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Is Your Data Strategy Helping or Hurting Your Distributorship? (Part I)

Is Your Data Strategy Helping or Hurting Your Distributorship? (Part I)

Distributors have tons of data at their fingertips but aren’t necessarily transforming that intelligence into data-driven insights that help attract new customers and retain existing ones.


As data continues to proliferate at a rate of about 2.5 quintillion bytes of new data per day, companies across all sectors are trying to figure out how to capture, assess, and use that intelligence to their advantage. A powerful tool, data can help you run your distributorship more efficiently; improve your product and service offerings; serve your customers more effectively; and even retain your workforce in a cutthroat labor market.

The problem is that most companies are completely overwhelmed by the data that 1) they’re generating and 2) is coming at them from online and offline sources. Lacking a stable of data scientists who can sift through the data, find the most relevant points, and then act on those points, for example, many electrical distributors are letting their most valuable data go untapped. As a result, customer service suffers right at a time when no company can afford to miss a beat on the service front.

“Everywhere we look, more decisions are being influenced by data. Making decisions on a hunch is a thing of the past and trying to solve a problem without any sort of metrics doesn’t quite feel right,” TeamSupport’s Robert C. Johnson writes in 3 Ways B2B Companies Can Use Customer Data to Improve Customer Service in 2019. “We’ve become accustomed to leveraging some form of data to justify even the simplest decisions.”

Changing the Mindset

Johnson points to the fact that service interactions (e.g., live chat, phone calls, email) take place so quickly that companies simply can’t make data-driven, informed decisions based on that information. “Sure, sometimes agents need to think on the fly, but the reality is these situations are becoming less common with so many business-to-business (B2B) customer interactions now happening online,” Johnson concludes. “It’s time to change this mindset and start utilizing data to improve customer service.”

This advice is especially relevant for electrical distributors, most of which have seen significant shifts in the way their customers do business with them over the last few years. “If buyers want information on a product, they don’t call distribution—nor do they talk to a salesperson who comes to visit once or twice a month,” Gregory Smith, VP of strategic accounts and partnerships for SPA, Inc., in Cleveland, says. “They go online for the information they need and then they place an order.”

That puts the distributors in the perfect position to be able to collect, analyze, and act on e-commerce and other data that can be leveraged to enhance customer service, solve customer pain points, and improve customer loyalty. Ignore this reality, says Smith, and you risk alienating customers and pushing them over to your competitor’s website just one mouse click or screen tap away. “Staying competitive in today’s industrial B2B environment is challenging, and becoming an even bigger problem for distribution,” Smith says.

“With rising selling, general, and administrative (SG&A) expenses to deal with, and margin pressures continuing to worsen due to several different factors,” he continues, “distributors are finding it difficult to maintain their EBITDA (earnings before interest, tax, depreciation, and amortization). Much of that relates to the data conversation, and how they can use data to increase sales.”

Going Beyond the Basics

It’s not enough to simply have the data stored in a database or other repository. It’s about taking the data and dissecting it, analyzing it, and then making it actionable. “Distributors have lots of data, but for most of them the challenge lies in being able to extract the data, analyze it, and then use it both internally and externally to help customers be more profitable.” Once distributors connect that missing link, he says even threats like Amazon Business can be overcome.

“Amazon certainly has the data, but what it currently lacks is the institutional knowledge of the complex industrial B2B environment; that’s where independent distributors can win big,” says Smith. To get there, he says distribution has to leverage data to understand what their customers are buying, when they’re buying, how often they buy, and the quantity they purchase—all by customer vertical and size.

“Once a distributor understands the data dynamics, it can help customers more quickly react to changes in their own businesses,” Smith explains. “At that point, they move their relationship up what we call the ‘Sales Value Pyramid,’ with the distributor becoming a true, strategic partner versus just a transactional distributor that reacts to circumstances (versus acting proactively).”

Mining for Gold Nuggets

Make no mistake, some B2B distributors are beginning to realize the value of their vast treasure troves of data and the analytics needed to effectively find the gold nuggets in all of that information. This is helping them hone their business approaches in a way that truly meets their customers’ needs.

For example, Mark McGready, CEO at Jigsaw Systems, Inc., says companies can use data to improve their logistics approaches; make sure that the right inventory is at the right location at the right time; reduce operating costs; and increase gross profit margins. This could create real challenges for any distributor that’s not taking a data-first approach to business right now.

“If you’re competing against a distributor that’s using data to increase its margins and reducing operating expenses,” says McGready, “you’re going to lose out if you’re not participating in a similar practice.”

Extracting Relevant Data

Looking at the bright side, McGready says electrical distributors that for decades have specialized in solving complex customer problems are in the perfect position to add data to their arsenals—a move that can make them even more powerful and valued in the eyes of their customers. Using e-commerce as a central platform where customers can go to “self-manage” their transactions, distributors can extract the relevant data from those platforms and then use it to up their customer-centric business approaches.

“The distributor’s role is to assist and facilitate customers in guiding them through 300-400 different manufacturing lines and tens of thousands of different part numbers, all of which have their own engineering specs, capabilities, and uses,” says McGready. “For this reason, data and information are very powerful in the electrical distribution field, which—like many other sectors that have tried running on the same business models for 50+ years—is changing over to being a more data- and software-driven industry.”


In the second part of this article series, we’ll give distributors tested strategies they can use to transform data into important competitive advantages in today’s marketplace.


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Bridget 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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