The Value Of Separation for HD Distributors
Unbundling product offerings may lead to increased profitability
February 2013, TruckingInfo.com - WebXclusive
Customer or Consumer?
“Consumers buy things; customers pay you for what you do.”
“For most customers, unbundled services are something to brag about. People like to buy just what they need," said Michael Workman, principal, Michael E. Workman Associates, during Heavy Duty Aftermarket Week.
In addition, he says that customers judge you against yourself and not against your competition, so you need to make sure they have a consistent experience when they interact with you.
“For most customers, unbundled services are something to brag about. People like to buy just what they need,” he says. “They will try to talk you into a lower price if you have a package that includes something they do not want.”
Workman reminded the distributors in the audience that their cost to service a customer was not a concern to the customer. “Only when something is performance-based can you charge more for it as an unbundled service.”
He also believes there is more opportunity for unbundling between the distributor and the supplier than between the distributor and the end-user customer.
Working with Suppliers
Distributors need to look at ways to collaborate with their suppliers in order for unbundling to be successful. One area where distributors can be of value to their manufacturers is in new product introductions. It takes time to launch a new product, and distributors who can offer accelerated new product acceptance can leverage that with their suppliers.
Another opportunity for unbundling occurs with customer data. The value of detailed customer information has skyrocketed. Suppliers want real-time information about customers and are willing to pay for it, according to Workman.
“Knowledge has no value in storage. It only has value coming in or going out,” he adds.
In addition, anything a distributor can do to simplify the process between itself and its supplier will be of value to that supplier.
Whether a distributor is unbundling to the consumer or to the supplier, he needs to look at processes that are not product related. For the airlines this was items like baggage and food service.
Workman went on to speak about concerns for 2013, which include recruiting and retaining the right people, the ability to keep up with technology, channel consolidation and inventory management.
He says distributors need to ensure their people make more effective decisions faster and that takes education.
He reminded the audience that technology will not solve a problem. If you have a bad inventory management system in place, for example, unless you fix the problem first, “all technology will do is allow you to do is grow worse faster.”
Distributors must focus on optimizing their pricing practices, Workman cautions. “Distributors are very inconsistent in their pricing. If I call three people in the same branch, I will get three different prices for the same product. Pricing optimization is a big opportunity for distributors."