Ulrich Dietze, Founder and Managing Director of Deutsche Vertriebsberatung GmbH, and Simon Schröder, Head of Sales and Marketing at encoway, in conversation about the impact of COVID-19 on the distribution of industrial goods.
What changes are you currently observing in industrial companies?
Ulrich Dietze: Ulrich Dietze: I have noticed two distinct trends. There are companies that are reducing all their costs and investments and waiting until the crisis is over. They are hoping that things will improve again in the future. Other companies, on the other hand, view the current situation as an opportunity. They are testing new methods to emerge stronger from the crisis and even to strengthen their competitive position. These companies regard the changing buying behaviour of their customers as a development that will have a long-term impact on their sales work and are open to new approaches.
In industries such as mechanical engineering, it would have been unimaginable up until a year ago to sell complex, highly technical machinery via web conferences. It does, however, work! There were, of course, some reservations at first. After all, an online sales meeting feels quite different to an on-site visit to the customer’s premises. However, many salespeople realise the advantages and potential of “new” selling. The decisive point is that the employees embrace it. It is also important that the sales team is trained in the new sales methods. If they are also given sales tools such as a product configurator to make it easier to offer products digitally, it is possible to achieve increases in efficiency that companies would never have expected.
“In industries such as mechanical engineering, it would have been unimaginable up until a year ago to sell complex, highly technical machinery via web conferences.”
Simon Schröder: “Change occurs as a result of crises” – this is also true in the current situation. Our existing and prospective clients have become more aware of the impact that a lack of digitisation will have on their future business. Toni Feldinger, Head of Business Process Management at our customer SKIDATA, summed up the investment in sales digitisation at the access systems manufacturer very well: “In this way, we are preparing ourselves for the upswing after the crisis, because as we see it, digital sales processes will then be even more decisive in order to achieve ambitious growth targets.”
Especially in mechanical engineering, we are experiencing a major change. In the past, digitisation projects were often put off. The order books were full and capacity utilisation was high. Now, however, mechanical engineers have the necessary breathing space to tackle projects head on. The willingness to experiment has also increased. Suddenly, the idea of making your own portfolio accessible to customers with the help of web configurators is no longer so far-fetched. During the first weeks of lockdown, many projects were postponed and budgets were frozen. Now, however, we are experiencing an investment run. Companies want a sales solution as soon as possible with which they can ensure a professional sales operation – a solution that also works for those working from home. Not least because they can see that the competition is not sleeping either.
Is what you are seeing only related to the current situation with COVID-19?
Ulrich Dietze: Most of this has nothing to do with Corona. It is more to do with shortcomings in recent years, which are now being rectified. Some sales managers used to think that their staff were able to sell effectively and that they didn’t need to train them to do so. In times of high demand, it is always easier to generate orders as long as the product is marketable.
Many companies have not felt the need to analyse and enhance their sales processes. However, it is no secret that reaction times, demand analysis and the quality of the quotations have a massive influence on the likelihood of a deal. Now, more than ever, when it comes to maintaining or expanding your market share in a subdued demand environment, these factors are becoming increasingly important.
“… that response time, needs assessment and offer quality have a massive impact on the closing probability is no secret.”
Simon Schröder: In addition to increasing the probability of closing a deal, there are two important topics that companies are currently having to deal with: Process costs and lead generation. COVID-19 has once again increased the pressure on process costs. Sales are plummeting, but the costs remain. Sales managers are under pressure to drastically reduce their costs. The focus is especially on personnel costs. However, a lack of enquiries and leads is also a big issue. The trade fairs have been cancelled, the sales pipeline is running dry and potential customers are difficult to reach for salespeople working from home. This is where the topic of eCommerce quickly becomes relevant.
