During the past ten years Keyence Corporation’s stock has increased from $67 a share to over $600 per share. Since 2014, Keyence has grown revenues from $265.01 billion to $526.85 billion, increasing sales 20% on average year over year. Keyence is listed by Forbes at #33 for the Top 100 Digital Companies and #38 for the World’s Most Innovative Companies.
I was fortunate to work for Keyence for about two and a half years selling industrial automation devices. During my time there I achieved 20% growth in an established territory year after year and earned an outstanding contribution award for acquiring product specifications at a large plant.
I was so awestruck by the collective productivity and “Keyence magic” that I witnessed that I made it a point to study the fundamentals of Keyence’s business model by learning everything about the organizational structure and sales processes and identifying the values and priorities that made them successful.
However, as a college student prior to working for Keyence, I was a sales rep for two summers at the Southwestern Company (SWC), a 160-year old door-to-door direct sales company, and the oldest direct sales company in the world. During those two challenging summers, I was taught that the habits and skills I was learning were fundamental to any successful sales organization.
When I arrived at Keyence I discovered that the fundamental processes and skills learned from my time at the Southwestern Company were nearly the same at Keyence, despite being in completely different industries with radically different products and customers. How could this be?
Founded in 1972, Keyence is a direct sales B2B Japanese company selling industrial automation and lab technology to engineers and scientists at manufacturing companies and research institutions.
Founded in 1855, the Southwestern Company is a direct sales B2C American company that originally sold Bibles during the civil war, but now sells educational resources such as books, study guides, and tutor services to families with children across the world.
What was almost identical was their organizational structure and sales processes which emphasized maximum efficiency and effectiveness.
Before I get into the fundamental sales processes they share, let me provide some insight into a day in the life of each company.
The Southwestern Company
The Southwestern Company recruits from college campus’s throughout the school year. Students who successfully completed a summer selling books for the SWC head back to their college campus and recruit new “book men and women” to adopt and train and manage as part of their sales team. Throughout the school year they identify individuals with the right character and coach-ability and host events and do some preliminary training and orientation. On the final day of your college college semester, you schedule your official orientation at the Southwestern Company headquarters in Nashville for a week of training on the following Monday.
Each week during the months of May and June thousands upon thousands of college students from all over the country descend to Nashville and stay in hotels within walking distance to the SWC HQ and undergo an intense “programming” and training which prepares them to go out into their territory somewhere in the USA and successfully sell books. Many of these college students have just completed their first year of college away from home for the first time.
During your first week of sales training at the Southwestern Company HQ, you begin to develop and form the habits that you will take with you in the field.
On your first Monday morning you wake at 6:00am and take a cold shower that typically lasts about thirty seconds. You then get dressed and head to breakfast where you meet with your members of your sales group to discuss the plan for the day. You then head to the headquarters where you listen to presentations and break out into groups to discuss and practice.
Training primarily consists of memorizing and practicing sales scripts, objections, asking questions/ collecting information, prospecting, demonstrating the products, and closing the sale. On day one you are given a product demonstration bag containing books and sales materials, a sales planner schedule book, and sales scripts.
The entire sales process at the Southwestern Company is formalized and scripted. The sales scripts include greetings, introductions, responses to common objections, targeted demonstrations, prospecting and closing techniques. The managers and leaders emphasized that these scripts were unalterable and never to be deviated from. They were tried and true, and used with minor variations since the companies inception 160 years ago. You memorized and practiced the scripts forward and backward, under every situation and circumstance, so that no matter what happened, you always knew what to say and when to say it.
You also spend a great deal of time learning about the products (books) and their value propositions, such as the different ways to sell to student athletes, straight A students, struggling students, students with extracurriculars, religious families, etc.
In addition, you learn about how to “strategize” your territory and “plan” your days and weeks to optimize your time. This includes learning to use a map of your territory to identify the best neighborhoods and sketch out a sales route to optimize your working day. You learn how to prospect and identify potential homes, and qualify by asking the right questions.
Interspersed throughout training are events with the thousands of other trainees to listen to speakers and testimonials of alumni about the impact of the Southwestern experience on their life, including the challenges you can expect to face, and the skills and financial rewards that wait if you persist through the 12 week summer selling books.
You also learn what a “goal card” is, and how to use it to maximize your time and increase productivity. Central to the SWC is the goal card.
