A strong dealer base benefits distributors and manufacturers as well as dealers. Contractors that are financially solid, have a core of well-trained personnel and are knowledgeable in applying marketing and sales principles to their business contribute efficiencies to the supply chain. Jim Booth of Grandy & Associates, a business consulting company for HVAC, plumbing, electrical and burglar/fire alarm contractors, discussed this topic at the Northamerican Heating, Refrigerating and Airconditioning Wholesalers Association convention held December in Washington.

"The distributor places a lot of faith in the dealer knowing how to market and sell equipment and accessories to the general public," Booth said. "So distributors need to provide marketing and customer-service training to contractors in addition to technical training."

But before the wholesaler's sales staff can begin such training and approach a dealer, Booth suggests they learn presentation skills, how the dealer earns a living, how to sell product and services, how to analyze markets, how to read the dealer and how to follow up with training efforts.

Salespeople should set goals for themselves and their dealers and use buyer behavior information to their advantage.

Distributors, as well as manufacturers, can provide contractors with technical and product training, sales and marketing skills for middle managers and field personnel, goal setting, business planning and inventory management skills.

Defining a strategy

"The objective of the distributor is to build a business relationship with the dealer that will stand up to the competitive pressures of the marketplace," Booth said.

The first step in building a dealer's business begins in the distributor's company. "Teach counter staff and outside salespeople the customer-relations skills they need, such as how to listen to people, how to handle complaints and how to sell features of products and benefits of services to make that customer a repeat customer," he said.

Analyzing the customer base will determine who the key customers are, what they are buying, how much they are buying and how often they buy. Using the 80/20 rule, customers should be segmented into five levels:

  • Level 1 (top 10-20 customers). Loyal, willing to learn, growth potential unlimited, financially solid, older, established companies.
  • Level 2 (next 20 customers). Young, aggressive, unlimited sales potential, financially solid, loyalty not as strong.
  • Level 3 (the middle group). Little loyalty, price is deciding factor, somewhat disorganized, low growth potential.
  • Level 4 (lower third of customers). No loyalty, complain about prices, never attend training classes, C.O.D. list members.
  • Level 5 ("the dregs"). Cash customers, no loyalty, constant financial problems and an embarrassment to the industry.

Companies falling in the first two levels should be targeted for training efforts in a dealer growth program, Booth said. Results should be tracked and used to build a foundation for Level 1 and Level 2 dealers.

Distributors should publicize the success of the program to the dealers in Level 3; however, program enrollees should be selected according to high standards. The goal is to aim for a 60/40 mix of customers.