On a global scale, foodservice distribution companies are facing massive industry disruption. M&A activity, cash and carry, private-label product competition and a customer landscape shifting toward consolidation are pushing company leaders to find new, innovative strategies for profitable growth. In fact, according to a report by The Hale Group, by the year 2020, nearly 80 percent of operator purchases will be centralized by GPOs and chains.
This shift in the customer landscape paired with the massive complexity in a typical food distribution business has made it increasingly difficult to maintain margins and grow revenue. As a result, food distributors must find new ways to combat these challenges.
Pricing is by far the most effective profit lever available to any company. In food distribution, success means offering the broadest product line possible, while also getting paid for the value-added services you provide. However, setting and realizing the best price for each and every selling circumstance isn’t straightforward. Cost volatility coupled with the sheer number of products, product categories and customers makes it nearly impossible for sales reps to set and quote a market-aligned price for each and every transaction.
Smarter company growth in the foodservice distribution industry hinges on how well-equipped sales reps are to quote profitably. It also hinges on sales reps’ ability to identify customers with the greatest propensity to defect or buy more. Through the use of prescriptive analytics, foodservice distribution companies can provide sales reps with actionable pricing and sales guidance to determine which customers they should call, what products they should pitch, and what prices they should quote to achieve the most profitable outcome.
However, two common myths in the foodservice industry often keep companies from implementing pricing and sales guidance programs:
Myth #1: “Experienced salespeople won’t use guidance”
It’s a common belief that sales reps with many years of experience are so set in their ways that any guidance provided will be ignored. Distributors have often tried internal initiatives to generate and provide sales and price guidance with very limited success or field adoption. Yet, sales reps continually fall back on nothing more than gut instincts to deal with the thousands of order guide lines that can potentially be re-priced each week. The subjective decisions that result hurt business as well as sales rep paychecks. The reason those internal attempts at analytics fail is simple – low quality. If guidance is not relevant, effective and easy to use sales will not adopt it. Analytical models need to account for key factors like cost volatility, competition, product portfolios, regional differences, buying patterns and customer price sensitivity. Without this level of sophistication, sales reps are burdened with decision complexity that they are not equipped to handle. The result is customer churn and shrinking margins.
Myth #2: “We can continue the way we have been doing business”
Another common mistake companies make is to dismiss recent developments as more change they can weather through. After all, they have survived through other changes in the past. You need to look around. The most respected and forward-looking of your peers have already embraced advanced analytics as a strategic capability and are benefiting daily from its use. These companies are able to thrive on the opportunities that recent market changes present. They have higher fidelity between corporate strategy and field execution. Yes, you can do things the old way, but are you setting yourself back from your competitors?
Prescriptive pricing and sales guidance can significantly minimize today’s challenges and transform how companies run their business in the future. Prescriptive pricing guidance allows foodservice distributors to quantify the potential profit and revenue tradeoffs associated with price changes to maximize financial results and minimize risk. Prescriptive sales guidance identifies actionable cross-sell and retention opportunities for every customer and product across a salesperson’s entire book of business.
Ultimately, by enabling sales reps to make smarter pricing and sales decisions, food distributors can combat the challenges facing this industry to achieve sustainable profitable growth.
About the author
Vishal Asatkar is a business solutions consultant at Zilliant, guiding prospective customers to see the value of applying optimization technology to their pricing and sales processes. Having worn different hats at Zilliant in the Services and Sales teams, Vishal brings multiple perspectives and deep experience in several industry verticals. His prior experience includes various roles at pioneering technology companies in the online B2B marketplace and SOA space, as well as in retail banking solutions for Citibank EMEA. Vishal earned a bachelor’s degree in Science from Nagpur University and an MBA from Mumbai University.