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Valin Corp. CEO Joe Nettemeyer spoke with me recently about how the distributor has made services a profitable and significant part of its business, including inventory management, training and engineering.
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How did the distributor do it? “We did it by design,” he says in the interview. In other words, the growth Valin has seen in revenue from services has been due to a concerted effort to grow revenue from services. Seems simple enough. “It’s one thing to talk about it, but you have to execute on it, and the good news is, as we continue to advance and the more engaged we get in each of these initiatives, our understanding of the opportunity expands,” he says.
Nettemeyer attributes part of the company’s success in this area to its breakdown of markets into niches and then determining how it can create a competitive advantage in those niches. Critical to that is moving away from a price-based relationship to one that is more integrated. “I don’t want to chase a billion-dollar market,” Nettemeyer says. “I want to find the most profitable opportunities within that and see if I can build a business model that gives us an opportunity to have a dominant position.” (Read more about Valin's approach in the MDM Interview, Services Drive Growth for Valin.)
The approach is similar to Brent Grover’s description in The Little Black Book of Strategic Planning for Distributors of finding your business’ sweet spot in which it can grow profitable sales. “The big idea behind strategic planning is to invest where you see the best chances for meaningful, profitable growth,” Grover writes. To do this, you have to understand your customer segments from the perspective of growth potential and profitability. “Many distributors keep investing in their largest revenue segments without regard to either growth potential or profitability,” Grover says.
Learn more about finding your business’ sweet spot in Grover’s new book, The Little Black Book of Strategic Planning for Distributors.