Keeping a Customer Focus in a Digital Age

As customer demands continue to change, distributors are making strides with their digital strategy. Nearly half of respondents (44.3 percent) to Infor/MDM survey “Keeping a Customer Focus in a Digital World” indicated they had a comprehensive digital strategy. In the 2015 digital strategy survey, it was only 31 percent. Improving the overall customer experience was the primary goal for technology investment, followed closely by improving operational efficiencies. Download this white paper to read the full results.

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© 2016 Gale Media, Inc. Digital Strategy in Distribution: Keeping a Customer Focus in a Digital Age Whitepaper: Digital Strategy in Distribution 2 © 2016 Gale Media, Inc. As customer demands continue to change, distributors are making strides with their digital strategy. Nearly half of respondents (44.3 percent) to Infor/MDM survey “Keeping a Custom- er Focus in a Digital World” indicated they had a comprehensive digital strategy. In the 2015 digital strategy survey, it was only 31 percent. Improving the overall customer experience was the primary goal for technology investment, followed closely by improving operational efficiences. Although the current preferred methods of buying are email and calling in orders, according to 32.8 percent and 28.6 percent, respectively, of survey respondents, distributors expect these numbers to change. More than half (52.1 percent) said they expect online buying to experience the biggest growth, followed by mobile ordering (16 percent). With these numbers in mind, e-commerce is again the platform in which most survey respon- dents (65.3 percent) are considering investment. Respondents to this year’s survey also indicated that the C-suite is driving many technology decisions. More than one-third of respondents (34.1 percent) said those decisions are man- dated from the top down, with some lower level input, while another 28.5 percent have a chief information officer or equivalent who decide the company’s technology needs. Executive Summary Whitepaper: Digital Strategy in Distribution 3 © 2016 Gale Media, Inc. The survey results presented in this whitepaper are the result of an online survey of readers from MDM (www.mdm.com) in September and October 2016. MDM is the only specialized information business that provides high-level in-depth resources to executives who are in or serve the wholesale distribution industry. It completed a survey in conjunction with Infor (www.infor.com), which builds business applications with last mile functionality and scientific insights for select industries delivered as a cloud service. Most survey respondents (60 percent) identified as wholesale distributors; 19 percent were manufacturers, with the remaining identifying as hybrid models or other. More than a third (37.2 percent) of respondents identified as an executive (CEO, COO, CFO, etc.) or owner of their companies, with the remainder indicating they are at the vice president, manager or director level. Size distribution of respondents was diverse with 7.1 percent of respondents below $2 million in annual revenues; 8.9 percent between $2 million and $10 million; 25 percent between $10 million and $30 million; 8.9 percent between $30 million and $50 million; 14.2 percent between $50 million and $100 million; 8 percent between $100 million and $250 million; 9.8 percent between $250 million and $500 million; 3.6 percent between $500 million and $1 billion; and 14.3 percent over $1 billion. Methodology Whitepaper: Digital Strategy in Distribution 4 © 2016 Gale Media, Inc. Almost half (44.4 percent) of survey respondents said they have what they consider a compre- hensive digital strategy that includes all types of software and solutions, up from 31 percent in last year’s survey. And 34.7 percent of respondents said they maintain a general approach to their digital strategies, down from 53.5 percent a year ago. Overall Approach to Digital Strategy Survey respondents said they have a number of goals they hope to achieve with their technology investment, but two rose to the top as the most important. One-third of respondents to the sur- vey said they want technology to improve the overall customer experience, while 30.9 percent said they want to improve operational efficiencies and 13.8 percent want to improve profitability. Primary Goal with Technology Investment Comprehensive digital strategy that includes all types of soft- ware and solutions 44.4% General strategy for upgrades, and some innovation (not comprehensive) 34.7% No strategy, per se, but always evaluating options 14.5% Only what we absolutely need at any given time 6.5% Improve overall customer experience Improve operational efficiencies Improve internal communication/ cooperation Improve customer engagement Improve customer service Improve profitability 6.5% 6.5% 8.9% 13.8% 30.9% 33.3% Whitepaper: Digital Strategy in Distribution 5 © 2016 Gale Media, Inc. Distribution continues to lag other industries in terms of customer buying preferences. While 32.8 percent of survey respondents said email is the preferred customer buying method, another 28.6 percent said their customers call in orders and only 13.4 percent prefer online ordering. Customer Experience: Buying Preferences