October 8–11, 2019    McCormick Place    Chicago, IL USA    Pure Processing. Proven Results.

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Sales margin

The 2018 FPSA Sales Conference will feature two days of education and networking to help you accelerate sales growth and improve sales performance and results. Learn more.

“Margins, margins, margins!” This is a common lament in the food and beverage processing and packaging industry, where margins are famously tight and the capital expenditure growth rate is low. At the same time, the cost of making equipment is constantly increasing, leading to a seemingly permanent state of margin compression.

“But, we can’t allow ourselves to make the mistake of believing it’s all about margin compression,” says Mark Hunter, aka The Sales Hunter. “If you deliver value, you won’t be victim to margin compression.”

Hunter is an expert at teaching sales teams to deliver value. He spent 18 years in the food industry in sales, marketing, and operations, first at a privately held meat company and then at Pillsbury, General Foods (now Kraft Heinz), and Conagra. Since 1998, Hunter has been conducting training programs and delivering keynotes on leadership and sales with a focus on the consumer packaged goods industry. He’s also the author of two popular sales books: High-Profit Selling: Win the Sale Without Compromising on Price and High-Profit Prospecting: Powerful Strategies to Find the Best Leads and Drive Breakthrough Sales Results.

This September at FPSA’s Fall Sales Conference, Hunter will speak about breakthrough strategies that can help salespeople avoid the margin compression trap.

“Too many companies end up with bad customers because they start with bad prospects.”

One of the biggest mistakes Hunter sees salespeople make is courting the wrong prospects by offering discounts upfront with the idea they’ll extract more margin down the road. “That never happens,” he says. “If the client doesn’t have profitable potential from the beginning, don’t think for a moment that you’re going to create more margin once you get in. If the customer can’t see the benefit you’re bringing to them, then you’re wasting your time.”

So, how do you quickly figure out if a prospect represents a viable, profitable opportunity?

“It comes down to understanding what the customer values and the outcomes they’re looking for,” Hunter explains. “Too many times, salespeople tailor their presentations around capabilities, whether that’s processing faster, increasing shelf life, or so on. But the company you’re looking to sell to may not value those things. You need to align your offerings with what your customer is looking for.”

He gives an example of what’s happening on the packaging side of the industry. “A lot of companies today are selling unbelievable packaging solutions. The problem is that their customers and their customers’ customers (i.e., consumers) don’t value packaging solutions. The supply chain needs to do a better job of understanding what’s being valued on the kitchen table and then work their way back upstream. When you do that, you can come up with better solutions.”

“Create trust and force discussions by asking questions your customer can’t answer, and you can’t answer either.”

The secret to understanding what your customers value lies in asking the right questions. To Hunter, that means asking questions you don’t know the answer to yet. It may be uncomfortable, but it’s the only way to start a discussion.

As an example, an ingredients supplier might ask a prospect: “Do you know what the nutritional breakdown truly is after 18 months or is it just speculation?” Hunter notes that many expiration dates are set based on corporate policy, but that policy may not accurately reflect the nutritional breakdown or how the food item will taste. Digging into these issues will help the processor and supplier understand what elements are causing nutritional fall-off.

“If we’re going to get to high, or even stable margins, we must have these uncomfortable conversations,” Hunter says. “Hopefully, you’ll get the customer to say, ‘I’d never thought of that before.’ Now you can help them figure out a plan.”

The risk of not having these uncomfortable conversations is becoming a commodity. “If you’re buying from me purely for my ingredient, I’m just a commodity and I’ll be traded out in a heartbeat. As the salesperson, I need to be part of the value equation. Otherwise, what am I doing there?”

Hunter suggests that food industry sales teams look to the pharmaceutical industry for inspiration. “In pharma, once you’re spec’d into a particular product, you’re in for life. The only way to do that is by being a critical element in the process and providing something that can’t be substituted.”

These types of conversations also help salespeople build trust. “Trust is currency. Prospects will only share that level of information with you if they have confidence in you.” Hunter has experienced the impact of trust on both sides of the sales relationship. He notes that when he was at General Foods, there were some suppliers they would never let into their research labs, but others who they would because they’d established trust. As a salesperson, Hunter gauges trust by the level of proprietary information the prospect is willing to share. “If they’re not willing to share proprietary information, then they are totally a price customer,” he says.

“If you didn’t help write the RFP, you’re never going to earn the RFP.”

Speaking of price, Hunter warns against bringing it up too early in the conversation. “Don’t bring up price until you truly understand the outcomes that the customer is looking for. That doesn’t mean the quantity, but rather what they’re trying to achieve. Never put price on the table before that. If you do, then they will only shop on price.”

This gets back to being part of the value equation so you can be spec’d into the RFP. “If you didn’t help write the RFP, then forget about it. All your prospect is doing is shopping for a price point so they can use it against the person they really want to buy from.”

Read more about when and how to bring up price in Hunter’s blog post on the topic.

“Don’t let your pipeline become a sewer line, and make sure your sales efforts are aligned with your production capabilities.”

Ask questions, provide value, be an integral part of the process — these are well-known strategies to be successful in sales. So, what’s standing in the way of salespeople implementing them?

One of the biggest obstacles Hunter sees is management. “Management tends to get on people for the wrong things, like how many projects are in the pipeline. But if you have too many things in the pipeline, it becomes a sewer line. The sales manager needs to say, ‘If this project  doesn’t have an X% chance of coming to fruition, then get it out of the pipeline.’ That doesn’t necessarily mean you ignore it completely, but it does mean you don’t spend your time on it.”

Another problem Hunter sees often is a misalignment between sales and production. For example, a sales manager will say, “All of my salespeople are trying to bag an elephant [i.e., make a huge sale], but if we did bag an elephant, we don’t know what we’d do with it from a production standpoint.”

This problem is especially apparent at reporting time, like the end of a quarter. “The problem is that goals and KPIs aren’t aligned,” Hunter says. “Sales needs to make its quarterly number, but manufacturing works 24 hours a day, 7 days a week. They don’t know what a quarter-end is. If they were to get a big surge at the end of the quarter, they wouldn’t be able to handle it. It’s management’s job to ensure the sales team’s efforts are aligned with the company’s own supply chain.”

“Sales suppliers need to understand consumer behavior as well as the dynamics of the industry.”

Finally, Hunter notes the importance of responding to changing consumer tastes. “We’re seeing a change in consumer behavior like we’ve never seen before,” he says. “Trying to stay ahead of that curve is a huge project. Branded CPGs haven’t done a good job with that, and they’re now willing to admit it.” He urges suppliers to be faster in understanding where consumer preferences are going so they can better support their customers…

…which brings us full circle to not falling victim to margin compression.

“Look at the amount of money consumers are spending on organic fresh produce,” Hunter says. “It costs dramatically more than traditionally produced produce. And yet consumers are willing to pay if we deliver the right value. The same is true across the food and beverage processing and packaging supply chain.”

Hunter will be speaking to all of these topics and more at the FPSA Fall Sales Conference in Chicago on September 17-19. Reserve your spot.