Most distributors consider themselves value-added suppliers. When author and consultant Tim Underhill posed the question to 91 local distribution executives, nearly all in the room raised a hand. But few of them are documenting the value they add for customers – and the documentation is key to maintaining margins in a tight economy, Underhill said.
“If you’re not constantly pointing it out to the customer, the customer is not going to see it,” he said. “You do all this work – you do the technical support, you do the vendor-managed inventory – and you get to the end of all this work and if you don’t put it down on paper, you don’t get any credit for it. And that’s a good strategy? Would you get more business and at a higher margin if you put it down on paper?”
During the 16th Annual Wholesale/Distribution Seminar – sponsored by Barnes Dennig, KeyBank and Martin & Associates – Underhill described why and how distributors should document the value they are providing to customers, and he provided tools for presenting those savings to customers.
One of those tools is an impact diagram that allows a distributor to highlight each of the customer’s cost drivers that are impacted by the distributor’s product and service. From there, the distributor can calculate how each of those costs were lowered. Sales personnel are then able to “sell solutions as opposed to selling products,” Underhill said – and they can sell at a higher margin than their competitors.
“It’s about creating a competitive advantage,” Underhill said. “It’s about helping your customers accomplish their objectives, helping them increase their profits, minimize their risks – those types of things.
“When you have companies that are looking for ways to reduce their costs, and you’re showing them how to save 10, 15, 20 percent on a total cost basis, and someone else can save them 5 percent or 3 percent on price, you know they’re probably going to look to you.”
Eighty three percent of attendees rated the seminar “Very Good” or “Excellent.” The next Barnes Dennig seminar will be our 13th Annual Manufacturers Seminar, to be held November 7 and featuring acclaimed economist Alan Beaulieu. Click here to register.