What can a distributor do when the customer only wants to talk about price?

by Paul Markgraff

Total cost of ownership can be a difficult topic to work into a normal sales call, especially when your potential customer only wants to hear about price. Try as you might, some customers’ brains go on autopilot when they hear the word value.

Outside salespeople working for fictitious distributor Primo Industrial Supply experienced just this problem. After more than a year of mandating value-added selling, sales manager Kevin Fitzpatrick is beginning to see results. Revenues are up and customers are happy.

But some of Primo’s customers still only care about one factor when it comes to signing that purchase order: price. And, Fitzpatrick’s salespeople are having a heck of a time trying to convince customers they need to look at total cost of product ownership rather than product price.

In our last issue of V-Mail, we asked readers what Fitzpatrick should do. What are some methods Primo’s salespeople can use to prove their worth to customers buying on price alone? Is it as easy as reminding them of special values Primo provided in the past? Is paper documentation required to make the value stick? If you were in the salesperson’s shoes, what would you do?

Felipe Ruanova, CEO of Tijuana, Mexico-based distributor Censa Tools, says distributors need to use facts and figures to demonstrate their value. No matter how much time Primo salespeople spend telling their customers how important and valuable Primo is, it all needs to be backed by numbers.

“How much production time do you save?” he asks. “How much inventory do you reduce with your service? How much do you reduce machine downtime? How many production steps have you eliminated? These and other issues should be addressed to prove Primo’s worth to customers.”

Phil Rosen, sales trainer for MSC Industrial Direct, agrees. He says Primo should develop a cost-savings document that tracks continuous improvement of both hard and soft costs the customer eliminates or avoids as a result of Primo and its salespeople.

“Use industry accepted standards such as labor costs and purchase order costs to validate the savings on acquisition, possession and application costs,” he says. “In addition, develop valuations for value adds like energy and safety audits, safety seminars and task-related training.”

Howard Tiedt, president of Montgomery, Ill.-based cleaning products distributor Pike Systems, takes a more holistic approach. He invites customers to look at the total cost of owning one product, how the product impacts the department or the entire company that’s buying it. Once identified, the benefit of one product over another must be written out and delivered to the customer.

“Spreadsheet analysis is a great way to show how the customer will benefit,” he says. “It also shows that the salesperson has done his homework. Keep in mind that the customer does not want to buy the drill bit; he wants to buy the hole.”

Ermin Sallmen, president of Saginaw, Mich.-based industrial distributor Iwen Tool Supply Co., listed numerous activities value-added distributors can perform to prove their worth to the customer.

His list includes:
• Regular sales rep visits to help with shop questions.
• Quick response time with quotes (normally minutes).
• Free freight for orders over $100.
• Manufacturer’s warranty protected through distributor so customer never has to ship/call to the manufacturer.
• Return goods handled expeditiously.
• Availability of tool expert for use on shop machines.
• Meet or beat all mail-order and Internet prices.

“Our sales force is not interested in an order today,” he says. "But they are very concerned about repeat business and the long haul of reducing tooling costs for our customers."

This article was prepared exclusively for ValueAddedPartners.org. Copyright 2006.

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