Caught in the middle

Customers are demanding lower prices. Manufacturers are exploring alternate channels. How can distributors survive?

by Robert Nadeau

These are tough times for distributors.

Customers are demanding more services and lower prices. Some are purchasing through catalogs, the Internet, “big box” retailers — or even directly from manufacturers. Manufacturers have always been loyal to distribution, but now some are exploring alternate sales channels.

Distributors find themselves caught in the middle -- doing more for customers, making less money and wondering about their survival.

How do distributors add value?
In this changing business environment, customers and some manufacturers are beginning to ask, How do distributors add value? The answer, of course, is that distributors add value in many ways! Distributors offer a wide variety of value-added services before, during and after the sale. These services include product availability, problem solving and technical support, just to name a few.

But customers and manufacturers often do not realize how these services translate into dollars-and-cents value. Why? Because distributor salespeople are generally not trained in how to calculate this value for customers.

Beyond product training
Every year, manufacturers train distributor salespeople on the features and benefits of their products. This is essential training that enables salespeople to have informed conversations with customers about products and their applications. But in today's price-sensitive marketplace, product training isn't enough. Customers are interested in more than product features and benefits. They want to know how these benefits translate into dollars-and-cents cost savings or sales increases.

Distributor salespeople must learn how to calculate these numbers for their customers.

The limits of “features and benefits” selling
Imagine a distributor salesperson who calls on her customer. She explains how her product, a technologically advanced piece of equipment, can improve productivity and reduce labor costs.

She also explains that her distributorship provides operator training. This training will make sure the customer gets the most out of the product and realizes the promised cost savings. The salesperson does a great job of describing these benefits, but she does not know how to calculate how much money the customer will save. She knows the customer is concerned about rising labor costs. If her equipment and training can reduce these costs, the customer will certainly realize that they’re worth the price she’s asking, right?

Not necessarily!

Two weeks later, the customer regretfully informs her that, due to difficult economic times and belt tightening, they will most likely purchase a similar piece of equipment through the Internet. To save the sale, the salesperson reduces her price — and she throws in the training for free.

The result is that she is now doing more for the customer and making less money. Meanwhile, her customer continues to view her product as just another commodity to be purchased on price alone.

Why customers still demand lower prices
So what went wrong here?

The short answer is that there is a big difference between promising benefits to the customer and translating those benefits into dollars and cents.

Many salespeople know selling value is important and are trying to sell value to their customers. As a result, customers hear a constant barrage of carefully crafted, well-presented sales pitches full of similar promises. But to stand out from this crowd, distributor salespeople must learn to calculate value in dollars and cents for the customer.

Get paid for the value you're adding
Now imagine that our salesperson learns how to calculate the labor cost savings the customer can realize by purchasing her equipment and having their employees trained by the distributor. She presents these eye-opening numbers, and the customer gains a much better understanding of the value of what she’s selling. The customer starts to realize that the distributor’s value-added services are well worth paying for.

Importantly, the customer’s focus moves away from the purchase price and toward the dollars-and-cents value they will realize. After seeing these numbers, the customer is now less likely to buy through the Internet or through another channel.

Selling dollars-and-cents value
Distributors don't have to be caught in the middle. The good news is that they can get paid for the value they add. To make this happen, distributor salespeople must learn how to calculate this value in dollars and cents.

All it takes is the right training.

The Industrial Performance Group specializes in helping manufacturers and distributors increase sales volume and improve profitability in supply chains and distribution channels. The company offers sales training, seminars, consulting and other services, as well as a wealth of information at www.indusperfgrp.com. For more information, call 800.867.2778.

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