The Lab Supply Sales Rep Changing Roles
The Lab Supply Sales Rep Changing Roles
In this post we will take a look at the lab supply sales rep. What do they do? What makes a “good” rep? Do customers want reps to make actual sales calls in the age of the internet?
A Little History Lesson
In the 1970’s, reps were the only way you could place an order other than calling over the phone and paying retail price. Reps carried big bags (it is documented that some reps' dominant arms were actually longer from carrying these giant bags!) with all the catalogs. In that bag were two important 4-part forms. The order form and the credit memo / return goods form two parts of which were mailed back to the office each day.
On the customer side, there was the order book. This was the equivalent of today’s grocery list. The holy grail for a rep was to be handed the order book and told “get me everything I need.” This seldom happened. More often, many reps called on the same customers and traffic jams occurred at times from all the reps waiting for their shot at that order book. Keep in mind that in 1970 there were over 10 national distributors (remember Aloe Scientific?) and many regional distributors all with sales reps out there pounding the pavement.
While most distributors had IBM mainframes, transcription errors, pricing errors, and picking errors were abundant. Thus the need for the credit memo 4-part form. These were not the good old days.
Introducing Mobile Technology
The two biggest needs were 1) improving how reps got orders into the office and 2) answering the question, “Do you have this item in stock?” Yes, way back then that was the key question!
The first attempt at solving the order entry problem was to provide the customer with a telephone that had a slot in the back where a 2 X 5” plastic card, punched full of holes, could be inserted. It was called the ASAP system. Each item was represented by a card and the quantity you wished to purchase was coded on the card. If you want something you didn’t have a card for, your rep was still the only way to get it or to produce a new card.
To solve problem #2, someone had the genius idea that sending microfiche cards out to all the reps along with a jewelers loup to squint through and read it would be a solution. It worked, but you can only imagine the pregnant pause while the customer waited for the rep to find just the right item on just the right microfiche. By the time they were received in the mail, the goods were likely already sold.
Fast forward to the PC and Blackberry days and, of course, the invention of the modem and the internet. The main benefit to the rep was that the 50 lb bag was now just parked in the trunk of their company car. (Yes, reps actually had company cars up into the ‘90’s.!)
The Decline of Dependency on the Sales Representative
From the short history lesson above, several things become apparent:
-The sales rep and his / her level of competency were extremely valuable to both the customer and the company.
-Knowledgeable, likable, and handsome/gorgeous sales reps dominated their respective markets, and earned very sizable commissions.
-Companies became extremely vulnerable to losses if a sales rep quit and went to work for a competitor.
-Customers became so dependent on their rep that their lab's ability to function could be seriously compromised if the rep left the company.
Solution #1 - Contracting
Hospitals started this trend. Many lab distributors got their start as one division of a much bigger company who provided a wide variety of things hospitals need. For example American Hospital Supply (later Baxter.)
The companies may have had a great rep in the lab but struggled to compete for the surgical business. So the idea was to bundle these into a single contract. Since most of the sales reps at that time were straight commission (their earnings were a percent of the margin generated) this dramatically impacted the earnings of the most successful reps. Many of them chose to leave in the first “wave” of resignations. A second wave took place in the mid-80’s.
This was a clear win for the big companies. These contracts locked out their competitors which were reduced from 10 to just 4 by the mid-90’s later to be reduced to two. They drastically reduced the commissions being paid out to reps and boosted the sales of reps in other areas of the hospital who had strong local competition. Many local hospital supply hoses were put out of business.
Today, contracting is still one of the most effective ways of locking out competitors and restricting the reps need to issue quotes. Companies once again had control over the majority of customer pricing and profitability.
Solution #2 - Reduce Rep Dependency
As outlined above, customer loyalty was a direct function of the rep. They were dependent on the rep to:
1.) Place orders.
2.) Find the needed item in that huge portfolio / bag.
3.) Solve problems.
4.) Provide competitive pricing.
5.) Host parties and sponsor 5k runs for the cure. (I.e., provide perks.)
The development of TCP/IP communications (also known as the web) along with years of pushing customers to order via the web took this function off the hands of reps. When all else failed, there was the 800 number.
Websites and Google made it a lot easier for customers to find what they need. Contracts kept them from shopping at some other online seller.
Solving problems can also be termed “Who you yell at when things go wrong.” That’s still a function that both the company and the customer agree that this is a rep function.
Pricing is one of those things companies have used technology to effectively straight jacket their reps. If you want / need a better price than the guidelines offer, you may need approval from the bosses, bosses, boss.
