The distribution model of the past 50 years is changing rapidly thanks in part to the digital revolution. Joseph Nettemeyer, president and CEO of Valin Corporation, says that means distributors must find ways to add more value to solutions offered to customers. It also means they must become digital experts in communication and in the transfer of information.
Today, “We are used to getting information instantly in our lives,” Nettemeyer said in a recent interview. This is true not only for the Millennial Generation, but for everyone, he added, referring to the “ask Siri” phenomenon of smart phones. The expectation that we can ask and get data immediately has transferred to the industrial marketplace, he said.
“Companies that are complacent, thinking they can do business the way they’ve done it the last 30 years are going to be irrelevant,” Nettemeyer warned. For distributors, the situation requires that data coming into their systems is consistent so that it’s easy to automate and send back out. “You can’t have three different ways to say one thing. It causes problems with finding information,” he said. A change as simple as switching a colon to a semi-colon can corrupt processing and complicate the picture, he explained.
Data also must be “normalized,” which means it must be organized using relational databases, and it must be easily searchable. Such changes cost a lot to implement and take added labor, “but it is absolutely necessary. There has to be a seamless connection of information leading to the answers buyers need,” he said.
This instant, searchable database replaces a world in which manufacturers, distributors and customers had islands of data that wasn’t cross-referenced. In contrast, customers today expect answers within 24 hours of the first online click, he said.
WHAT THAT MEANS
Nettemeyer said Amazon.com has re-defined the buying experience for many things. They’ve been able to accomplish this not through staffing, but rather through software, he pointed out.
“People today are used to doing their purchasing research for anything online and having all relevant information at their fingertips,” he said.
Part of the problem with how that translates to the industrial world is that the data for suppliers and distributors is not set up in a fashion that makes it possible to research and purchase the way buyers now expect, he said.
That will have to change.
The call for normalization of data means manufacturers must re-define the metrics of what they measure to focus on creating a customer experience. They have to stop focusing so much on the product and start focusing on “the experience of purchasing the product,” he said. Unfortunately for companies used to doing business the old way, that also means looking at branding differently.
“Amazon is out to maximize the experience and maximize their transaction profitability,” he said. Distributors that are more used to focusing on branding “must now add value to the products to be relevant and to excel,” he said.
“You have three seconds to grab someone’s attention,” and about two minutes to close the sale. “How are you making that easy for someone who is making the decisions?” he asked.
The 50-year-old strategy that focused on product features and benefits is simply no longer relevant, he said. In today’s markets, many customers have already decided what to buy before they approach the purchasing process, which compares to just a decade ago when a business customer would call distributors and manufacturers to request more technical information so they could specify a product. “As a result,” said Nettemeyer, “One million B2B [business to business] sales reps will lose their jobs to e-commerce by 2020—22% of the 4.5 million U.S.-based B2B sales agents will be gone,” he said.
Successful businesses will learn to gather information quickly and act on it, creating a speedy purchasing process while adding value into products, logistics services and wrap-around offerings, Nettemeyer said.
“The control is no longer with the sales reps. The buyers are taking control since they are doing their research online,” he said.
As a result, customers should have easy access to price and availability from suppliers on the digital platform so that they don’t have to chase information.
Meanwhile, all product brands are at risk in the next 10 years, he said.
“What makes you think that just because you have a good brand, it’s going to stay that way?” Nettemeyer challenged. Unless a patented technology is involved, many brands can be usurped.
Brands won’t go away, but to survive and thrive in this environment, those brands must be accompanied by digital savvy; the products must solve problems; and the companies must define themselves.
“You must also have a channel strategy,” Nettemeyer said. “The dumbest guy in the room is the one who focuses on market price. We all have the same discounts, so that cannot be your strategy,” he said.
Nettemeyer admitted that becoming a digital company is a learning process that requires redesigning the whole business to be able to communicate digitally with not just customers, but also with the supply chain. The information must flow seamlessly in all directions. To make that happen, companies must:
- Normalize all data
- Build a strong digital interface (website) with good content
- Ensure seamless information transfer; the distributor and customer do not want to chase information.
Companies also must offer service that is top-notch: If a customer needs a special lead time on a valve, for example, it has to be delivered right away, not in several days.
“Service is expected,” Nettemeyer said, at the same time it’s subject to different interpretations. As a result, companies must look inward at how they handle things.
While it’s important to think outside the box, our perception of the “box” needs to change, Nettemeyer said.
“How are you measuring yourself against the expectations?” he challenged. He recommended customer satisfaction surveys to ensure continuous monitoring of what makes a good experience.
To truly thrive, it is important to remember that:
- Status quo is the enemy.
- Relevance is the new mandate.
- We own our future; if not us, who?
“Take a moment of self-reflection, look at yourself in the mirror every night and ask yourself if you did your best,” he said. “That’s the challenge for all of us.”