Olsztynski Editorial: “Yeah, But What's It Cost?”
A couple of years ago, I visited the Montgomery, AL plant of Rheem Water Heaters. Inside a training room are displays of memorabilia from the company's history. Included were a mannequin of Edwin Ruud, inventor of the water heater, alongside one of his early models from the turn of the 20th century. An adjacent advertisement shows the price of that heater as $100, or $115 west of the Rockies and in Canada. This in early 1900s dollars.
Amazing, isn't it? A century has passed, yet this is about what some consumers might pay in today's dollars for an incomparably better product on sale at a big box. Just as dazzling as technological progress has been the cheap revolution that has made so many high-tech gizmos available to the masses. Remember what a big decision it was to buy a personal computer just a decade ago? Now it's virtually an impulse buy. Modern PC's and laptops contain a thousand times the memory at a small fraction of the price we paid in 1995, with little performance difference between brands.
Commoditization is daunting to people such as yourself who make their living selling a lot of what used to be regarded as technologically distinguished merchandise. The consultants and pundits keep admonishing you to sell value rather than price. So you bring out all the literature touting features and benefits. Yet, when push comes to shove, what you hear from most customers is: “Yeah, but what's it cost?”
If there's a speck of good news in this scenario, it has to do with the fact that buying decisions aren't always 100% rational. Customers can be influenced toward one supply house over another for all sorts of reasons that overcome at least a small gap in dollars and cents. I'm not only referring to salesmanship and marketing expertise, which still count for something, but also a lot of little things PHCP distributors can do to influence sales without squeezing every last penny out of margin. Here are some examples.
- Extend hours of operation. Not many wholesalers can justify staying open 24 hours like many Home Depot and Lowe's stores do. But it is feasible to open an hour earlier and stay open an hour later than most other supply houses. Small contractors in particular don't like giving up potentially billable hours to visit supply houses.
- Segregate consumer business. Most supply houses have separate pick-up counters for consumer and trade customers, but some still do not. Also consider setting aside some showroom hours strictly for the trade and their customers.
- Unique amenities. Most supply houses offer free coffee and sometimes snacks for counter customers. Free pop and bottled water is a good way to boost business during summer months - especially if there's also an ice machine on site for customers to fill up their coolers.
- Order accuracy. Customers hate it when they feel compelled to check every invoice for accuracy, and hate it even worse when they find mistakes in favor of the supply house. (I never hear about the other kind.) Wholesalers that can boast a high rate of mistake-free orders would do well to tout this advantage with offers such as “$100 credit for any invoice mistake we make.”
- Personality counts. Most people in this industry get promoted on the basis of technical knowledge. However, a mind that's adept at memorizing product codes does not always translate into a service-oriented personality. Contractors are people, too, and they don't like dealing with people who don't seem to like them.
This goes for the top brass as well as sales and counter employees. There used to be a time when most supply house executives came from the trade ranks or at least grew up getting their hands dirty in the warehouse. The companies they founded are now run by their kids, who are more likely to have business degrees and wear $500 suits to work. Some of them feel more comfortable mingling with fellow swells at the country club than rubbing elbows with the folks in overalls. Plumbers sense this, and those that do tend to give the bulk of their business to places where they feel like “us” rather than “them.”