by offering buyers the ability to simultaneously review pricing, check stock availability and place an order, is well-suited to the hyper-efficient and cost-sensitive B2B supply chain. 

Personal selling has long been one of the most expensive parts of the customer interface.  Manufacturer sales forces typically cost 2% to 4% of sales, and distributor sales efforts cost 4% to 8% of sales. These costs are figured into the cost of the product, which has a big chance of being a commodity in a world of global manufacturing and supply. In short, the cost of a personal sales call, lumped on to the price charged for a commodity product, can easily make that product too expensive. The direct cost of a personal sales call is $100 or more compared to an e-commerce transaction whose direct costs are $5 or less. 

The upshot of e-commerce in the B2B sector is that it brings significant transaction efficiencies to the existing supply chain. No small part of these efficiencies are due to the differences in a sales-supported transaction versus digital commerce. Hence Forrester’s prediction that one million B2B sales positions will be lost by 2020 is well-founded and prescient.

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The B2B sales force will survive e-commerce, but it will undergo substantial change. Following are the top five changes underway.

1:  Territory allocation changes from geography to value

In yesterday’s world where sellers were the communication vehicle to get products to market, the geographic territory made sense. It minimized distance and drive time in between calls. The web has no geographic restrictions and A.P.R.’s (areas of primary responsibility) are increasingly anachronistic to the web buyer. Geographic allocations for sales territories make less and less sense in a world of digital commerce. The territory allocation will favor more the value proposition of the sales force. For instance, if a seller has a unique product/application expertise, the role of the sales rep is a technical expert. There may be continental territory boundaries that reflect the value of the technical expertise, but only when an on-site visit is justified.

While there will always be a geographic component of a sales territory, the boundary setting will be more a result of value-added service, culture, language, and international relations.

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2:  Margin dollar compensation moves from total volume to specialization

Most field sales forces are paid part or all of their compensation on the territory sales volume. Compensation is typically a percentage of gross margin dollars in a time period. The cost of rewarding sellers on commodity sales, however, which are often 60% to 70% of sales volume, is redundant. It is simply too expensive to pay sellers on total volume when they do not confer value to the commodity portion of the sale. Therefore, compensation will reflect new sales definitions as more commodity purchasing takes place through self-service e-commerce, and sales positions move further into areas of value differentiation. Field technicians will be paid by the job or by the hour, consultants paid by the proposal, and product specialists will typically demand hourly compensation and product commissions.   

3.  Sales roles move further into the value chain

Sales forces will also move further into the value chain to drive demand through product application expertise, consulting, start-up assistance, field service and other roles. In our 2013 research on non-product-based sales staff roles, we found that nearly half of B2B distributors had sales revenue from consulting, field service, and advisor- based work, and they expected these revenues to grow.  

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4.  Social Media is required to keep customers and find new ones

B2B customer relationships are comprised of intricate, firm-to-firm interactions that often number into the thousands in a time period. There are numerous points of expertise and contact, post-sale that keep the relationship running smoothly. Online chat, texting, and phone conferencing have increased immensely between seller and buyer. Video for product application is growing as the cost of production comes down and we find more and more prospecting done online with LinkedIn and Facebook.

In today’s world, the use of social media and associated communication is a growing part of the solicitation spectrum. It is far more efficient and effective than earlier technologies.

5.  Sales force reorganizations become more common and more complex

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In the product- and geographic-centric sales effort of yesteryear, the sales organization was more often than not static. Territory configurations, compensation changes, and product expertise were done in time intervals, and these often lasted for several years before companies made major changes.

As transparency increases, production globalizes, and product lifecycles compress, the roles, configurations and compensation of sales representatives will change more often. Today’s B2B customer and supplier relationships, aided by Internet technology, allow cross-firm communication in any number of areas. The sales rep role, especially the support role, will become more diffuse but more valuable. The costs of reorganizing sales staffs will increase as more functions support solicitation such as customer relationship management and I.T. assistance.

In an online world, geographic sales forces, product generalists, and one-size-fits-all compensation systems are relics. They are too expensive and ineffective. Digitization of the supply chain requires significant changes in sales management, including new value definitions of the sales role, stepped up use of social media, and cross-functional changes as the sales force is reorganized.

Scott Benfield is a consultant for B2B supply chains in areas of e-commerce, digital marketing and sales. He can be reached at [email protected].

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