The past few years' economic upheaval is changing how electrical distributors need to market and grow their businesses. While providing best-in-class service to existing customers will always be important, reaching new markets and new customers will be more important than ever. We're seeing larger electrical distributors investing in new product categories and market specialists and expanding the e-business and social media initiatives they use to reach end-users.
End users have their own challenges. Progressive electrical contractors are pumping up their marketing efforts to find new customers and are striving to keep up with new and more technical products and new installation techniques. Builders and developers have smaller pools of buyers, so they must adapt their offerings to compete in a more competitive environment. Commercial, institutional and industrial companies are more financially driven than ever and are seeking cost savings, launching green initiatives, and are only investing when a solid return on investment (ROI) exists.
Although some think the next 10 years will be similar to the past 10 years, doing business as usual won't enable you to achieve your goals. The role of marketing within a company and the need to create and earn business changed dramatically within the electrical industry during the past decade. It will change even more in the future. To prepare this article, we have spoken with industry leaders, researched other channels and sought ideas that could be adapted to the electrical channel. We have identified 10 ideas for distributors to consider for beyond 2010. Next month's article will explore ideas from electrical manufacturers.
- Use the Snap-On tool approach
Snap-On Inc., Kenosha, Wis., is well known for the fleet of trucks it uses to sell tools at job-sites. With contractors and maintenance departments tightly managing their inventories, the need for a warehouse on wheels could be in your future, too. Similar to the coffee wagon or canteen truck at job sites or factories, “inventory on wheels” could become reality for distributors that sell in areas with high density. Consider the top 50 discretionary products that your customers frequently run out of (tape, wire nuts, tools, extension cords, fasteners, lamps, standard wire cutters, breakers, etc). The order could be placed on the customer's account or charged via an iPhone, credit card application and other similar technologies.
The benefit for electrical contractors is obvious, but there is an additional growth opportunity, especially on construction sites. Consider selling some of the same ancillary products you provide to electrical contractors to other trades. Who doesn't need tape or tools? During these road shows you could provide coffee, donuts, rolls in the morning or sandwiches or hot dogs at lunch. It's a great way to get workers to see what you have to sell and a terrific way to brand your company.
- Sell strategically
You will see more distributors utilizing real-time salesperson and customer dashboards on their mobile devices and integrating CRM (Customer Relationship Management) activity reporting. Outside salespeople will be responsible for identifying opportunities, while inside salespeople and application specialists will differentiate companies by providing more value-added services to customers than their competitors.
- Rethink your counter area
Your counter traffic is probably down right now. Could your floor space be better utilized or should it just stay as a warehouse for impulse items? Instead of having your counter area solely capturing infrequent impulse buys or servicing forgotten items, consider dividing up some of the floor space to merchandize and promote specific market areas such as energy-saving products (occupancy sensors, timers, energy-efficient drives/motors, solar products, lamps, etc.); labor-saving products; and safety products. Each market-specific area should include selling tools such as literature, videos, computer layout programs, calculators, project design software and more. This approach reinforces that you are the expert on the subject.
- Recalibrate your inventory levels and stock management strategies
After labor, inventory is your largest investment. While contractors, maintenance departments and storerooms have reduced their inventories and made them more dependent on distributors, the need for orders to be filled at 100 percent has not changed. Customers can't complete jobs or conduct maintenance if they don't have the material, and traveling to multiple distributors or calling and receiving multiple shipments costs money. With the recession fresh in everyone's mind, now could be the time to expand your inventory or offer on-site warehouses for customers. Would any of these ideas work for your company?
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Managing a customer's' storeroom or warehouse.
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Using crib management software in non-industrial locations.
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Renting space in storage facilities in different market areas (creating virtual branches) where you deliver products from existing branches, and having customers visit to pick up material.