The “goal card” is a self management system of tracking your activity. Each bookman is given a handbook for tracking daily activity each week to track goal achievement. The goal card outlines your day in three hour increments in which you tally how many “contacts” you spoke with, how many “demonstrations” you performed, and how many “sales” you closed. The daily goal is 30 contacts, 10 demonstrations, and 3 closed sales.
A contact is a person who could buy from you. This includes parents of children in school or educators. This also means the person with the power to write the check. If you talk to mom, and she loves them, but can’t speak with dad and he’s the one that will have to write the check, they it doesn’t count as a contact. Grandparents aren’t likely to be contacts, nor are parents with children in college.
A demonstration is when you generate interest and are invited inside to pull out the products or books and show the family member what they are and how they work. A demonstration is not pulling out the book on the porch to show them, although sometimes this is necessary to gain trust and try again to get invited inside. A qualified demonstration involves sitting down in the comfort of their home where you can build the rapport and intimacy of a friend they can trust. You cannot sell to someone who doesn’t trust you in their home.
A sale is only when 50% or more of a deposit is paid. Families who don’t trust to pay half now and deliver the books at the end of the summer never really were sold to begin with. In addition, you must buy inventory at the end of the summer to deliver their books. Any sales made with no deposits means you purchase inventory with money out of your pocket and run the risk for them declining the books when you schedule your delivery.
The daily goals for the goal card are 30 contacts, 10 demonstrations, and 3 sales a day. That’s a 10% close rate. The average sale is about $399, with some more and some less, depending on what books or services were purchased. Some days you have more sales, and sometimes less, but the goal is 3 a day. Assuming you collect half the deposit, you’re collecting $600 a day.
During sales training you are either memorizing the sales script or objection responses or demonstrations or closing techniques, or practicing their delivery with your bookman peers or sales managers.
The days at sales training camp end late, around 10:30pm, only to begin all over again. This sets the tempo for the rest of the summer.
Saturday evening concludes sales training with an inspirational speaker and a big send off party. You are assigned a territory somewhere in the USA, and you excitedly look forward to getting into the territory where you will meet families and sell lots of books.
On Saturday evening you form a caravan with the dozens of cars headed to your state and begin driving, stopping at gas stations to pick up regional maps, sleeping in cheap motels along the way, and saying farewell to other salesman as you pass through their territories.
During my first summer I was assigned to a territory outside of Houston that included Pearland, TX. On Sunday morning I woke up at the motel at 6:00am, got a cold shower, and met my manager and fellow sales team at the continental breakfast. We pulled out our paper maps, and the sales manager directs us where to begin.
At 7:00am we arrive at a neighborhood and park the cars at the end of the street. The more seasoned salesman know the drill and go alone. The beginners have a sales manager with them the first day. We grab the demonstration “book” bag and sling it over our shoulder and pull out a map which has a pencil outline of our route for the day. My manager waits on the sidewalk as I approach the home and knock three times, and take three steps back, looking off in the distance at an angle.
I knock three times again.
I knock three times again and ring the doorbell.
I look at my sales manager and he is already moving to the next house. I turn and run from one front door to the next and repeat the process. After about four houses I get an old man that tells me to go away from inside.
I go to the next, and an old woman greets me. “Hi! My name is William, and I’m the one talking with all the parents and teachers about how to save their kids time with homework.”
“Oh I’m sorry, my children are all grown up.” I begin to speak up but she quietly closes the door. I turn and run to the next house.
This time it’s a mother with kids in college. “Oh, that’s great. You must be really proud. Well, I’m going to be in the area all summer meeting with families, and I’m looking to rent a room while I’m here. I work six days a week from 6:30am to 8:30pm so I won’t be in the way, and I can help out around the house when I have free time. Do you know anyone with a spare room that’d like to make an extra $25 a week?”
And with that we secured our summer living arrangements.
Each day we would wake at 6:00am, take a thirty second cold shower, get dressed, drive to a local cafe to eat and meet with our team, plan our daily sales route, exchange sales stories, and perform some silly motivational chants designed to shed the ego so we could greet the day and customers with unflinching confidence, totally immune to the inevitable rejection. We run from door to door, ticking off our daily activity quota of contacts, demonstrations and sales.
Each contact we met we would prospect and ask who else would benefit from learning about and seeing the books, asking about which houses to see and which to skip, and when the best time to visit them was. Prospecting saved enormous time.
