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Today's Distributor Success Formula

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Innovation and strong company culture are your new requirements.

by Mike Marks

Industrial distribution is undergoing a powerful revolution for an old-school industry. New technologies, new ways to do business (accelerated by the pandemic) and the growing influence of Gen Z has had a profound impact on many family-founded companies.

It’s easy to continue long-held practices that have “worked in the past,” but to do so will be the death knell for your organization. Using forward-thinking strategies and recognizing the pivotal role of culture will help you build an adaptable foundation for success.

How do you change the way you’ve been doing business?

First, build a strong workplace culture that fosters cross-functional teams and breaks down silos. Next, transition from a legacy outside sales process to a more robust hybrid model that integrates inside sales, digital channels, and well-defined team roles. Lastly, invest in the best tools (your tech stack) to enhance customer engagement, lower sales costs, and give you the power of data analytics.

1 Build a culture that fosters cross-functional collaboration. Nurturing and valuing employee engagement is the first place to start when building your workplace culture. Creating a team of forwardfacing employees who genuinely care about where the company is going and how they can play a part in its success is vital.

Unfortunately, leadership teams often implement their vision without employee input, so getting people on board can be challenging, especially if there is a lack of transparency. The best place to start is by conducting an employee engagement survey to get a pulse on your culture (and continue to do so every two to three years to stay current). Allow employees to fully participate in shaping goals and redefining roles, and have “human leaders” who act purposefully, show genuine care and respect for their employees, and support their team’s unique needs.

This focus on transparent communication and employee engagement should continue and even intensify during volatile times. You’ll need your best team members to find solutions when customers are struggling. Employees are confident when they have a clear vision of where their company is going, what that vision looks like, and how they can be involved. Communicate the vision to your team and ask for (and listen to) feedback.

2 Rethink your current sales structure for today’s customers. The role of inside sales has grown more critical. Face it: Once customers realized they didn’t need to see your outside sales rep as often, they developed a better relationship with the inside sales rep. When an inside sales rep can meet customer needs, it’s time to focus your field reps’ roles on market-making rather than market-serving. This change in customer buying habits necessitates a sales transformation plan and a new sales compensation structure. To do this:

• Assess your current state and evaluate new hybrid sales models and digital sales channels.
• Survey your customers to identify your strengths and weaknesses.
• Rethink your current processes and note where you are trailing your competition, then map out goals and create manageable steps to achieve them.
• Talk to your industry peers and find out what’s working for them, whether it’s restructuring employee roles or new technologies.

Even better, join an industry trade association where you can exchange information with suppliers, learn the latest industry trends, and network with industry colleagues. Joining a buying group can also be a great way to network, learn from industry innovators, and take advantage of buying discounts.

3 Optimize your tech stack to benefit you and your customers. Many distributors think they don’t have the time to implement new tools and processes. That view will cause them to lose business to their competitors who are using technology to enhance the customer experience, reduce information silos, and lower costs. Your competitors are one reason you should be adopting digital tools. Your customers are another, and most important: They want to conduct more business digitally, from looking up product information and invoices to entering quotes and expediting POs to initiating RMAs.

Suppliers want to be more efficient and avoid mistakes when interacting with distributors on matters such as the delivery of Advanced Shipping Notices, new pricing catalogs, or the management of Special Pricing Agreements. Automating many of your processes can enhance the customer experience, as well as reduce errors and improve profit margins.

A well-built and well-used CRM can help eliminate information silos within your company. Set up a system that eases the workload for your sales reps and rewards cooperation among your cross-functional teams.

Well-designed e-commerce platforms help customers search for product information during the research phase. Specialized apps help them initiate their material returns (RMAs) and make it easier for them to do business. An inventory-sharing platform can help you locate a much-needed product for a valued customer or eliminate dead stock. Pricing software can ensure you make pricing decisions, particularly regarding raising prices, where real opportunities exist. An integration platform can make data sharing between platforms more manageable and efficient. And a Warehouse Management System (WMS) can help you run your warehouse more efficiently and lower operational costs while meeting customer expectations for speed and accuracy.

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Don’t forget to use your existing tools to their potential, such as updating inventory settings in your ERP as the supply chain fluctuates. And if you’re still faxing orders to suppliers, plan for a digital upgrade!

How do you figure out what technologies you need? Talk to your customers and assess their digital readiness. Learn what they want and figure out if you can provide it. Then do some recon and find out what the digital innovation leaders are doing now and planning for the next three to five years. Measure your capabilities in relation to your customers, suppliers, and competitors, and identify where and how you can reduce the friction of business processes to improve customer service.

4 Harness the power of data analytics. To grow as a company typically means operating in more territories and using inside sales, technical sales, and other niche roles to target customers more efficiently. Despite this strategy and the availability of technology, some distributors are still operating in the dark and scrambling to find high-profit clients or please their existing customers.

Segmenting your customers with information gleaned from a robust CRM will allow your sales teams to work more efficiently to meet customer needs, remove friction from your transactions, close deals faster, and add new customers. Your customer segments need to be clearly understood and delineated to know where your profitability lies by determining what kind of customer occupies each spot, what they want, what they need, and whether you can fulfill those needs. Once you’ve analyzed the data, you can determine which segment is in your sweet spot.

Innovative distributors find out what their customers truly value. There’s a difference between what you think you sell and what customers buy. Using analytics on customer buying habits – such as who is buying digitally or whether they interact online but finalize their order through sales reps – forward-thinking companies can market to specific groups of customers with targeted marketing strategies. Marketing automation software can help you use this data to launch campaigns seamlessly with minimum effort.

EMPLOY A FORWARD-THINKING STRATEGY FOR GROWTH

Put your customers first when transforming your company’s culture and sales teams, upgrading your tech stack, and using data analytics. By doing so, you can create the ultimate customer experience. Enhance engagement at every touch point in the buying journey, whether it’s an interaction online, marketing efforts, sales team, or customer service.

Recognize that it’s an ongoing process to ensure the buying journey is simple, your customer is happy, and you improve profit margins. Build a data-driven feedback loop by:

• Creating a place to store and integrate data from multiple sources.
• Using predictive analytics, such as an artificial intelligence-enabled app, to anticipate customer needs earlier.
• Conducting regular scheduled reviews with defined actions.

Keeping your customers in mind and prioritizing continuous improvement will ensure growth for your business.

ONE FINAL NOTE

Up until the pandemic, the industry was very stable, and many owner-operators spent the preceding years as caretakers. The caretaker role is dead-on-arrival today. Your employees want to follow a leader who has a vision for the future and has confidence in their plan to achieve it, while answering the “what’s in it for me” question for all employees. Those that lack the willingness or ability to assume this role should consider getting out of the game – just say’in.

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