Perks are, sadly, a faded memory. Sarbanes-Oxley and a host of settled lawsuits coupled with huge sales rep compensation reductions mean the party is all but over.
Do you need a sales rep now?
If you are a lab manager reading this, I would like to first ask you if you have a receptionist? Most companies have an empty desk and a phone out front which on occasion has a list of numbers but in most cases does not. Caller ID identifies you as a lobby dweller.
Productivity is paramount and having a bunch of salespeople cold calling your staff is a surefire way to reduce productivity. But you don’t want to cut them off altogether! Sometimes you may NEED their help. The solution is to have a policy that says the rep must have an appointment to visit.
So how does a rep make an appointment? If they are a rep you routinely do business with and you have a need to speak to them - no problem. If you are interested in something a company has and you want a demonstration, you will try and arrange a rep to stop by with an appointment. If they are a rep working for a competitor to someone you currently buy from, how often do you grant an appointment? Companies recognize this problem and many have just given up asking reps to even call on labs that fall into this category relying instead on “Inside Sales” to handle your moribund account. Why? Because you are a waste of time to them even though you may be buying hundreds of thousands of dollars of products they can provide!
Putting things out for bid doesn’t fool most companies. They know that companies will award the bid to the incumbent over 90% of the time regardless of the offer made unless it is governed by law and made public. After all, they are thinking about productivity as much as you are!
To sum things up:
-Sales reps don’t do physical cold calling because customers have erected barriers designed to keep out any reps they don’t want to see. Email or phone calls are the method du jour and these have a notoriously low success rate.
-The internet is how people source products. When was the last time you bought something because a sales rep presented the product to you first?
-Sales reps make great punching bags and their main function is to solve problems when the rest of their team screws up.
-Sales reps may issue quotes but are hamstrung by their companies into how low they can quote.
Aren’t Sales Reps Supposed to Sell?
Imagine that you are a vendor who wants to sell truckloads of your product through a major distributor and that distributor said: “We would love to sell your products but we only have an online store.” Why would you bother giving them huge margins when anyone can set up a website and sell online?
Vendors are routinely entranced by the fact that these companies have over 400 sales reps throughout the U.S., Canada and the rest of the world are just itching to sell your better mousetrap.
This is why companies still fund a salesforce. Even today their main duty is to hand out flyers although today these may be PDF attachments to an email which you promptly delete.
A Small Percentage of Reps Do Bring Value
In spite of all I’ve said so far, the fact is that there are a small percentage of reps that are highly trusted by their customers. Reps that customers value, respect, like and rely on daily.
These reps have earned the trust of their customers. These customers have learned that a highly qualified, trusted, reliable sales rep can become a team member to the lab who you don’t have to pay!
Getting to that point takes time, luck, and customers who are willing to participate in their learning process by waving “come on in!” instead of “stay away, we don’t need you.” Admittedly it becomes very apparent after the first couple of meetings (not phone or Zoom meetings!) that the rep has what it takes to be worthy of your help.
Must a good rep make routine visits to your lab?
We no longer live in an era where the sales rep is your only interface with the company. The rep is one important component in a team effort. You may be visited by a sales rep but supporting him is a team of people that you will never meet who are just as vital to ensuring a steady supply of goods to your lab as the sales rep.
To answer the question posed above, a rep who visits your lab IS important. It’s the only way to cement relationships no matter how many phone or Zoom calls he/she is on. When you throw in the word “routine” the answer is different. Today you make the call on when a meeting should be accepted and it should have an established purpose when it has a reasonable chance of a mutually beneficial outcome.
Remember - Incumbents Rule
None of this will happen if you have a locked door policy. No matter how much your incumbent sales representative seems to be on your side, if you lock out all competitors or he/she even gets a hint that “their company could stand in the middle of 5th Avenue and shoot someone and still retain all your business” then they will take advantage of the situation. It may be too subtle for you to see and your rep may not even be aware.
Putting all your eggs in one basket, like putting all your barrels of bourbon in the same barn, are never good ideas. The biggest mistake you can make is to assume that because you have bought from distributor “F” for many years that your loyalty to them is mutual.
Unlike the past, a sales rep is just one member of the team needed to keep your lab up and running. LPS uses the team approach and every member of our team are as experienced and personable as the best rep that ever called on you.
Don’t rely on a contract or an incumbent vendor to ensure that you are paying a fair price. Realize that companies are always looking for ways to increase their profits. They are playing a long game and you are in their ballpark. By utilizing LPS, we will help you spot not only the areas you are overpaying but the areas where you may be getting a great price!
That’s the LPS difference. Unlock your door and see what a difference we can make in your lab.