Delivering for Best-in-Class Wholesaler-Distributors
March 1, 2017  |  ByMark Dancer, NAW Institute for Distribution Excellence Fellow
NAW-Why Data Sharing Leads to Better Value for Customers–Distributors in the Digital Era #6

With the adoption and use of digital tools by wholesaler-distributors, new possibilities for working with suppliers are becoming possible. Truth be told, the partnership between manufacturers and distributors has always been a kind of love–hate relationship. Distributors need products to sell, and manufactures need access to their customers.

But, the threat of disintermediation by manufacturers has always been real, and supplier websites, inside sales, and other digitally enabled capabilities make going direct ever more possible. From another perspective, distributors are leveraging videos, configurators, and other digital tools to lessen their dependence on manufacturers for product expertise, and thereby potentially weakening that partnership.

 

Despite all of this, the fact remains that the case for partnerships between manufacturers and suppliers remains, although the basis for that partnership is changing. The most important rationale for manufacturer and distributor partnerships lies in working together to create value for another party – the customer. In doing so, both partners receive value in return while the customer receives value that would not be possible otherwise. This has always been true. There is nothing new in this argument.

What is new is that digital tools can enable traditional partnerships to create higher and higher levels of value for customers, through many means. Some of these means go to effectiveness (better solutions of products and services) and other go to efficiencies (removing redundancies and excess costs from the value chain). Each partnership will have its own customized and unique executions, but the common ingredient is data – the data created by digital tools. By sharing data collected through CRM, distributors and manufacturers can better coordinate resources, speed time to market and improve customer satisfaction. By sharing data collected through marketing automation tools, manufacturers and distributors can better tailor their website experiences, video, and configurator assistance, and create a seamless environment as customers migrate from one partner’s site to the other and back again.

Of course, manufacturers and distributors both know that data, specifically customer data, is at the heart of conflict between manufacturer and distributor partnerships. Distributors want to protect customer data as their final defense for preventing disintermediation. Manufacturers jealously guard their own data about sales and especially margins, because they believe distributors will use that information to lobby for better prices to improve their own bottom line. But none of this matters. Digital tools enable disruption. If one set of manufacturer and distributor partners does not figure out a new way to collaborate around data, another will.

Or, look it from another perspective. Online marketplaces (like Amazon) are a huge disruptive threat for both distributors and manufacturers. Alone, manufacturers and distributors may not be able to counter the threat. But, working together, there may be new possibilities.

Data is the key. Data sharing will lead to improved results for customers, justifying the need for ongoing and improved collaboration. It’s a tough nut to swallow, but D (data) must come before C (collaboration).

Our research in Getting the Most Out of CRM: Best Practices for Wholesaler-Distributors explored the opportunity to share data for mutual benefit. I’ve pasted some of the insights here, starting with a quote from a distributor that pointed us in the right direction:

“One of our best suppliers asked all of their distributors to start using a specific CRM package. We did. We were skeptical at the start, but as we analyzed CRM data for this supplier, we began to find opportunities for the supplier to help us drive results faster. Because we managed against a sales process with win-rate metrics, we were in a strong position to ask for joint sales calls when they could make a difference. We went to other suppliers and convinced them that our use of CRM made us a better partner for them. Over time, CRM has dramatically improved our ability to proactively drive partnering expectations with our suppliers.”

The graph below tells the tale. Each row indicates the degree to which distributors agree, disagree, or are neutral on four statements about leveraging CRM data and analytics with suppliers. As the top bar indicates, distributors were very hopeful that CRM would lead to improved collaboration around making the distributor sales process more effective. Distributors also indicated that adoption of CRM would lead to more sharing of data with manufacturers. Distributors were evenly divided about receiving more support from manufacturers as CRM is adopted, and they did not believe CRM would be required by manufacturers.

Leveraging CRM data and analytics

The data behind this graph and subsequent discussions of our findings support an overall conclusion that the adoption and use of CRM by distributors can lead to improved collaboration with suppliers, which in turn can lead to better financial results. As distributors implement marketing automation and other digital tools, we expect to find similar examples. If distributors can use data and analytics to demonstrate the effectiveness of their websites, marketing campaigns, videos, and digitally enabled salespeople, they will be in a much stronger position to expect (or even demand) higher levels of customized support from their best manufacturer suppliers.

Our work with distributor leaders yielded three key insights for leveraging CRM to achieve better results from supplier partnerships, and we offer them here as input for building your digital vision:

  • Supplier expectations for CRM will vary by their distribution policies. Suppliers that offer wholesaler-distributors exclusive territories and those that seek to limit authorized distributor competition (selective distribution) may be motivated to require CRM at their wholesaler-distributors for improved communication and collaboration. In both cases, the supplier seeks to work with fewer wholesaler-distributors in exchange for closer working arrangements for selling and marketing efforts. Suppliers that have open distribution policies will sell to most, if not all, wholesaler-distributors. These manufacturers tend to view wholesaler-distributors more as customers than as partners, which could lead to their internal use of CRM for delivering better results through wholesaler-distributors.
  • CRM may become an element of supplier loyalty programs. Many suppliers offer higher levels of support and favorable terms to wholesaler-distributors that are willing to commit to specific levels of sales and marketing support. Often, participation also requires that wholesaler-distributors reach specific purchase levels. Suppliers may require wholesaler-distributors that participate in these programs to adopt CRM, again to improve communication and collaboration with the manufacturer’s closest partners.

Wholesaler-distributors may differentiate through CRM. Whether or not suppliers request or require wholesaler-distributors to adopt CRM, some wholesaler-distributors may choose to tout CRM capabilities as evidence of differentiated sales and marketing capabilities. Many wholesaler-distributors have always made this argument, but CRM will allow them to back up claims with fact-based evidence. As one wholesaler-distributor put it: “If I know which customers or products are important to a particular supplier. I can use CRM to track results and generate reports that I can share with that supplier. I can also make the case that I can use CRM to better direct our sales efforts, particularly if the supplier is willing to give us better pricing or support.”

Have you downloaded the Pocket Guide about this important study yet?
Click on the image to receive some valuable excerpts from the full study.

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Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer founded the Network for Business Innovation to drive awareness, advocacy and excellence for B2B innovation, and to enable an exchange of ideas between leaders on business transformation, technology adoption, social impact and community engagement. For more than 30 years, Mark has worked with leading companies to achieve go-to-market excellence across a wide range of industries in developed and emerging markets.

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