You should also try to work more closely with key suppliers to ensure you stock what they sell the most of. Every manufacturer knows what their top 100 stock-keeping units (SKUs) are for your market focus. Ask them to compare your inventory to these SKUs and adjust it accordingly to fill in the gaps. Consider offering an in-stock guarantee for the most popular products and don't forget get your manufacturers to work with you on dating or overnight delivery guarantees. Tomorrow's distributor will be competing more with non-traditional distribution such as online sellers, Grainger-type companies, electronic distributors and plumbing supply houses. Your difference is your expertise and your inventory.
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- Beef up your data analysis
We have become a data-driven society and data analytics drive performance. Unfortunately, data by itself can overwhelm. When you analyze data, it can unearth valuable information that can be a powerful decision and business driver. Are you using the data you have inside your organization to measure sales, inventory turns, branch, employee and departmental performance and the effectiveness of marketing activities? Don't consistently monitor your pricing strategies — it may uncover opportunities to optimize margins.
- Rethink how you reach specific demographics
Because of layoffs and all the changes in the marketplace, reaching existing or prospective customers is a getting tougher. Everyone's busy and many have gatekeepers or worse — voice mail. That's why you may need to rethink how to market to specific customer demographics. For instance, if you sell to the institutional/commercial markets and call on property managers, are you attending local or national meetings of the trade associations to which they may belong, like the Building Owners and Managers Association International (BOMA), Washington, D.C.? Or if you are promoting energy efficiency, how effectively are you reaching CEOs, CFOs and plant managers? Do you know how they get their information on electrical products? You need to figure out how you can become their top choice for this information.
- Think retail
Did you know many department stores outsource their high-end jewelry departments to other companies? Or that department stores are opening smaller specialty locations within the same mall that the larger store is in, such as kiosks during holiday seasons? Learn from these retailers and think beyond typical brick and mortar branches and twig locations. Consider setting up a kiosk of products in a rental tool distributor or a lumber yard, or having an industrial-product vending machines loaded with key electrical supplies in tool crib of a commercial facility or factory, or even in retail stores where contractors or technicians shop, such as paint stores or auto parts shops.
- Integrate your marketing and sales strategies so you can customize your sales pitches
Because your salespeople cannot be at every customer all of the time, you need a more integrated sales approach. Consider how marketing can supplement your sales process through various database/CRM-driven initiatives that will allow you to reach customers in a much more targeted manner. Integrating marketing tools such as e-communications, social marketing, print strategies, seminars, telemarketing and more can help you retain visibility within your accounts.
- Harness the power of social media and web-based marketing
Today's technology has expanded our communications capabilities far beyond “traditional” print-based communications. With Facebook, Twitter, Youtube, Google AdWords, LinkedIn, websites, blogs, texting, mobile advertising, virtual mobile advertising, smartphone applications, online advertising, e-newsletters and more, the marketing and promotional opportunities are limitless. Successful companies will pick and choose the appropriate tools to craft customized content for different customer audiences.
- Blend in new products with your existing basket of products
The one thing many new products such as LEDs, wireless controls and metering systems have in common is that they are based upon electronic technology. This requires additional training for employees and perhaps even hiring product specialists. And since many of these products are so new, some of the companies manufacturing them are new to the electrical market, and it will take some time to figure out which vendors are reliable. Another concern is obsolescence. Because these products may be software-based or are still evolving, inventory management becomes an issue. No one wants to get stuck with shelves full of the latest, greatest products that quickly become obsolete. New products bring new competition, too, and you may find yourself selling against companies such as electronics distributors, audio/visual houses, or IT distributors and more.
The next decade will offer electrical distributors many opportunities to differentiate themselves in the products they sell the markets they target, and the sales and marketing strategies they utilize to remain profitable.
David Gordon is president of Channel Marketing Group. He can be reached at [email protected] or (919) 488-8635. Stan Rydzynski is an associate partner for Channel Marketing Group, and spent more than 35 years with Leviton. He can be reached at [email protected] or (516) 319-1191. Combined they have almost 55 years of marketing experience in the electrical industry.