Find your marketing niche

When looking for new business, avoid a one-size-fits-all-customers strategy

By -- Industrial Distribution, 8/1/2000

Being a distributor is like being the middle child: if you don't let people know you exist, you'll be overlooked.

In decades past, a company could look to another company in the same industry to gain insight into the next step towards profitability and longevity. But today, "in the same industry, we're seeing different strategies," says Barbara Bund, a senior lecturer at MIT's Sloan School of Management. "There's not a model anymore. That makes it that much more confusing."

The business model that works for one distributorship may not be the business model that will work for another distributorship. Like a person's fingerprint, each distributor's business model will be unique unto itself.

Now, more than ever, distributors must give their customers a reason to contact them. The tasks are similar and simultaneous: current customers must be persuaded to buy more; existing sales territories must be deeper mined for new customers; markets previously untested must be combed for potential sales.

Channels of distribution are changing rapidly. Of the 900-plus distributors participating in ID's 54th Annual Survey of Distributor Operations, what was their third greatest concern? Manufacturers circumventing distributors via the Internet and selling directly to the end user. Here's how several distributorships, in their own way, set themselves apart from the pack. They did so by heeding those four words: in their own way.

Catch a rising star

When management at Portland, Oreg.-based General Tool & Supply saw the speeding success of high-tech companies in that city in 1983, they wanted to be part of the ride. The distributorship sells tools and general MRO supplies but in the mid-eighties wasn't significantly invested in servicing the electronics industry. For the Oregon business, the electronics field would be new territory.

Through sales to another industrial customer, General Tool was introduced to a large end user, Jim Miller, executive vice president of sales and marketing, explains. Forty new product lines were added to General Tool's inventory. Randy Shearer, promoted to head this new division, learned soldering and other essential skills. The OEMs supplying this new division shared technical expertise.

''Shearer and I hit the streets and learned a lot from our customers,'' Miller says. ''We grew a division out of that.''

It took a good two years, Miller says, to get the high-tech and electronic side of the distributorship up and running, but it was worth it. Now, one-fourth of General Tools' revenues come from supplying electronic and high-tech customers.

'Net advantage

For distributors, the next big thing is already the big thing: selling on the Internet. Your company's Web site must complement your sales and marketing teams' actions.

"After all is said and done, can I increase my sales and profit margins?" is the question distributors should ask as they set their e-commerce strategy, says Bill Sullivan of PurchasingCenter.com. Sullivan is vice president of industry marketing.

There are several ways to establish a Web presence. One model is for an Internet company to bring together a buyer and a seller and charge a price between them for that transaction. Another model is for a distributor to host its catalog and customers come to the site to buy what they need and at the prices listed. Or, there are models where a general MRO catalog is offered where manufacturers and distributors have placed information and negotiated a price with the Internet company, which then charges a margin on the sale of the product to an end user.

But, an industrial distributorship's Web site is "not this thing you put out there and people will flock to. It must act like a coordinated piece of the business," Sullivan says. "For some, it's a marketing and sales tool. For others, it's a lower cost transaction mechanism. Each is very viable. You just have to make that decision."

Face-to-face sales won't disappear, he says.

"People are still going to use the phone, drive to branches, use faxes," he says. "People will still buy from people. We're just not going to toss everything away."

First thought, first bought

Get on and stay on your customers' minds. Be the one they know to call. A call came in to Grainger's FindMRO.com business. "Where can I get one of those fiberglass cows,?" the caller asked. Last summer, about 400 fiberglass cows grazed in downtown Chicago. The inanimate bovines, painted by artists as part of a charity auction, attracted tourists and native Midwesterners.

To the caller, Grainger clicked as the place to find anything. The 370-branch distributorship is really about "enhancing our value proposition and going to any length to keep a customer," whether an item is in the catalog or beyond our catalog, says Ed Franczek, senior vice president of marketing.

From a warehouse known for nuts, bolts and the like, came a fiberglass cow. Likewise, when a person working in the oil industry in Alaska needed bear repellant, it was Grainger who got the nod.

Talking points

Here's a recap of topics to consider when developing your marketing strategy:

• "You have to redefine who you are and what business you're in," says Thomas G. Schuster, president and CEO of Milwaukee, Wis.-based A-C Supply Co.

Deciding what potential customers and markets to seek will save all manner of resources. For Schuster, his decision to close one warehouse and open another near the intersection of two major highways in downtown Milwaukee for easier customer access, made strategic sense.

• "What is it that makes you different?" General Tool's Miller says each distributor must ask about his or her company. "That's the story that needs to be told. Translate that well to your employees."

  And in determining what makes your distributorship different, you can focus your company's marketing efforts.

• Break your sales routine. What is comfortable may breed complacency. Do "not fall into the trap of going to the same places at the same time and talking about the same things," says J. Lee Juett, president of Farmington Hills, Mich.-based J.Lee Hackett Co.

• Think like a customer. The more you know about your customers and what makes them unique, the more you can empathize with their business challenges. Go after business that fits your business model.

• Don't look too far for new customers is lecturer Bund's first suggestion. "Are there things that we could do that would increase our level of business with our current customers?" is the question to answer. "Talk to your customers. Find out what bothers them. And see what you can do to provide more value."

• Knowledge is power. Parlay the specialized information you can give a customer into a sale. Juett names knowledge of application engineering and analysis of parts as two examples.