By Bridget McCrea
How electrical distributors can get their customers to think beyond price and instead rely on the distributor's expertise, product knowledge, and technical smarts to improve their own financial positions.
In the electrical distribution environment, most customers—contractors, in many cases—are shopping around for the best possible prices on the equipment and parts that they need to get their own jobs done. In reality, those contractors should be asking their distributors for technical expertise, product knowledge, and information on how they can run their own companies smarter, better, and faster than they're doing right now.
“Distributors are in a prime position to be able to provide this information better than anyone else,” says Gerry O'Brion, speaker, author, and founder of What Big Brands Know. “They're out on the front lines every day, dealing with contractors. They know those contractors, understand their businesses, know how they make money, and can multiply that knowledge across many different contractors.”
But instead of soaking up all of that knowledge and turning it into a valuable asset (e.g., education, benchmarking, etc.), distributors all too often get caught up in the “race to the bottom” in the pricing game. O'Brion, whose company helps companies of all sizes create disruptive change and growth—regardless of their budgets—says the distributor that becomes “more adept at helping contractors win business, earn margin, and have better financial structures,” will become the go-to supplier, plain and simple.
“When that happens, a distributor's value equation suddenly goes through the roof,” says O'Brion. “At that point, the question is no longer, 'What's the price of your commodity?' Instead, it's 'How can we do business together, create a win-win scenario, and claim a bigger piece of the pie by working together?'”
Are You Really Listening?
Distributors of all sizes miss the mark when it comes to pushing their value equations through the roof. That's because they don't always listen to their customers, nor do they understand what those customers want and need. “They need to do a better job of listening to those customer demands (i.e., what do they want more or less of?),” says O'Brion, “and then be able to turn those demands into insights and outcomes that can be delivered to the customer.”
That exercise may sound simple enough in theory—after all, how difficult is it to reach out to customers and ask them what they want, right? In reality, O'Brion says a lot of distributors skip this step and assume that they already know what their customers want and need. From there, you can help customers answer questions like:
- Why should I believe that you can provide those outcomes better than anyone else?
- Why would I believe that you can help me be more successful in my business?
- How do I know that you will link me up with better vendors?
- Can you help me benchmark against my competitors?
- Can you help link up with potential customers?
When distributors have the answers to these questions, they can develop value propositions that go well beyond just offering the lowest price on the block. Using the example of a product training program, O'Brion says distributors offering such programs must able to illustrate how companies that have taken part in it have improved their sales by X% within the first year of completing that training. “Tell them how you've worked with more than 20 different contractors,” says O'Brion, “and how you've moved those contractors' overall business margins from X to Y as a result of the training.”
Are Your Customers Voting for You?
Acknowledging the fact that many electrical distributors deal in commoditized products, O'Brion says there are some fairly easy ways to set yourself apart from the crowd, even as the likes of Amazon Business and Grainger are sharpening their e-commerce pencils and slashing prices. It ultimately comes down to one question: Why would someone give you the order and the money versus all of the other options that are out there right now?
“If you're selling commodities of one kind or another that someone can buy from various sources, you have to be different in a way that's valuable to your customers, and in a way that makes them vote for you with their dollars,” O'Brion says. “If you're not different, you quite literally will cease to exist because you won't be relevant anymore.”
And it's not just about being different, O'Brion adds, it's about providing more value for the dollar than all the other options. For example, is your distributorship easier to do business with than an online entity that's selling the same products? Do you provide customers with more value in the relationship? What other differentiating factors set your firm apart in the marketplace, and how can you effectively exploit these advantages?
The answers to these questions are safely stored in one place: your customers' heads. To tap into this knowledge bank, O'Brion advises small to midsized distributors to borrow a page from their larger competitors. “Big companies are generally more adept at listening to their customers,” says O'Brion, “and gathering insights into what your customers want more or less of. That drives everything.”
SIDEBAR: 4 Questions to Ask Right Now
Business may come down to customers trading money for a solution, but customers today don't just buy products, says Gerry O'Brion. Instead, they choose between lots of options. “Our lives are packed with spending opportunities, and many products seem the same,” he writes in 4 Questions That Can Change your Business. “It's more important than ever to give customers a reason to choose you.”
Positioning your business distinctly from your competitors may seem obvious, but many companies—and even large ones—fail to do it. Here are four simple questions that billion-dollar brands ask themselves each and every year to be certain customers continue to choose them:
- Who is your target? Consider which customers you're really going after, who your most profitable customers are, and who purchases from you the most frequently.
- What does your target need or want? “Think of a simple product like tissues,” O'Brion says. “We might be thinking about softness, absorbency, strength, price, box shape, box artwork, availability where we shop, size, brand name, tissue count, transportability, and more.”
- What is your unique benefit? Create a list of the benefits you're providing for your customers.
- Why should they believe you? “Papa John's has better pizza because they use better ingredients,” O'Brion writes, “and you can trust that Progressive has low prices because they give you competitor quotes right on their site.”
“Once you've figured out how you're providing value different from your competition, you're ready to do marketing,” says O'Brion. “What you say in your marketing messages will be simple if you've done this work upfront.”
Click here to read O'Brion's complete article.
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