Just when it looks like everything's going beautifully, a shot of hard data can sometimes change the view. Measured in sales dollars, 1998 was a huge year for Fromm Electric Supply of Reading, Reading, Pa., one of the best in all its 41 years. The economy in its six-location Eastern Pennsylvania territory was booming. The company seemed to be landing big jobs at every turn. Sales for the 112-employee company leapt almost 20% over the previous year's record results to $37 million. "We were ecstatic," recalls John Hanna, vice president of sales and marketing.

But when they sat down and analyzed the year's results, though, a different picture emerged. "What we realized was that there were just a lot of cool projects going on," he says. "With some customers our market-share actually decreased."

Of course, superb sales growth is not such a bad problem to have, most distributors would say, regardless of the circumstances. But Michael Fromm, the company's third-generation president, remembers that year as a "frightening wakeup call." It showed him that even when it seemed strongest, the company could be vulnerable.

Hanna knew well that Fromm Electric was vulnerable. He had scrutinized the company for years as branch manager of a major competitor before coming aboard, and knew where some of the holes were. With his help the company had begun addressing those shortcomings. But after the shock of 1998's "success," it was clear they needed to develop a more methodical process for filling in those gaps.

That process has now grown into a powerful tool that Fromm hopes will help keep his company viable through the storms he believes lie ahead for the independent electrical distributor. Like many third-generation business owners, Fromm takes a deep pride in the family business and is committed to maintaining the company's independence. He is concerned about the effect domination by a handful of large chains could have on an industry whose history was shaped by entrepreneurial characters unafraid to question the status quo.

Fromm Electric Supply is itself a company with a proud history, and Michael's father, Bernie, has been influential in shaping the industry. Yet Michael believes a blind allegiance to models established by his father's generation could spell trouble for independent distributors in the coming years. Instead he believes today's owners and managers must carry on the previous generation's constant search for innovative ways of improving the business.

"There's no rule or policy in this company that can't be rewritten," Fromm says. Fromm and the company's management team are putting that claim to the test this year, not just rewriting company policies but replacing some of the business models underlying the traditional electrical wholesaling business.

With the memory of 1998 still fresh in his mind, Fromm is taking a page from the time-tested practices in the consumer-products industries, and is trying to shift the focus of his entire company to finding ways of increasing market share. He and his management team are working through the process of aligning every department to support and enhance market penetration.

The reason for such a major culture change is simply because Fromm believes a focus on market share will protect the company from the hazards of a fluctuating economy and a consolidating industry, and generally will leave less of the company's fortunes to chance.

Shifting an electrical distributor's focus from the typical sales volume and gross profit to market share requires a fundamental rethinking of many core job functions, particularly in sales and marketing.

"In general, most distributors don't do a good job of marketing." Fromm says. "At most companies, the marketing people are usually the guys who are good at desktop publishing. They make fliers and order food for the counter days. If you look at the consumer goods companies, that's not what marketing people do."

In the consumer model, says Fromm, if you visualize the total available market for a company's products as a pie, the role of marketing is twofold: to increase the overall size of the pie by identifying and cultivating new market opportunities, and to find or create opportunities for the sales team to capture a greater share of the existing pie.

The role of sales in this model is to maximize the piece of that pie that the company commands. The traditional electrical distributor sales model, by comparison, seldom addressed the pie at all. Frustration with this approach was one of the primary factors that made Fromm look for new solutions in the first place.

"Take the traditional method, which I participated in," Fromm says. "I would sit with a salesman, and say, 'John you did $50,000 with this account last year, and our budget for this year calls for 10% growth. We need you to do $55,000. How are you going to do that?' John comes up with some intelligent answers like, 'Well, it looks like they might be doing a project, and they might be upgrading this line...' and I say, 'Great, I'm going to make some notes here and we'll talk in about six months and see if that's happening.' He leaves my office. So if John comes back and has met his budget of $55,000, he's a hero, right?

"But nowhere in that conversation did we discuss that customer's total potential-the whole picture. What if we found out that the potential purchases of that customer were $150,000 of electrical supplies? All the salesperson ever did was perform against the method of management that we used. But if we had known he was only getting a 33% piece of that customer's business, we would have looked at that situation much differently.

"That shows how you can shift your thinking from the traditional management model to this (market-share-oriented) model and reach a completely different conclusion," he adds. "We may capture just 10% of the available business by just doing what we do well. Imagine what we could accomplish if we really focused on capturing the remaining 90% of that customer's business. That's the scary part of what we've been doing all these years."

Over the past two years, Fromm Electric's management team has been developing and putting in place the mechanisms it needs to look at sales in the context of its total potential. Beginning next year, Fromm Electric's sales force will be compensated primarily on their success in market penetration and market-share growth.

The key element making this shift possible is the company's use of information. Fromm Electric's foray into market-share modeling started a couple of years ago when it developed account profiles to better understand what each customer was buying. They divided the company's product offerings into 15 general categories and ran reports showing sales in each category for each customer. The methods were crude, but the exercise proved extremely valuable, says Hanna.