The day ended at 6:00pm, sunset, or when 30 contacts were secured. Sometimes this meant working until 7:30 or 8:30 pm. When I arrived home, I counted up my orders, counted the days cash deposits, and recorded the days sales in a record book. I would eat a $2.00 microwavable dinner and go to bed, exhausted from running with 20lbs of books in humid summer heat. I’d wake at 6:00am to do it all over again, Monday to Saturday. On Sunday, we rested. This meant getting together as a sales team to picnic at a local park, visit a museum, or attend a party at a successful bookman alumni’s house in the area.
Each bookman is an independent contractor, meaning they don’t make a wage. Instead, they take a half downpayment deposit from their customers and use that to live on throughout the summer, as well as purchase inventory to deliver at the end of the summer where they collect the remaining deposit.
As a bonus incentive, any sales rep who achieves the daily goals of 30 contacts, 10 demonstrations, and 3 sales per day and sells over $25,000 gets an all expense paid tropical vacation with fellow bookmen and women.
Less than half the bookmen complete a whole 12 week summer. Most leave within the first four weeks. Less than ten percent return for a second summer. If you do decide to return, or are encouraged to return, your job will be to recruit bookmen as a sales manager from your college campus and form your own sales team for the next summer.
Keyence founder Takemitsu Takizaki was an employee at a Japanese Toyota Motor Plant when he developed his first sensor, which in Keyence lore was the DD model for detecting double sheet metal blanks that were stuck together. This was around the time when Taiichi Ohno was pioneering and implementing the famous Kanban system, or just-in-time or lean manufacturing, which transformed manufacturing into an hyper-efficient process. Mr. Takizaki was undoubtedly influenced in Toyota’s continual improvement of making processes more and more efficient.
When he decided to leave Toyota and found his company, he leveraged his insights and implemented sales process engineering into his routine as he traveled around from factory to factory to give in person product demonstrations to each of his customers, collecting information about their needs along the way to develop new and better products and a better understanding of the market.
Mr. Takizaki applied the same techniques used to automate manufacturing facilities to automate his organizational sales process, using data to guide decisions to optimize time, and always keeping the goal of profitability in mind.
Working for Keyence
Keyence recruits its sales team from colleges with strong alumni networks, typically with reputable industrial engineering programs, but they really don’t discriminate and hire where ever they can find talent. They look for character, personality, and technical aptitude. The interview process includes several and web conference interviews, a personality test, an IQ or aptitude test, and final interviews at their HQ for a series of meetings with area, regional and national sales managers, where you not only explain why you want to work for Keyence, but are asked to sell a Keyence devices to teams of managers. You are also asked to sell a pen. They make the interviews difficult to test the interviewees persistence and grit and desire to close the sale.
Once hired, you are selected to join one of Keyence’s many divisions. Their products typically fall into one of two categories: lab technology or industrial automation technology.
Keyence flies you to their Itasca, IL HQ where they pay for you to stay in a hotel to train between two and eight months, depending on the product and application complexity of the technology.
Training begins at 7:30pm on Monday morning and lasts until 5:00pm. You are expected to arrive at the office at 7:15pm Monday through Friday while employed at Keyence. Most sales training involves learning about the technical specifications of products, which applications they are used to solve, and the value proposition of Keyence over other technology or competitors. Every fourth week you fly to a territory in the United States and conduct “ride alongs” with experienced salesman so you can witness and absorb the culture surrounding Keyence’s process. On these ride alongs you meet somewhere in their territory, park you car, and sit in the passenger seat with them as they drive from factory to factory and meet with engineers to give product demonstrations and examine manufacturing processes or machines in search of sales opportunities.
Aside from learning the technical specifications of products, knowing the answers to common technical questions, and understanding the value proposition or competitive advantage of Keyence, a lot of time is spent practicing product demonstrations and performing presentations.
Keyence emphasized using scripts for everything. Every sales call, every email, every demonstration is scripted. This creates consistency that can be measured and analyzed and tailored and improved upon by sales managers who coach you throughout your employment. Everyone in the company is expected to use a script and perform technical product demonstrations the same way. These scripts were practiced a great deal.
The only sales techniques that Keyence actively employs is SPIN Selling, which involves asking questions to understand the customer’s Situation, identify the Problem, clarify the Implication, and formulate the Need or solution. Asking questions and collecting information to understand customers and their needs is at the heart of Keyence sales process.
Every Keyence sales engineer has a portable demonstration case containing a selection of core products from the division they represent. The technical demonstration is another of Keyence’s key processes. It is expected that salesman open the case and perform a demonstration at every “sales call” or meeting with prospective customers.
