What can the diamond trade teach us about LBM sales? More than you might think. The distribution and sale of these precious gems exemplifies the importance of having a systematic approach to qualify and grade your assets and, in turn, maximize their worth. By looking at the prospects in your territory as “assets,” or diamonds in the rough, you can develop a similar approach that will help you to measure the value of current and potential business and dramatically improve your time-and territory-management skills.
The De Beers Group, based in South Africa, has a tightly controlled monopoly on the world's diamond resources. Its grip on the distribution network is so powerful that international distributors must wire millions of dollars prior to the shipment of an order to buy the stones. There is no negotiation or product selection for the customer, but rather a simple transaction in which the customer invests millions of dollars solely for a box of rocks sight unseen. The success of the distributors is therefore contingent on their ability to classify and resell the jewels for a maximum yield in order to achieve a satisfactory return on their investments, in much the same ways that organizations must qualify and maximize the value of prospecting opportunities and repeat business in the sales field.
A diamond distributor begins the process by establishing subjective measures of quality that individually rate each gem in their inventory. (The diamond rating system includes four basic criteria called the “four Cs”: cut, color, clarity, and carat.) The distributors know that their ability to maximize ROI will require them to sell the highest quality diamonds at the highest prices, gems of secondary quality at secondary prices, and so on. Imagine if a distributor simply put all of the diamonds up for sale at the same price with no regard for their different properties. Naturally, this would completely destroy the diamond profit model in a hurry.
The scenario is no different for outside salespeople who operate in the lumber and building materials supply industry. A salesperson's “box of resources” is his territory, prospects and customers are the gems, and time is the financial resource that must be allocated. A salesperson who ignores valuable prospects or improperly allocates time with second-rate customers is committing the same mistake a jewel distributor would make if he were to improperly evaluate or, worse yet, disregard the quality of gems in inventory when pricing them for resale.
All businesses are not created equal; without a useful list of criteria to rate prospects and customers, a salesperson runs the costly risk of misallocating the most valuable resource available—time. Like the diamond industry has four Cs, there are characteristics that determine the value of a prospect, including purchasing volume, long-term potential, loyalty, profit margins, timely payment of bills, and the cost of doing business. A salesperson may choose to add or deduct from this list, but must certainly recognize that failure to establish a method of evaluation in this area may lead to a significant waste of time.
For example, a Sales Leader, given the choice of a slow-paying, low-margin customer that requires high levels of service versus a high-margin prospect with long-term potential, wisely trusts his rating system and allocates his time so that the most profitable prospect can be pursued. The factors that go into evaluating the worth of a customer or prospect are not as nebulous as you might think. It may not be an exact science, but a systematic approach enables you to make better use of your time in the field.
Exact science or not, identifying some of the characteristics you seek in your ideal clients will help dramatically improve your vision and time management. For instance, a customer that will purchase 25 house packages of material on a one-time basis may not be as valuable as a loyal customer that will purchase 10 house packages of materials annually over the next 15 years. Most salespeople would rather have a loyal customer than a large onetime sale. So, in this case, loyalty and long-term potential are the measurable characteristics that make the 15-year client worth more.
Polishing Your Performance A Sales Leader that thinks like a sophisticated diamond merchant examines his prospects carefully and allows his or her actions to be guided by rational thought and logical comparisons of time-management opportunities. Try the following if you want to be a better manager of your box of resources:
Strengthen your vision by identifying the criteria you desire in a perfect prospect. The characteristics I described earlier in this article have always worked for me, but won't be an exact fit for everyone.
The type of customers you seek may differ as a result of market factors, company capabilities, or personal preferences. I always preferred to target small- and medium-volume accounts that offered good margins and created more stability in my overall sales volume than big builders. With a large number of medium-size accounts, if I lost one it did not impact my bottom line. But you should carefully consider what works for you. For example, many other salespeople need to work with larger-volume customers in order to adapt to their local market conditions.