However, what is already common practice for standard products is still viewed with scepticism by manufacturers of multiple-variant machinery and plants. “Online configurators for our high-tech machinery and special constructions? That’s not even an option” is a frequent response I get from the mechanical engineers. The example of our customer LiSEC, however, shows that this is the concept that really works. The manufacturer of glass processing plants has been using an online configurator on its website and at trade fairs for three years now in order to systematically and very successfully generate qualified leads.
“COVID-19 has once again increased the pressure on process costs.”
How can you justify investing in better sales processes or even in IT systems considering the current cost discussions?
Ulrich Dietze: In my experience, many companies do not have any real insight into the costs of their quotation process. When I go through the figures with my clients, they are often very surprised. If we then look at the effect of increasing the hit rate by just a few percentage points, I often find that companies are wasting six-figure sums every year. Some potential can already be achieved by making minor process adjustments, and this is a strong argument for a new approach.
Simon Schröder: I, too, am repeatedly confronted with the question of the payback from a CPQ solution. There is, of course, no general answer to this question. However, with the help of a simple cost calculation example, the savings potential of a product configurator quickly becomes obvious.
Let’s assume that you write 1,000 quotations a year. And you need 5 hours per quote at an internal hourly rate of 50 €. The preparation of the quotation alone will then cost you 250,000 € per year. If you succeed in halving the time required for each quote by using a quotation configurator – which is absolutely realistic – you will already save 125,000 € per year. One good example of this is our customer LiSEC. With the help of our configuration solution, they were able to reduce the processing time for their quotations for special solutions by 50 percent. And in practice, many of our customers actually achieve significantly higher gains in efficiency.
If we also consider the increased hit rate due to faster, more professional and above all error-free quotations, the investment in a product configurator usually pays for itself in less than a year. There are also additional positive effects, such as a lower error rate in order processing thanks to end-to-end processes from the initial enquiry and the creation of the order in the ERP to the elimination of manual work processes. This is also a considerable lever for reducing costs that many companies do not even see at first.
“The investment in a product configurator usually pays for itself in less than a year.”
What do you think the sales process for industrial goods will look like in the future? What will be the most important factors?
Ulrich Dietze: The crisis has been a wake-up call for companies and has shown how dependent they are on people and face-to-face meetings – especially in the sale of industrial goods. It has also confirmed that paradigms such as “no order without an on-site visit” no longer apply. In order to stay ahead of the game, companies need to explore new avenues right now. Now is the time when companies can still try things out and meet customer demands with simple, digital solutions. However, if you wait another three years until your competitors have acquired initial experience and have further enhanced their digital sales tools, the expectations of the users will have become considerably higher. You will then have to provide an extremely professional solution right from the start in order to keep up. There are therefore really only two mistakes that companies can make at the moment. First: to wait, and continue doing everything the same as before. Second: to reduce their sales activities in order to save costs.
“In order to stay ahead of the game, companies need to explore new avenues right now..”
Simon Schröder: I see a very positive development. The topic of digital sales support is now being addressed – not “over-engineered”, but fast and agile. Companies are moving away from the idea that a configurator must always deliver a 100 % finished solution. In practice, some of our customers are already enjoying enormous success and achieving significant process improvements with an 80 % solution.
Experience has shown that if you decide to integrate your entire portfolio as well as all the back-end systems into a product configurator right from the start, you are guaranteed to fail. The project will take far too long and runs the risk of becoming very costly. After two years at the latest, you will have to ask yourself the management question: Why have we only generated costs so far and why is there still no evidence that we are leveraging the forecast potential? The result will be that the project is abandoned without success.
Therefore here is my tip: You should start with a simple solution, manageable costs, and fast, measurable results. At encoway, we have designed a “quick-start package” for precisely this purpose. The web configurator “out of the box” with its data maintenance software can be put to work within a few days, for example to generate qualified enquiries via your website. You will quickly notice whether this digital lead-generation tool is working for you. And if there is no positive impact on your business, you can simply return the software.
“The topic of digital sales support is now being addressed – not “over-engineered”, but fast and agile.”