Allied Sales: Dual Focus Needed on Quality, Training

The popularity of high quality coffee has given OCS operators the chance to better position themselves as refreshment service specialists in recent years. While much of the discussion now focuses on the nuances of what makes a good cup of coffee, operators should not pay any less attention to maximizing their allied product sales.

In fact, the increased variety of coffee being provided has created opportunities to offer a greater variety of allied products. With more blends of coffee being served, the customer is more likely to want a broader selection of flavorings and condiments, in addition to the more traditional paper and plastic allied OCS products.

Fortunately, product suppliers are responding with a wider assortment of flavors, creamers, teas, mineral beverages, juices, health-oriented snacks, and it couldn’t be happening at a better time. OCS operators need to maximize sales now more than ever, given the rising costs of servicing their accounts.

Operators must maximize sales per location
Maximizing revenues by selling creamers, sweeteners, cups, napkins, first aid supplies, single-serve beverages, snacks and other miscellaneous products is nothing new. But competition for these products from other retail channels has presented new challenges to OCS operators.

Operators have no choice nowadays but to work harder to make sure their sales and route delivery personnel are aware of the variety of allied products available to customers, and to make sure they are taking the initiative to sell them. Doing so not only improves the company’s bottom line. It also builds stronger customer relationships and provides employees the opportunity to maximize their own compensation.

Some OCS operators have reported allied product sales in excess of 50 percent of total sales. The average OCS operator’s allied product sales represents closer to 30 percent of total sales, according to the Automatic Merchandiser State of The Coffee Service Industry Report.

The opportunity to increase allied sales depends on several factors.

Factors affecting allied sales
There are several factors separating operations with high and low allied product sales figures.

One factor is the type of market being served. Operators serving big metropolitan areas with a lot of high-rise office buildings generally sell more allied products than those serving rural or suburban areas. This is because it’s easier for locations in suburban and rural areas to shop other retail outlets.

Another factor is what types of allied products the operator has opted to offer. Operators who limit their allied sales to traditional coffee-related items such as stirrers, creamers, filters and cups will have less opportunity than those who have broadened their offerings to include cleaning products, ink jet cartridges, bathroom supplies, and foodservice supplies.

Perhaps the most important factor is the amount of training operators provide their sales teams. Those who take the time and trouble to make sales people aware of all the products they sell and the importance of making the customer aware generally sell more allied products.

Price increases extend to allied products
Compounding the challenge to sustain and improve sales are the recent price increases that many of these ancillary products have incurred in recent years. The challenge is even stronger than in the past, due to the new willingness by many retail competitors to undercut OCS operators on price.

In the case of office supply retailers, these competitors are enticing customers by using the Internet, a growing medium for all types of purchases. Customers perusing office product catalogs online are finding all types of office and break room supplies in these catalogs.

Internet shopping emerges
“If you’re not on the Internet (with a Web presence), all your customers are, so you’re in trouble,” said Dan Ragan, president of Joe Ragan’s Family of Companies in Springfield, Va.

OCS operators must pay careful attention to their allied product sales on a regular basis to ensure they aren’t losing sales to other retailers’ online shopping carts, Ragan noted.

Ragan, who serves the greater Washington, D.C. market, reviews customer purchases regularly to see if allied product purchases are slipping. If a customer’s sales are sliding, he contacts the decision maker and brings it to their attention. The first question he asks them is if there is a problem with his service.

“If you don’t pay attention to your account base, they (the office supply stores) will take it (the allied product business) from you,” Ragan said. “That’s why it’s important to run those reports on a daily basis so you see where your sales are falling off.”

Should the customer say that the allied product was purchased while shopping for items that his company doesn’t offer, Ragan tells them his company also offers the convenience of online ordering. The goal is to make the customer aware that they are expected to buy their allied products from him since he can provide them just as conveniently.

