E-commerce has increased transparency by putting pricing, customer service successes and failures, and product availability in the spotlight, a trend both driven and capitalized on by national distributors, mega-retailers like Amazon and even new market entrants not handcuffed by the switching costs involved with upgrading legacy technology and processes.
Unfortunately, independent distributors may be leaking business share to these challengers. Previous MDM Editor Jenel Stelton-Holtmeier wrote in a blog: “The customer is in control of when, where and how they want to do business – and they're willing to go elsewhere if you can't meet those demands.”
The end-user is also under pressure to do more with less, raising the expectations they have of their suppliers. And as your long-standing contacts within customer companies move on or retire, the perception of your value to their successors may change, as well.
Given all of this, retaining business is probably one of the toughest jobs that distributors have today. Here are some tips for building a stronger customer retention strategy in this age of transparency:
1. Clarify your value proposition. Why do your customers do business with you? What earned a customer’s business at the start has to stay center stage after the sale closes. Rarely is that reason price. Is it quality? Productivity? Training programs? Your product specializations? Location? Jobsite delivery? Your mobile app?
Know and articulate your value proposition, and make sure it remains transparent to your existing customers. The customer experience has to support that. It doesn't do you any good to say, "We're going to influence productivity by helping you produce products faster at lower cost," but then run the customer out of stock, stopping their production line.
2. Design processes and identify metrics that support your value proposition. Implement processes to consistently deliver on the expectations your customers have for doing business with you. What’s your recipe for delivering a great customer experience every time?
Identify and track the right data for visibility. Measure what makes a difference for the customer. This requires an investment in data, as well as consistent use of that technology across your organization.
3. Align your organization to deliver on your value proposition. If your sales and operations teams are not aligned, your limited resources and capabilities will be running in different directions. In other words, you can't pay the operations team to drive low cost and low inventory and pay the sales team on growth.
It's common for the operations team to have a different world view than the sales team. That has to change. Get your entire team on board. For some, this will require a dramatic cultural shift.
4. Communicate and execute. It’s one thing to build processes to deliver on your value proposition. It’s another to execute on those in the long-run. If your team isn’t doing so, the time and money invested is wasted, and you’ll be back at square one. It’s an iterative process that requires communication and collaboration across disciplines in your company. Learn from failures and build on successes.
There’s so much to juggle day-to-day in the industrial distribution business; inevitably things will not go as expected all the time. That’s where communication comes in. Build transparency in the channel. Talk with each other and with the customer. Work with your suppliers.
If you proactively reach out to the customer and say, "Hey, we've had a miss, here's what's going on, and here's how we're solving it," that builds tremendous confidence in your relationship.
5. Consider a complete reset. The pressures are so great and the risks so real in this market right now that distributors must reboot their teams to focus on the customer. Fight the tendency to focus exclusively on new customer acquisition, and make retaining your customers Job No. 1 for everyone in your organization. After all, new growth won’t matter if you're losing customers on the back end.
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.