Help your customers succeed
BY RICH SCHMITT
Management specialist
This month, John Messenbrink, editor of Phc News, a sister publication to The Wholesaler that targets contractors, asked if I would write a column from the perspective of the wholesaler. As I was thinking about the wholesaler/contractor relationship and how to make some helpful comments, it occurred to me that wholesalers don’t spend as much quality time with contractors these days. Maybe my memory is incorrect but I remember that some wholesalers used to be trusted advisors to their contractors in addition to supplying products.
Now the pace of business seems so fast that I seldom hear of substantive business discussions between wholesalers and contractors. Of course, I may just be out of the loop and it may be happening, but what I hear about are very transactional conversations like the example that follows:
Wholesaler: “What do you need?”
Contractor: “I need 8” widgets”
Wholesaler: “When do you need them?”
Contractor: “Your price is too high!”
Wholesaler: “I asked when you needed them. I haven’t told you what the price is yet.”
Contractor: “Sorry, I need them tomorrow and your price is too high.”
Wholesaler: “I still haven’t told you what the price is.”
Contractor: “Sorry, I forgot. What is the price?”
Wholesaler: “$12.00 or $11.75 by the case.”
Contractor: “See, I knew your price was too high. You obviously don’t care about my business. I buy those for $1.00 every day.”
Wholesaler: “Can you get me an invoice to show my sales manager?”
Contractor: “The dog ate that invoice. I mean he ate all the invoices with that product but trust me it was $1.00 or the price had a “1” in it. I wouldn’t lie to you.”
(Note: The actual competitor’s price had two “1s” in it…It was $11.00.)
Wholesaler: “I can get down to $9.00 if you buy a case.”
Contractor: “Can you get me 3 cases? Also, can you lock that price into the computer so the knuckleheads at your counter don’t try to gouge me next time?”
Notes:
• $9.00 is 12% gross margin.
• 12% is far below break even for the wholesaler.
• I’ll bet $11.00 would have gotten the order.
My concept for the Phc News column was to ask some wholesalers what they would like to say to contractors if they could. I asked those wholesalers one question:
“If you could suggest just one thing to your contractor customers that would help to make them more successful, what would it be?”
Here were their responses:
• We want you to succeed — One common thread that I heard from every wholesaler was, “We want contractors to succeed. As a wholesaler, our success is directly related to their success. When contractors fail, we often suffer too. Successful contractors are better long-term customers.”
• Don’t be afraid to ask for our help — “We won’t always be able to help but we always want to help.”
• Take advantage of the training we offer and take it seriously — “We work hard to provide our contractors with good product and business training. We know that properly trained techs do a better job. The job is done right which makes the end customer happy with fewer call-backs. The job is done faster and that makes it more profitable for the contractor.
“We offer business training because we know that owners with good business skills are stronger long term customers and that’s good for both of us. Contractors seldom get into trouble because they aren’t good with their tools, they get into trouble because they don’t control their business.
“Also, if our training is missing the target, contractors need to let us know. If we are not covering the right topics, tell us what is needed. If you have suggestions, we are eager to do better but most contractors don’t even take time to fill out the course review.”
• Stay on top of your job costs — “The best contractors do a good job of understanding their costs so their bids are solid. They know the labor side and the material side PLUS they understand their business has to cover its overhead. Some of my customers seem to need help with every job they win because they bid it wrong. You know the drill — they forgot something, they used old costs, they missed on the hours required. The most successful contractors occasionally make mistakes but their bidding process is solid. They take time to get it right. Frankly, I’m less willing to help a guy who makes the same mistakes over and over. If you need more information from us, tell us what you need.”
• Take time to upsell so you can make more money — “My most successful contractors are not high-pressure salespeople but they take time to show customers a few options (Good, Better and Best). I know it takes more time but it is often worth the effort. If a homeowner needs a new faucet, most contractors charge for the install and they also mark up the faucet. The homeowner only needs one faucet. So why not make the best possible return on that faucet install?
“By upselling to the “Best” option, the contractor pockets an extra $100 for the install and the homeowner gets the faucet he/she wanted. I know some of my contractors have given up and just send the homeowner to a big box to buy the faucet. Sure it’s less hassle but they lose the profit that they could make on the product itself. Plus with the weak economy, there are just not as many installations out there, so you try to make the most of the installs that you do get. One more thing, we sell enough high-end faucets that we know, even in this economy, some homeowners are spending money on upgrades.”
• Pay on time — “I know this probably sounds like I’m being selfish but I see good contractors get into trouble as they get behind with their wholesalers. I work with my contractors so they stay current.
“At first, some may think I am just being a jerk but I know from experience that getting behind is bad for the contractor and for the wholesaler. Some of the contractors who stayed current have thanked me because they developed good business habits. Those who didn’t stay current are mostly out of business.”
• Pay attention to your truck — “A lot of the trucks that come to our lot every day are pretty ratty looking. I’m not suggesting that you buy a new truck. On the wholesale side, we aren’t buying new delivery trucks but we try to keep them clean and painted — even if it’s just using a can of spray paint. I think the contractors with clean trucks and their phone number on the side seem to do better overall. It isn’t a big thing but in this economy, anything that can give you an edge matters.”
• Consider a basic website or at least get registered with Google — “A lot fewer consumers seem to use the Yellow Pages these days and the trend toward online shopping for services is increasing. People are using Google or online advisors like angieslist.com to find local tradespeople.”
• When a customer calls, answer the phone or return the call — “In an effort to help our trade customers, we used to keep a list of area contractors on our website. We got calls from homeowners asking why they can’t get contractors to return their call. They were mad at us for listing these guys on our site.”
• Hire better people — “Some of the techs who come to our counter are pretty messed. Some of these employees don’t know what they’re doing. Others have substance problems that we see when they come in hung over or under the influence. I bet some are stealing from the company’s owner. When the economy was booming we all hired some lesser people to quickly fill a job. While most of those people are gone, there may still be instances where contractors should consider trading-up.” (Rich’s note: As you make any changes be sure to check with your labor attorney.)
I hope the above suggestions will be thought-starters for wholesalers as they attempt meaningful conversations with a select group of contractors with whom they want to build long-term relationships.
As an aside, I found it interesting that several of the wholesalers indicated that they would rather not have their name attached to the suggestions since the suggestions might aggravate some of their customers. Apparently, some of their contractors already know everything and don’t want to be distracted by other ideas.
When wholesalers have a strong relationship with their customers, they can not only make these kinds of suggestions, their customers may even ask them for suggestions and ideas. The key is to get beyond the transactions and earn their trust so you can suggest ways for them to be more successful. The highest level of relationship that a wholesaler can achieve is to become a trusted advisor to his customers.
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.