If the customer claims that the price is better on a certain item from an office supply company, Ragan reviews with them his overall pricing in comparison to the competitor’s. While a competitor might have a better deal on some items, this will usually be an exception. Office product retailers often discount certain items as loss leaders, Ragan noted.

Chris Sletten, president of Gold Star Coffee Service in Madison, Wis., said some of his company’s paper goods suppliers compete against him by selling direct to his customers. In such instances, he has been able to convince the supplier that it makes sense to allow his company to handle the service. “I think they realize it helps to work with a company like us than to send their own trucks,” He said.

Sletten said this hasn’t been an issue with condiments and food-related items he sources from vending distributors.

OCS trump card: service
One advantage OCS operators always have against office supply retailers, membership warehouse clubs and other merchants that carry office supplies is service. Communicating this advantage requires an ongoing effort on the operator’s part, one that must be installed in the sales force.

OCS operators are in a better position to monitor customer needs than other retail competitors, whether they do route sales or pre-call deliveries. The OCS sales person, route or pre-call, is usually better able to track consumption of these products and to suggest additional products.

Operators in most markets observe that membership warehouse clubs don’t deliver products to customers, and when they do, it isn’t done on a consistent basis.

“There are a lot of reasons why it’s (shopping at club stores) not worth it to them (OCS customers),” said Steve Neighbors, co-owner of Executive Coffee Service Inc., based in Oklahoma City, Okla., referring to the time it takes an employee to go the membership warehouse club and the liability they incur. “The bigger office understands the expense of sending someone there or of being out of something because someone forgot something.”

Consumer choices change
OCS operators also need to be cognizant of the changing consumer tastes in allied refreshment products. Ragan of Joe Ragan’s Family of Companies said customers want more energy drinks and flavored bottled water nowadays.

In paper and plastic products, Ragan has found that everything isn’t about price, even as costs are rising. Ragan has found customers receptive to higher quality paper towels and plastic plates and utensils.

Asked about popular new allied items, several operators cited bottled water, flavored coffee creamers and new flavors of powdered Crystal Light from Kraft Vending & OCS. Several noted that liquid creamer has become more popular as a complement for better quality coffee.

Customers who need to serve clients on premises are more likely to want higher quality serving goods – plates, cups and utensils – to impress clients, Ragan said. “More people are trying harder to sell bigger clients,” he noted. “They’re doing more to impress the clients.”

Ragan is among many OCS operators who has recognized the need to train his sales people so that they are aware of the options to offer customers. Because his sales people are paid fully on a commission basis, it isn’t hard to encourage them to take the time to offer allied products.

Customer ordering methods differ
Maintaining allied sales is especially difficult for customers who prefer to call in their orders rather than allowing the OCS delivery person or an in-house sales rep place the order. These accounts are more likely to place orders with whichever provider will offer the best price.

If an office supply retailer is providing products that the OCS operator doesn’t carry to begin with, such as office furniture, the customer might find it easier to get their break room supplies from this supplier, especially if the pricing is competitive.

In such situations, sometimes referred to as “free call,” the OCS operator is not providing the same level of service as a route sale or pre-call system to begin with. This puts the OCS operator in more of a price war, since office supply retailers operate with different profit margins than OCS operators.

“We are like an office supply company in that (free call) work place,” said an operator who did not want to be identified in print. “Anything that we do that lowers our level of service makes us vulnerable to anybody who delivers.”

One operator estimated that profit margins on products that are ordered in this “free call” manner are typically 6 to 8 percentage points lower than those sold using a route sale or pre-call system.

OCS operators indicated that these “free call” accounts are not common, but they are more prevalent in certain geographic markets.

“There’s a service element missing in that delivery process,” said Peter Tullio, president of Gourmet Coffee Service Inc. in Van Nuys, Calif. “There’s work involved on the part of the location once that product is dropped off.”

“They (the customer) think they can control the cost better,” he noted. “In reality, they can’t. They don’t want to accept the fact that we can tell what they buy. Once they see that what we sell them is geared to their usage, they accept it.”

