October 18, 2016 | Written by: Paul St. Germain
Categorized: Supply Networks
This is the fourth 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.
Some of the most turbulent seas wholesaler-distributors encounter today come from their relationships with customers and suppliers. The disruptive forces discussed in previous blogs permeate these relationships, contributing to the changing face of the industry. Although this discussion primarily focuses on customer relationships, many of its tenets apply to supplier interactions as well. Ultimately, managing relationships on both sides of the aisle in these turbulent times means understanding one’s own value, meeting others’ needs and expectations, and differentiating oneself from the competition.
Avoiding the minefield of relationship disruption
Avoiding the minefield of relationship disruption starts with three basic elements of business: knowing one’s own company, knowing one’s customer, and knowing the competition. Distributors must plumb these depths at a deeper level than ever before because the very nature of the distributor–customer relationship has changed greatly in recent years. Once-loyal customers now abandon long-standing relationships for companies they perceive as giving them better value for their money. Wholesaler-distributors are expanding their product and service offerings to meet a wider scope of needs, becoming full-service providers to many customers.
If you ask distributors why their customers buy from them despite the myriad other options, they often cite their long-standing and deep relationship with the customer. These relationships may be of a personal or business nature, but the conventional wisdom is that people buy from people they like and that selling is about having a relationship first and then sales will follow. Customers may say that they have a great personal relationship with a sales rep, but they will buy from the competition because they perceive that it offers better value. A newer opinion in a disruptive world is that the customer relationship is becoming the result and not the cause of successful selling.
Distribution leaders who understand that they are now navigating in a customer-centric world are less likely to be caught off guard by these forces because they have probed multiple sources to determine customer actions, needs, and feedback to quantify their value to those customers, ascertained their customers’ needs and how they can meet them, and determined how they can potentially become the disruptive forces with which their competitors must contend.
There is an important difference between asking whether a customer needs certain products or services and asking whether those products or services will meet the customer’s needs. The latter question looks at the relationship from the customer’s point of view—that is, from the outside in—and opens the door to a customer-focused experience where a strong relationship results from continually delivering value to the client. Instead of following the old business model in which a distributor told its customers how it would do business based on its own internal business rules and processes—for instance setting minimum order size or limiting delivery windows and locations—today’s leading distributors will ask their customers how they want to do business and then design services and offerings around meeting those needs. In the outside-in relationship, the customer experience is critical; if you can’t help the customer solve problems or help it achieve its outcomes, it will turn to someone who will.
Being a leader in today’s world
Leading distributors focus on understanding customer needs and then move to creatively generate new or modified processes to meet them, all while focusing on the underlying relationship experience. One key is to determine the right questions to get to the why of what needs to be accomplished, versus focusing on what was being done previously. Some methods used include journey maps, shadowing, or ride-alongs involving the stakeholders who will be using the newly designed processes. These methods involve documenting the actions individuals perform, step-by-step, in the course of accomplishing tasks. Analyzing, at an aggregate level, the paths top customers take through their business creates valuable insight into how a distributor can provide services to improve the efficiency of its most valuable customers.
For example, a distributor might want to study the top five paths—in revenue generated, time to completion, and so on—traveled by people in different customer segments to discover:
- what they do before they order from you
- what they do to order from you
- what they do after they order from you
Understanding need begins with defining the desired result, which could be getting something done, saving time, providing information, ensuring accuracy—basically making life easier by focusing on the user experience.
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
Branding and image: Distributors as service providers