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Selling more to existing customers has long been one of the biggest opportunities for growth for distributors, especially for those with loyal customers. (If you’re not already providing a great customer experience and a clear value proposition, focus there first. Learn more about the importance of this in my recent blog on customer retention.)
Assuming you’ve earned your customer’s respect, you should be well-positioned to earn a greater share of their wallet. To capitalize on wallet-share opportunities effectively and sustainably, I recommend the following best practices I’ve learned working for and with distributors over the years:
1. Target the right business.
When the customer gives you the opportunity to expand your business with them, where should you start? In some cases, the customer will give you data on what they’re buying elsewhere and which categories they want you to bid on. But if the end-user can’t easily pull that data, build that intelligence yourself by walking the plant, going through storerooms, looking at the different manufacturing cells and even auditing the production process. This exercise is worth its weight in gold, helping you understand your customer’s spend much more clearly.
Another approach is to build a profile of the customer based on purchasing patterns from other customers in that segment. Bring in analytics from your own system and market-demand data from sources such as MDM Analytics.
After identifying areas of opportunity, do your homework. Know who the customer is buying those products from, why they are buying it from them and why that value proposition was relevant when they made that decision. That will help you determine your approach to winning that business. Do you have a better value proposition? If that category is a commodity, can you provide a more efficient supply chain so that you can be more competitive on price? Create a strategy to penetrate that business.
Build relationships across departments in your customer’s operations, as well. If you don't, then you're opening the door for somebody else to have access to your business.
2. Identify your value proposition in each category.
When it comes to your value proposition, all product categories are not created equal. For example, your value proposition based on technical proficiency may work great in metalworking, because you’re providing expertise that drives productivity in their throughput. But that same value proposition doesn’t work in a commodity category such as earplugs or manual respirators.
If you try to apply the same pricing and value proposition to every product category indiscriminately, you may lose your chance to expand further in that account. The customer may feel like you’re trying to gouge or take advantage of them, which may result in lost trust.
3. Start slow, and build off each win.
The sequencing of the categories where there are opportunities is a must; don't bite off more than you can chew. If you try to do too much, too soon, you risk the business you’re already doing with that customer. This isn’t a land grab. Make sure you are intentional about how you approach these opportunities.
Of course, there’s always some risk inherent to this approach. A competitor could react before you get through your list. But if you're doing your job and winning the business category by category based on a strong value proposition, you should be able to win and defend it. Stay close to your skill set and use that first and second category conversion to build trust and confidence in your capabilities.
If you haven’t previously sold a category or line available for conversion, you may need to seek out partners for technical and digital support to operationalize into that category or line more quickly. The more you can leverage partners to support you on the back side, the more competitive you’re going to be.
4. Solve problems with your conversion – don’t create new ones.
A smooth onboarding is critical and essential to making the leap from new business to retention. Are you converting the same line to the same line or to a different line? Are there changes in the part number? Does your customer have the right information in their system? What’s more, you need to validate that the product you’re replacing was prescribed correctly to begin with. They may be using the wrong tool because someone gave them the wrong answer. It’s an opportunity to apply your value proposition and potentially save them money rather than to just blindly convert a line.
You should also determine well in advance how you will handle the technical aspects of the changeover, including how you will add the part number, pricing and the data to their system. Make sure it’s set up correctly in your system, as well. The more integrated and under control that transition is, the better.
5. Once new business has been onboarded, defend it.
My mother was a stylist when I was young. At the salon, the stylists would put a different-colored cape on a new client for the first six months so that everyone knew they were new; as a result, they got special treatment to keep them coming back. The lesson: Make sure that your team gives that business – whether with your existing customer or a new one – extra care.
All too often after we win business, we take off running for the next piece of business before the newly-won business has truly been established. To reap the rewards from our efforts, though, we must shift some of our focus from winning new business to operationalizing new business: Are you delivering great service levels? Is your invoicing clean? Are your processes supporting the customer? Are they getting the value that you said that they were going to get from you? If not, you may lose the business you worked so hard to acquire.
Build processes into your system to ensure you’re meeting customer expectations from the start, consistently. Remember: The incumbent supplier for that product category is still in your customer’s system and can easily be brought back.
6. Know your saturation point.
In nearly all cases, you won’t be the exclusive supplier for a customer; you will not sell 100% of the products they are buying. So what percentage you should aim for? What’s a reasonable share of that customer’s wallet?
Use the data in your own system as well as data from other sources such as MDM Analytics to identify your existing share and your potential share. Know your saturation point and reach for that. This number will also provide you with guidance as to how you should align your resources against that account.
A friend of mine told me a great story about a boat trip down the Amazon. He told me you don’t know dark until you’re on that river at night. What got me in his story was his commentary on the guides. The lead guide sat in the front of the boat and throughout the night he explained everything that was happening and what was about to happen; because of this they were never surprised by a big splash or were worried about getting off-course. He talked about what to expect, what the risks were and how the crew was managing them.
The lesson for distributors: If you’re the guy at the plant that made the decision to convert a line to a new supplier (you), you have skin in the game. If your boss asks where you are with it, if you’re able to provide updates throughout the transition, that’s going to make you look good. Support the champions within your customer locations by providing them with up-to-date information on the conversion. Become a true partner to your customer as you build your business with them.
Larry Davis is CEO of AgoNow, a Tulsa, OK-based pure industrial master wholesaler and channel solutions provider. Learn more about AgoNow at agonow.com. Before co-founding AgoNow, Davis served as the executive vice president and chief commercial officer of Stellar Industrial Supply, an industrial distributor based in Tacoma, WA, and as president of ORS Nasco, Tulsa, OK.