By Bridget McCrea
As a follow-up to “Win the Value-Added Game by Stepping Into Your Customers' Shoes,” here are two sidebars that provide real, actionable strategies for turning value-added services into a profitable venture.
Generating New Revenues When Business is Brisk
When sales are coming in and all hands are on deck, it's easy to fall into the trap of “giving away” value-added services that should be generating additional income for a distributorship. Busy putting out fires, solving customers' problems, and finding ways to be competitive on price can eat up the sales and management teams' time, all while leaving real profits on the table.
During the busy summer season, distributors are particularly prone to losing money on the additional services that they provide. One jobsite visit to solve a problem, one hour of expertise provided via phone, or one seemingly-simple equipment modification, can quickly add up to lost profits.
Doug Dobie, CEO and founder of growth strategy consultancy Delvantage, Inc., in Long Beach, Calif., says the distributor that's selling highly-commoditized products—the kind that are increasingly appearing on the sites of e-tailers like Amazon Business—can't afford to “give away” value-added services, even when business is brisk and sales are strong.
“It's time to explore your business model and think in terms of reorder and recurring sales opportunities, both of which correlate directly with the 'extra' service and support that you provide,” says Dobie. For example, consider the fact that your electrical contractor customers are probably just as busy are you are right now. Knowing this, you can come up with a “subscription” type model (think Dollar Shave Club) for replenishing its consumables without having to place a new order every two to three weeks.
“There are a lot of recurring revenue opportunities out there that distributors don't even consider,” says Dobie, “and that can help position your company as the 'supplier of choice,' across different product categories.”
Another way to capture more business when sales are good is by infusing more technology into the buying and selling process. Since electrical contractors are probably already using their mobile phones and tablets for researching and shopping on their own time, why not let them do the same while they're on the job?
“Both distributors and manufacturers need to up their sophistication levels on the marketing front,” says Dobie. “Buyers are consumers too, and they know how it feels to shop on Amazon, Google, and other sites. If they come to work and have no online decision-making and ordering tools, they're going to shop elsewhere.”
How Do Distributors Really Add Value?
“Some companies compete successfully on price. Other companies compete fiercely because they sell a product that is so desirable that buyers will gladly stand in line and thank the seller for the opportunity of being put on their backorder list,” Tom Reilly writes in How Distributors Add Value. “If neither of these sounds like your company, then the value-added approach might be the way for [it] to compete.”
After studying over 300 distributors, this author of The Value Added Organization came up with a laundry list of ways that distributors add value. After organizing his list into 12 different categories, Reilly developed 150 separate examples of how distributors add value.
Read the complete list online here, but in the meantime here's a sampling that you can use to jumpstart (or, reignite) your distributorship's value-added campaign:
- Planning: Helping buyers understand their needs, plan their purchases, and source solutions (i.e., formal needs assessment, design assistance and planning, product demonstrations, estimates, etc.).
- Logistics: Logistical support that encompasses order tracking, just-in-time delivery, free shipping, special packaging, expediting, and barcoding.
- Usage: Offering performance audits, ongoing training, advertising, energy audits, inventory management, and cost reduction initiatives.
- Maintenance and service: Helping customers maintain their purchases and look for suppliers that offer preventive maintenance, roadside assistance, reminder mailings, service vehicles, loaner equipment, and/or warranty service.
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 firstname.lastname@example.org or visit her website at www.expertghostwriter.net.
Tagged with customer, distributor, profit, services, tED, value-added