Jack Of All Trades Or Master Of One?

For some distributors, customer segmentation is replacing the traditional sales territories model.

Sales territories have long been the prevailing sales model in the gases and welding industry. But with the way of doing business constantly evolving, it may be time to look at a different sales model. GAWDA distributors are looking more and more at customer segmentation—where salespeople are responsible for specific customer types or product lines. In a world where product knowledge is king, is customer segmentation the answer to differentiating your company from your competitors?

Success with Segmentation
Butler Gas Products started moving toward customer segmentation in the 1980s when steel business in the Pittsburgh, Pennsylvania, area tapered off. Looking around, Butler Gas saw strong market potential in medical and research labs. There was only one hitch. “The new markets took a different kind of salesperson than steel mills,” says President Jack Butler. “It took a different set of skills.” And so specialty gas became the first area of segmentation for Butler Gas.

In the last decade, Butler Gas has moved to 100 percent segmentation, adding expert salespeople for medical, industrial gas and welding. Jack Butler himself is the company’s wholesale gas specialist.

Rather than asking salespeople to have encyclopedic knowledge of every product, aligning salespeople with customer segments allows them to specialize and become expert in a specific area. Says Butler, “A typical welding supply salesperson may not be as knowledgeable in the areas of specialty gas or medical. Segmentation gives us an advantage in those areas.”

Airgas (Radnor, PA) has also seen success with segmentation. Chairman and CEO Peter McCausland addressed the company’s segmentation initiatives in Airgas’ 2011 Annual Report. “Because we have a critical mass of customers in at least ten different segments, we have deployed specialists who can concentrate on a specific market area and bring a higher level of expertise to their customers,” he says. “Today, product and industry specialists make up more than 25 percent of our total sales force.”

McCausland expanded on Airgas’ segmentation efforts in a recent interview with Welding & Gases Today. “It’s definitely been a contributor to our success,” he says. “Now we have people in each of our ten customer segments who really know the customers’ business, who spend their time calling on people in research or biotech, for example. They attend industry meetings. Because they’re familiar with customers, they know what potential customers might need in those industries. It’s a much more efficient way to go after customers than just giving people geographic territories, which we have at the local level.”

A New Way of Doing Business
Many GAWDA distributors say the way of doing business has changed over the last decade. “We live in an information-based society, and today’s customers are better informed,” says Earlbeck Gases & Technologies President Jim Earlbeck. “We have to be better informed to keep up with the customer. Salespeople need to understand the customer’s needs.”

Zapping the Zip Codes
Several gases and welding distributors are saying farewell to sales territories. Below are a few examples of customer segments:
  • Construction
  • Dry Ice
  • Energy
  • Food and Beverage
  • Industrial Gas
  • Medical/Healthcare
  • Metal Fabrication
  • Research/Biotech
  • Robotics/Automation
  • Specialty and Rare Gases

The Baltimore, Maryland, distributor currently operates with geographic territories, but salespeople with specialties in spec gas, plasma cutting, robotics, welding certification or government sales might be called on outside of their territory as needed. To address the challenge of keeping up with the customer, Earlbeck says he has been considering the possibility of adopting complete segmentation. “When salespeople are working in a geographic sales territory, they can’t really hone their craft with any particular segment,” says Earlbeck. “As a result, they don’t learn the nuances of those segments.”

With segmentation, salespeople get to know much more than the products—they become students of customer culture. “Calling on a steel mill is much different than calling on a hospital,” says Earlbeck. Steel mills may start early and run on shifts, while doctors in a hospital may work later hours. Hospitals may prefer to conduct business by email, while steel workers may prefer the salesperson to show up with a pizza. Says Earlbeck, “Salespeople working in focused segments can start to understand how customers in their market segment think and react and what their challenges are.”

The Other Side of Segmentation
Along with its advantages, segmentation raises several question marks. What if a customer does not fit neatly into one segment? Butler says it does not happen frequently, but when it does, his company will send multiple experts to visit the customer. “Some companies may see it as inefficient, but we don’t see it that way. When we send two experts, they are both adding value in their area of specialty.”

Earlbeck points out that doing away with territories also means that the potential coverage area for a salesperson is much larger. “Windshield time achieves nothing for a salesperson, other than spending corporate assets.” Distributors with a segment-based sales staff are tasked with the challenge of maximizing selling time and minimizing driving time.

Segmentation also requires some adjustment in recruiting, hiring and training salespeople, with a focus on specialists rather than generalists. When hiring a salesperson to call on hospital and medical customers, for example, a distributor might look for an individual with experience in medical sales. “That salesperson has already absorbed the culture of that segment,” says Earlbeck. “He knows how to dress and how to speak, and he knows when people are likely to be at their desks.” He adds that recruiting would not necessarily be any easier or harder, just different.

Tried and True or Something New?
With the breadth of industries served by gases and welding distributors, the territory-based salesperson is at risk of becoming a jack of all trades—and a master of none. Is segmentation the solution for doing business in today’s information-driven world? Or is a distributor better off sticking with proven methods?

Do you favor territories or segmentation? Let us know what you think by leaving a comment.

Gases and Welding Distributors Association