Someone once said, “Data is important. Once analyzed it becomes information. Information analyzed becomes knowledge, but knowledge, when utilized, is powerful.”
When business owners gather data to improve their market intelligence, it enables them to make better decisions. The more market information you have, the better the quality of your decision-making. Think of the financial newsletters that offer stock opinions, the Web sites that support fantasy baseball and football leagues and the J.D. Power & Associates' customer-satisfaction studies. And don't forget A.C. Nielsen, who pioneered the concept of point-of-sale (POS) analysis in 1935. His work is the classic example of how market intelligence can help companies gain market share.
Electrical distributors and manufacturers can use customer and product data in their market analysis in a variety of ways:
Determine what lines to carry;
Identify growing product categories and product types;
Discover what customers and employees think of their organizations;
Identify markets to serve;
Understand sales opportunities;
Uncover underserved and undersold products;
Understand stocking and pricing trends.
The key to winning more market share is knowing more about your market and your customers than your competition does. To do that, you must know how to convert data into market intelligence.
Leading distributors and manufacturers typically use multiple intelligence-gathering tools. They include:
Customer satisfaction and perception surveys;
Focus groups and customer advisory councils;
Manufacturer information from the National Electrical Manufacturers Association (NEMA), Rosslyn, Va., or from systems like Sylvania's “The Source” or Leviton's MKISl;
Electrical Wholesaling's www.ewhotspots.com;
Data products from DISC Corp. such as DataSearch, MarketTrack and CountyLines;
Dodge reports from McGraw-Hill Construction;
Information from Dun & Bradstreet, local Chambers of Commerce and state or federal resources.
Customer satisfaction surveys
Some distributors survey their customers to determine the quality of the services they provide to them. Many of these surveys are in a traditional hard-copy format, but e-mail surveys have become more popular.
Customer perception surveys
These surveys can effectively identify and compare your company's strengths and weaknesses versus your competition. Respondents are asked to rank the criteria in the order of importance they use when deciding whom to buy from. These surveys then ask customers to rate the performance of a company and its competitors in each of these areas. When the surveys also include open-ended questions, you can uncover valuable information about your customers' buying habits, as well.
Focus groups, advisory councils and customer interviews
Depending upon the issue and the audience, focus groups, advisory councils and one-on-one interviews can provide a wealth of information, especially if the effort is conducted by a knowledgeable third party. By using a third-party specialist in market research, you can create an environment for unbiased conversation by providing anonymity in a non-sales setting that's more comfortable for the respondent.
Most manufacturers don't have information tools that can be used at the local level. While many manufacturers have access to NEMA information, this information is based upon shipments to distributors from participating manufacturers. As mentioned earlier, there are some manufacturers that have created their own internal resources, which they make available to their distributors to support local market research and lead-generation efforts.
National data resources
www.ewhotspots.com, and DISC Corp., Orange, Conn., provide local market information on growth potential, market segment sales projections, and product-category projections; McGraw-Hill Construction Group sells local project data.
According to a fall 2005 survey conducted by Channel Marketing Group and Allen Ray Associates, only 33 percent of responding distributors provided point-of-sale information to more than three manufacturers, and only 50 percent were receiving some level of competitive information from their suppliers. Rockwell Automation, Milwaukee, Wis.; Philips Lighting Co., Somerset, N.J.; and Square D Co., Palatine, Ill.; were the only manufacturers frequently mentioned as providing information to their distributors.
The ability to gather and use geographically specific point-of-sale information has been lacking in the electrical industry. Being able to analyze item-level POS information could enable manufacturers and distributors to make more informed sales, marketing, pricing and purchasing decisions. This is especially true for distributors and manufacturers who do mine their information but have nothing to compare it against. Most manufacturers who receive POS information from distributors utilize it primarily for sales compensation.
To date, distributors and manufacturers have not had a third-party resource that can provide geographically based, non-customer-tspecific information to compare their end-user consumption data in the context of the competitive landscape. This is changing with the advent of Vista Information Services, a division of Activant Solutions, which receives POS data from a panel of distributors using its distribution software packages. This new service brings the same type of item-level POS analysis that is used in other industries. Vista's service tracks and projects monthly item-level product sales based upon information gathered at the point of sale. Participating distributors and subscribing manufacturers receive information on sales, brand market share, marketplace potential, top-selling SKUs, average pricing and more.
Manufacturers who use POS-based information see the potential to better understand distributor needs and market trends. One manufacturer said receiving POS information directly from distributors would be the “holy grail.” According to another manufacturer, “POS information can significantly improve our sales and marketing planning with our partners. We could then provide product category guidance based upon better information. Key strategic information such as average unit price per SKU versus competitive products, pricing trends by market segment, local growth rates, up-sell opportunities and more could be available.”
The old saying, “The more you read, the more you learn,” holds true for market intelligence. The more data sources you can access, the better the quality of your decisions and your ability to drive your business to improve sales and profits. If manufacturers know what's selling and what's not, they can optimize their manufacturing to have the right product ready for customers when they need it. Additionally, with their fingers on the pulse of the marketplace, manufacturers have an opportunity to strategize with their distributors to help them improve sales.
Allen Ray is principal of Allen Ray Associates, Kennedale, Texas. The firm helps companies improve measurable profitability through effective pricing strategies and streamlining business processes through effective e-business utilization. Ray can be reached at (817) 704-0068 or [email protected].
David Gordon is a principal of Channel Marketing Group, Raleigh, N.C. His firm develops strategic plans and market share strategies for manufacturers and distributors. Gordon can be reached at (919) 488-8635 or [email protected] You can register for his monthly newsletter at www.channelmkt.com.