What's Your Purpose?
Creating value for customers and you need just three things to do it.
By Mike Marks
Remaining profitable is what keeps businesses alive. However, customers don’t purchase from your company because you’re profitable. Instead, customers come to you – and return – because your business provides them with something they can’t get elsewhere.
Companies that fail to serve their customers struggle to stay open. Your focus must be on creating value. A self-regulated cost stream will naturally follow.
Your customers determine your value, but do you know how you bring value to them? According to Peter Drucker, one of the foremost thinkers of modern business management, a company has two functions: marketing and innovation.
His philosophy was that the purpose of a business in society is to create a customer. That’s how you add value, and everything trickles down from those two roles.
HOW MARKETING AND INNOVATION ADD VALUE
Many distributors emphasize growing sales teams as the path toward greater profitability. However, successful marketing proves that you understand your customers’ needs so well that they come to you; selling is no longer required.
Effective marketing makes customers aware of your unique solution and puts the onus on them to take advantage of it.
Would you need field salespeople if you provided competitive pricing with a digitally enabled customer experience with little friction? Many distributors have a customer intimacy business model – saying they win by providing quality service with the best people. But what would happen if the money shifted to implementing a frictionless customer experience?
Innovation is how you use your resources to create value for your customers. That’s how you’ll differentiate your company in a competitive environment. Without innovation, every distributor would be equal and have no edge.
3 STEPS TO BETTER UNDERSTAND AND CREATE CUSTOMER VALUE
Marketing and innovation share one common thread: They focus on reaching today’s customers by creating new strategies that provide differentiated value.
Start with these three steps.
1) Segment your customers.
Today’s marketing must focus on what the customer wants rather than the company’s location, account size or SIC code. Find out how customers want to buy and use technology to create a system that allows them to buy with as little friction as possible.
Sort customers based on what they care about, what they’re shopping for and how (and when) they shop. Armed with these insights, your team can work smarter — not harder — to meet customer needs, remove tension from the relationship, close deals faster and pick up new customers along the way.
2) Ask Questions
You may think you know your customers best and can evaluate what you are doing well or not. But how well do you really know your customers and their emerging challenges? Do you have a source of insight that does not rely on your sales force? How often do you take the time to truly understand what your customers value (or more importantly, don’t value) about your services?
Starting from the inside is the No. 1 error distributors make; it’s good practice to assign a non-sales team member or outside consulting service to do this research.
Qualitative interviews involve asking questions to find out what motivates or drives customer behavior. Some questions to include could be:
- We’re trying to improve our customer experience. Can you describe the challenges and frustrations that exist in your role today?
- Without naming names, how does your preferred supplier help you deal with those challenges?
- What would help you the most in support that you can’t find in any of your suppliers today?
Customer insight is the resulting data. Without it, you are making decisions based on opinions. It takes discipline to utilize data, but it presents the best opportunity for actionable results.
3) Be Future-Focused
Don’t get caught up in the moment. The easy path is to focus on what is already being done and duplicate it. But that isn’t innovation, and you’ll lose business to competitors who are providing what customers want.
Focus on creating value for your customers for the long term. With more competition and fast-changing customer needs, distributors must find a way to redefine their place in a crowded market. The lessons that Drucker taught me years ago can serve as an effective starting point.
Take time to learn how the market changes are affecting your customers and create a path forward that will facilitate their growth.
Mike Marks is the founding partner of the Indian River Consulting Group, focused on B2B channel-driven markets. Prior to founding IRCG, Mike worked in distribution management for more than 20 years. Reach Mike at www.ircg.com.
This article originally appeared in the September/October 2023 issue of Industrial Supply magazine. Copyright 2023, Direct Business Media.
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INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