You also learn about the incentive plans and bonus structures. Keyence has two types of bonus incentives. One is tied to activity and the other to sales numbers, both of which are meticulously tracked in real time. I will elaborate on this aspect momentarily.
At this point in training you’re introduced to the Keyence Customer-relationship management platform, or CRM database, and you learn the expected data entry processes that will accompany your daily experience at Keyence. While this piece of software initially seems old and clunky, written on a .NET framework that looks like Windows 98, you’re told from the very start that this is the most important sales tool at your disposal. It’s not until you spend a week or two in the field that you realize that the CRM is insanely powerful, and one of the primary reasons for Keyence’s success.
What makes Keyence’s CRM so powerful? The daily sales processes that every single sales engineer follows are tracked using the CRM. Every salesman in the company lives on the CRM, and every activity is recorded, from emails and phone calls, to sales meetings and applications (opportunities) and purchase orders, as well as a host of valuable information about the qualities and needs of the customers and contacts in your territory.
There is a tremendous amount of “data entry” when working for Keyence. For many starting out, this seems tedious and painstaking. Nothing could be farther from the truth. If you want to succeed in sales, you need to track your activity and progress with the utmost detail. Keyence’s sales activity processes are seamlessly streamlined with the data entry. You couldn’t invent or innovate a better system. The Keyence CRM is a proprietary system custom developed in house to optimize all activity. It is a reflection of the direct sales culture that has been developed through trial and error and refinement since Keyence’s founder Mr. Takizaki pounded the pavement selling his first sensor products.
In fact, every customer and contact through Keyence’s sales history is collectively shared in Keyence’s CRM. It is constantly being shared, updated, and streamlined for accuracy and efficiency. When sales engineers join, they gain access to decades worth of customer information.
Keyence pays a competitive base salary. For most 21 year old college graduates, a $65,000 or $75,000 base salary for a sales job seems like a god send. This includes expense reimbursements such as .55 cents per mile driven, food stipends, and some of the best benefits and investment plans you could ask for. In addition, if you achieve 100% of your sales goals, your monthly and quarterly bonuses quickly take you over six figures for the year.
Like I mentioned before, Keyence pays out two types of bonus incentives. One is a quarterly bonus tied to your overall sales achievement numbers. The other is a monthly bonus tied to your monthly sales activities recorded in the CRM.
The quarterly bonus is a multiplier formula based on total revenues + goal achievement + growth + effect. Total revenues are the total sales for the territory, which include residual or passive purchase orders. Goal achievement is based on your monthly and quarterly and overall sales target set by your manager.
Monthly sales targets are the total “pro-active” sales for the month, or Linked Purchase Orders, meaning there is a relationship linking a sales call to an application to a received and processed purchase order. This is opposed to “reactive” or passive sales for the month that just keep coming in without any work aside from taking an order. There are also quotas on “sold Shodans”, which means “beginner” in Japanese, and refers to new customers who haven’t ordered within two years.
Quarterly sales targets includes whether you hit your monthly goals, and whether your quarterly sales targets were achieved. Growth is the percentage achieved of your growth target, so if your territory growth target was 50%, and you hit 40%, your at 80% of your growth target for the quarter. Effect is the margin of your total revenues. Every product has a set effect or margin. As a salesman, you have leeway to discount up to 10 or 15 or 20 percent, depending on the product and your sales manager. Any additional discount needs submitted “special price request” approval. Keyence highly discourages discounting, so they monitor your effect closely.
The monthly bonus is based on your divisional ranking of monthly sales activities. Each week a sales activity update is emailed to the division sales reps which includes data on a variety of metrics that vary from division to division and even quarter to quarter as strategy influences incentives. New metrics are routinely introduced to incentivize sales activity according to strategy, update or increase the accuracy of data in the CRM, or incentivize habits for collecting information, such as adding new accounts to the CRM or adding new contacts to accounts.
Some common or core activity metrics include:
- # of sales calls, or scheduled face to face meetings
- # of applications (opportunities for those familiar with Salesforce)
- # of minutes on the phone
- # of ECO’s entered, or “existing competitive opportunities” i.e. instances where a customer is using a competitor’s product
- # of Linked Purchase Orders, or proactive sales generated by applications tied to sales calls
- # of Sold Shodans, or new accounts
- # of New Product Customers, or selling a different product into an existing account
- # of Needs Cards, or customer needs that Keyence currently doesn’t have a solution for
- # of ILS, or internal leads sent to reps in other divisions.
