R&D: Distributor Style
Based on a research published on strategyand.com, the average company in North America spends an average of five percent of revenue on Research & Development (R&D.) Further study points out that more innovative companies are spending closer to 20 percent (Google spends 16.6 percent, Amazon was 27.7 percent and pharma companies go into the high 20s.) While these companies are pushing for new and groundbreaking products, it makes sense that every company would want to invest a little in their future. Should distribution be any different?
Many believe that R&D involves white-smocked scientists
working in some secret skunkworks laboratory deep underground. Arguably, distributors sell the products developed in this kind of product/technology-based research setting. Research & Development involves more than just products. Some research should also be focused on the customer. Things like future direction, service needs, future buying habits and shifts within their process all come to mind. Sadly, most distributors tend to skip over this important point.
Distributors like to brag about their customer intimacy. Based on decades of back and forth discussions concerning Point of Sale (POS) data, many value their customer relationships above all else, even to the point of withholding POS data from their top supply partners. In many cases, we distributors have intense familiarity with our regular customer contacts. But questions about true customer understanding continue to come to the surface. Let’s explore a few of these.
A few years ago, I received an emergency call from one of my clients. One of his top customers had given a 30-day notice that all purchases would be channeled to a competitor based on the ability to participate in a “commodity supply contract.” This teary-eyed distributor’s most important contact delivered the message, indicating the decision came from well above him and was irreversible. Later, research specified the customer had been contemplating the move for nearly a year, but had not been mentioned during any of the weekly sales visits to maintenance, engineering or purchasing. However, everyone in management knew it was coming as a process for driving down transaction costs.
I had to ask, with the distributor bragging about customer intimacy, how was such a move missed? Pushing further, wouldn’t this have been something worthy of exploration by R&D? But this isn’t the only topic distributors should be thinking about. Today, distributors need to understand how the following might impact their customer relationships:
• Internet-based purchasing
• Location and training of new employees
• Changes in the way customers prefer to be contacted
• Value of services provided
• Importance of local inventory
• Customer processes which might be automated in the future
• Shifts in customer operations, i.e., outsourcing, expansion and other needs
Customer Surveys – R&D tool for distributors
Why not gather, review and benchmark information from your customers? After assisting with dozens of customer-focused surveys, we have yet to see one that didn’t provide some valuable insights about overall and specific customer direction. Reviewing the questionnaire details, it’s common for distributor managers and salespeople alike to have some eureka moments. Many of these discoveries lead to instant process improvement while others become part of a strategic initiative to position for the future.
Let’s talk about best practices for customer surveys.
• Surveys need to be well thought out and worded properly. Customers willing to provide the gift of feedback should not be required to wade through poorly worded questions or information that doesn’t apply to their position in the company.
• Surveys should require less than 10 minutes to complete. Let’s face it, customers are bombarded with requests for their time. A survey that runs longer than a few minutes rarely produces measurable results because the customer simply gives up part way through the effort.
• Benchmarking is important. We recommend distributors conduct a survey of their very best and most established customers first. This creates a standard allowing for further comparison of some of the “lesser known” customers. We can discover differences in perception, potential unmet needs and a wide variety of information.
• Forward looking surveys provide the best information. While getting a snapshot of the past is important, the real meat comes by way of the customer’s vision of the future.
• Understanding how you measure up against competitors is a critical piece of the survey. Unfortunately, many distributors dwell on the local competition versus the non-traditional competitors; i.e. Amazon, of the future.
We recommend using a third party for conducting the survey.
While this may sound self-serving coming from an organization conducting surveys for clients, there are good reasons for insulating the customer from your organization:
• Customers are more likely to share the good, bad and the UGLY with an outside party. Being nice folks, they are hesitant to tell you if they think your service stinks.
• A third party can do post-survey interviews to clarify points made during the initial survey. Since the third party is not tied to your organization, they can engage in conversations without preconceived notions of the customer. A third party can ask what someone within the organization might consider to be a “dumb question” without offending the customer.
• The outside surveying organization gives the impression that your company is both scientific in their process and serious about gathering their customer’s thoughts.
