Much Ado About Marketing

Oct. 1, 2003
The deluge may be daunting, but electrical distributors are learning to make the most of manufacturers' marketing programs.You probably thought when you

The deluge may be daunting, but electrical distributors are learning to make the most of manufacturers' marketing programs.

You probably thought when you bought that first CD-ROM drive that you could soon do away with all the shelving you had packed with printed product catalogs. Little did you realize that you would have to move those shelves into the marketing manager's office to hold all the binders manufacturers have sent you with the details of their distributor marketing programs. Welcome to electrical distribution today.

The role of the electrical distributor as the marketing envoy to end-users has blossomed over the past few years. Some distributors long ago embraced marketing as a competitive strength. Others have been dragged to it, and some still seem clueless, say manufacturers. But industrywide distributors are getting used to their expanded role in the product channel, and they're getting better at it.

One manufacturer says 10 years ago distributors were focused almost exclusively on sales and inventory issues. Now he estimates more than half of the electrical distributors today have at least one dedicated marketing person on staff, and a growing number of distributors have marketing departments. Clearly this business is not just about sales and inventory anymore.

The interest in marketing seems to have come from a couple of sources, at least. Distributors under fire from home centers and other big-box competitors have responded by studying these competitors' tactics. From another direction has come the educational snowballing effectof past marketing efforts. The successes of distributor-marketing programs such as Bussmann's Buss Plus or Thomas & Betts Corp.'s Signature Service have inspired innovative variations on the theme at other companies.

"When Signature Service was introduced 10 years ago, distributors thought 'Oh, here's your program of the year,' but it has grown into far more than that," says Tom Latanision, executive vice president of marketing for Memphis, Tenn.-based T&B. In the past decade, Signature Service has not only survived and evolved as a program, it has become the centerpiece of T&B's corporate culture, he says.

Distributors are seeing an increase in the number of formal marketing plans coming from their manufacturers. "I sometimes shake my head at the number of trees killed," says Ken Cain, vice president of marketing for the Branch Group, Upper Marlboro, Md. Those trees may not have been a total waste if the result is more sophisticated, more effective and more competitive electrical distributors.

Several manufacturers have observed that today's distributors in general have more marketing savvy than they had in times past. As a result, their expectations are rising, says Steve Hartkopf, manager of strategic projects in the Channel Management group at Square D Co., Palatine, Ill. "There is a level of sophistication out there that was not there five years ago," says Hartkopf. "They are very focused on the results. They want specific programs to accomplish specific things."

"We're seeing a more dedicated effort to have a plan with each manufacturer," says Neil Wolfson, president of Red Dot, a division of L.E. Mason Co., Boston, Mass.

The result is better communication among the various players in the channel, better planning, better use of resources and better penetration of the market. It's practically a full-time job just to stay on top of the programs that manufacturers offer.

Certain old standbys in the world of electrical products marketing continue to pull their weight, and benefit from continual refinement and reinvention by electrical manufacturers and distributors across the industry. Counter days, joint sales calls, freebies, catalogs, ads, flyers, merchandising displays, contests and training programs continue to form the backbone of electrical distributor marketing.

Auto racing is the latest craze for promotional activity. Some manufacturers have invested in sponsorships, and build their promotions around the cars themselves, as well as inviting distributors to bring customers to the races.

Square D has focused much of its promotional activities on its $5 million investment in a NASCAR sponsorship. Distributors can reserve a mockup of the Square D Ford Taurus for special events, where the machine often becomes a focal point for contractor racing fans.

"Our NASCAR sponsorship is relationship-based," says Hartkopf. "When Kenny's doing well at the races, we see dramatic increases in hits on our Web site."

The program is distributor-driven. Distributors buy tickets to the races and give them to customers, who get to enjoy the Square D hospitality tent, where driver Kenny Wallace often makes an appearance and signs autographs. This year Square D has hosted more than 8,000 customers. It allows Square D and its distributors and end-user customers to bond, says Hartkopf. "It's quality time away from the pressure of the business."

Electronic catalogs are fast becoming distributors' preferred means of getting up-to-date product knowledge to customers. Some are producing catalogs on CD-ROM, and a pioneering few have begun putting searchable product catalogs on Internet web sites. The creation of an industrywide product and pricing database will give distributors and their catalog producers more options in this area.

Manufacturers have invested a lot of resources over the past five years in merchandising displays to help distributors move their products in the counter area. As the displays themselves become more attractive and effective, electrical distributors are redesigning their counter areas to turn what wereonce little more than dingy waiting rooms into a Premium Shopping Experience.

The deluge of free stuff emblazoned with factory logos is a time-honored tradition and an effective marketing tool if used intelligently. Charlotte Via, marketing manager of Dixie Electric Supply Co., Richmond, Va., says the quality of giveaway products has improved. "At our counter days we're able to give away some real quality merchandise, like Coleman coolers. It's not just a hat anymore."

Ken Cain, vice president of marketing at Branch Group, Upper Marlboro, Md., says he's found he can get even better deals by buying the products himself and billing the manufacturer. "We'll usually buy it and put their name on it and bill it back to them," he says. "Sometimes their pricing is out of line. They'll charge $7 for a T-shirt I can buy in quantity for $3."

Whatever the source, the important thing is to track the merchandise and make sure it gets customers back in the door, Cain says. "We tie everything back into a purchase. We have an obligation to use the merchandise properly. You don't just give 10 to a guy because you like him."

