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50 Ways to Add Value

(For a copy of this article in PDF format, click here. Requires Adobe Acrobat reader, free download.)

Do you want to blow away your competitors? Employing this simple four-step approach and excelling at the value-added services offered here can differentiate your company from the pack.

The only way your company will survive against the new channels of distribution is to offer more value-added services than they do with a package of products. A value-added service is an investment that you have made in your company or its employees that makes life easier for your customers or helps you do a better job of performing as a distributor of electrical supplies.

Value-added services help differentiate your company from its competitors, and it's important to regularly take stock of the services that your company offers--as well as those of your competitors. Take a close look at the services a competitor is unwilling or unable to perform and you may find that your company can package some of them for your own mix of 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 you how to analyze the value-added services that you and your competitors focus on. It also offers a four-step approach that you can use to establish your company as the primary source of electrical supplies in your market. It's a strategy excerpted from "An Electrical Marketers Survival Guide," a book and training program that Electrical Wholesaling will publish later this year. Excerpts from this book will be published regularly over the next few months.

Let's take a look at each of the strategy's four key elements: 1. Scope out the marketplace; 2. Examine your company's package of value-added services; 3. Evaluate the competition 4. Develop counter-strategies based on what you have learned

1. Scope out the market. The first thing to do is examine the various channels for electrical supplies in your market and how their value-added services differ. One of themost valuable tools for evaluating these is the "Electrical Marketplace Pyramid" shown on page 42. Many companies have used the Pyramid since Electrical Wholesaling first published it in 1994 to analyze the key channels for electrical products in today's electrical industry. You will probably be surprised at how many different types of companies sell electrical products. Worksheet #1 on page 46 will help you do your own analysis of the role these various channels play in your market. Here are some defining characteristics of each type of channel outlined in the pyramid.

National chains. There are four national chains in the electrical wholesaling industry-Consolidated Electrical Distributors, Inc., Westlake Village, Calif.; Graybar Electric Co., Inc., St. Louis, Mo.; GE Supply, Shelton, Conn.; and WESCO Distribution, Inc., Pittsburgh, Pa. Together these companies have 14% of the total market.

National chains can buy products at a better price than many smaller companies because of the volume at which they purchase. They also usually have the advantages of lots of capital to draw from to invest in new technology, branch expansion or acquisitions. On the flip side, the decisionmaking in some of these companies can get decentralized, and they may not be able to react as fast to particular market situations as smaller, more nimble distributors. It's also not uncommon for the nationals to use local branches to train salespeople and managers for other jobs at the regional or corporate level, which can affect the continuity of distributor-customer relationships in the local markets. The clout of a national chain in a specific market area often depends on the people at its branches and the service they offer. A chain can be the top dog in one market but a non-factor in another.

Super-regional chains. Companies of this size have dozens of branches around the U.S., but are not yet national because they don't have branches in every state or market. All-Phase Electric Supply Co., Benton Harbor, Mich.; Hughes Supply, Inc., Orlando, Fla.; Rexel SA, Coral Gables, Fla., and seven other companies fall into this category. These companies have many of the same advantages and disadvantages as the national chains.

Independent distributors. Distributors that are much smaller than the national or super-regional chains account for most of the industry's sales. Many independent distributors have joined one of the industry's five buying/marketing groups so that they can compete on purchasing with bigger companies and gain the marketing expertise and networking opportunities that these groups offer. The electrical industry's buying/marketing groups are Affiliated Distributors, Inc., Wayne, Pa.; IMARK, Oxon Hill, Md.; Equity Electrical Associates, Inc., East Walpole, Mass.; EDN, Beachwood, Ohio; and United Purchasing Association, Sanford, Fla. Over 600 distributors belong to these groups, and a general rule of thumb is that 30%-plus of a distributor's total sales will flow through his or her group.

As companies that don't often venture far out of defined regions, independent distributors have the opportunity to develop tight, long-lasting relationships with customers. But they usually don't have the cash reserves of a national, and too many family-owned businesses keep the key management posts inside the bloodlines, eliminating much of the top talent in a market.

Hybrid distributors. These companies are distributors of many different types of products, but do not focus on electrical products as their primary offering. W.W. Grainger, Inc., Lincolnshire, Ill., and Fastenal, Inc., Winona, Minn., are hybrid distributors that are in the news these days because of the increasing number of electrical product lines they sell.

Product specialists. Distributors of wire, motors, lamps, lighting fixtures, datacom products and other product niches have market interests an inch wide and a mile deep in that they have a broad product offering of related products in relatively narrow market segments. They often have terrific technical expertise and mountains of inventory in their chosen product areas, so they are a haven for customers seeking hard-to-find products.

Home centers. Home centers like The Home Depot, Inc., Atlanta, Ga., and Lowes Co., Wilkerson, N.C., and hundreds of hardware stores offer smaller electrical contractors convenient access to "A" items but don't stock slower-moving stock-keeping units. These companies score points for their marketing and merchandising expertise, long store hours and easy access, but stumble when it comes to trained sales help and inventory depth and breadth.

Value makes the difference. The competitive advantages of each of the different types of electrical distributors or of the various alternate channels for electrical supplies is often tied to their distinct package of value-added services. A small, family-owned electrical supply house may have a core group of dedicated inside salespeople who are of 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's still a source of certain electrical supplies long after that distributor has closed up shop.

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 that needs an unusual wiring harness that no electrical distributor in town would stock. But that electrical distributor may be that customer's first call for job-site delivery of bulk wire.

Each of these scenarios is an example of a distributor of electrical supplies winning an order because they are providing some extra service not offered by another competitor.

2. Examine your company's package of value-added services. Below is a list of 50 value-added services that you can use to evaluate your own company's service level. You can also use this same checklist to evaluate your competitors' packages of services. Sharpen your pencil and give yourself one point for each service that your company provides. No points for "planning to someday," but give yourself a half-point if it's a service that you are developing. Good luck!

Your company should be doing a regular analysis of the strengths and weaknesses of key competitors. Worksheet #2 on this page can help you organize key competitive information. If a competitor has a Web site, make a visit, if you haven't done so yet. While most Web sites in the electrical industry are still little more than electronic promotional brochures, you will be surprised at how much company data you may find.

Customers are also obviously another great source of information on competitors. If any of your employees have developed close personal relationships with customers, see if you can fill in some of the blanks on these worksheets with information from this source.

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

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

Evaluating the value-added services that you and your competitors offer is one of the most valuable exercises that your company can invest it in. With all of the new channels of distribution now on the radar screen, the value-added services you offer will become the key to your future success and survival.

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