- # of Leads, or outstanding leads that are past due and need follow up
These metrics are assigned a point value which ultimately determine your ranking among your divisional sales peers. The top 50% of the ranking get a monthly bonus payout, which might be anywhere from $1500 to $1000 for 1st place. In addition, ILS’s are paid out $25 if they are accepted by the recipient and a legitimate application is generated, and another $50 if it leads to a sale. This tracks and incentives intra-company referrals.
Everyone in the division has the same sales activity goals, and achieving every activity metric doesn’t guarantee you’ll land in the top 50%.
Within my division, monthly sales goals consisted of roughly the following:
- 700 Minutes on the phone
- 60 Sales calls
- 36 Applications
- 15 Linked Purchase Orders
- 5 Sold Shodans
- 15 NPCs (new product customers)
- 25 ECOs
- 4 Needs Cards
After months of on-boarding and training you’re sent back to the field office in your regional where you are assigned a cubicle. While the work day officially begins at 7:30am, you’re expected to arrive at the office at 7:15am, with many sales managers arriving as early as 6:30am. You’re expected to begin working at 7:30am promptly.
For your first day on the job, your area product sales manager runs you through the sales process by outlining what the daily routines of your week will look like, and showing you how to begin the process of scheduling calls. He opens up the CRM and shows you the ins and outs of your territory, generating total accounts in your territory and showing you how to sort by annual sales, number of contacts at company, number of applications at company, number of POs sold, sort by city, by zip, as well as how to sort through a company’s contacts and see how many sales calls a contact has accepted, how many applications were generated by that contact, what products were demonstrated at each visit, as well as information about sales calls and applications and POs of other divisions, which is great for cross selling.
You are expected to be in the office Monday and Friday from 7:15am to 5pm. Your primary activity in the office is cold calling, or picking up the phone and calling from lists of contacts in the CRM. If you don’t get a response in the morning, call again in the afternoon. If no response, leave a voicemail and send an email. Your objective is setting up as many sales calls as possible. Being in front of customers and showing the products is the top priority.
On Tuesday, Wednesday, and Thursday you are on the road visiting customers. Your goal is six sales calls (meetings) a day, scheduled at 8:00am, 9:30am, 11:00am, 1:00pm, 2:30pm, and 4:00pm. Ideally, at the end of every sales call you transcribe meeting data and notes from your Composition Notebook into the CRM about the company, engineering or purchasing contacts, applications, or competition. Most often this occurs at night when you arrive at the hotel room. On Friday’s you are expected to have all weekly sales activity data entered and updated with accuracy by 5:00pm.
During your sales meetings with customers you are responsible for gathering highly detailed information about the company, the customer, their processes or work flows or machines, as well as competition and needs. Requesting a tour of the plant or a manufacturing line or seeing examples of the machines is an essential part of understanding the customer and establishing common ground for discussion. Every sales call with a customer is a crucial opportunity to collect data about the customer and contacts and competition and enter it into the CRM. In this way Keyence is able to develop real-time hyper-granular customer profiles across the US that they can use to perform detailed analysis for marketing, product development, and sales strategies.
You begin your meeting by opening up a company brochure and providing a company overview which includes a brief history of Keyence, their direct sales model, and a survey of the various products and technologies represented in each division. As you flip through you are asking about whether they use any of the technology and where, and making notes for later.
After a five minute company overview, you open the demo case and begin a scripted demonstration of the products, tailoring only to the types of applications commonly used by similar factories. After you point out the physical aspects of the device, you demonstrate how easy it is to use by configuring it on the fly for set up and programming, and highlight three unique features that sets this device apart from the competition. You then ask if there areas they could use a device like this. If yes, you ask questions and probe for more information about the need, and try to identify the pain point or cost of the need which you then use to develop your three value add justifications for purchasing this device.
These justifications come down to making or saving money, but the value propositions always involves saving time, increasing quality, reducing waste, and the like. It might save time with installation or maintenance because of ease of use or increased durability. It may increased quality via higher performance prevision or function capability. It may reduce waste by increasing reliability. Cost may not be an issue as much as performance and ease of use. Or ease of use might not be as important as durability and cost. Understanding the nature of the application and the customers unique needs allows you to develop a compelling value proposition.
Depending on the product, a typical demo lasts between 10 to 30 minutes. If the meeting is longer than 60 minutes, you politely explain that you have another meeting, and ask to schedule a follow up meeting to continue discussing the applications on the spot.
