Delivering for Best-in-Class Wholesaler-Distributors
July 5, 2017  |  ByMark Dancer, NAW Institute for Distribution Excellence Fellow
NAW-Get in Front of Digital Disruption-Distributors in the Digital Era #23

In my ongoing research and discussions with distributor leaders about digital tools and the threat of disruption, I continually hear that Amazon is thought to be making inroads among business customers, but that the impact in their own business is small and can’t be measured.

These leaders are not in denial about change; in fact, they are worried. Change is coming. Many firms are upgrading ERP platforms to better track sales and profit trends in their business as they look for opportunities and problems. All of this is good … perhaps very good … but it is not enough.


Sales revenue and gross margins are lagging indicators. They point to customer decisions and changes in buying behaviors that have already happened. There is a lot of distance between a customer going online to search for information or answers and actually switching sources. For any distributor, the latter is measured in lost sales and profits. Granted, not all customers will switch sources at once, and minor losses may be noticed before they become major. But tracking lost business does not help prevent future losses. It may not blunt momentum. To be fully prepared, distributors must add leading indicators to monitor changing customer buying behaviors and to discover new value propositions and root causes that can point to new strategies and offerings.

Business customers are rational decision makers, and decisions are typically made at the end of a process. In new research conducted over the last several months for an NAW Institute research report being published later this year, we asked customers about the evolution of their buying process, given new disruptive channels and the adoption of e-commerce platforms and other digital tools by incumbent distributors. Mostly, we found that customers are experimenting, making changes gradually over time and learning as they go. They seek to retain control of their buying processes and their leverage with suppliers. Change is happening, but gradually. Customers generally believe that disruption and digital transformation will result in benefits that flow to them. They are ready to move fast, but they’re not seeking to drive change.

This means that the best leading indicators for tracking changes among your customers will measure two parameters:

  1. the learning that your customers are acquiring from online information seeking and growing interactions with disruptors and innovative incumbents
  2. more fundamentally, the measures that point to changes in your customers’ business needs.

Below, we suggest five leading indicators to help you get started. Some can be measured and tracked through independent sources, while some will require conversations with customers. We suggest these five leading indicators as a starting point and look forward to feedback from distributors in our ongoing work:

  1. Information sources, random buys and repeat purchases. It is not enough to know that your customers are going online for information and answers. You should also investigate the quality of information and its impact on decision-making. Some searches will lead to purchases because the information sources offer a product for sale or because a purchase is made out of curiosity or for a trial. These buys are in a sense, random and may lead to repeat purchases. These indicators are critical, because they are following customers’ learning processes and the impact on their decisions. You may find some useful data in industry-specific research, but it more likely that you will need to gather this information from conversations with your customers through sales conversations, leader-to-leader discussions, collaborative working groups and so on.
  2. New hires. The addition of new employees, particularly in positions responsible for sourcing, specifying or using products sold by a distributor, can signal potential changes. New employees may bring new sourcing preferences. They can come on board to bring new knowledge, skills or capabilities. Or, they can come on board to help launch a new initiative. The opposite of macro hiring plans, sometimes known as downsizing, can also be a leading indicator of changing buying needs or behaviors. Knowledge of new hires can be gained through personal contacts or by monitoring LinkedIn. As a social media, LinkedIn is a digital tool that can be leveraged by distributors and should be done through a well-organized method of data collection and analysis. Doing so is an important first step toward building an executive dashboard of leading indicators.
  3. New product buys. The acquisition of products not previously purchased or traditionally purchased in smaller quantities can signal important changes. When purchased by dealers or contractors, new products can signal a change of business direction, a search for new revenue opportunities or evolving customer needs. When the customer is an end user, new products can indicate a shift to new solutions, trials for new product runs or changing performance standards. And if the product is not currently offered by a distributor, new product buys can lead to declining revenue and profits.
  4. New or expanded investments. Businesses make investments with the expectation of a return, and so every investment can point to both a sales opportunity (selling products to support the investment) and a deeper understanding of a customer’s evolving business objectives and performance expectations. Investments can have their own early warning systems if the distributor’s account management or salespeople are tuned into a customer’s annual planning and business case review processes.
  5. Leadership changes. Every new leader brings a new direction for a business customer. Senior leaders are approved by boards, and c-suite leaders are brought in to be part of the CEO’s team. New leaders are tasked with solving problems, changing directions or growing sales and profits at an accelerated rate. Each new leader brings a history of experiences, industry knowledge, education and relationships. Change starts at the top and every distributor should carefully evaluate the changes a new leader will bring and the associated impact, large or small, on the sourcing of products and services from a customer’s suppliers.

Back in my days as a mechanical engineering student, I learned about the concept of “metastable systems.” We explored this concept through laboratory work, formulas and mathematical model, and statistical analysis. However, all of our work boiled down to a simple observation: all mechanical systems are stable until they are not. The trick was to identify when they would become unstable and then have an engineering solution ready to go.

This concept can be easily applied to customer buying processes where customers are largely happy with current buying options, but are ready to change when a better and proven source comes along. Change doesn’t happen until it does. Tracking lagging indicators will let a distributor know that change is happening and if caught early, before it builds momentum. But a better approach requires tracking leading indicators, observing the factors that will lead to change and developing solutions to ride the wave or defend against disruption.

French microbiologist and chemist Louis Pasteur said, “Fortune favors the prepared mind.” In today’s changing and disrupted markets, being prepared means tracking leading indicators and acting on the knowledge and insights that are gained.

For more ideas for creating your suite of leading indicators, we recommend Chapter Two: Digital Change Starts with Customers in Getting Results from Your Digital Investments, and you may also enjoy these articles, 6 Customer Buying Behaviors in the Era of Digital Tools and It’s Not Too Late … Do You Know Your Customers?

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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.