What does it take to build and maintain strong customer relationships for distributors these days? Are the strategies that are necessary today any different than strategies that worked in the past? And what are some effective ways to measure these relationships? Several distributors have some thoughts on these questions.
While it is a national distributor, Applied Industrial Technologies (Cleveland, Ohio) focuses on local markets and local customers and supports local community programs. The company’s goal is to improve efficiency, increase uptime and reduce costs for customers by assessing their application needs.
“The most important key to building strong relationships with customers is to understand their specific needs, not their general needs,” states Tom Armold, vice president, strategic accounts and marketing. “Part of this involves learning and understanding each customer’s strategies and financial goals. Once we understand these, we can work with them to agree on how we can fit into those strategies and goals.”
In other words, according to Armold, it’s not about just selling products. It is more about providing value and solutions. “Once we achieve this, we find that we actually become part of each customer’s current and future plans,” he notes.
“In terms of building customer relationships, we have always operated with the same philosophies,” Armold continues. “What has changed in recent years, though, is that customers have become more dependent on their supply chains. Many of them have downsized, and they have become much more focused on their core competencies. This makes our relationships with customers even more important.”
Another distributor committed to strong customer relationships is Grainger Industrial Supply (Lake Forest, Ill.). “We always think of our business in terms of starting with the customer,” states Mike Pulick, senior vice president of Grainger and president of Grainger’s U.S. business. “Our goal is to be our customers’ first choice in terms of helping them keep their workplaces safe, efficient and functioning. We are always looking for ways to save them money.”
To build on the strong relationships that Grainger already has with customers involves a strong focus on listening. “We want to understand their priorities,” states Pulick. “We don't want to make any assumptions about what we think they struggle with. What we have been finding, especially during the recession, is that customers are trying to find ways to take cost out of their business. We want to help them better manage their inventory and focus on total cost.” As a result, Grainger views every customer interaction as an opportunity to help them save time and money.
Grainger also hosts an annual customer show. “We discuss current trends in the industry, and also allow them to interact and network with other customers that are in the same areas of business, so they can learn from each other,” he states.
As is the case with Applied, Grainger has maintained its philosophy of customer relationships for a long time. What has changed in recent years, though, according to Pulick, is that the distributor is always looking for more innovative ways to serve customers. “I was in one of our branches a couple of months ago,” he recalls. “A lot of their business involves customers calling to place orders, and then pick the orders up in an hour or two. As part of the old system, they would pick the orders and stage them back in the warehouse.” When the customers came in, it took them some time to go back to the warehouse to get the orders. To improve service, they moved all of the “will call” orders right up to the customer counter, so they would be available immediately when customers arrived.
For Bill Rowan president of Sunbelt Industrial Trucks (Dallas, Tex.), the most important thing is to provide solutions, rather than just products. “It sounds like a cliché, but it is true,” he states. Second, Sunbelt works hard to provide several options from which the customer can choose. Third, it works to be preemptive in providing solutions and options. “We don’t wait for customers to come to us,” he explains. “We try to anticipate their needs.”
Sunbelt has always operated with this philosophy. What has changed is that everything is under more of a microscope these days, according to Rowan. “A new key is to remind customers of the job we are doing for them, such as how we save them money and how we provide extra value,” he explains. “We don’t want them to take us for granted.” As a result, when competitors visit Sunbelt’s customers, they may offer a slightly lower price, but Sunbelt wants customers to remember to ask these competitors: “Do you do this, this, this, and this? Sunbelt does.”
One thing that has developed in the last few years for M&G Materials Handling (East Providence, R.I.) is that the distributor has taken on a consultant’s role. “In fact, we are often a member of a customer’s planning team,” reports Kenneth McDonald, president. “Customers invite us in during the third quarter of each year to discuss material handling, logistics and supply chain management. As a result, we are on a much closer basis with more customers than we ever were before.”
Measuring Customer Relationships
Applied measures customer relationships in three ways. The first involves formal customer surveys to measure satisfaction levels. “We make adjustments based on their feedback,” states Armold. From such surveys, Applied has learned that customers seek the following: reliability, on-time delivery, staff product knowledge, locally available product, speed of order process, prompt handling of billing, consistent/competitive pricing, product catalog and Internet/e-commerce.
“Second, we measure our success on repeat business and increased business opportunities over time,” continues Armold.
The third is the longevity of the customer relationships. “When customers are satisfied, churn is reduced,” he explains. Several things determine churn beyond just the company’s service to its customers, though. Churn can result when there is turnover in the customer’s purchasing department. “As a result, this drives us to become even more innovative and creative to maintain strong customer relationships,” he states.
Grainger is constantly focused on finding out what customers are thinking. “Informally, we have discussions with our customers all the time,” states Pulick. “Formally, we have a customer satisfaction program that started in 2006.”
Grainger arranges for a third party to survey 45,000 Grainger customers a year. Within 72 hours of a transaction, customers are asked a series of questions. The most important of these is, “How satisfied were you with the overall experience?” Other more detailed questions are based on whether they placed the order on-line, by phone, or walked into a branch.
“This provides us with tremendous data that helps us improve the overall customer experience,” states Pulick. “In fact, the feedback we get from customers is what drives the improvements we make in our business.” This could involve adding more products to inventory, adding to the sales force, making an investment in e-commerce, or investing more services in the products it sells.
Sunbelt measures customer satisfaction two ways. One is customer feedback. The other is whether the distributor continues to maintain that customer relationship. “This isn’t a formal measure,” notes Rowan. “However, if we are able to keep our customers, this definitely tells us something.”
M&G’s traditional measure is market share, which is a reflection of past success. “We also measure customer success, which is a reflection of present day to future success,” states McDonald. “We also look at frequency of transactions and frequency of communications with customers.”
M&G has a customer survey on its website where, in McDonald’s opinion, no news is good news. “If everything is going well, customers rarely bother with the survey,” he explains. “The good part of the survey is that, if someone does report a problem, it gives us the opportunity to take corrective actions.”
William Atkinson is a freelance writer specializing in supply chain management.