Last month we considered the cyclical aspect of the demands placed on distribution businesses. In their early days, distribution businesses offered a wide range of products. These general stores gave way to more specialized operations over the years, as product complexity increased. Now, we've cycled back to market demand for a wider, aggregated offering (a.k.a.: one-stop-shop). But this time around, the customer is also demanding specialized expertise and support for the products he buys. A daunting challenge! In many ways, this issue summarizes the survival challenges distribution businesses face in the coming years.
How does one deal with this seemingly unrealistic demand? The same way one might eat an elephant - one piece at a time. First, you must decide if you will compete on price, added-value or both. Competing on price alone is a slippery slope and centering on added-value without price consciousness is, frankly, counter to most marketplace migrations. So, competing on price and added-value concurrently seems to be the best overall approach. But how does one accomplish that goal? Consider the "Good, Better, Best" strategy, offering good, solid value, no-frills products to those customers who are 100% focused on price. For customers who demand added features, offer a "better" category of products that would naturally cost more and provide a greater margin. And, for those customers who want the best and are willing to pay for it, offer the "best" category, with appropriate prices and margins. Selling and specifying techniques might have to change slightly to leverage a "good, better, best" strategy. But in the end, offering the customer a spectrum of features, content and prices, with a logical sales process to "move them up," where possible, is almost always the best bet.
Businesses that have adopted a "good, better, best" platform mentality have found that they're in a position to go after the lower budgeted/lower margin business, while also maintaining the flexibility to easily respond to higher priced/higher margined jobs.
What about the "specialized support" today's customers are demanding? Consider turning part of that demand around on your suppliers. If specialized support is to be a differentiator for your business, is it correct to suppose that a significant portion of the expertise might be made available from the manufacturers that you carry? You bet! And, in many cases it's actually available, but under-publicized by the manufacturer and/or under-used by the wholesaler. Think about it.
Best Practices
Here are this month's Best Practices. Readers are encouraged to send in their own proven practices, so we can share them with others.
7. Differentiate your business with "Specialized Support."
Specialized support can take several forms:
Personal support - Either supplied directly by your staff or "recruited" by your organization. An example of the latter might be having one of your manufacturers supply an engineer to help make a customer presentation. Making the best use of manufacturers' centralized technical support capabilities to add value with your customers is another example.
Sales aids and tools - Most manufacturers spend a significant amount of money each year to develop sales and marketing tools for distributors' use. Make absolutely certain that you and your entire team know all of the support elements that are available and use them to their fullest advantage. And, don't hesitate to critique the tools provided to you. Your manufacturers need to know if improvements can be made.
Remember: You don't have to have all of the answers -- you just need to know where to find them! Specialized Support is a team effort!
8. Use technology to differentiate your business!
Technology can be a powerful tool in your efforts to provide specialized support to your customers. Consider your use of technology as a value-add and image enhancer, as well as a time saver. Using technology to assist your customers can provide up-to-the-minute information and save time, while also clearly establishing the professionalism of your company if that technology is visible to the customer. For example, the Haws Corp.'s Web site, www.hawsco.com, is not only a valuable tool in specifying plumbing and emergency equipment jobs, but it can also be configured (using Haws' personalized, password-protected folders) for use as a sales presentation tool.
Bottom Line: There are many ways to differentiate your business - and, not all of them cost you money!
