When is it OK to Compete on Price? - Modern Distribution Management

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When is it OK to Compete on Price?

There is a segment of distribution customers who are only interested in price.

Competing on price is a no-no for many distributors. Few want to say, “The reason why people buy from me is price.” But, do all of your customers want to buy from you for your customer service, people or your other services? When customers are surveyed, many say they at least need competitive pricing to justify doing business with their supplier.

The reality is, there is a segment of customers who only are interested in price. And it is their perception on whether or not that price is low. It is a price that is acceptable to them.

Why Focus on Price

There is a lighting competitor, well known to distributors, that ostensibly is a manufacturer selling direct. Whether you agree or disagree about them selling direct, they are serving the needs of a segment of customers. 

There are contractors and facility maintenance personnel who buy from them, whether opportunistically or regularly. While some may comment on the quality of the product, that the product quality is acceptable to this segment of the market.

Aside from industry insiders who regularly deal with lighting, does the average contractor or facility maintenance person who may periodically buy lighting know if the pricing is good or bad? These are relative terms based upon what an individual customer can negotiate with a distributor.

But, what this lighting company is doing better than others is e-marketing to its target audience. They make the buying process easy and are promoting like a retailer with a consumer mentality.

Why Not You?

As a distributor who has invested tens of thousands, if not much more, into e-commerce, getting an ROI on your investment can only typically happen a few ways:

  • Increased penetration (revenue) from existing customers
  • Customer acquisition of your core customer type
  • Increased throughput that derives improved productivity
  • Taking a page from the aforementioned lighting company’s playbook. 

Could you pursue all contractors and facility managers within your geographic footprint for highly desirable products — a subsegment of your offering? Could you market to this audience as a B2C company, but an expert in your field? Could you be a creative marketer? Does your end-user pricing have to be so distinct from your contractor pricing or could you price shop Home Depot/Lowes, etc., and be a little lower … flat rate pricing? Could you periodically offer online coupons, rebates, one-week sales, holiday specials, etc.? Is it easier to hire a retail-minded marketer to run this segment of your e-commerce business?

Adding another pricing field to your webstore shouldn’t be a problem. In fact, with some systems you could add another industry’s catalog with specific segmented pricing so that you could offer industrial supplies — with pushing the industrial product orders to a local friendly distributor (and there are master distributors in other industries who will provide an e-commerce offering to you).

Another option: Logistically, while you may not want to offer free shipping on every order, we’ve seen distributors use free freight as a promotion, free freight for $49 orders and $99 orders. The lighting company referenced above offers free freight for orders over $500. You can be creative but don’t be afraid to charge, or offer a premium loyalty program. Think Amazon Prime. Free freight for a year if customers pay $X. You can also provide them some other services for free, such as training.

If you market the right products, you’ll pick up your back-end rebates. Become successful and perhaps gain supplier benefits (and some suppliers have marketing content they’ll share with you.)

While you can’t out depot Home Depot, it may help in capturing incremental business and creating another revenue stream that helps you leverage your e-commerce investment and your inventory. All that is needed is the right marketing person and the right thought process.

David Gordon is the president of Channel Marketing Group and has worked with companies in multiple industries on marketing strategy and execution, organizational and culture development, internal communications, employee motivation and change management. A version of this blog ran on electricaltrends.com. Email him at dgordon@channelmkt.com.

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