Distributor Survival Strategies

Here's how to analyze your competitors' value-added services.

To compete and survive in today's tough market, electrical distributors must offer better value-added services than their competitors. A value-added service makes life easier for a distributorship's customers or enables it to do a better job distributing electrical supplies. It often requires an investment on the company's part in itself or in its employees to make those services happen.

Value-added services can help differentiate an electrical supply house from its competitors. A distributorship must regularly take stock of the services it offers — as well as those of its competitors. By taking a close look at the services a competitor is unwilling or unable to perform, a distributor may find an opportunity to offer something extra to customers. The company with the best package of value-added services will win its unfair share of the market most of the time.

This article will teach electrical distributors how to analyze the value-added services that their companies and competitors offer. Manufacturers and reps can use it to size up a distributor or to prepare a marketing plan with one. It also offers a three-step approach to establish a company as the primary source of electrical supplies in its market. Let's take a look at each of this strategy's three key elements.

  1. Scope out the marketplace.

  2. Examine the packages of value-added services that you and your competitors offer.

  3. Develop counter strategies based on what you have learned.

  1. Scope out the market

    First examine the various sources for electrical supplies in the local market. One of the most valuable tools for doing this is EW's “Electrical Marketplace Pyramid.” You can find a free article on this market-analysis tool by typing “pyramid” into the search engine at www.ewweb.com. The graphic for that article is available for sale at www.ewweb.com/resources. Make an electrical pyramid for your own market, and identify the sources of supply with which you compete. It will probably surprise you to find how many different types of companies are competitors in your market.

  2. Examine the packages of value-added services that you and your competitors offer

    The next step will be to rate the strengths and weaknesses of existing, new and potential competitors from the various channels to market in the following key areas: personnel, inventory, reputation and service.

    When analyzing any competitor, no matter how new or how traditional, remember that with every strength usually comes a reciprocal weakness. For instance, a niche marketer with a narrow product line may struggle against a distributorship that sells a broad product offering and promotes the benefits of dealing with a single source for supplies. Find out which value-added services differentiate your company from the competition and make the most of them. The competitive advantages of each of the different types of electrical distributors or of the various alternate channels for electrical supplies often tie into their distinct packages of value-added services.

    A small, family-owned electrical supply house may have a core group of dedicated inside salespeople who give enormous technical assistance to customers, while the home center down the road may rely on a constantly changing lineup of salespeople with no particular expertise in electrical supplies. Yet that same home center will score points with customers because it remains open long after that distributor has closed.

    Or take that datacom wiring specialist that invests in all sorts of oddball conductor and insulation varieties. That company may be just the ticket for a customer who needs an unusual wiring harness that no electrical distributor in town would stock. But that electrical distributor may not be that customer's first call for job-site delivery of bulk wire.

    Each of these scenarios exemplifies how an electrical supply house can win an order because it provides some extra service not offered by a competitor. You can use the list of value-added services on page 55 to evaluate your service level.

    You can also use this same checklist to evaluate competitors' packages of services. Any company should do a regular analysis of the strengths and weaknesses of the service offerings of key competitors. Another way to check out a competitor's services is to be a regular visitor at its Web site. Although most Web sites in this industry still do little more than act as electronic promotional brochures, you may find a surprising amount of company data.

    Customers obviously also can prove a great source of information on competitors. If any of the company's employees have developed close personal relationships with certain customers, see if they can provide additional market intelligence.

  3. Develop counter strategies based on what you learn

    Now that you have identified what your distributorship and its competitors do best, it's time to sit down with key employees to use what you have learned to develop a battle plan. If the distributorship can afford it, this might be a good time to organize a company retreat so everyone can get away from the phones for a day or two to focus on this challenge.

If a company retreat does not work into the plans, key managers can get together during work hours. For either type of meeting, the best bet will be to distribute competitive analyses to key department heads who will attend. They can report on what their departments can do to improve the company's package of value-added services. For instance, the warehouse manager may see some new ways to stage orders for large construction projects to simplify jobs for customers.

Evaluating the value-added services that a distributorship and its competitors offer will pay off as a valuable exercise. With all of the new channels of distribution now on the radar screen, the value-added services a distributor offers will become the key to its future success and survival.

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