Keyence Business Model
Keyence Japan is a research and design company specializing in industrial automation and lab technology that contract manufacturers all of its products. Much like Apple, they don’t fabricate or manufacture anything. Keyence American is a direct sales subsidiary of Keyence Japan that acts as a wholesale distributor to the US market.
Unlike every other industrial automation and lab technology company in the United States, Keyence does not use 3rd party distributors to import and stock its products. Instead, it imports and stocks its own domestic warehouse, and takes orders and ships to all its customers. As a result, Keyence saves up to 30 to 50% on margins by selling direct to customers.
For inventory planning and forecasting, it relies on the CRM data entered by the sales team to provide up to date information about applications and products in the pipeline, ship dates, estimated order size, recurring frequency, and the like. This allows Keyence to forecast inventory and restock its US warehouse every two weeks. The CRM also makes all inventory visible to sales reps, which allow them to notify management if there are any last minute large orders.
Most other companies rely on channel partners such as regional or online distributors or manufacturer’s reps to sell their products, in addition to stock. Typically, these channel partners represent dozens or hundreds of vendors, with no prioritization or specialization in any one. Industrial Automation companies typically have Regional Sales Managers or Channel Partner Managers that train and oversea distributors and their 3rd party sales reps.
The reality is, distributor sales teams bring little value to any one industrial automation manufacture, be it product knowledge or sales skill, and end up costing 30-50% margin to maintain the “partnership”. Distributors primarily rely on passive MRO business from established customers, and as a result, have little incentive to proactively target and sell.
Keyence knows this, and has structured its business model that assumes all responsibility to targeting and growing business. In any given territory, there will be up to 15 Keyence sales engineers with specialized knowledge in a group of technologies for every one Regional Sales Manager who rely on distributor sales reps with no deep knowledge, and often possess a conflict of interest while they try to sell one of the dozens or hundred of other products they represent.
When Keyence entered the US market thirty years ago, sales engineers represented a wide spectrum of Keyence technologies of varying cost and complexity. They found that sales engineers would neglect the low cost devices in favor of the higher dollar devices, or focus on the simple devices rather than the more complex products requiring longer sales cycles and support. In order to drive sales in the unpopular products, Keyence took steps to regularly split product lines into divisions based on technology, cost, applications, and complexity. This has resulted in the 15 or so divisions currently represented in the USA.
Keyence has an unbelievable ability to move products. Quotes are generated within 24 hours. Orders are shipped within 24 hours, and can arrive within 24 hours using UPS Red, or within 5-10 days for most other products. NDAs are processed within a week. For Keyence, increasing efficiency and effectiveness are the cornerstones of profitability.
The primary strategy for Keyence is profitability. Every product developed and introduced into the market is scrutinized for net profit. This influences their product design by creating a one-size-fits all for 80% of the identified applications or needs in the market, with little ability for customization. They’re interested in selling what’s on the shelf with ease, not engineering a solution, which takes time, and time is money.
Contrary to every other industrial automation company that Keyence competes with, they don’t use Applications Engineers. Instead, every Keyence sales rep is a “sales engineer” and trained to do the work of applications engineers. At the Itasca, IL HQ, Keyence utilizes “technical marketing managers” which act as a hybrid of marketing managers and product managers. As well as being the senior technical product and applications experts, they’re also responsible for developing each products value proposition as well as designing the marketing materials of their division’s products.
Each of Keyence’s products prioritize ease of use with a shallow learning curve so that just about anyone can pick it up a product and implement it with little to no training, regardless if you’re a technician, maintenance, engineer, scientists, or manager. Keyence designs off the shelf products that solve 80% of potential applications with little or no need for training or custom accessories, such as bracketing, cabling, connector options, communication, networking modules, lensing, or lighting.
Keyence designs products that cast a wide net over the most common applications and challenges that engineers and maintenance face. Their goals is to be the best at catching 80% of those opportunities, while not worrying about the 20% of applications that require additional support or engineering to configure.
It’s very common that a Keyence sales engineer identifies a potential application that might work with a product their represent with the right time investment, but they are trained to walk away and find the easy sale: those aren’t Keyence’s target customers.
Time is money, and efficiency is everything.
Because Keyence’s primary target customer is B2C End Users, with production lines containing machines with their own communication architecture ecosystem, they design their products with the most flexibility to integrate into any environment. Ease of installation, ease of configuration, ease of use.
Because Keyence develops products that are designed to work for 80% of applications, their product selection for any particular technology grouping is usually smaller than the competitions lineup, but Keyence products typically have higher overall functionality when it comes to general applications.
