Distributor survival depends on marketing, not selling
This was the message of consultant J. Michael Marks, who addressed the annual meeting of the Air Conditioning and Refrigeration Wholesalers International (ARWI) here. Confronted with new challenges like e-commerce, which compresses the time needed to make a buy-sell transaction, distributors must wean themselves from the traditional function as sellers and embrace the more challenging role of marketers.
What’s the difference?
Selling focuses on the seller’s need to convert product into cash, said Marks. Marketing satisfies the customer’s needs by providing the product, plus a whole cluster of things associated with “creating, delivering, and finally consuming the product.”
“Find out what your customer’s problems are and where they are in pain,” he stressed. “Go from their point of view, not yours.”
For example, Fed-Ex (which began as a concept in a college term paper, earning a D for its author) now dominates the package delivery business. The company doesn’t have a sales staff because it doesn’t need one. All it needs to do is publicize its 1-800 number, Marks said.
The company “finds the customer’s pain,” and satisfies it. It focuses on the customer, not itself. And — most important — it sets the price for the service.
One clever distributor satisfies his customers’ “truck inventory” needs by restocking the trucks overnight and even giving the vehicle a good wash.
This obliterates the usual process that wastes the technician’s time and ensures the truck carries no unnecessary stock.
What's your competency?Distributors must develop core competencies that can sustain their competitive advantage. The competencies must be:
- Valued by the customer;
- Hard to copy quickly; and
- Transferable to other markets or products.
This process requires distributors to find a way to get customer feedback and improve communications, and to measure cause and effect in the selling process.
“This is the ante to play,” Marks said.
The problem is that distribution has traditionally been a selling field, and distributors must make the cultural adjustment to the new world, Marks said. Older tactics don’t make it today, and the cost of a personal sales call has now reached $258 — so it had better be effective.
He criticized special price promotions as harmful to both sales and profits, as well as one-dimensional and consuming the attention of the vendor and distributor.
For example, having a special price on refrigerants in November ensures that the customers who had planned to buy earlier (October) or later (December) buy in November at low prices. This kind of “funneling” doesn’t create any new sales, creates inventory crimps, and subverts gross and net margins.
End of the world?While e-commerce is changing the world for distributors, Marks voiced skepticism about the “end of the world” scenarios being circulated that would turn distributors into mere managers of warehouses.
“How many of you guys have bought books on [the Internet]?” he asked.
A majority raised their hands.
“How many of you guys ever bought a motor by [the Internet]?”
No hands were raised.