Santa Shares All…. Six Lessons for Distributors

For those of you who don’t know, Santa Claus and I have a special relationship. It began way back when I was still knee high to a short elf. It seems my grandfather, who was a jolly sort of guy himself, was somehow connected with Mr. Claus. Imagine being 3 or 4 years old and learning Grandpa and Santa were buddies. Special feeling? You bet. I knew it was real when Santa greeted my Grandpa with, “Hey Red (my Grandpa’s nickname,) how late did you stay down at the Eagles’ Club last night? If they weren’t pals, how in the world could this jolly red suited man know these details?

Santa knew me by name, too. Really! And since that day back in the early 60s, Old Santa and I have enjoyed a close and special friendship. According to Santa, yours truly has managed to make the “nice” list for 5 of my 62 years, but this story is not about me. It’s about distributors.

During a slow point down at the local mall, I managed to grab a few minutes of the jolly old elf’s time. After our normal greeting and a few “Ho, Ho, Hos, Santa took me aside and asked me to share a few pointers with my distributor friends. It was an “everything important in distribution can be learned from Santa” sort of moment. Rather than blast out with bloviating reindeer breath, let me pass on six of Santa’s lessons.

Lesson 1: Segment your Customers
Santa said he learned this lesson some 500 or so years ago. Once he started segmenting his customers into groups, naughty and nice, business picked up. Today, Santa’s North Pole organization carefully tracks customer behavior and provides services accordingly.


Santa believes distributors must understand customer demographics too. The customers, who value your service, buy in the right quantities, display the right kind of buying behaviors and allow you to make a profit, deserve extra nice treatment. Santa and his team of elves carefully insure the “nice” boys and girls get better treatment than the rest. Simply put, distributors can dive more profitable business if they target the right customers.

Lesson 2: Build your own unique brand
The red suit and eight tiny reindeer shtick is part of the whole North Pole Brand. Flash a picture of a slightly overweight guy dressed in a red suit with white fur trim and kids anywhere immediately recognize the brand.

Even Coca-Cola knocked
on Santa's door

Santa and his team of marketing elves first came up with this whole branding deal back in the 1600s. Since then, dozens of marketing gurus came knocking on the North Pole door; each proposing a different strategy. On a side note, you can only imagine what would have happened if Santa would have taken on that Paisley Nehru Jacket pitched sometime in the 1960s. Thankfully, Mr. Claus avoided the temptation of flipping his branding message.

For distributors, this means understanding what you’re known for in the marketplace and carefully advancing the message. Are you known for having a larger stock of hard to find items than your competitors? Is your team more tuned to technical support? Are you good at solving logistics issues? Is your counter more knowledgeable than those of your competitors? It’s time for distributors to stop relying on their supply partners for branding. In the future, distributors must understand what they’re known for and advance the message. It develops a strong and loyal following who are willing to partner.

Lesson 3: Adapt to changing customer styles
When Santa first started up, things were different. Boys and girls were known to whisper their Christmas wishes up the open chimney hearth. Santa had thousands of elves employed at listening posts. It was mostly tedious and time consuming work. Later, the kids wrote their wish list on a piece of paper and tossed it in to the fire with the hopes that Good Saint Nicholas would somehow read their smoke signals.

For most of us, an annual letter to Santa was something of a

tradition. But today, Santa receives requests via email, instant message, phone calls, and the traditional “snail mail." Along the way, Santa has constantly upgraded the way he monitors and processes these incoming orders. He's had to shell out some big bucks on technology and training.

Today, distributor customers communicate in ways unheard of just a decade ago. Inside sales teams receive faxes, emails, and EDI communications at the speed of light.

Santa, who keeps abreast of the younger generation, believes some distributors have missed out on the trend toward communications via instant messaging. Applications currently exist which allow customer instant messages to appear on the inside sales team’s computer screens. This gives customers a new way to communicate with the team and allows inside salespeople to handle multiple customer requests simultaneously. Further, as customers move toward faster and more sophisticated devices, the jolly old elf believes the trend will grow.

While we’re on the subject of mobile devices, distributors need to evaluate some of the applications designed for speeding up customer selection of products. Santa tells me that he is working on a new “app” for next Christmas.

