Avoiding Price Wars: The Benefits of Sourcing & Selling High-Quality MRO Products

Avoiding Price Wars: The Benefits of Sourcing & Selling High-Quality MRO Products A closer look at why more industrial buyers are gravitating toward higher-quality, value-intensive product options. Page: 2 Avoiding Price Wars: The Benefits of Sourcing & Selling High-Quality MRO Products A closer look at why more industrial buyers are gravitating toward higher-quality, value-intensive product options. The ways in which an industrial distributor can distinguish themselves is varied. Successful strategies can emanate from a desire to provide faster delivery, more consultative business services, automated replenishment options, or access to a greater depth of inventory. In all of these instances the focus is on making the purchasing process, and any associated business activities, as simple and painless as possible for the customer. While value-added services will continue to be a key competitive differentiator, distributors must also offer expertise in their core role – helping customers find the products they need. After all, tapping into a distributor’s knowledge of different product solutions should help mesh performance expectations with a strong return on investment for the customer. Recent research conducted by Industrial Distribution offers some unique perspective on how both of these purchasing goals can be realized. The balance between quality and price can be a dangerous slope for distributors to navigate, and when fulfilling orders for MRO products often classified as commodities, that challenge can be even more daunting. In working to understand some of the challenges related to buyer perceptions of price and quality, Industrial Distribution surveyed the readership of its sister publication, Industrial Maintenance & Plant Operation (IMPO). Results of this survey offer vindication to distributors wishing to direct their customers towards products with a slightly higher price tag to deal with in the short term, but promise greater performance capabilities over time. Getting What You Pay For Survey respondents were comprised of operations, maintenance and reliability managers at industrial man- ufacturing facilities throughout the U.S. Collectively, their responses indicated average annual expenditures of just over $33,829 on facility maintenance and repair products such as brushes, brooms, tapes, sealants, adhesives and re- lated products. Approximately 12% of respondents spend more than $100k on such products each year. Looking more closely at the impact price can have on purchasing intentions: • 56% indicated that, more than price alone, they want- ed the best value for the price of the products they were ordering. • One-third indicated price was never an issue, or at best a minor consideration. • Only 3% of survey respondents said they made their selection on whichever product is the least expensive. Admittedly, most buyers will never admit to putting price ahead of quality, but respondents also offered the following in spotlighting the need for higher quality products, regardless of their application: • When comparing products, 57% admitted that they are always investigating better options but only 5% equated better with less expensive. • When evaluating facility maintenance and repair products like those mentioned previously, 79% of respondents rated product durability as the most important criteria. • Less than 2% said price was the leading factor in determining which product they chose. Again, it can be easy to cite quality over pricing on an anonymous survey, but the remaining questions offer perspective on the role distributors can play in helping point these buyers in the direction of more durable products that will pay off in the long run when evaluating performance. Page: 3 We asked survey respondents about their attitudes to- wards the distributor or distributors that sell to them: • 20% stated that they stay loyal to their current distributors. • 48% use the same distributor because of the service level they receive. • Fewer than one in five said their search for a better price often takes them to a new distributor. When they are evaluating the use of new distributor: • 29% felt product knowledge was the most important criteria for a distributor to offer in getting or keeping their business. • 28% stated that a distributor’s depth of inventory and product availability was the most important dynamic. • 25% placed the most credence on their relationship or history with a distributor. • Less than 5% indicated that price was the sole reason for bringing a new distributor in their purchasing programs. In conclusion, this feedback from the industrial buyer offers a number of key takeaways for distributors: • A race to the bottom has no victor. While it can be difficult to avoid a price war, responses from industrial buyers seem to indicate that sacrificing service, value and product quality do not project well for meeting long-term goals targeted at increasing sales or retaining customers. Rather, a sales approach that lends support to product selections based on qual- ity and long-term performance will help solidify the relationship and improve customer perceptions of the distributor and the products associated with that individual or business. • There is strength in … strength. Durability is not a trait often attached to lower-cost products. Nearly four out of five industrial buyers indicated that this was the most important attribute for an MRO product, such as a brush, broom, tape, sealant or adhesive to offer. Ensuring that offerings match with these customer expectations will help ensure long-term success for the customer and distributor. • Quality breeds loyalty. Product knowledge, depth of inventory and a quality working relationship were given as reasons for industrial buyers to establish or maintain a relationship with a distributor. In connect- ing all the data points offered by this survey, it would seem to demonstrate the importance of knowing when higher quality products could be a fit, being able to provide them and delivering these same solutions on a consistent basis would, again, be beneficial to both the buyer and seller. • Improvements are not always measured financially. Less than five% of new, long-term purchasing agree- ments stem from price-based considerations. When industrial buyers are investigating new partners, price might get them to consider a new distributor, but that alone will not keep them in the fold or establish loyalty. • Value is more than a proposition. Industrial buyers have access to more purchasing outlets than ever before. In addition to brick and mortar distributors, on-line entities continue to offer convenience, rapid fulfillment rates and expanding inventories. This is where the product knowledge, technical expertise and organic understanding of product solutions can help the traditional distributor maintain and grow their business. As demonstrated here, part of this approach is not focusing on the lowest priced option, but in providing the best option for the customer. 28.9% 8.6% 25% 27.6% 9.9% Which of the following is most important to you when selecting a distributor of facility maintenance and repair products? Product knowledge Consultative services Work history/relationship Depth of inventory/product availability Other Source: IMPO MRO Purchasing Study, November 2015. Page: 4 About This Report The information presented in this report was research and produced by Industrial Distribution and IMPO in conjunction with The Brush Man, Inc. Statistical data was researched and compiled by Advantage Business Media in November 2015. About Industrial Distribution For more than 100 years, Industrial Distribution (www.inddist.com) has been the leading news source for industrial sales and distribution. Industrial Distribution is part of Advantage Business Media’s Manufacturing Group, with sister properties that include Chem.Info, Food Manufacturing, Industrial Maintenance & Plant Operation, Manufacturing.net, Manufacturing Business Technology, and Pharmaceutical Processing. About The Brush Man The Brush Man (www.brushman.com) is the one-stop source for the contractor/industrial/janitorial supply distributor supplying a comprehensive inventory of maintenance and safety equipment, supplies, and apparel for industrial buyers.