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Boosting Your Distributor’s Value-Added Proposition, Part II

By Bridget McCrea

Going the extra mile for customers is a must in today's competitive business environment. Here's how distributors can develop and sell value-added service menus that customers can't resist.   

Trash is a pretty big deal for contractors that have to haul waste away from the job site on a regular basis or watch it pile up into an unsightly mess. Zeroing in on this “customer need,” Interstate Electric Supply of Boise, Idaho, comes to the rescue of these contractors by minimizing the amount of potential waste that's delivered to those jobsites. In other words, the less excess packaging and other detritus that makes its way onto the construction site, the less work the contractor will have to do to remove it.

“We look at the little things,” says Timothy Young, district manager, “and take the time to assess our products and how they're packaged. If we're selling something that includes a box and packaging that will need to be hauled way, we know it will cause heartburn for our customers.” Young says his company's determination to reduce waste usually works against its suppliers' commitment to creating eye-catching, protective packaging. “In the end,” he says, “they don't always realize that a box is very difficult to get rid of.”

Boxes aside, Young says his firm also offers project management, kitting, and vendor managed inventory (VMI)—the latter of which is yet another value-added service that customers can't resist, and particularly if they don't have the space or human resources needed to manage inventory on their own. And while the company doesn't break these services out as line items when bidding, it does “charge a little more” for the added perks, knowing that in many cases customers will be willing to shell out more money for the help.

“That's the tough part,” says Young. “The customer has to understand that working with us may cost a little more. But when they want their orders ready in 15 minutes, and delivered wherever they need to go, they start to see the value in it.”

To other distributors that may be struggling with this point, Young says the best strategy is to step back and say to yourself, “We are worth something, and what we do has value.” And if what you're doing is something that no one else wants to do—or can do—all the better. “Talk to your customers and get close to them; find out what they need and what their pain points are,” says Young. “Then, come up with a 'here's what we can do that you can't do' menu of value-added services.”
  
Total Value Proposition
With a smaller labor pool to choose from, and with top talent demanding higher salaries and better benefits, customers across many industries are beginning to look more carefully at the total cost associated with doing business. This is a positive trend for distributors that have historically been pushed to compete solely on price—an environment that's not always conducive to actually earning revenues from value-added services.

“Anything you can do to make customers' lives easier, or make projects less expensive for them in terms of total value, the better,” says Rock Kuchenmeister, general manager at K/E Electric Supply Co., in Mt. Clemens, Mich. “Contractors, in particular, are assessing the total value proposition as opposed to just the bottom line, black-and-white product price.”

A contractor that has limited physical space at a job site, for instance, appreciates extra services like stage-and-store, just-in-time (JIT) delivery, or project management, says Kuchenmeister, who adds that there are still customers who believe that the DIY approach will cost them less money. In most cases, it takes a salesperson to illustrate the total value proposition associated with offloading non-core tasks to a reputable, reliable distributor. “Some contractors value the added offerings and others don't,” he says. “Or, they believe that they can manage the services themselves at a lower cost.”

To break through that barrier, Kuchenmeister says distributors should look at value-added services as they would any other product or offering. When bidding on lighting retrofit jobs, for instance, a distributor's first visit to the facility will likely include an encounter with a customer that doesn't want to spend too much money upfront on the project. However, when that customer hears about the potential rebates and fast return on investment (ROI), associated with such retrofits, he or she will start to warm up to the idea.

“It works the same with value-added services,” says Kuchenmeister. “If we're kitting the items together, providing stage-and-store services, or building a prefabricated product for the customer, we work to selling the ROI and come up with a win-win scenario for both of us.”  

Calling value-added “the wave of the future,” Kuchenmeister says the distributors that are getting it right are the ones that are taking innovative approaches to earning money and raising revenues. “Anybody can sell a GFI or a circuit breaker, but not everyone can sell services like kitting, specialized wire reels, engineered products, or project management,” says Kuchenmeister. “If we don't sell value-added, we're just another Walmart or Amazon, where the cheapest guy wins.”

Helping Them Cool Off
It doesn't take an intricately-engineered product or relinquishing 5,000-square-foot of warehouse space for a customer's vendor-managed inventory for a distributor to set itself apart in the marketplace. In fact, sometimes all it takes is a few hundred ice chests and some cases of water and Gatorade.

That's exactly what Rexel learned during the dog days of this past summer in San Diego. To customers who spent $500 at the counter or $1,000 for delivery, the company handed out ice chests filled with ice, water, and Gatorade which were greatly appreciated by its hot-and-thirsty customers.

“We sent out more than 250 ice chests to job sites in San Diego and gave more to customers who came in and made purchases at the counter,” says Maxwell Gabin, branch manager, who feels that intrinsic value (namely, workers whose thirsts were quenched, and who likely reused the ice chests at the jobsite) of the promotion was more meaningful and appreciated by customers. “We wanted to make their days a little cooler,” says Gabin, “and we sent out ice chests left and right throughout the month of August. Our customers loved it.”

 

SIDEBAR

9 Services to Add to Your Distributorship's Value-Added Menu

  1. Customized Labeling:  The labeling of products or goods sold to customers to meet specific customer demands. This could include labeling of service entrance equipment or private labeling of parts to be resold.
  2. Material Scheduling and Staging:  Project management services where the customer and distributor schedule the material to arrive and be staged by the distributor.
  3. Kitting and Assembly Services:  When a distributor manages (receiving and warehousing) multiple parts and groups the parts relative to the installation of those parts in a manner that reduces installation times.
  4. Customized Packaging: Typically, product is packaged in accordance to the mode of transportation to ensure that it arrives organized, appropriately marked, and undamaged to its final destination.  
  5. Project Management:  Managing the purchase and delivery of material for a project that involves multiple vendors with multiple releases and typically requires submittals.
  6. Inventory Consignment:  Inventory Consignment is providing inventory to a specific place of the customer's choice (work site, customer's location, distributor warehouse, etc.) that has not been billed to the customer until the material has been taken out of the stored location.
  7. Radio Frequency Identification (RFID) or Barcode Labeling:  Individual product tracking to identify specific information unique to that product and/or customer.
  8. Just-In-Time (JIT) Delivery:  Strategic delivery method of inventoried product to maximize customer efficiencies while reducing inventory costs, reducing material waste, and eliminating company down-time.
  9. Repair, Return, Support Services:  Providing support and tracking to get product sent to manufacturer, repaired, and sent back to customer.  

 

Learn more about how to effectively integrate more value-added services in NAED's Value Added Services:  A Distributor Guide on Monitoring & Recovering Costs.
 

McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

 

 

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