For example, Keyence may have 18 lasers measurement models, whereas a competitors may have 36 or 48 different models. It’s likely that for niche applications any one of those 36 or 48 models have a higher specific performance than a Keyence model, but if a customer has lots of general applications, they’ll need to purchase a fewer variety of models from Keyence, which allows the customer to maintain fewer stock numbers of a product that can do more.
You can see this drives down the variety of inventory needed for Keyence to stock as well as their customers. It also means Keyence is producing high volume of any one product, which means higher margins on the products it produces.
Keyence sales strategies revolve around analyzing CRM data to spot market needs and identify product sales trends. What is the average reorder rate for specific products at end users? How quickly is a product adopted by other plant engineers once sold? What percentage of customers that buy one product buy another product after a targeted sales call and demonstration? How many sales calls does it take to generate an application for a product? How many sales calls does it take between identifying an application and receiving a purchase order for a particular product? Which opportunities are we losing because we don’t have the right technology? Which opportunities are we losing to competition and why? Who is our competition for specific applications or industries or regions?
These questions and more define the nature of Keyence strategy.
Keyence Organizational Culture
Paramount to Keyence’s sales process is the overall culture. The work is repetitive, tedious and relentless. Your job responsibilities are typically the same year after year, will little variation throughout your career. It’s common to hear colleagues talking about being a “Keyence Drone”.
Everyone in the sales organization maintains the same schedule and responsibilities until you are promoted to Regional Product Sales Director, at which point you’re relegated to a desk to conduct sales strategy and market analytics for your regional team with the CRM data.
Sales goals set by senior directors, and typically based on last years total revenues and growth, with anywhere between 15 and 50% growth expectation. Unless a territory is extremely mature, yearly growth targets will rarely fall below 20% from the year prior, and often exceed 30%.
For career advancement, there are two tracks available for those promoted from Sales Engineer I and II (SE 1 and SE2) to Senior Sales Engineer (SSE): Sales Management or Business Development. For those who want to manage direct reports and grow a territory of sales engineers, there is the sales management route. For those interested in strategic business development with application engineering support, there are the sales product specialist roles that lead to business development management.
Coaching and mentoring are a crucial part of passing on the sales knowledge to the next generation of recruit. Keyence promotes only from within. Each sales engineer is hired to grow a territory until annual sales of 1.5 to 3 million are achieved for two to three years. At that point a new sales engineer is hired and the territory is split. Once a territory grows to a certain size, say about $10 million, Keyence will promote the senior sales engineer within the territory to Area Product Sales Manager or APSM, where they manage a group of sales engineers as well as a handful of local accounts requiring minimal travel. Once that territory grows to include anywhere between 5 and 15 APSM’s, the most senior or accomplished is promoted to Regional Product Sales Director, and these National Product Sales Directors.
Keyence’s primary market strategy is to provide value add solutions to End User’s with innovative products that solve for real market and customer needs.
Most of Keyence’s sales calls and proactively generated applications are with plant level engineers at End Users. A manufacturing line process needs to be improved so higher function sensors are required. Or maintenance is trying to find ways to reduce down time with more reliable sensors, or reduce the time to replace a sensor on a line, or reduce the cost of having to replace cheap sensors.
By targeting End User’s at a plant level, and by replacing existing competitor technology with their own, Keyence slowly begins to build a case for converting all future production lines and machines with their technology.
And because Keyence records meticulous data about their customers in their CRM, they’re able to develop products with a definite market fit that solve justifiable and quantitatively proven problems.
Below is a breakdown of industrial manufacturing market (Note: $ is business development potential, and + is passive sales, MRO, or one off projects):
- Machine Shop End User– CNC, Metrology $
- Fabricates parts to business
- System Integrator and Engineering OEM $++
- One off custom integration to business
- Given the specification by B2C End Users
- B2B Custom OEMs $$+++
- One off custom automated machines to businesses
- Given the specification by B2C End Users
- Cost > Value
- B2C End Users (Manufacturing Plant/Factory Line) $$$+++
- High Volume products to commercial or consumers
- MRO business (Maintenance, Repair, Operations)
- Organic Sales Growth (Where distribution companies)
- Plant Specification driven to B2B Custom OEMs
- Requires Business Development (long sales cycle)
- Value > Cost
- B2B Specialized OEMs (Standard Products) $$$$
- High Volume to businesses: industry or commercial (Flow business)
- Requires Business Development (long sales cycle)
- Determines specification
- Cost > Value
- High Volume to businesses: industry or commercial (Flow business)
Some of the biggest buyers of industrial automation technology are B2B Custom OEMs. They are in the business of building automated machines and production lines for massive B2C End Users. However, they rarely have the freedom to specify parts.