Giveaway merchandising works better with the contractor market than industrial purchasers, says Latanision of T&B. "If you're in the contractor market, those things are still effective, but most of all contractors are looking for products and ideas that will improve their productivity," he says. "They will forego the hat to get a product that makes them more productive. But given that, I think they appreciate that someone's thinking of them."

One trend many manufacturers point to is the more careful use of co-operative marketing funds. Where once distributors often passed up this "free money" either out of rugged independence or simple ignorance, vendors say now there are far fewer co-op dollars left unclaimed at the end of the year.

"When I first came into this business, 14 or 15 years ago, we didn't use co-op. My boss said 'I'll pay for it myself. We don't want those people telling us what to do,'" says Via of Dixie Electric Supply. "I think we've all learned, and every time now, he'll say, 'Now, is that co-op?' It helps the relationship between the distributor and the manufacturer. It kind of helps the reps too, so we're working together on it and everybody's got a stake in it. That makes it kind of fun."

At some distributorships, marketing managers have helped pay for their salaries by helping their companies make the most of co-op funds.

The marketers take co-op funds seriously. "We use all co-op funds. We'd be crazy not to," says Cain of Branch Group. "We consider that part of the purchase price, and the manufacturer has a right to see a result from that."

Wolfson of Red Dot says he recommends to his company's distributors that they put one person in charge of tracking co-op funding opportunities. "It might be a secretary or a junior marketing person, but it's almost a full-time job to stay on top of it and make sure they don't leave money on the table," he says. "We see more distributors assigning someone to do it."

Distributors and manufacturers both are learning ways of making the marketing programs work better. Regardless of the size of the binder, the effectiveness of the plan seems to be a function of communication, Cain says. "You have to reach a consensus as to how marketing funds are used," he says. "The manufacturer has a right to see a result from that investment, and the distributor has to be shooting for the same thing."

Cain says his company maximizes its marketing punch by ganging non-competing manufacturers together for promotions and events.

Among the trends in the programs being offered, Cain points to the move to more local and regional programs as a positive development. Where once most of the programs offered by manufacturers were national in scope and created with a one-size-fits-all approach, many manufacturers are more open now to creating or helping distributors create marketing programs tailored to regional market dynamics.

Timing is everything, says Via of Dixie Electric Supply. "For the most part the programs are great. We just need a little lead time. It's the worst problem we have with the programs," she says. "A lot of manufacturers have learned if you keep the program short and sweet, they get a better result from them. Don't give me a year-long program, because after three months, the salespeople and the customers forget what it is.

"I especially like the idea that the salespeople and customers will benefit from a spiff or a special promotion that's going on," she adds. "It's the salesperson who drives it out to the customer, and they need a little reward."

Better ways of tracking the programs by computer have also helped distributors make more of the marketing programs they have available. As distributors' business information systems become more advanced, they have developed sophisticated reporting functions that greatly simplify the work of tracking participation.

This development has helped overcome one long-time obstacle to the programs, the difficulty of getting busy salespeople to keep up with the paperwork. "Our salespeople don't like to track the stuff," says Via. "Now it's easier to get the computer to run a report showing invoices and sales. They can report it by vendor or by product or by customer, and that helps a lot."

Online tracking of the programs has become a reality for some distributors. Last year, Affiliated Distributors, Inc. (A-D), a buying/marketing group based in King of Prussia, Pa., introduced A-D Net, a communications site that operates on the World Wide Web. In rolling the system out, A-D required that all the Sales Stimulator Plan programs conducted by its distributor and vendor affiliates be filed and tracked electronically via A-D Net.

Several A-D members say the system eliminated the biggest headache in making use of the programs--keeping up with paperwork and getting all the signatures of distributor salespeople, factory and agency representatives and A-D staff for every program they pursued with A-D vendors. A-D Net automates the system and lets everybody involved track progress.

Electrical distributors want new kinds of support from manufacturers, too. They are interested in demographic data collected and processed by manufacturers. Manufacturers keep asking for point-of-sale data in exchange, and say electrical distributors are more willing to share this critical competitive data.

Some distributors find that as yet manufacturers are not quite up to speed on the technical side of exchanging such information. Cain of Branch says many manufacturers cannot provide their market data in a useful format. "Trying to get information from them is the pits," he says. "The technology still has a long way to go."

Manufacturers are making investments to improve this. Square D, for example, is developing an extranet for speedy exchange of such data. The system is due for a mid-1999 launch. It will be accessed through a secured Web site, and will give distributors access to virtually all the marketing and demographic data available to Square D's field operations, says Hartkopf.

The influence of magazines, associations and buying groups is keeping marketing in the forefront of distributors' minds. Many industry observers believe the marketing groups have fostered a greater awareness of the importance of marketing among electrical distributors by giving them a strong, financial incentive to arrange and follow through with marketing initiatives, be they joint sales calls, counter promotions, training sessions, mini-trade shows or spiffs. For companies that have pursued marketing as a core excellence on their own, the impact of the groups is less pronounced.

Electrical manufacturers say they expect distributors' investment in marketing to increase further in the future. Investments in electronic commerce are taking precedence at the moment, as electrical distributors try to banish the Y2K gremlin and prepare to use the industry data warehouse due online next April. But once those priorities are taken care of, Hartkopf of Square D hopes to see more electrical distributors push their marketing to the next level.