Your salesperson comes to you with yet another special request. He has a potential new customer that promises to purchase all his millwork materials from you over the next 12 months—if you can accommodate some “special needs.” The builder wants pre-cut orders of materials at specific lengths and insists that he won't pay extra for this additional service. Your salesperson is lobbying hard for the sale because he has been short on his quotas the past few months. What do you do?
A. Tell the salesperson to sell the standard products or get a significant price increase.
B. Ask the production manager what he thinks.
C. Find out how many truckloads the customer promises to buy before you commit.
The business model that defines how your company operates should dictate your answer. If you answered A, you probably are doing a very good job of managing profits for a company that strives to standardize procedures. If you said B or C, then you may need to prepare for an internal battle among departments, but one that may be worthwhile.
One of the biggest sales challenges you will face occurs long before the negotiation battle begins with the customer: fully defining and understanding your organization's business model and then communicating it to your salespeople. In today's LBM supply channel, two prevalent business models exist: the Franchise model and the Adaptive model. While they often both work in tandem within an organization, the company usually must choose between the two in order to manage profits successfully.
Using the Franchise model, a business establishes firm (or relatively firm) parameters under which the company will operate, essentially training customers on how the two companies will conduct business with each other. While this seems an absurd statement to many salespeople, the reality is that, for many businesses, profitability is contingent upon this very premise. Companies that use the Adaptive model of business adjust their business practices to accommodate the individual requests of customers.
The Franchise model is proactive, while the Adaptive model is reactive. To illustrate how the two business approaches might be applied, consider the basic factors that a business offers its customers: product and service at a specified price.
Product implications of the two models. In relation to products, the Adaptive model can be a challenging approach for most dealers because it implies that a supplier continually is trying to provide exactly the products requested by customers. If 10 different customers ask for 10 different products, then the dealer will strive to accommodate those requests. Using the Franchise model, on the other hand, a salesperson is given a set menu of products to sell and must persuade customers to buy from this limited offering.
Service implications of the two models. In the area of service offerings, the Adaptive model is more costly than the Franchise model. A simple request for a special delivery, for example, has ripple effects throughout an organization, e.g., extra work for order entry, shipping paperwork, an extra stop for the driver, and special coordination with deliveries to other customers. Conversely, the Franchise model establishes specific rules for delivery, customer pickup, billing procedures, discount terms, incentive programs, and other operational issues. The leaders within a Franchise model teach each sales representative that the cumulative costs of adaptation are strenuous. If 10 companies request 10 different cutoff times, the exact same challenges occur as if 10 customers requested 10 different products. Rather than create a smooth-running operation, the company starts reacting to daily requests that keep its sales and shipping staffs guessing and on edge. The costs might not be as easily quantified, but they are quite real.