Instead, B2B End User’s drive the spec for their factory. The manufacturing and plant engineers consider many variables, such as what products they currently stock at the plant, what their maintenance engineers are familiar with, what products have a proven track record, and which suppliers are most reliable.
Most B2B End User’s develop a preferred list of suppliers based on their relationship and their familiarity with the products. It is incredibly difficult to take business away from a competitor at these companies; the risk is too great, and many companies are far too entrenched with existing product lines and ecosystems.
At the end of the day, B2B Custom OEMs are the biggest buyers of industrial automation products, but what they buy is determined by the B2C End User Factory.
This is also true for System Integrator and Engineering OEMs. They are hired to integrate machines from B2B Custom OEMs and B2B Specialized OEMs into a production line. The only industrial automation products they buy is what the B2C End User specifies, or whatever is already used on the machines they’re integrating.
B2C End Users Factories vary in size, but at the biggest manufacturing plants, such as automotive facilities where harsh conditions lead to increase maintenance, the MRO business can be extremely profitable.
One of the most profitable customers for industrial automation companies are B2B Specialized OEM’s. These companies design automated machines with a very specialized process, and target industry or commercial markets. These customers are very price conscious, and will develop as much of their own technology in-house as possible to reduce costs in order to have a competitively priced product that can sell in the market.
B2B Specialized OEMs typically have standard, off the shelf products, with a relatively finite lifespan, which may be a result of many factors, such as changes in consumer demands and tastes, or advancement of technology which requires redesigning the machine (faster chips, better screen resolution).
However, there are B2B Specialized OEMs that make off the shelf products that rarely change, because the process or products produced by the machine are consumer staples that will never go away. Such as trash compactors,
Once the machine is designed, it’s not redesigned for many years. They’re typically selling at high volume, or high dollar. Once an automation product is designed into a machine, you can count on years of business. Unfortunately, many of these machines are relatively low maintenance, so the future MRO business is limited.
B2B Specialized OEMs are also looking for industrial automation companies that understand their needs, and provide a full solution that integrates into a nice package that they can engineer, service, and sell with ease. If they can purchase from a single supplier who provides them with all the automation technology needed to make a competitive machine, they won’t look elsewhere.
At the end of the day, Keyence’s most successful strategy to market is to target B2C End User’s. By solving plant level problems and replacing existing competitor technology with their value-add products, they are able grow MRO business. Over time this influences and drives the plant specification for future machines and production lines, which eventually increases sales with B2B Custom OEM’s and System Integrators OEMs.
The Fundamentals of a Successful Sales Organization
So what do Keyence and the Southwestern Company share in common?
- Quality Training
- Coaching and Mentoring for ongoing Improvement
- Sales Scripts
- Repeatable and Duplicatable Sales Processes
- Scheduled Routines
- Sales Achievement Goals
- Activity Goals
- Activity Data Entry and Tracking Processes
- Activity Incentive Plans
- Demonstration Tools and Equipment
Both organizations prioritize efficiency and profitability by doing as much as possible with as little expense as necessary.
There are two fundamentals areas that both these companies excel in optimizing: Time and Impact. Or, efficiency and effectiveness.
Optimizing time is about automating activities to be repeatable and duplicatable throughout the organization.
Optimizing impact is about increasing the power those activities have to influence an outcome and achieve a goal.
Every manufacturing line or sales team can be seen as a multivariable calculus function f(x,y,z) of inputs, with combinations of constants and variables, which gives outputs. The time it takes to process the inputs of that function will influence the value of output, because of the time value of money (TMV), where future money equals present money plus time. All inputs are investments. Reducing the process time increases the returns on the investment.
The goal or output of every organization is profitability, or return on investment.
Within a sales organization, sales processes are the steps needed to close a sale. This includes which activities are performed and when they are performed during the day or week, and how every customer interaction can increase the chances of a sale, and produce a maximum order transaction.
Optimizing Time: Efficient Processes and Systems
Processes are the scheduled steps of action or work flows needed to achieve a result or goal within a given time.
Systems are formalized processes supported by structures of technology and people, with defined roles and responsibilities, which organize the flow of information.