The Cost of Not Knowing the Voice of Your Customer

We have now published two editions of our “What Customers Want” research. And in both, the most recent available from MDM, we’ve found a shift to digital and in-person shopping (finding and selecting) and buying methods from print by distributors’ customers. That change is accelerating.

But while aggregate data from our surveys of more than 10,000 end-users shows some clear preferences among distributors’ customers, differences do exist among customer bases. Some customers demand a robust website to shop even if most of their buying remains offline. Other customers need websites for both buying and shopping.

So while we know that all distributors need to move to a multichannel approach to serve their customers, each distributor must strike the right balance to meet their customers’ needs. The risk is too great to get the resource allocation between field sales, inside sales, customer service reps and electronic channels wrong. No distributor can afford to use a one-size-fits-all strategy anymore.

Here are the risks of not understanding what your customers want:

Overbuilding or underbuilding ecommerce

We often see distributors spending 5 to 10 times too much on e-commerce or even 5 to 10 times too little because they’re uncertain about what they are building. They’re too focused on the idea of having a platform, rather than understanding what their customers need. It’s not as simple as “Build it and they will come.” Generating demand for an ecommerce platform takes a focused strategy and plan, and requires a strong understanding of how your customers want to shop and buy products. Our research shows that distributors may lose orders by not having an ecommerce solution that meets their customer requirements.

Too many or too few salespeople

For many customers, the role of field sales is declining in importance in the shopping and buying process. Unfortunately, too many distributors still have far too much dedicated to their most expensive resource. Most could stand to invest more in inside sales, customer service and electronic channels to serve their customers more efficiently. For example, one distributor we worked with thought its salespeople were the most important channel for its customers, but the customers wanted a more transactional relationship, with less contact with salespeople. That changed how the distributor went to market.

But while the aggregate data from our research shows a trend away from field sales, every distributor’s customer base is different. This is why it’s critical to understand your own customer base before taking action. For example, we conducted a survey for a distributor whose customer base varies greatly from most because of the industries they serve. For this distributor, 96 percent of customers said they want a sales rep to visit at least weekly or monthly, a sharp contrast from the aggregate results, which found that 37 percent of customers never want a sales visit or want one just once a year. That means this distributor needs to maintain or even beef up its field presence, and if it reduced it, its business would likely suffer.

Too much or too little branch infrastructure

Again, most distributors can expect a shift away from in-person ordering at a branch or store to electronic channels and the phone. But every customer base is different. Do you need the same number of branches or square feet you historically have had? Do you need the same amount of in-branch inventory or employees? Or would it make sense to consolidate branches? These are questions that can only be answered based on a survey of your customers’ needs.

Lost efficiencies in e-procurement, EDI and email order automation

Many distributors say that their call centers are relatively quiet compared with five or 10 years ago, in large part due to the rise of email from customers vs. phone calls. About 70% of end-users very frequently or frequently order by email, sending order details in the email body itself or as a PDF, Word document or Excel file attachment. If your customers fall into the 70% that prefer email ordering, there are great opportunities for better efficiencies on both sides. EDI should be used for very large customers and some large customers who are willing to incur the cost of setup. For others, invest in email order automation, which speeds up order processing and improves time to cash. It also eliminates the costly keying of orders, savings the cost of manual order entry, and frees up staff to better serve customers.

But again, know the voice of your own customer. For example, one distributor’s customers did not order by email frequently because they were on a plant floor or in the field working. Talking with a rep was simpler. Knowing this means you will shift to channels that accommodate those needs, rather than spending on resources that won’t have a big impact.

Passing up high-margin opportunities with small and medium customers because field sales can’t or won’t service them.

Customers prefer to shop as efficiently as possible, and more often than not are seeking out inside sales or customer service reps vs. looking for an in-person visit. We expect an ongoing shift in this direction over the next two years. Larger distributors with more mature multichannel offerings are routinely taking market share form smaller competitors by employing dedicated ecommerce, proactive inside sales and robust online marketing strategies to reach a broader cross section of potential customers, including small ones.

Reconsider your sales structure, shifting transactional activities in-house with your CSRs, and re-position inside sales to play a more proactive role in qualifying and converting leads to sales. Inside sales can reach 20 to 25 customers per day at $7 to $9 per contact, considerably more cost-effective than field sales. It’s about your customers’ efficiency – sales calls can be completed in 15 minutes instead of an hour, and it extends sales coverage to smaller accounts where outside reps don’t make financial sense.

A multichannel approach that aligns a channel with a customer segment allocates more responsive resources such as CSRs and inside sales to target typically underserved mid-market accounts, which are likely to grow significantly with the additional attention.

For more insight on the voice of the customer, read our report, “What Customers Want: A Distributor’s Guide to Customer Buying & Shopping Preferences.”

If you’d like us to help you conduct your own customer research, please contact us today.