HARDI Attempts to Define Distributors' Role in Demand Creation
Does an HVACR distributor play a role in creating demand for the products they stock and sell? If so, what exact role do they play, and what best-practice measures may be utilized to achieve ultimate interest? Trustees of the Heating, Air-conditioning, and Refrigeration Distributors International's (HARDI) Education & Research Foundation are yearning for an answer.
DEFINING DEMANDThe HARDI Education and Research Foundation is commissioning a study to quantify the impact a distributor plays in creating, maintaining, and increasing demand.
The foundation solicited requests for proposal from 17 research firms, consulting groups, and university departments.
"There are sometimes differing perceptions about who is creating demand," said Emily Saving, director of education and research, HARDI. "Suppliers might indicate that they create all the demand, and the distributor only adds value through warehousing and transportation. On the other hand, distributors might feel that they do a lot to help demand creation - through their knowledge of the local market, the service elements of each product, and the representation of the brand. This HARDI Foundation research project seeks to clarify the 'who' and 'how' of demand creation."
Bill Shaw, president, Standard Supply & Distributing Co. Inc., Dallas, is acting chairman of the HARDI Foundation. He believes the study will help define the role - and value - of a wholesale HVACR distributor.
"Through this study, we're trying to measure if a wholesaler can affect demand for a product. We want to know how that impact on demand is formulated and if a program can be designed to reward everyone involved," said Shaw.
Under the current competitive business model, both the manufacturer and distributor are losing money, he said.
"When a manufacturer comes out with a new product, they tend to go with their best wholesale distributor. That distributor does all the work on the forefront, until another distributor catches wind of the product and decides, 'we ought to sell that, too,'" said Shaw. "The second distributor picks up the line and offers the product at a 5 percent discount. By then, others have caught on and are offering further discounts, eroding the profits for the manufacturer and the entire distribution side of the business."
MEASURING DEMANDThe commissioned research organization will conduct interviews and issue surveys to manufacturers, distributors, and contractors throughout the HVACR industry and other relevant industries. Topics will include demand creation, expectations, examples, strategies, and more.
The research will aim to quantify demand creation data through interviews and surveys, questioning: How does the long-term process of relationship and customer development create demand, and to what degree. Additional questions will examine demand-creation best practices, and how distributors can demonstrate that value to the supplier manufacturers they represent.
Saving said the foundation hopes to elect a suitor in the next several weeks.
"We've received a fair amount of interest so far," said Saving. "Each respondent is proposing different ways of collecting data. One identifies performing a statistical correlated approach through customer satisfaction scores and a controlled group of products. While another group prefers to identify best practices and define each example on a case-by-case analysis. Other applicants may use other unique forms of information gathering."
She hopes to share the final results no later than next summer.
"The final report will be as wide reaching as possible, the HARDI foundation will make it available to the public as a benefit to the industry and the wholesale distribution channels," said Saving. "We'll organize the information in the form of a white paper, present educational programming, and more. We'll also present the findings through a final report that is easy to understand, so that it doesn't feel quite like an academic research paper."
DEMANDING RESULTSDemand Creation was first discussed by HARDI members at last year's annual conference. Keynote speaker Mike Workman, professor emeritus of Industrial Distribution at Texas A&M University, shared in his speech that a distributor can indeed increase product demand.
"I see this as a precursor to understanding the market as it exists today. Many people are still running businesses based upon the information they had 10 years ago. This is about being able to define the environment they are going to be working in," said Workman. "To those who repeatedly bring up the same old story about manufacturer relationships not working, unless you can show the value numerically, unless you can show how much you're growing a market, unless you're sure that you're doing what those guys pay you to do, then it's a moot point for distributors to complain."
Shaw said some businesses have protocols in place, however, much more work needs to be done.
"There really isn't much of a program out there right now to measure demand creation," he said. "Some manufacturers will come out with a product and ask a specific wholesaler to roll it out. They say, 'hey, you're my No. 1 guy, we'll give you exclusive rights to the product.' But, how long does that last," he said. "Maybe this study will provide us with a time range that benefits the manufacturer, distributor, and the other distributors who will eventually offer the product, because wholesale distributing, as opposed to a plan-and-spec operation, is supposed to be an open market."
Regardless of the results, foundation members are sure the project will provide beneficial information to its member distributors.
"Our members have consistently asked, 'how do I add to the demand for the products I sell?'" said Saving. "This will allow them to definitively answer that question."
The HARDI Education and Research Foundation is commissioning a study to quantify the impact a distributor plays in increasing demand.