Lesson 4: Don’t forget your warehouse
It’s no secret that Santa operates from a single central distribution facility located in a remote part of the world. One would expect that this could be a disadvantage to the fat man and his organization. However, over the years, Santa has refined his delivery mechanism in order to meet customer needs. North Pole warehouse is equipped with all the modern material handling and tracking tools. Each year literally millions of Red Rider BB guns, electric trains, Easy Bake Ovens and dolls are delivered accurately and on time.

Santa asks distributors to take time to ask how their warehouse today differs from the warehouses of 1983. Does your system employ barcoding, part location, wave picking, or any of the tools which allow you easier throughput and cheaper warehouse operations?

Lesson 5: Never say no
Santa has developed a customer service plan second to none. He has trained his team of salespeople (dressed in Red down at the mall) to never say no. Instead, they say, “Santa will have to check.” There’s a big difference.

One of Santa’s distributor friends (a guy named Jack) once told me this: “I never say no, I just ask; how much you would be willing to pay to make it happen?” Distributor sales and customer service people need to be trained to offer options when the customer’s original request can’t be met.

For instance, if a customer asks for a part that’s not on your line card, do your customer service reps say “we don’t have it?" Would it be better if they asked if a substitution can be made? While this doesn’t seem like “reindeer science," it does provide your organization with additional sales opportunities.

Further, if the customer would like to have something sold by a competitor, do you have a plan? Some customers want you to take ownership of the issue, regardless of cost. Santa thinks that’s a cool concept.

Lesson 6: Understand the cost of services
Finally, Santa wanted to point out the rising cost of value-add services. For eons he assembled dollhouses, set up elaborate train sets and put together back yard swings. It was pretty cheap to do this back in the 1960s. Even though the elves and reindeer work for carrots and peanuts, he has been more reluctant to put things together in today’s business environment. Health care benefits are spiraling out of control up north too. Instead, Santa pushed the work off to the moms and dads of generally good girls and boys.

He will still set things up for the really, really nice kids; the ones who never (ever) pout or cry. The medium nice kids have to pay for services and I don't mean in cookies.

Santa thinks distributors, now more than ever, need to understand the cost of the value-add stuff they provide. As a matter of fact, Santa took time to make one last point. The great bearded one strongly recommends that distributors everywhere read Frank Hurtte’s The Distributor’s Fee-Based Manifesto. He won’t be placing this book under your tree because he still remembers that incident at the golf outing last summer (Santa really does keep track of these things.) Naughty and nice applies to everyone.

Even the naughtiest distributor can order the book in time for Christmas. It’s on Amazon.

Now a word from Santa’s longtime friend and veteran of five seasons of niceness:
December is a joyous time of year. Whether you celebrate Christmas (I do,) Hanukkah’s Festival of Lights (many of my friends do) or anything else, I hope you are blessed with time for friends, family and fun.

And, my Grandpa and Santa really were close friends.

Frank Hurtte, Founding Partner of River Heights Consulting, speaks, writes and consults on distributor issues. He can be reached at frank@riverheightsconsulting.com.
Santa has him on the “naughty list” again.

Believer, Skeptic or Psychoplanner, Part 3

Part III: Key Topics to get the Planning Juices Flowing

Joint Planning with Key Supply Partners
Not all vendors are created equally. Some have the power to cause our business to accelerate; others don’t. We have proof that companies who plan with their supply partners grow faster than their competition. Lots of companies go through the motions of planning with their partners. If you would like to hear of our proof, give me a call.

Major Marketing Activities
These can be marketing activities, plans for customer presentations, open houses, trade shows and other such events. Often we observe distributors rushing into events they have known about for a very long time – just because they lacked planning.


Major Technology Initiatives
What major initiatives can fundamentally change the way you do business? Here we are referring to things like CRM System implementation, implementing pricing tools, rolling out a new software system or warehouse bar-coding projects.






Product Launches
Far too many times, distributors in our industry launch new products and nothing happens. Based on observations and reports from the field, very little planning is applied to the process. Before you launch a new product ask yourself a few questions about the plan. Do we have the stock on hand to support the initiative? Is literature in place? How many times have you allowed a supply partner to do the training only to realize the support materials were lacking?