"We have some Allen-Bradley branches and some non-Allen-Bradley branches," Hanna says. "As is typical, we found that in the Allen-Bradley branches, a higher percentage of sales were in Allen-Bradley products and related items, such as industrial enclosures and commodities, and this bothered us. But the other branches had figured out a way to sell a lot more of the other, more mainstream products." By sharing methods among branches, they were able to improve the breadth of their account penetration at the A-B branches.

The account profiles also revealed some strange dislocations-such as a contractor who bought a huge amount of conduit but no fittings-giving Fromm Electric a chance to capture add-on sales to existing customers. More importantly, "that was really the moment the salespeople began to see the potential pie more clearly," Fromm says.

Based on the success of the account profiling, they began to look for the next step, a model that would give them a more precise indicator of sales potential. "It's one thing to say, 'a customer bought a lot of pipe and no fittings,'" Fromm says. "It's another thing to say, 'based on this customer's SIC code, size of location and operating hours, how much light-bulb business should they do? How much fuse business? How much circuit protection? How much safety switch business?"

Bill Smith, supply contract specialist, developed an Excel spreadsheet to analyze data pulled from the company's DRC management information system. Using historical sales data combined with a witch's brew of multipliers for various types of customers drawn from the company's vendors, published statistics and a variety of other sources, Smith developed a model for calculating potential sales of any product to any type of customer.

"For years, many of our suppliers have had reliable statistics that can project annual purchases of their products by end users," Smith says. "It's just that nobody seemed to know what to do with them." By juxtaposing these sales potentials against records of actual sales to a customer, they created account maps or "gap maps" that show specifically where a salesperson or marketing campaign could target their efforts to increase market share at a given customer.

The system can be used to drill down into the company's sales data just about any way you might want. It can show sales and market share versus potential for any specific product or product type by customer, by SIC, by sales territory, by branch, by vendor. You can see how a particular salesperson does selling a specific SKU to a certain type of customer. There are no limits, says Smith.

Initially, salespeople were given monthly printouts of the full reports, but while the information was useful, digging through the data proved too time-consuming and cumbersome. The company's managers still use the reports for detailed analysis and planning of account penetration efforts, but Smith has since developed a quick-scan summary report that shows actual sales versus potential for a number of product categories, and it highlights the items where sales efforts would show the most potential (see example on page 41). "It's now user-friendly enough that we can use it as a marketing tool," he says. Salespeople get monthly printed reports on each of their accounts so they can track their performance over time.

Management tools like account mapping are possible today due to the improved accessibility of data and the flexibility of computer systems. "The raw information always existed," Fromm says. "But ten years ago it would have been far too cumbersome to extract and correlate the statistics to reach any meaningful or timely conclusions." Having the technology to import, export and manipulate customer point-of-sale data gives distributors the ability to engage in real-life business analysis and planning on an actual-and not theoretical-basis.

These have developed into the tool Fromm and Hanna sought to drive sales by market potential instead of last year's sales volume. "We have changed the way we view the sales process. Instead of managing from historical results, we are now measuring our performance against the full purchasing potential of the customer," Fromm says.

The system was tested last year using one account from each sales territory in the Reading location's area of coverage. This year they are gathering data on all accounts to benchmark current sales efforts and build a pool of historical data for the future, but the compensation program remains unchanged until next year. Fromm says he wants to work out all bugs and get the system ingrained in the company culture before basing everybody's livelihood on it. But the benefits already are apparent.

Armed with the gap maps, Fromm Electric can now attack the holes in its market penetration efforts. The sales managers begin by building a target list of products that appear to offer the greatest upside potential at each account. They then work with the account managers to refine the target list and the potential figures based on field-level intelligence. They develop whatever marketing campaigns they need to support the effort, whether that means training seminars, joint calls with specialists, targeted mailings or whatever. The account manager then can meet with the customer equipped with a full arsenal of information and marketing tools to address precisely the reasons the customer is not buying that product from Fromm Electric. To close the sales loop, information from that effort is then fed back into the system to help them do a better job next time.

The account maps are a powerful tool for analysis of the sales process. For example, sales training can now be crafted to specific needs and weaknesses of individual salespeople. "When you look at the aggregate account map for a salesman's territory, it's like a Monet painting of that person's strengths and weaknesses," Fromm says. "Up close it's hard to make sense of the details, but when you step back and look at the whole, you can see what he is most comfortable at selling and where he might need improvement."

In the traditional distribution sales process model, a salesperson challenged to increase sales by 10% will invariably concentrate on his or her strengths and avoid any weaknesses. Typically, a salesperson will have strong sales in some product areas and weaker sales in others, because he will invariably stick to his or her comfort zone. Having the sales of 30 accounts or so dependent on the strengths of one individual is hazardous for any company, no matter how good the salesperson, Fromm says. Using the account mapping programs to reveal and correct weaknesses, on the other hand, results in better sales mix and market share growth across the board. It can also take a salesman out of a rut in that comfort zone and result in real personal growth, Smith adds.

