Distributors add a lot of value for their customers, said Tim Underhill of Strategic Business Solutions in the latest MDM Executive Briefing, Making Value Mean Something to Customers. But they rarely communicate that well to their customers.
And, according to Underhill, when they do have a system in place to document value for customers, they often make three common mistakes:
They document the wrong things. “Eighty percent of what they are documenting is price savings,” Underhill said, including discounts or rebates. In the first year, they may also be able to document process or inventory savings. “It’s the easiest thing to document and save money on.” But Underhill said that that may be the wrong message to send to customers. “It makes the customers feel the value (the distributor) adds is the lower cost,” he said. But many distributors add a lot of value beyond price.
They document the value too late. Distributors often try to document a solution months after the value was provided. “By then the customer has forgotten most of the pain,” Underhill said, including downtime, personnel involvement or expenses they were able to avoid. “So what I end up with is half the value, if I’m lucky, if I wait six months to document it.”
Management does not take a big enough role. This is the biggest mistake, according to Underhill. “A lot of managers think they can tell their people to go out and document value and may give some training, but that rarely works,” he said. They have to be more involved throughout the entire process.
Get more from Tim Underhill on these mistakes and how to define value in the clip below. Watch or download the entire interview with Tim Underhill at www.mdm.com/executivebriefing.