While most distributors learned long ago to avoid managing for top-line sales revenue as a measure of results, many of today’s distribution businesses still believe that managing by gross margin is effective. In particular, sales compensation is typically rewarded based on gross margin for a particular deal.
Research from the previously published annual 2015 State of E-Commerce Study indicates that more than 41 percent of distributors are generating less than 5 percent of revenue through e-commerce.
E-commerce revenue as a portion of total revenue has grown significantly in the past year through the growth of existing e-commerce sites, as well as new implementations, according to a joint MDM online survey with Distribution Strategy Group conducted at the end of 2012.
When we ask successful distribution company executives about the sweet spots in their market, they readily provide a confident answer. The problem with the answer is that it is usually incorrect or at best partially correct.
Up-selling and cross-selling are the two primary means of growing an account. Among these, cross-selling is paramount. Here’s why: many distributors have regular customers who buy the same set of 10 to 20 SKUs over and over, yet, they have thousands of other products that could be sold to those same customers.
One of the biggest challenges for any sales and marketing organization is when to reach out to a customer with an offer or promotion. The objective is to reach out according to a natural buying cycle. If it is done too frequently, it loses its impact or even turns the customer off.
The research performed included interviews with nearly 10 distributor senior executives and an online survey taken by 170 participants across a variety of distribution sectors. There was heavier participation from industrial, electrical/electronics, building, safety, hardware, and chemicals and plastics.
There is a very wide variety of marketing practices within the distribution sector. In general, the MDM Market Leaders more broadly embrace marketing as evidenced by resources they apply. Not surprisingly, they obtain better marketing results than other distributors.
Historically, distributors were limited to in-store marketing vehicles such as print flyers, catalogs, some telemarketing and tradeshows. Marketing vehicles that have become prevalent in the past five years include email, search engine marketing, increased telemarketing and social media.
It may be that many distributors are just guessing when it comes to positioning and messaging. Their beliefs about what attributes are important to emphasize in messaging and positioning is based on scant market research.