Expanding Revenue Growth Levers for Chemical & Specialty Distributors

Four Levers to Achieve Profitable Growth

Profitable revenue growth is imperative for chemical and specialty material distributors, but achieving growth targets remains challenging. Consistent organic growth requires distributors to:

1. Drive new logo acquisition
2. Sell more to existing accounts
3. Expand the portfolio to serve new and existing customers with value-added, higher-margin offerings that differentiate themselves in a highly commoditized space
4. Support these initiatives with new sales talent who will replace retiring long-tenured sellers

Chemical and specialty material distributors need to focus on these four levers to achieve profitable growth in today’s market.

Drive Focus on New Logo Acquisition

Historically, sales representatives served as the keepers and nurturers of long-term customer relationships, and the mandate of the sales representative was to primarily protect existing revenue and, to the extent possible, grow share of wallet in these accounts. However, this came at the expense of landing new accounts as sellers were left with limited time to dedicate to hunting efforts. Additionally, organizations had compensation plans that paid on total volume rather than growth, further exacerbating the issue.

An organization can increase its focus on new logo acquisition in two ways:

1. Offload sales support activities from the core sales role to other resources
2. Deploy hunters specifically focused on landing new business

To understand which activities should be off-loaded, organizations should survey their seller population to understand how they spend their time between high-value account development and persuasion activities versus customer service and administrative activities. These non-sales-related activities, while important, can be executed by other resources giving the seller more time to dedicate to new logo pursuit efforts without compromising the expansion and retention of existing accounts.

Another way to drive focus on new logo conversion is to deploy hunters specifically focused on landing new logos. These resources are tasked with identifying and breaking into whitespace accounts while current account managers farm the existing account base. This dual-pronged coverage approach hinges on the distributors’ ability to clearly define role responsibilities and rules of engagement to ensure a seamless customer experience.

Regardless of an organization’s chosen approach, performance management tools, particularly sales compensation plans, should reinforce the ideal seller behavior. If an account manager is tasked with growing and managing existing accounts as well as converting new logos, then their sales compensation plan should reflect both revenue motions.

Leverage Data and Insights to Target and Prioritize Accounts

Traditionally, distributor sales reps spent a disproportionate amount of time with a select few accounts representing the lion’s share of their territory revenue. The balance of the accounts in the territory, which often represents significant growth opportunities, remained reactively managed. To ensure sellers are actively working their entire territory, organizations need to review account lists regularly to ensure the accounts in seller’s patches warrant coverage.

Distributors should leverage their Revenue Operations function to provide data and insights on which accounts the sales reps should prioritize. The first step is to leverage data and analytics to estimate account potential based on data inputs such as cross-selling opportunities and firmographics. These data inputs coupled with management insights on target accounts will serve as a foundation for effective account segmentation. Once accounts are segmented appropriately, sellers can prioritize their time on accounts with a high propensity to purchase. In addition, distributors can drive coaching, focusing on managing the territory and developing a management cadence that reviews account plan progression for target accounts.

Deploy Specialist Roles to Sell the Full Portfolio of Offerings

As distributors look to differentiate themselves by selling non-commodity products while increasing margins, leaders often leverage product specialists to help provide expertise in the sales process. These specialists bring deep technical knowledge and the ability to articulate value propositions for multiple offerings, bringing expertise from specific industry segments to the table.

To effectively leverage specialists’ resources, distributors should clarify the role of the account manager or account owner and the specialist, as well as the rules of engagement. Additionally, it is important to identify the types of opportunities that warrant specialist resource engagement to understand the frequency and time commitment to determine the ideal seller-to-specialist ratio. This approach will ensure sellers are not fighting for specialist support, diverting attention from the overall focus on expansion. It will also avoid the overinvestment of having costly specialist capacity sitting idle.

Incentivize New and Long-tenured Talent with Growth Goals

Distribution companies have historically experienced low turnover and usually have a tenured sales organization which has helped them maintain and nurture long-term customer relationships. Not surprisingly, long-tenured sellers own many key customer relationships and accounts. While organizations deploy additional resources to ensure customer success, the need to preserve existing, valued relationships remains.

As the industry faces an aging workforce, distributors must attract and retain new talent to maintain customer relationships. Leading organizations recognize the need for new talent to thrive in their roles, so they are prepared to take on key customers as their more tenured colleagues retire. Organizations must ensure that these new sellers are assigned territories with enough current business and potential to generate enough earnings as they come into the organization. In most cases, companies will need to reduce large territories and limit the “land-lording” of accounts, balancing expected negative feedback from long-tenured sellers who will only agree if this doesn’t impact their earnings. Balancing new and experienced talent will require the sales organization to design a compensation plan that rewards growth over total volume, making it one of the few incentive levers that support overall strategic goals.

Conclusion

To achieve consistent profitable growth, leading chemical and specialty materials distributors are evolving from a historical focus on a few large accounts and relationships centered primarily around high-volume commoditized products to a more balanced approach across all revenue motions. This approach includes targeting new account conversion as well as expansion opportunities with value-added higher-margin offerings and within underpenetrated accounts.