Despite a small percentage of customers currently ordering online, it is the dominant area where companies see the biggest growth. With regards to the previous question, where do you see the biggest growth? How do most of your customers prefer to buy from you? Using a mobile device In person at the customer location Other Using EDI Online, self-service on a computer Calling in the order Using email 0.8% 4.2% 5.0% 7.6% 7.6% 13.4% 28.6% 32.8% In person in a branch Using a mobile device In person at the customer location Other Using EDI Online, self-service on a computer Calling in the order Using email 0.8% 2.5% 2.5% 3.4% 10.9% 11.8% 16.0% 52.1% In person in a branch Whitepaper: Digital Strategy in Distribution 6 © 2016 Gale Media, Inc. A majority of survey respondents (60.5 percent) said customers tell them how they prefer to buy through polls and talking to salespeople, while only 16.8 percent use analyzed data around shopping behavior to determine this and 15.1 percent said they don’t know. Customer Experience: Behavior In terms of identifying changes in how customers prefer to buy and then meeting those de- mands, about half (49.6 percent) of survey respondents said they rely on salespeople to share what they hear and see in the field but have no formal process, while 31.9 percent of respon- dents said they survey customers on a regular basis. How do you know how your customers prefer to buy from you? How do you identify changes in customer desires and demands with regards to how they buy from you? They’ve told us (through polls, talked to sales- people, etc.) 60.5%Analyzed data around shopping behavior 16.8% I don’t know 15.1% Other 7.6% Salespeople share what they hear and see, but no formal process 49.6% Survey customers on regular basis to gauge interests 31.9% Salespeople enter data into CRM that allows company to monitor changes in the relationship 18.5% Whitepaper: Digital Strategy in Distribution 7 © 2016 Gale Media, Inc. Companies allocate money to digital or technology needs in a variety of ways, with most (31.2 percent) dedicating a specific amount to an overall IT budget each year, down from 34.8 percent a year ago. Slightly fewer companies (25.4 percent) report that they spend money on technology when an individual makes a specific request, down from 29.4 percent in 2015, while 20.5 percent create a minimum amount to spend each year and consider other technology expenditures as they arise, up from 17.9 percent last year. More companies (14.8 percent) reported that departments have a portion of their budgets allo- cated, up from 11.4 percent in 2015. Allocation of Technology Budget Specific amount allocated to an overall IT budget 31.2% Individuals lobby for products at start of year 25.4% Minimum amount set aside and consider based on need 20.5% Many departments have a portion of their budget allocated 14.8% Assign specific percentage of profits to cover expected costs 8.2% Whitepaper: Digital Strategy in Distribution 8 © 2016 Gale Media, Inc. Close to half of survey respondents deem investing in technology staff important, with 43.4 percent saying they invest “significantly” because it’s a critical function in the company. Another 22.1 percent said they invest “some” – while staff plays a key role, most development focus and investment is on other critical roles – and 23 percent said they invest minimally. Technology Staff The C-suite is dictating the technology decisions at most companies. More than one-third (34.1 percent) of survey respondents said those decisions are mandated from the top down with some lower level input, while another 28.5 percent have a chief information officer or equivalent who decides the company’s technology needs. How much do you invest in your technology staff? Who leads the technology decisions at your company? Mandated from the top down, with some lower level input 34.1% We have a CIO (or equivalent) 28.5% Each department/group decides what they need and when 18.7% IT department drives conversation and decision 14.6% Mandated from the top down, with little to no lower level input 4.1% Significantly: It’s a critical function 43.4% Minimal: They provide a tactical function rather than strategic 23.0% Some: They play a key role, but most investment is on other critical roles 22.1% Shifting: As we move more apps to the cloud, their role will be changing 7.4% Other 4.1% Whitepaper: Digital Strategy in Distribution 9 © 2016 Gale Media, Inc. Most distributors plan to expand their investment in technology, and those plans are relatively broad-based. E-commerce is the technology platform in which most respondents to the survey (65.3 percent) said they are considering investing, followed by CRM at 44.9 percent; business intelligence at 39.8 percent; mobile at 37.3 percent; and ERP at 36.4 percent. Platforms for Investment Other WMS Pricing Product information management Marketing automation solutions ERP Mobile Business intelligence tools CRM E-commerce 7.6% 17.8% 21.2% 25.4% 32.2% 35.6% 36.4% 37.3% 39.8% 65.3% In which platforms are you considering investment? 