Tullio said rising costs for allied products have heightened the need to continue to seek higher prices. He said it isn’t difficult to get customers to accept higher prices when they realize the increase is coming from the manufacturer. However, it is up to the operator to ask for the increase.

Training must be ongoing
Ollie Thomas, owner of Thomas House Coffee Service in Silver Spring, Md., a market where most OCS deliveries are ordered on a pre-call basis, agreed that constant training is important to maintain allied products sales. This is especially important for companies such as his that are always looking for new items to carry.

For instance, Thomas recently began selling dishwasher detergent. “Each one of these things takes time to get the customer instructed in the fact that you provide that thing,” he said.

Thomas has found it important to be able to special order for customers when necessary.

Neighbors at Executive Coffee Service agree that training the sales people is critical. Allied sales as a percent of total ranges from 35 percent to 50 percent at his company, depending on the route.

Neighbors holds contests to see which driver can sell the most allied products.

Equipping sales people with customer sales software is also important in maximizing allied product sales. Royal Cup Coffee Inc., based in Birmingham, Ala. provides drivers with handheld computers that can run inventory reports on individual accounts. The trucks are loaded prior to delivery based on these reports.

Howard Chapman, vice president and division manager for office beverages at Royal Cup Coffee, noted sales people can win allied sales by emphasizing the environmental and safety features of many products. Biodegradable utensils can fetch higher price points than plastic ones because they’re environmentally friendly. “We’re going to have to be sophisticated because our customer is,” he said.

Chapman also cited hand sanitizers that kill germs on hands when there is no access to water. These are popular on peoples’ desks.

Crystal Rock Water Co. Invests in driver training
Crystal Rock Water Co., a water and coffee service provider with 12 branches and 105 routes based in Watertown, Conn., recently recognized the need to strengthen route sales training to improve allied product sales. Dave Reckdenwald, operations manager, said the route sales people were frustrated that they weren’t selling more allied products. There were thousands of stock keeping units (SKUs) in the warehouse that weren’t moving.

The key challenge, noted Reckdenwald, is to instill in route sales people a way to communicate the value of their service. This is especially important during times such as the present, when customers are price conscious.

“We started opening up their (route sales people’s) eyes in how to talk to customers,” Reckdenwald said. “We created the mindset that the longer you can spend time with that customer, the more they will buy and the more commission you can make. It actually slows the guys down, but that’s a good thing. They’re not on a time clock.”

Crystal Rock Water decided to hire a corporate sales trainer to oversee allied product sales and customer service. Fred Vernic was hired last year. He brought 15 years experience working as a sales trainer and route sales trainer at a competitor.

Vernic noted that sales training should be ongoing, and that it helps to have a supervisor who acts like a coach. He rides with all of the route sales people periodically. “That helps when they know you’re willing to do that,” he said. Vernic knows this from first hand experience, since he was also once a route sales person.

The key to successful allied product sales is for the route sales person to look carefully at the break area, Vernic noted.

In his first training session with the route sales people, he placed dollar bills underneath products in a room filled with boxes of allied products positioned throughout the room to convey the message that money is hidden throughout the customer location.

“I had money hidden all throughout the boxes through the entire display,” he said.

Motivation is a big part of the job, Vernic noted. To build morale, he has held contests. Teams vie to win the most points. Winning teams are awarded gasoline cards and
other prizes. The winning team also gets a trophy cup to display in its warehouse, while the losing team gets a cup that features a horse’s buttocks. “They have that competitive feel,” he said of the contests.

Teams are updated weekly on their performance.

The training has paid off at Crystal Rock Water. “It’s an awareness of what’s out there,” Vernic said. “Letting them (the customers) know what you actually have.”

This past April, Crystal Rock Water set a record for allied product sales.

The opportunity to improve allied sales has increased as more products have been introduced to the OCS market. Seizing this opportunity requires a commitment to training the sales staff about the products themselves and in customer communication.