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The Value-Added Distributor Series: Will Contractors Pay for Value-Added Services?

By Bridget McCrea

It’s no longer enough to work up a bid, take the order, and deliver the product to the jobsite. Today’s electrical distributors are filling myriad roles – from consultants to research assistants to kitting professionals to new product trainers – and everything in between. Some of these services fall under the “cost of doing business” umbrella, others are compensated for as part of the overall order, and others are offered in return for some type of payment. And wait – there are other value-added services that are simply given away for free by well-meaning sales reps that do what they can to keep those orders coming in.

At some point, electrical distributors have to ask themselves if they are giving away too much in their quest to win bids and keep their customers as loyal as possible in an era where the next provider is just a mouse click away. “This is a process,” said United Electric’s Rick Freebery, in tED magazine’s The Value-Added Distributor Series: Reversing the Trend, “so changing the view of selling services within your own organization is the first step to success.”

United Electric, for example, has developed a number of information pamphlets and brochures that sales reps use to educate themselves and their customers on the services that the company offers. “Remember that any existing salesperson with tenure in our business has most likely been giving these services away for free,” Freebery noted, “and doesn’t necessarily understand the changing model that is taking place.”

The good news is that electrical contractors do seem to understand that “changing model.” For this article, we asked six of them how important value-added services were to their firms, how they typically pay for such options (or, whether they pay for them at all), and what type of pricing model would work for these arrangements. Here’s what they shared with us:

Michael Duffield, manager and service manager, Greenway Electrical Services, LLC in Apopka, Fla.
“I believe that distributors should get a premium for services that they offer. For example, if a company is willing to store job-related products in their warehouses because we don’t have room onsite for the goods, then that would be a plus for us. We’ve worked with several distributors in this manner and it was invaluable because they basically took possession of the order and held it until we needed it. Some companies are doing a very good job of this; it’s a good service. At the end of the day, a distributor serves two functions:  a bank and a stock of inventory. If they have enough room to offer the latter, it’s invaluable to us.”

Dave Gilson, owner, Tera-Byte Technologies, Inc., Aloha, Ore. 
“We frequently turn to our electrical distributors for value-added services, particularly when it comes to getting trained on how to use new products – or, when a new employee needs to learn how to use an existing product. We basically send them to the training that the distributor offers; it’s a pretty valuable service. A lot of this training has been offered at no charge but once in a while the distributor will want to charge for it. I’m not sure of the role that the manufacturer plays in the situation, but knowing that those products are going to be used in the field should be an impetus to offer the training at no charge.”

Tim White, division manager, APG Electric, Clearwater, Fla.
“We don’t generally pay for value-added services that are offered by the three main distributors that we work with on a regular basis. They don’t hit us with any ‘added fees’ for these types of services. If that were to happen we’d probably use the same strategy we use now in selecting suppliers:  We don’t look at the cheapest quote for gear, lighting, or other goods. Instead, we look at the firm’s history with us, how well it has performed, whether we are getting full shipments or not, the size of any backorders, and so forth. For us, it’s all about performance. So if a company offers us a little something more – and if that firm has a good track record with us – in exchange for a slightly higher price, we’ll consider it.”

Bruce Seilhammer, electrical construction group manager, SECCO, Inc., Camp Hill, Pa.
“Value-added services are always very helpful for our company. Some local distributors, for example, have placed their own trailers on our job sites and used the vehicles to store and distribute inventory (and only charge SECCO for the products that are actually used during the course of the job). Services like that have been a huge help on our projects. In most cases, the distributor has wrapped the cost of the value-added services into the overall cost of the order. If that changed, and if the supplier started charging extra for the value-added options, then it would have to be a ‘win’ for both of us. If the specific service being offered saves us money on manpower on a project, for example, that savings would help offset any additional costs charged by the distributor.”

Justine Maglio-Wardell, office manager Maglio Electric, LLC, Hampton, N.J.
“Distributors have really curtailed the amount of value-added services that they offer us. At this point we really don’t have any; it’s not something we’ve been privy to. Years ago outside salespeople would come visit us, talk about products, work with manufacturers’ reps, and help us bring in new products (like charging stations that are used in hospitals). Nothing like that has happened in a long time. As for the payment vs. free issue, I can understand why a distributor would need to charge for training, consulting, kitting, or some other type of value-added services. You can’t do everything for free.”

Joe Martin, executive vice president, KenMor Electric, Houston.
“We always welcome distributors who bring value-added ideas to the table, particularly when it comes to training. Training is always valuable to us. We also like it when distributors present us with new product ideas and options that help us work more efficiently on the job. I personally would rather see distributors build the charge for the value-added services into their overall costs and to also indicate what type of services they’re offering right on the bid. That way, when comparing bids and making purchasing decisions, we know which suppliers will (and won’t) open their doors on a Sunday night at midnight to help us solve an emergency problem on the jobsite.”

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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