Is it time to make an investment?
Most of the time, investment equates to sales pitch, but not here. I believe understanding customers is so important that I want you to do something, anything, to better understand your customers. If not an outside survey, then via your own survey mechanism; companies like SurveyMonkey allow short, limited reach surveys for free.
The important thing is to begin the process of asking:
This IS an advertisement
If you are a manufacturer, when was the last time you reached out to your distributors? Our survey results always help companies build better relationships! Let us know how we can help your organization!
Many believe that R&D involves white-smocked scientists
 |
| Disclaimer: Frank was not in Back to the Future |
Distributors like to brag about their customer intimacy. Based on decades of back and forth discussions concerning Point of Sale (POS) data, many value their customer relationships above all else, even to the point of withholding POS data from their top supply partners. In many cases, we distributors have intense familiarity with our regular customer contacts. But questions about true customer understanding continue to come to the surface. Let’s explore a few of these.
A few years ago, I received an emergency call from one of my clients. One of his top customers had given a 30-day notice that all purchases would be channeled to a competitor based on the ability to participate in a “commodity supply contract.” This teary-eyed distributor’s most important contact delivered the message, indicating the decision came from well above him and was irreversible. Later, research specified the customer had been contemplating the move for nearly a year, but had not been mentioned during any of the weekly sales visits to maintenance, engineering or purchasing. However, everyone in management knew it was coming as a process for driving down transaction costs.
I had to ask, with the distributor bragging about customer intimacy, how was such a move missed? Pushing further, wouldn’t this have been something worthy of exploration by R&D? But this isn’t the only topic distributors should be thinking about. Today, distributors need to understand how the following might impact their customer relationships:
• Internet-based purchasing
• Location and training of new employees
• Changes in the way customers prefer to be contacted
• Value of services provided
• Importance of local inventory
• Customer processes which might be automated in the future
• Shifts in customer operations, i.e., outsourcing, expansion and other needs
Customer Surveys – R&D tool for distributors
Let’s talk about best practices for customer surveys.
• Surveys need to be well thought out and worded properly. Customers willing to provide the gift of feedback should not be required to wade through poorly worded questions or information that doesn’t apply to their position in the company.
• Surveys should require less than 10 minutes to complete. Let’s face it, customers are bombarded with requests for their time. A survey that runs longer than a few minutes rarely produces measurable results because the customer simply gives up part way through the effort.
• Benchmarking is important. We recommend distributors conduct a survey of their very best and most established customers first. This creates a standard allowing for further comparison of some of the “lesser known” customers. We can discover differences in perception, potential unmet needs and a wide variety of information.
• Forward looking surveys provide the best information. While getting a snapshot of the past is important, the real meat comes by way of the customer’s vision of the future.
• Understanding how you measure up against competitors is a critical piece of the survey. Unfortunately, many distributors dwell on the local competition versus the non-traditional competitors; i.e. Amazon, of the future.
We recommend using a third party for conducting the survey.
While this may sound self-serving coming from an organization conducting surveys for clients, there are good reasons for insulating the customer from your organization:
• Customers are more likely to share the good, bad and the UGLY with an outside party. Being nice folks, they are hesitant to tell you if they think your service stinks.
• A third party can do post-survey interviews to clarify points made during the initial survey. Since the third party is not tied to your organization, they can engage in conversations without preconceived notions of the customer. A third party can ask what someone within the organization might consider to be a “dumb question” without offending the customer.
• The outside surveying organization gives the impression that your company is both scientific in their process and serious about gathering their customer’s thoughts.
Is it time to make an investment?
Most of the time, investment equates to sales pitch, but not here. I believe understanding customers is so important that I want you to do something, anything, to better understand your customers. If not an outside survey, then via your own survey mechanism; companies like SurveyMonkey allow short, limited reach surveys for free.
The important thing is to begin the process of asking:
- What do I want to know about my customers?
- What is our company’s R&D?
- Would I invest in a company that spends zero dollars on R&D?
This IS an advertisement
If you are a manufacturer, when was the last time you reached out to your distributors? Our survey results always help companies build better relationships! Let us know how we can help your organization!
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