The sales environment driven by account mapping allows a salesperson's talents to be more fully developed. "The salesman's talent has a very prominent role in this equation," he says. "You're not trying to make the salesman into a marketing guy; you're trying to deliver to the salesman the tools to do his job better. If you can say, 'Here are the holes we've identified, here's the arsenal, we'll get you joint sales calls, we'll build a promotion around it...' A good sales guy will make the rest happen."

The account mapping process is useful far beyond the selling situation. In fact, this one method, applied to different parts of the business, helps to analyze and direct many of Fromm Electric's operations.

Gap maps by branch can be used to analyze the nuances of regional product preferences and buying habits. They can also help vendors focus their promotions and joint marketing efforts more effectively to grow local market share. Fromm says branch managers' compensation will be tied to market share and penetration gains revealed by the account mapping programs.

Account maps can also be used to evaluate vendor performance. Having knowledge of precise product holes, down to the specific product, helps Fromm Electric identify where manufacturers' local marketing efforts are effective and where they can be improved. Being able to share this kind of specific local-market knowledge with vendors sets a distributor apart, and helps form stronger partnerships by putting the distributor on a more equal footing with the manufacturer, says Fromm.

The company has begun using the account maps to get the most out of joint sales calls. A two-day "Sales Blitz" event last year that paired all Fromm Electric's Reading salespeople with Thomas & Betts people yielded some of the most productive calls either company had seen. The key was calling on accounts with substantial potential to increase sales of T&B products, as opposed to the usual "milk-run" joint calls where salespeople often prefer to concentrate on customers who are already loyal users of the products, Fromm says.

Account mapping has a strong impact on Fromm Electric's purchasing operations as well. Using vendor-specific sales and potential data, Fromm Electric is able to negotiate special incentives and focused partnership programs aimed at boosting sales and support for a target product.

Purchasing also keeps close tabs on the gap maps to make sure the company has product on the shelf to support marketing efforts directed at specific product holes. Instead of purchasing being driven almost entirely by sales history, as is the case in most distributors, the account maps make it possible for Fromm Electric to manage purchasing based on proactive marketing efforts as well.

This move to "complete the circle" by tying purchasing to marketing and sales has created some interesting hybrid responsibilities at Fromm Electric. For instance, Hanna's responsibilities as vice president not only include oversight of sales and marketing. He is also in charge of purchasing, and his compensation is tied to gross margin return on invested assets as an incentive to keep the equation balanced.

Fromm Electric's experiences with account mapping have already yielded some remarkable results, even without the change in sales-compensation structure planned for next year. The increased knowledge of market potential has enabled them to spot anomalies in customers' buying habits and use those observations to help customers in unexpected ways. For one example, Fromm Electric's account maps showed that a steel mill was buying considerably more fuses than the models suggested that they should. Suspecting that there might be a power-quality problem, the Fromm Electric salesperson investigated the situation with the customer, who discovered that the fuses were underrated for the application. The customer changed to the appropriate fuses, resulting in a decrease in annual fuse sales to that customer from $5,000 to $2,000. But the relationship with that customer was taken to a whole new level, Fromm says, and the resulting business growth has paid for the difference many times over.

The account maps also have proven to dramatically reduce the time it takes to get a salesperson up to speed in a new territory. One salesman who moved from one Fromm Electric branch to another and took over a roster of house accounts that had grown large enough for an outside salesperson's attention used the account maps to acquaint himself with each customer's buying history and potential. From the first day of calling on an account, says Fromm, that salesperson knew more about the account than a typical distributor salesperson would be expected to know at the end of the first six months. "Just having this knowledge made them look more professional to the customer, and made them think they were the most important customer in the world," he adds.

As the process matures, Fromm expects to see improvements in profitability due to a better product mix focusing on higher-margin items. He also believes driving operations according to market share will help insulate the company from fluctuations in the economy. "It won't make us recession-proof, but may make us less vulnerable, and given the choice between trying to manage gross sales volume and market share, I would rather ride the market share wave any day," he says.

One of the benefits of basing the company's sales process on accumulated sales data is that the model will get more accurate, more subtle and more meaningful over time. "The value of data is that it is regenerative," Fromm says. "Every day the cost of gathering the data decreases, while its value increases."

In the end, it's Fromm's goal that the new focus on market share, empowered by detailed data crunching, will leave less to chance. He emphasizes repeatedly that what his company is doing is by no means new and that other industries are five years ahead of his nascent efforts. That's why it's so important to him that the electrical distribution industry moves out of its comfort zone, and that distributors don't delay their investments in the IT equipment that can help them master customer sales data.

Fromm says his frustration over the ever-increasing cost of technology was one of the main factors that sparked his company's search for ways to make its computer systems pay greater dividends. He says if other distributors embark on the same search, their efforts will be rewarded by what they learn about their companies. "If we had to shell out a half million dollars for our brains," Fromm mused, "I suspect we would all be motivated to get a bit more use out of them."