The Value-Added Distributor Series: Winning the Game

Originally posted at tED Magazine Online.

Ask Doug Borchers what he thinks about electrical distributors offering value-added services to their customers and his answer is straightforward: "We all need to differentiate ourselves from the multitude of other offerings available now, including online general marketplace sources like Amazon.com and Google Apps Marketplace. In the end, the company with the best package of value-added services priced competitively wins the game."

Amazon and Google aren't the only competitors lurking around the next corner online. Specialty sites like automationdirect.com and bulbs.com, and the hybrid type distributors like Grainger and MSC, can all pose threats to electrical distributors that don't incorporate value-added services into their offerings. "If there is no differentiator," says Borchers, vice president of sales at Dickman Supply in Sidney, Oh., "then convenience and/or price win."

No One-Size-Fits-All Here

Value-added services come in as many different shapes and sizes as the number and breadth of customers served by the typical electrical distributor. That's where customization comes into play. By creating packages "around" the individual customers -- rather than developing a one-size-fits-all approach -- distributors can position themselves as the "go to" companies for a wide range of contractor wants and needs. Distributors that ignore this fact, says Borchers, will quickly find themselves competing on price against the world's Amazon.coms and Google Apps Marketplaces.

"Sometimes the hardest part is truly defining up front what it is that the customer wants and needs, and then figuring out a way to perform that service competitively -- so that it's a win-win for both companies," Borchers explains. "That takes time and understanding on both companies' parts. This effort involves a lot of people in different roles and by the time it's all said and done. . . commitments need to be made both ways for these relationships to be successful long-term."

3 Valued-Added Moves

To develop its own value-added approach, Dickman Supply carefully assessed its individual customers' pain points and needs. The exercise revealed several areas where the distributor could deliver additional value for clients, including:

  1. Having trained specialists on staff. Dickman Supply's Green Energy Solutions division handles all of the work for customers during energy retrofits --from the payback analysis to the energy efficient solution recommendations through installation consulting and utility/tax deduction paperwork. The distributor charges for the services "in competitive situations when we are used as consultants on large projects," says Borchers. The firm initiated this service in 2008 as a value-added way to do tax deduction paperwork for its customers. "The group has grown significantly since then and now is its own division within our company," says Borchers. The latest addition to the group was an LED Specialist who has been trained at a very high level on LED lighting applications, and who acts as a resource for that rapidly growing market. Borchers says the service has been well received by industrial and commercial customers, and also by electrical contractors who partner with Dickman Supply's GES team to handle all of the upfront calculations and back side services that are needed on specific projects.
  2. Developing customized inventory management programs. Dickman Supply customizes its inventory management to accommodate exactly how every customer wants the process handled within its own facilities. "If that includes vending machines, so be it," says Borchers. "And if it includes weekly stock checks by our people to make sure the customer always has its high moving items in stock in its facility's inventory, then we do it." Other specialized features include dedicated personnel, consolidated billing, and regular reporting of data in the format requested by the customer. "We spend a lot of time listening to what the customer wants and then figuring out a way to make the relationship mutually beneficial," says Borchers, noting that Dickman Supply charges for some of these services, depending on the level of distributor involvement (as required by the customer).
  3. Setting up customer education centers. To make sure its customers are up to date on the latest technologies, regulations, and safety requirements, Dickman Supply equipped a 2,500-square-foot "customer education space" with audio/visual equipment and a standalone kitchen strictly for educating customers on the latest market trends and applications. "We don't teach product in these sessions," says Borchers, "we host regular outside instructors along with our specialists who cover topics the market wants to keep up on." Some of the areas covered include safety and NFPA70E requirements, energy savings opportunities for facilities, renewable energy, and the latest automation trends. "We also allow our customers to use it for their association meetings or their company safety training meetings," says Borchers, "as many of them do not have a fully equipped facility to conduct these types of events."

Standing Out

From these and other value-added efforts, Dickman Supply has made gains that go beyond monetary compensation. The fact is, today's buyers have a lot of choices that include not only competitive electrical distributors, but also the online marketplace (i.e. Amazon or a specialty site) and related-distribution industries standpoint (i.e. general industrial distributors). Pricing can be researched within seconds on Google, Borchers points out, and can quickly give customers a reason not to do business with you.

"The Internet is rapidly changing the world for customers, so if you don't continue to give them sound reasoning to keep doing business with you by offering value-added services," says Borchers, "they readily have multiple options available at a moment's notice at their fingertips."

Borchers, who has seen more electrical distributors jump into the value-added game as a result of the most recent economic recession, says those that ignore this aspect of their businesses with soon find themselves scrambling to get out of the "low-cost leader" category.

"Over the last five years we've definitely seen an uptick in the number of companies offering value-added services, and I expect that number to grow as competition heats up and more online channels open up," says Borchers. "Now is the time to step up to the plate and start listening to what your customers really want and need -- and then delivering those services in a customized package."

McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.