October 14, 2016 | Written by: Paul St. Germain
Categorized: Supply Networks
This is the third blog in a series of blogs revolving around Facing the Forces of Change®: Navigating the Seas of Disruption, published by the National Association of Wholesaler-Distributors (NAW) — the only major research study analyzing the future of wholesale distribution within multiple lines of trade. Find a shortlist of the other blogs in the series at the bottom of this post.
The need for a defined brand
When a customer, prospect or supplier hears your company’s name, what is the first thought that enters his or her mind? How well does it match what you would like it to be?
In general, the wholesale distribution industry has spent less time and effort in developing brand awareness than retailers, consumer packaged goods companies, manufacturers, and banks. However, this trend is changing.
More and more distributors are engaging in marketing activities, including establishing a role of Chief Marketing Officer. A distributor placed an ad during Super Bowl 50 in February 2016.
In a world crowded with technology and instant access to everything, companies need a clear, concise branding message that immediately tells the listener who the company is, what it does, who it serves and how it differs from other companies that do the same thing. For a company that tries to be everything to everyone, it is difficult— if not impossible — to let customers know why they should choose it instead of any number of other companies in the same field. A clear branding message is also a benefit in the recruiting process, when candidates are aware of a company’s existence when considering career options.
Distributors today operate increasingly as service providers and so need to determine which of their business activities could become competitively differentiating service offerings. Similarly, distributors need to know and should quantify the cost of each of the services they provide to their customers. Monetizing helps avoid the temptation to give away services that customers are willing to pay for once they realize their worth and which cost the distributor money or time to provide.
Furthermore, it is necessary for distributors to quantify the value of the service to the customer. If the cost exceeds the value, an assessment should be made to determine if the service should be revised, offered to another group of customers, or discontinued. In some cases, the value provided is not recognized by customers due to their minimal focus in a particular area, and attention needs to be drawn to the potential financial benefits that is a result of documented benefits achieved by other customers.
For example, a customer requires an atypical $10 part to repair a piece of rental equipment that rents out for $1,000 per day. Because the part is uncommon, the purchasing agent needs to spend time searching for and acquiring a one-time only product. The cost to acquire the product far outweighs the price of the product. In addition, the elapsed time to acquire the product is time that the piece of rental equipment is not generating revenue. If the customer regards the situation as a $10 purchase and not worthy of attention, the financial benefit of a speedy supply of the repair part will not be recognized.
Remind them of your value
If the distributor is successful in displaying the frequency of this situation across all rental equipment products, the overall cost of acquisition, and the continuous revenue stream by providing the fastest delivery, it will receive the appropriate amount of attention from the customer, and create an opportunity to provide documented benefits to the customer.
It is essential that service providers periodically remind customers about the value of their services lest those clients take them for granted. If not, the relationship may be disrupted when the customer is swayed by other, seemingly more attractive, pricing offers. Service level agreements and other measurements help the distributor continue to quantify its value to the customer, building up further levels of trust and perhaps opening the doors for deeper levels of service and collaboration.
An ongoing challenge to achieve success at selling value versus price is the measurement system of the purchasing agent or buyer, who are often evaluated on metrics that are easily calculated, such as price. Decisions to buy based on total cost of acquisition often involve higher levels of management, who can be less accessible, and require a different level of sales skill.
In the upcoming edition of Facing the Forces of Change®: Navigating the Seas of Disruption, published by the National Association of Wholesaler-Distributors (NAW), you will find much more detail on all of these topics, including strategies and examples from leading distributors, along with suggested actions to understand and minimize the effect of disruption on a business, or present the opportunity to become a disrupter.
Stay tuned for upcoming blogs on other topics examined and discussed in the book.
Facing the Forces of Change®: Navigating the Seas of Disruption is available for purchase from NAW at: http://www.naw.org/ftf16, and will be available in November 2016.
Previous blogs in the series:
Wholesale Distribution at a Watershed Moment
Unpacking the 6 Disruptive Forces in Wholesale Distribution