Helping Manufacturers And Distributors
Improve Sales Performance And Profitability
Published by the Industrial
Performance Group, Inc.
800-867-2778
Issue
No. 40

Making It Right vs. Getting It Right

Our year-long study of what consumes a salesperson's time, revealed two very different philosophies regarding how manufacturers and distributors deal with problems and mistakes.

One group of manufacturers and distributors concentrates on doing everything humanly possible to make things right for their customers, after a problem or mistake occurs.

These organizations tend to be so focused on making it right, that they fail to realize they are dealing with the same problems and mistakes over and over.

The most common problems and mistakes identified by our research are:
• Purchase orders that don't reconcile with quotes and invoices
• Invoices that don't match what was actually delivered.

Many of the manufacturers and distributors who live by this philosophy truly believe that making it right, after a problem or mistake has occurred, is how they add value to their customers.

There is another group of manufacturers and distributors who are focused on doing everything they can to get it right for their customers — the first time. They work together to prevent these common problems and mistakes from occurring.

Both groups contend that they are acting in the customers' best interest. However, when you look at how making it right impacts the balance sheet, you will quickly see which philosophy makes the most business sense.

The true cost of making it right

No one will dispute the intent behind trying to make things right for a customer when a problem or mistake occurs. It has to be done.

However, when the same problems and mistakes occur over and over, this approach can have a huge financial impact on the manufacturers, reps and distributors involved in making it right. Not to mention the negative impact these common problems and mistakes have on customer confidence and loyalty.

The best way to understand the true cost of the making it right philosophy, is to provide an example.

Let's say a customer orders 250 blue widgits and is quoted a price of $10 dollars per widgit. The customer is also given a delivery date two weeks from the date the order is placed.

So far so good.

The customer assumes that their basic needs will be met. In other words, they expect that they are going to get what they ordered, on the date promised and that the paperwork will be correct.

The salesperson assumes that the order is being processed, so they move on to other sales-related activities.

Two weeks later.

The order arrives on time, but the customer quickly realizes they have been shorted 50 blue widgits. They also discover that they have been invoiced for 250 widgits at a price of $10.25.

The customer's first response is to call the supplier's customer service department where they are greeted by that all too familiar recorded message: Thank you for calling XYZ corporation. All of our customer service representatives are busy helping other customers. Your call is important to us, so please stay on the line. After waiting 10 - 15 minutes the customer hangs up and does what every resourceful customer does next, they call their salesperson.

As soon as the salesperson answers this call, they stop selling and they start trying to make it right.

Our study revealed that the average salesperson spends 11 weeks out of every year dealing with situations similar to the one described above.

According to compensation experts, the average cost to support a field salesperson is $460 per day. This amounts to $25,300 dollars per year, per salesperson.

This cost does not include the time-cost of all the other people who are involved in resolving these common problems and mistakes, including the customer.

In addition, the customer in this example is not likely to pay the invoice until they have received the missing 50 widgits and the invoice has been amended to reflect the price they were quoted. In some instances this can take months. During this period, neither the manufacturer, the rep or the distributor have their money. And nobody needs to be reminded about the importance of cash flow.

Aside from the "hard" costs associated with making it right, you also need to consider the opportunity cost. How much additional revenue could your salespeople generate during the 11 weeks each year they spend making it right, rather than selling?

See for yourself by visiting our Sales Performance Calculator.

The choice is yours

You can spend your time and money trying to make things right for your customers, or you can take action to start getting it right more often.

How much would it cost to prevent the situation described in the example above?

Much less than it costs to deal with the same problems and mistakes over and over.

If this is true, why don't more people take action to get it right the first time?

We've identified two barriers that keep manufacturers and distributors from getting it right.

1) They are too busy making it right to even think about trying to get it right.

2) They are unaware of the true cost of making it right.

However, an amazing thing happens when manufacturers, reps and distributors become aware of the true cost of making it right, they find the time and the money to start getting it right more often.

If you want to start getting it right, call us at 800.867.2778

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