44.9% EDI Whitepaper: Digital Strategy in Distribution 10 © 2016 Gale Media, Inc. About two-thirds (65.5 percent) of survey respondents said they use CRM (customer relationship management) software. Other than their sales teams, 24.4 percent of survey respondents said their customer service representatives use CRM, followed by multiple departments (23.1 per- cent), executives (19.2 percent) and marketing (15.4 percent). A majority (58.2 percent) of survey respondents said their CRM was integrated with their ERP systems. CRM Usage Finance Customer support Marketing Branch managers Executives Multiple departments 1.3% 7.7% 9.0% 15.4% 19.2% 23.1% Customer service 24.4% Other than your sales team, who uses CRM in your company? Integrated with ERP/other sources to provide updated customer & order information Orders from online storefront No integration, it’s a standalone system Lead capture forms on our website No integration, it’s based in spreadsheets with manual entry 3.8% 3.8% 15.2% 19.0% 58.2% What level of integration exists with your CRM?? Whitepaper: Digital Strategy in Distribution 11 © 2016 Gale Media, Inc. Survey respondents were equally divided about the types of new technologies that will have an impact on their operations, with sensors on products (35.1 percent), sensors on equipment (35.1 percent), image/video recognition (27.9 percent), GPS (25.2 percent) and 3-D printing (25.5 percent) all scoring equally high. More than a third (34.2 percent) of respondents don’t believe any of these new technologies will impact their operations. Top concerns specifically about the internet of things are cost/questionable ROI (24.3 percent), security/concerns about privacy (19.8 percent) and disintermediation (19.8 percent). Impact of Technology Do you think any of the following will have an impact on your operations? Sensors on equipment Sensors on products GPS None of these Image/video recognition (QR-codes) 3.6% 12.6% 25.2% 25.2% 27.9% What concerns do you have about the internet of things in the supply chain? Disintermediation Security/concerns about privacy Other Usability Don’t see a role for it 12.6% 16.2% 19.8% 19.8% 24.3% 7.2% Cost/questionable ROI Other 3D printing Drones 34.2% 35.1% 35.1% Whitepaper: Digital Strategy in Distribution 12 © 2016 Gale Media, Inc. Although many distributors still lag in technology investments, they are moving in the right direction. More now have a comprehensive digital strategy and most plan to invest, with a growing emphasis on ensuring that they are meeting customer demands. Distributors are showing an increased willingness to invest in solutions that can improve en- gagement with their customers – including e-commerce, CRM (customer relationship man- agement), business intelligence tools, mobile capabilities and market automation. Two-thirds of survey respondents, about the same percentage as in last year’s survey, are using CRM. Of those, 58.2 percent of companies have integrated their CRM with their ERP platforms to provide updated customer/prospect and order information. Also among those using CRM, many are ensuring that departments beyond the sales team, including customer service, the executive team and marketing – or multiple departments, in many cases – have access to it. Although many distributors (32 percent) are still using email for order placement, which could lead to errors, a majority are now looking to build robust online and mobile ordering capabil- ities because they see that as the biggest growth area for their customers’ ordering needs. One area where companies can improve is appointing someone to lead technology decisions – where and how much to invest, as well as staffing an IT department with the right person- nel. As more distributors move to cloud, the roles of their technology employees will change. This will free up resources and help distributors become less tactical and more strategic with their technology investments. Another area is finding out how customers prefer to buy. With 15.1 percent of survey respon- dents saying they don’t know and only 16.8 percent using analyzed data, companies have room to better understand their customers’ preferences. Those who meet the changing demands of an ever-increasing digital world by strategically investing in technology will sharpen their customer focus and surge past their competitors. Conclusion Whitepaper: Digital Strategy in Distribution 13 © 2016 Gale Media, Inc. About MDM Designed for progress™ Infor® is committed to being the market leader in wholesale distribution enterprise business applications. We build beautiful solutions with last mile functionality and scientific insights, and provide our customers with what they need today and the innovation they’ll depend on tomor- row. Worldwide Headquarters 641 Avenue of the Americas New York, NY 10011 Toll-free: 800.260.2640 Modern Distribution Management is the only specialized information business that provides high-level in-depth resources to executives who are in or serve the wholesale distribution in- dustry. With MDM’s information services, you’ll find fresh analysis, accurate reporting and good ideas to practice across many lines of trade. We provide original, in-depth thinking - and you won’t find MDM’s content anywhere else. MDM’s editors have received several Editorial Excellence Awards from the Specialized Informa- tion Publishers Association and are regularly recognized by industry groups as content leaders in wholesale distribution. 2569 Park Lane, Suite 200 Lafayette, CO 80026 Phone: 303.443.5060 Toll-free: 888.742.5060 About Infor