How to Choose the Best CRM for your Distribution Company
CRM in the distribution industry manages different goals and requirements than the generic CRM software shared across many industries. For example, wholesale distributors business success measures are based on efficient and effective inventory movement.
The application software must bring visibility to inventory pricing and logistics, including trade promotions, deductions, negotiated (sales price) trade agreements and supplier rebates with bill backs, chargebacks, and SPAs. Yet most CRM software has little to no visibility for these things, leaving distribution managers and salespeople scurrying to other systems and unable to deliver real-time response to customers.
That’s why the best CRM for wholesale distributors includes key industry requirements such as simple and efficient order processing, pricing optimization to improve margins and supply chain visibility to improve inventory turns. These more industry focused CRM systems offer tools to respond to fluid customer demand, logistics disruptions, changing market boundaries and the need for improved cost containment. And they offer analytics to know when to expand into new channels and how to find the optimal balance among stockouts and overstocking to increase cash flow and free up capital that was previously tied up in inventory.
Start with the Most Important Business Objectives
When searching for the best distribution CRM software many novices compare technology features. That's usually a mistake as CRM software features and functions may or may not deliver business results. A smarter approach is to prioritize the most important business goals and then identify the CRM systems that best accelerate those goals.
For most distributors, the most important business goals are to acquire more customers, grow customer share, increase customer retention and lower cost to serve. In this post I'll drill down on these goals to share how CRM software can assist.
CRM to Increase Customer Acquisitions
Distribution is a sales-driven business. Improving sales productivity aids cost containment while improving sales conversions drives revenue growth. Here are several CRM software capabilities to do both.
Many wholesale distributors categorize their customers at a very basic level and based on what they buy. Customer segmentation can be used to better define customers by their growth objectives, complimentary products that they are not purchasing, profitability to the distributor, cost to serve and other factors that drive revenue growth and margins.
Effective customer segmentation identifies the most profitable customers, the customers with the highest probability for profitable growth and those that are resource drains. This allows distributors to focus their time and value-added services where they will be most effective.
360 customer view
Every CRM vendor claims to deliver a 360-degree customer view. But most don’t. At least not for distributors. What most deliver is a customer view with little more than company firmographics and contact demographics. What’s really needed is a complete and detailed history of purchases, fulfillment, returns, trade agreements, special pricing and profitability per order, item and customer.
To achieve a 360 customer view you need 5 types of customer data - demographic, transactional, behavioral, environmental and social. From my experience, when sales reps apply a complete 360 view, they improve productivity by 4 to 7 percent.
Salespeople spend time calling customers and meeting on site. They use that time to learn their customers goals and pain points, understand the tasks they do, review product mixes, suggest promotions, offer value-added services and most of all, build customer relationships. Everybody’s busy and customers don’t have much time so sellers need to make that time count. CRM software can automate the scheduling, routing, agenda points, proposed next actions and 360 customer view to minimize overall time and maximize productivity.
The most successful distribution sellers have shifted from good ole boy selling to strategic selling backed with a sales methodology. A sales methodology is a prescriptive but dynamic program of sales strategies, tactics and responses that systemically and predictably advance the sales cycle and maximize sales conversions. A sales methodology shifts your selling strategy from what you sell to how you sell.
Sales reps with disciplined sale methodologies always achieve higher sales win rates than those with informal sales methods. The best CRM for wholesale distributors is designed to integrate the sales methodology within the CRM activity and opportunity management records.
Optimized sales process
A repeatable sales process applies proven methods or techniques to advance sale opportunities through each step of the process. For example, it defines the investigative questions to qualify a sales lead, the path to align buyer pain with solution benefits, the strategy to create a win plan, the negotiation tactics to preserve revenue, the incentives to get the deal done and many other actions to win competitive deals.
The best distribution CRM software supports repeatable sales processes with guided selling tools. Many times, these are visual process workflows with branching or conditional logic that display Stages and Steps and can streamline sales cycles, facilitate repeatable processes and recommend best practices. These capabilities collectively accelerate sales cycles and increase sales conversions.
The combination of a sales methodology and repeatable sales process integrated with CRM automation can grow distribution revenues by high single digits or low double digits, depending on the particular sales methodology and sales adoption discipline.
