So what business are you in?
BY RICH SCHMITT
Management specialist
The wholesale business just isn't what it used to be, so trying to run your business for those bygone days might not be the best approach. Sure there are many things from the past that continue to work just as well now as they did then — like integrity, trust, relationships, accuracy, thinking lean, hiring good people, etc. So keep doing those things that continue to work, but be mindful that our industry is changing and that the rate of change is accelerating. Failure to adjust to the new normal could leave you behind.
With all that said, I believe it is time to fundamentally rethink how we market and present ourselves to today’s trade customers. A part of it may be to almost rethink the business you are in. So what business are you in? In most cases, when I ask someone this question at a trade show or buying group meeting, I get their default answers like plumbing, PVF, HVAC, controls, waterworks, etc. This answer has served most wholesalers well for many years but I believe that this may no longer be the correct way to think about what you market and sell.
A similar thought process change occurred in the restaurant industry some years ago. Most restaurants thought they were in the food business until some leading-edge companies realized that they were in the entertainment business and began to refocus their sights on delivering a complete experience in dining.
At the same time, they began to raise the bar on other parts of their “product” to include clean uniforms, polite service, clean restrooms, clean seating and floors. So some restaurants stopped searching for the galacticly great burger and started focusing on serving a good burger surrounded by a fun experience with consistently good service. And it worked. Most customers would never have asked for a better dining experience; but they liked it when they experienced it and instantly began using “dining experience” as a criteria for selecting between competing restaurants.
On a recent trip, we were driving for many hours and needed a rest stop. The group voted on McDonalds. Not because we craved a Quarter Pounder, Big Mac or Happy Meal, but because we thought McDonalds had the best odds for clean restrooms. We probably wouldn’t have chosen McDonalds if we thought their food sucked, but each of us were able to find a food item that was acceptable after using their clean restrooms. We selected a burger place based on their restrooms. Go figure.
So what about our industry?
• Help me understand how your PVC fitting is different than the other guy’s — In our industry, one of the “elephants in the room” is that very small differences exist between many, many similar products. And I believe that those actual and perceived product differences will continue to diminish over time.
Of course many manufacturers will argue this point with me but, as I talk with wholesaler salespeople, they confirm that for all their selling, marketing and brand support, many of their mainstream products are very similar, if not identical, in the minds of the trade buyer. That toilet, those fittings, that thermostat that you sell are pretty much the same as what your competition offers. The word commodity probably does not apply in most cases, but “fundamentally-undifferentiated” does describe the situation for a growing number of hard-goods products.
The guys who install this stuff do have some brand preferences and emotional attachments, but often they have more to do with history and often have little to do with the actual fit or function of the products. So while XYZ company may have a really great toilet, most plumbers aren’t searching for the really great, “killer” toilet. They are looking for a good or maybe pretty good toilet that most wholesalers can provide.
• Communication and adoption of new technology, materials and techniques is faster than ever
before — This fundamentally undifferentiated view of hard goods products is strengthened by communication and technology moving so fast that any differences disappear in a matter of months, not years and decades as it was in the past. While there may be exceptions, it will be difficult for the wholesaler to hang his hat on killer products or brands for more than a short period before competition matches or leap-frogs that market advantage.
• Technology gains are shorted lived — To make matters more complex, even sophisticated technical products are being copied or leapfrogged in months, not years. Companies might gain a short-term advantage but must always be driving for the technical edge that will help them next month or next year. The technology pace is fast and is accelerating. So you can only expect this to get worse.
• What the heck is loyalty? — Loyalty between manufacturers and wholesalers seems lower than ever before. Both parties continue to ask each other, “What have you done for me today or in the past hour for that matter?” While manufacturers want brand loyalty, wholesalers must build “wholesaler loyalty” that supersedes brand issues and changes.
• Acceptable quality is the default — The quality for all products is improving to the point where product quality is often assumed and no longer part of the decision process.
A. When my grandfather R.R. Schmitt was running his plumbing shop in West Newton, Pa., in the early 1900s, some of the fittings companies were advertising an interesting differentiating concept: That their fittings were actually the size that they were supposed to be. Back in those days the industry had acknowledged the need to meet standards and for accuracy in sizing, but not every manufacturer had mastered the manufacturing processes required to accomplish these objectives. The installers often had to adapt sub standard materials in order to complete jobs. So when one manufacturer got it right, they were shouting it from every soapbox they could find.
B. Twenty years ago I heard complaints that import fittings might not be up to snuff. In some cases, it seemed that foreign manufacturers were struggling with the quality, consistency and perception issues that domestic manufacturers mastered decades ago. Now mostly what I hear is that many fittings from anywhere are about the same in the eyes of the trade person.
• It is a game of inches — When so many things about wholesalers are the same or similar, just being a little better might be enough to trump your competitors.
While this may seem like a dismal forecast, like the weather, we can complain about it but there is little we can do to actually change it. My main recommendation is that wholesalers, and probably manufacturers, need to focus on rethinking and rebuilding their trade relationships to create and to promote their non-product differentiators. It is these non-product differentiators that can convince trade customers to reliably buy from a wholesaler whose products are largely the same as every other wholesaler’s.
So here’s my prescription for wholesale differentiation
• Good reliable operation is first and foremost — If you are unreliable in the normal stuff: Ordering, Stocking, Delivering and Handling warranty issues, you need to fix that first in order to get invited to the party. People don’t care about anything else when your base service sucks.
• Friendly people is a close second — People buy from people they like when possible. Make sure that every person in your company understands that they are part of the selling process. When your grumpy truck driver gets up on the wrong side of a hangover and is rude to a customer, he just differentiated your company in the wrong direction. And in a game of inches, it matters.
• Tend to the small stuff to create distance between you and your competitors —Neat clean counter areas, contractor work areas, clean coffee areas and absolutely spotless restrooms can be enough to differentiate you from the other alternatives in your market.
• “Find out who you are, then do it on purpose” (Dolly Parton) — Who knew that Dolly was a marketing person? Most wholesalers have unique strengths that their customers value. Part of good marketing is knowing who you are, then doing it consistently well and, of course, selling the heck out of it. Most wholesalers do a lot of things right but never get credit from their customers and prospects.
Rich Schmitt is president of Schmitt Consulting Group Inc., a management consulting firm focused on improving the profitability of distribution and manufacturing clients. Rich is also the co-owner of Schmitt ProfitTools Inc. (SPI), a business producing print, CD-ROM, web and palm-based catalogs as well as pricing management and analysis software for wholesalers. Go to www.go-spi.com for more information.