This is an excerpt from our recent report, the State of Technology in Distribution: A Guide for Growth, available now.
Where do you start in evaluating your existing technology – and then building the right set of technology solutions for your customers based on their customer journey?
Start with the basics: the value you deliver to your customers.
A distributor’s value proposition is all about complexity. How complex is the nature of a product that you offer, and how complex are the logistical requirements of your customer base? Value is relative to the level of expertise and support that a customer needs.
Most distributors don’t just pull a package off of a shelf, put a label on it and drop it off at the nearest UPS location to be delivered. Instead, they sell products that have multifaceted service, training and information requirements. This is where the Distribution Strategy Group’s Distributor Relative Value Model comes into play. The more complex your offering is, the more your customer will need to rely on you for support and the more value-added services you can provide. Similarly, the less complex your product is, the more your customer can lean on automated purchasing options and self-service.
For instance, marketplaces generally have simple products and logistics. They don’t have items that need to be expertly configured or require consulting or commissioning. Marketplaces also don’t do kitting and assembly. Instead, they sell the products that are in stock and then send them to customers via common carriers. It is simple from a logistics and product standpoint. Marketplaces are valuable to customers who need simple solutions but struggle to meet the needs of more complex buyers.
Distributors thrive on the other end of this matrix, where they can solve complex transactions and handle intricate logistics. For example, a marketplace would not have the capability to put together assemblies and deliver them to a production line or take heavy construction products and put them on a flatbed truck with a special forklift for rough terrain. Marketplaces can’t offer these types of services – but distributors can.
The Distributor Relative Value Model and your value proposition should inform the strategies you should implement to differentiate your business and the technology stack needed to serve your customers effectively.
As distributors add services to their value propositions, they distance themselves from common marketplaces.
Distributors need a local and digital presence, support teams to answer the phone, sales teams to talk customers through complex buying decisions and the logistics required to service a wide range of orders. Here is some technology that supports this value:
- A CRM solution can help your sales team understand the ins and outs of each account and enable customer service reps to be more proactive and consultative.
- An ERP solution will improve day-to-day operations such as C-suite management, billing and order-to-cash management.
- Likewise, WMS software will make your team more accurate and efficient as you stage orders and oversee complex logistics.
- Even artificial intelligence plays a role as AI models can use customer analytics to drive highly relevant product suggestions to inside sales reps and in the online shopping experience.
So, how can you apply this idea? Here’s an example of how you can select technology that supports the customer experience.
Simple Order: Hotel Buying a Shop Vacuum
A customer calls and wants to buy a shop vacuum for their hotel. This transaction should be fairly straightforward. If you have an ecommerce site with digital buying options, the customer can buy the vacuum through an online shopping cart. The customer will use a credit card to make their purchase and then receive the item a few days later via a common carrier.
Although marketplaces could handle this type of transaction, distributors can differentiate by offering replacement parts, an extended warranty and consultative product recommendations. For instance, your ecommerce site could recommend extension cords and spare bags during checkout to ensure the customer has everything they need for their new shop vacuum. Then, your ERP could automatically process the order and invoice to improve accuracy and reduce delay.
For simple orders like this, the key technologies are:
- Touchless ordering
- Cross-selling functionality and analytics