By Jason Bader
“Do you want fries with that?” It’s a common question heard at fast food restaurants, where menu items rarely stand on their own. On the contrary, the additional complementary items enhance the satisfaction of the purchase. And let’s not forget that for every $1 in cost, the fast food chain can sell approximately 20 orders of fries. While most distributors can only dream of making such a lofty markup, the principle remains the same: Selling complementary products will drive gross margin dollars to new heights and improve overall customer service.
The first step is to create a benchmark. Start by determining the current average lines per order (which, as a rule, should be measured every month). For the average hard goods wholesale distributor, this often falls between 2.3 to 3.3 lines per order—and judging by the number of products stocked, this leaves a lot of upward potential.
Now set a goal of improving that by half a line. Monitor this number every month, break the metric down by customer service person, and use the information to discover coaching opportunities.
When training customer service reps to drive more lines per order, dispel the feeling that asking questions is intrusive or somehow conveys that the customer is incompetent. Discuss the consequences of letting a customer go out the door without all the materials necessary to complete the application. In many situations, the customer will be forced to get back in his or her vehicle to source a critical, yet forgotten, item. One can hope that the customer returns to the original place of business, but that’s not always the case. Superior service means helping customers spend more time applying their skills and less time sourcing product.
Another key to supporting this add-on service mentality is teaching customer service reps how to sell an application, not just an item. I grew up in the construction supply business, but this holds true for most wholesale vertical markets. When a customer was buying a tool, it was up to me to ask what he or she was doing with the tool. Were they drilling a hole? Think drill bits or hole saws. Were they cutting something? Think saw blades or cutting fluid. In addition to looking forward into the application, we were trained to look backward as well. This meant suggesting personal protective equipment, such as safety glasses or gloves. It could also mean extension cords or temporary power equipment. By looking at the whole application, a world of complementary product opportunities is presented.
Of course, almost any one of a distributor’s stocked products has a complementary item. With many thousand items to choose from, the challenge is where to begin. High-ticket items can be a good start since they often carry a lower gross margin percentage. To bolster the overall margin percentage, adding some high margin complementary items can help make the ticket more attractive. Beyond these items, focus on the highest hit items. By definition, these items are the most frequently requested and will appear on the greatest number of sales transactions. Take a look at the top 200 items. Focus on teaching the complementary relationship of these products.
If you want to create lasting impact, have a different team member teach about an application each week. Give them a little time to prepare and coach them on how to present the material. If anything, the instructors each week will become highly skilled in selling the whole application.
In addition to training focused on complementary selling, many distribution software packages have the ability to suggest add on items during the order generation process. Although many users know about the feature, very few maximize the capability. The function relies on the company setting up the complementary item database. This means that relationships need to be documented in the software. Similar to the earlier challenge with product training, the sheer enormity of creating this complementary database often scares off most users. Work smarter, not harder. Don’t try to create complementary item relationships for your entire stocked database, just focus on the high hit items. Creating complementary items for the top 200 or 300 items is a great start. As an additional teaching opportunity, invite customer service people to create the list of complementary items.
Bader is the owner of The Distribution Team, a firm that specializes in helping distributors become more profitable through strategic planning and operating efficiencies. The first 20 years of his career were spent working as a distribution executive. Today, he is a regular speaker at industry events and spends much of his time coaching individual distribution companies. For more information, call (503) 282-2333 or contact him by e-mail at Jason@Distributionteam.com. Also visit The Distribution Team’s website at www.thedistributionteam.com.
Tagged with tED