By Bridget McCrea
Historically, manufacturers sold products exclusively through distributors that, in turn, relied on their suppliers to create and execute solid “go to market” plans and strategies. And while industrial distributors have always played some role in developing those strategies, for the most part the task of getting new products to market largely fell on the manufacturer’s shoulders.
Fast-forward to 2015 and the new product marketing landscape has changed quite a bit. Not only are distributors being asked (or, in some cases, being “forced”) into taking a more proactive role with new product marketing, but many are finding themselves having to accept their suppliers’ marketing strategies – and, subsequently, the associated inventory – before they even know if those new items will sell or not.
“Many manufacturers have volume-purchasing requirements. These requirements force distributors to ‘stock up’ so the best prices can be had and contracts can be satisfied,” writes Lynn Daniel in The Daniel Group’s report, The Industrial Distributor. “These requirements can sometimes force less desirable strategies for distributors. The decision to purchase the typical industrial product is influenced by factors beyond just the tangible characteristics of the product (e.g., performance, durability, price, etc.).”
Losing the Connection
At K/E Electric Supply Co., in Mt. Clemens, Mich., General Manager Rock C. Kuchenmeister says new product marketing has become much more difficult for his company since the Great Recession, when vendors “stopped spending money on their products and marketing.” Marketing funds that were once earmarked for distribution channels, for example, were allocated to different causes and have yet to be restored. Those dollars that are available, says Kuchenmeister, often come with restrictions. “[Manufacturers] aren’t letting local reps and/or distributors dictate and leverage what works in the marketplace,” he says.
Manufacturers are also missing the boat on marketplace differentiation, says Kuchenmeister, whose firm has four branches throughout Michigan – each of which is different from the next. “We go to market differently at each of those branches; I can’t imagine how a larger, regional or national distributor must be dealing with it in this regard,” he says. “In essence, independent distributors exist to give customers that ‘local presence,’ but manufacturers don’t listen well to distributors and have a lost that connection.”
Working in Tandem
One way electrical distributors can tackle the new product marketing challenge is by pairing up with their manufacturers to develop plans of attack. “We handle it in tandem with our suppliers,” says John Gearman, electrical/automation segment manager at Dakota Supply Group in Fargo, N.D. For example, the distributor manages a number of promotional efforts throughout the year, relying on its manufacturers to “provide the information and collateral materials” on the new products, says Gearman.
Dakota Supply Group also has an internal marketing group that takes on a lot of the new product marketing responsibility and that “does a good job of spreading the word and garnering interest in new offerings,” according to Gearman, who adds that his firm is challenged by having to take on inventory before the demand levels and interest in a new product is even determined. “We’re actually dealing with that right now,” says Gearman. “Our suppliers send us out a certain amount of inventory, but how do we drive that inventory? That’s the key question that needs to be answered.”
The situation becomes trickier when the supplier doesn’t offer up a marketing plan to go with the new offering, and when it instead relies on the distribution channel to take on that burden. At that point, Gearman says distributors like Dakota Supply Group are pushed to look internally to their own marketing departments for help. “It gets to the point where we have to come up with the marketing plan and put it out there for our [salespeople] to use,” he says. “At that point at least they’ll have something to use to drive sales and raise customer awareness.”
To other distributors that are dealing with similar challenges, Gearman says a good starting point is to ask manufacturers about their marketing plans before products are launched and shipped. “I don’t think there’s enough of that going on in our industry right now,” says Gearman. “Suppliers are making products that they think will work, but there’s no real strategy or plan for moving those products forward.”
They Do it Their Way
When he thinks about the most recent new product launches that Sidney, Oh.-based Dickman Supply has been involved with, Doug Borchers says his firm has shouldered most of the responsibility on the marketing side – and with good reason. “We have good manufacturing partners who have good brands, but in our marketplace we’re also promoting our own brand,” says Borchers, vice president. “Because of this, we tend to do most of the marketing ourselves; we want to be able to create our own spin on our own brand. We’ll include the manufacturer’s information, but it’s done in our own way.”
To circumvent the inventory-related challenges (i.e., take it on and hope that it all sells) that often accompany new product launches, Borchers says his firm recently mobilized a new “inventory committee” to carefully screen the opportunities from various angles. Key questions being asked include: Do our customers want this product? What kind of marketing materials are available for the launch? Does it financially make sense to invest X number of dollars in this inventory (or not)? Are we going to receive a discount on the initial order due to all of the preliminary work that we’re putting into this? And, are there incentives for the salespeople to start moving this product off the shelf?
Borchers says purchasing, sales, finance, and other areas of the company are involved in the committee, which will soon begin meeting once a month to discuss the questions outlined above. “Any new product will have to get through this committee before we agree to get involved; everyone will have to be in agreement,” says Borchers, who sees the initiative as a big improvement over the typical “yes our buyers will buy this product, let’s put 10,000 of them in stock” mentality that distributors have historically operated on. “That just isn’t happening anymore.”
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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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