Sales order processing
The order to cash cycle includes complexities not found in other industries. Things like complex trade promotions, SPAs, negotiated trade agreements, consignment inventory and supplier rebates with deductions, bill backs and chargebacks. And every one of these variables is an opportunity for either incremental revenue capture or revenue leakage. When CRM software helps automate these voluminous and complex interactions the distributor squeezes out more margin in the order to cash process.
Other sale order processing capabilities include mobile order entry, EDI, Next Best Offer suggestions and intelligence suggestions for up-sell, cross-sell, kits and bundles. CRM managed pricing can accommodate SKU proliferation and the voluminous item pricing from many suppliers to many customers.
The best CRM for distribution can do these things and also create fast, accurate quotes, easily convert quotes to sale orders, and monitor sale order progress through cash collection.
CRM to Increase Customer Share
Sales managers in most B2B industries allocate most of their sales efforts to winning new business. Wholesale distributors tend to focus more on growing relationships with existing customers. Most distributors earn an average of about 25% gross margin and 4 percent profit. Selling more products to the same customers lowers the cost of sale and increases slim margins. Here are two CRM software capabilities to increase customer share and financial margins.
Distributors keep customers happy with timely order fulfillment that complies with service level agreements. CRM for distributors helps deliver orders on time, every time, while minimizing shipping costs.
But it’s a difficult balance as sellers must work with their customers and partners to align inventory with fluid customer demand. The challenge is further complicated when managing more inventory (SKU proliferation) over more channels.
The best CRM for distributors responds to these challenges. Accurate order fulfillment starts at sales order processing with CRM software that displays real-time inventory quantities and available to promise. The order entry function can facilitate the pick, pack and ship process. It uses the sales and marketing apps as the front end to improve demand forecasting. It uses partner relationship management (PRM) to manage fluid customer demand and it provides tools to streamline VMI (Vendor Managed Inventory). It also offers seamless integration with ERP and supply chain systems so that all of these capabilities help get the right goods to the right place and the right time and at the lowest cost.
Order processing is incurring a sea change. Even small or unsophisticated customers expect to be able to place all or certain types of orders on demand, online, and with their mobile devices. And this demand will only increase as Millennials continue to fill procurement and inventory manager roles.
Adding to the challenge, customers expect more than just basic online commerce. They expect product details and rich information content. They expect the digital commerce site to know their reorder points, SPAs and service level agreements. And they expect to complete the entire process online and without having to speak to a person.
For many distributors, it’s not that they don’t do digital commerce, it’s that they don’t do it well. Delivering a poor online commerce user experience, or an experience disintegrated with customer pricing or agreements, or a standalone or discrete channel experience will invite customers to look elsewhere. It will also encourage customers to reach out to manufacturers or other sources and accelerate the disintermediation of the middleman. Fortunately, the best CRM software for wholesale distributors satisfies these essential digital commerce requirements.
CRM to Increase Customer Retention
Even with new customers coming in, company revenues, growth and valuation decline when too many of those customers leave through the back door. Two ways to increase customer retention are to offer online self-service and proactively engage customers at risk of defection.
Customers have lots of questions. They want to know things like "where’s my product?” and “why did you charge me this price?" or "why didn't I get the discount I got last time?” CRM customer self-service portals can answer these and other questions on-demand, 24 by 7, and without incurring customer service labor cost.
The best CRM software for distributors offers self-service knowledgebases, chatbots, virtual agents and other tools that when properly implemented can handle about 80 percent of routine customer service questions.
Customer churn prediction
The ability to improve customer retention delivers significant and sustained revenue growth. So, to aid that goal some CRM systems can automatically calculate customer health scores and use artificial intelligence algorithms to identify customers most at risk of churn.
Even better, these systems can identify the root causes of churn. That's powerful because knowing why customers churn is more important than knowing which customers will churn as it allows companies to fix the causes of churn and prevent customer attrition before it happens.
The Top 4 CRM Systems for Wholesale Distributors
I've been implementing CRM software at distribution companies for three decades, and a frequent question I’m asked is, “What is best CRM for distributors?”
The short answer, based on market share, industry fit and my experience is Salesforce, Microsoft Dynamics 365, Oracle NetSuite, and SAP CRM. The longer answer and a deeper analysis is available at the top four distribution CRM systems.