Targets – accounts, products and line expansions
Research indicates companies who establish formal targeting processes are 47% more effective in reaching their sales and financial goals than organizations who leave targeting to their sales team (without a process). Do your targets have timelines, individual responsibilities, opportunities for review and measures of success?


Inventory Management
Seasonal shifts in demand, changes in technologies and

obsolescence of existing products sometimes requires more than just a single person’s input. Without a plan in place, less than ideal consequences arise. A process for measuring and monitoring the ever changing conditions around the Industrial Distribution must be incorporated into the inventory management to achieve maximum results.

Now a final word for our psychoplanner friends
You have read through this article. Little voices are going off in the back of your mind. One voice says, “I’m a planner. This is a bunch of hot air. Plans don’t need all these things to work.” But you feel a little discomfort because you remember times things didn’t work out like you imagined they could. The other voice is saying, “If I would have had reviews, I could have avoided a costly mistake.” Or they're saying, “The inside sales group just didn’t execute on the plan. Maybe I should have assigned Deborah to make sure things got done.”

No plan is a perfect plan. 
Following the best practices of other Industrial Distributors tips the scale in favor of accomplishing top notch results. What would happen if you started looking back to the best practice list on a regular basis? My guess is you would soon find yourself enjoying at least one of my old distributor friend’s plans. And you too could plan for a nice summer vacation.

If you are planning to improve your own planning process, shoot me an email. I have a list of other areas where planning can impact your business.  

Of course, you're also still welcome to check out my planning book on Amazon.

Marketing the Last Frontier

Marketing the Last Frontier

Marketing plays an important role in business. By definition, marketing works to

inform customers of the value created by an organization. Extending further, marketing also complements the sales department by acting as the mechanism for collecting customer data, determining why customers buy, developing a comprehensive value message and matching a company’s product/services to various customer groups.

In years gone by, Distributors sorely lacked marketing knowhow. When a marketing person was on staff, they were most generally described as event coordinators and keepers of the trinkets. I’m not saying they didn’t work hard. Nor, am I implying these early marketing folks weren’t an asset. But they certainly did little to actively direct the Distributor to higher sales or greater gross margin.

Happily, those days are gone.

Last week, I attended the National Association of Electrical Distributors (NAED) AdVenture Marketing Conference in Chicago. The event was a gathering of 200 plus professionals from the marketing departments of both Distributors and Manufacturers. And, these folks had a purpose: generate growth in the industry.

Top speakers covered topics ranging from Social Media to Amazon to going digital. My own presentation covered building a killer loyalty program. Without taking away from the speakers, the most exciting part of the whole gathering came via networking. I couldn’t help but notice the sharing of best practices. And, I noticed supplier marketing teams and their Distributor counterparts sharing ideas for future efforts.

Distributor Marketing is Accelerating
Failure to get your marketing effort off dead center will be harmful to your financial health. Just like the medical field of the 1800s, snake oil toting experts are beating the drum and passing themselves off as “Dr. Marketing.” There is no elixir of life or ancient cure-all remedy. Despite the bark of these later day charlatans, social media, search engine optimization, email marketing and CRM systems won’t magically heal your bottom line and cause your warts to vanish. It takes commitment, hard work and some planning for the future.

Here is a short marketing checklist:
• Customer segmentation – A lot of distributors break their customers down into a few categories for pricing, but put little thought into the basic differences in business operation. Thought must go into customer values, motivations and what the customer looks for in a supplier.
• Contact segmentation – Engineers think differently than maintenance people. Business owners respond to different messages than project managers. Provide the wrong information to a person and they are likely to tune you out.
• Branding message – Distributors used to rely solely on their supply partners for brand recognition. What do you want to be known for?
• Consistency of message – We just spoke to a Distributor who found themselves with 4 different versions of their logo. Another, Distributor has a different tag line on their line card than their website.
• Plan your programs – What happens when programs overlap? Customers are confused. Even your sales team has a hard time understanding which program carries the priority.
• Coordinate your programs with supply partners – When the distributor and their key suppliers work together it’s a thing of beauty. There should be ongoing meetings to understand how you can build synergy.
Finally…
• Website – We used to be able to build a website and then say we had one. But that’s not good enough anymore. If you website hasn’t been updated, overhauled or added to in the past 3-4 years you may be in trouble.