FLEETSchneider National Inc.
Doug Kading, director of Fleet Services
TPS: What are the pitfalls of selling only on price?
Kading: While there are price buyers out there, selling on price only doesn’t mean the lowest overall cost for the business. Trucking companies have significant amounts of invested capital that they need to produce a return on. The best overall value for them is to keep their equipment on the road earning revenue. Product availability and reliability have significant implications, not the product price.
TPS: What is the single most important thing a distributor can do to define its value proposition to its customers?
Kading: The most important thing a distributor can do to define its value proposition to a customer is to prove that the customer will achieve the lowest total cost of doing business by working with that distributor. This might be done through a combination of price, service, product availability and quality components.
TPS: How are a distributor’s product lines important to its
value proposition?
Kading: Distributors who work with product lines that provide quality products, an uninterrupted supply of parts and all at a reasonable price will be able to show customers that they value the same overall low cost that the customer is trying to achieve. The distributor must not just tie itself to a single product line but understand what the customer is trying to achieve and help the customer select the product line that meets that need.
TPS: How receptive are customers to learning about a company’s value proposition over simply the cost of a product? What is the most effective way for a distributor to communicate its value proposition?
Kading: Customers are only interested in learning about a company’s value proposition if that value proposition meets a specific need. When a need is met, a sale is made. For example, in today’s economic environment, a customer who may have valued product longevity in the past may become a price purchaser because of falling revenue in their business. The distributor needs to understand the need of the customer and respond to that instead of being tied to one solution and trying to convince every customer how the distributor’s preferred solution provides a value.
The most effective way for a distributor to communicate its value proposition is to put it in terms that are important to the customer. As a general rule of thumb, price gets you in the door, then you better understand what the customer is looking to achieve or what they place value on. A good salesperson will ask questions to determine what the customer values so they can tailor their value proposition to the specific customer. If the customer values price only, the distributor needs a price-point product. If the customer values longevity to replacement or warranty coverage, the distributor needs to relate how a more premium product can add value.
Clearly stated, it is not a good strategy to try to convince every customer that brand X has a premium product that all customers should use because all customers have different needs.
TPS: How do you train and equip employees to effectively communicate the company’s value proposition?
Kading: Since maintenance is a cost center in any business, a good strategy is always to show how the value proposition leads to increased equipment availability, increased revenue and lower overall cost to the business versus just lower maintenance acquisition cost. It is important to understand the needs of the customer. Training and equipping employees with tools that let them evaluate a customer’s needs, and then help them tailor the message about specific products and services to meet those needs, will help get the value proposition across effectively.
DISTRIBUTOR Midwest Wheel Companies John Minor, chief operating officer
TPS: What are the pitfalls of selling only on price?
Minor: You’re never going to have the lowest price – someone else will always be lower. So even if you do get the business based solely on having a lower price, you will end up losing it at another time if that is all the customer values and the only value you bring to the customer. It is also not an enviable market position to be perceived only as the lowest-cost distributor as it also means you have the lowest value to your customers.
TPS: What is the single most important thing a distributor can do to define its value proposition to its customers?
Minor: I don’t think there’s any single value proposition. It’s a combination of all of your resources and how you apply those to your customers. But toward the top of the list must be well-trained, skilled employees.
This is a people-driven industry and the better trained and more knowledgeable your employees are, the more value you bring to customers and those relationships last longer and bring greater mutual success.
TPS: How are a distributor’s product lines important to its
value proposition?
Minor: The distributor’s value proposition should be aligned with its major suppliers’ value propositions. When we evaluate our supplier relationships, it is essential that they provide a value proposition that is complementary to our own.
Having a supplier aligned with our value proposition means many different things. It could be VMI, it could be training, it could be field work, it could be all of those things combined – and generally it is. Without those values, the relationship would not be a long-term success and we would not be able to provide the value-added services to our customers.
TPS: How receptive are customers to learning about a company’s value proposition over simply the cost of a product? What is the most effective way for a distributor to communicate its value proposition?
Minor: In today’s market, trying to cultivate new business with new customers is a challenge because many companies are looking primarily at price. It is extremely hard to convey to a new customer your depth and breadth of inventory, delivery services, product knowledge, training and the level of skill your employees have.
That said, if you can get your foot into the door with a new customer, you can start to build the relationship on a small scale and work toward growth. That way they can see the greater value you bring through your people and all of your services. If that happens, you have a good shot at gaining new business.
TPS: How do you train and equip employees to effectively communicate the company’s value proposition?
Minor: We train; our training calendar at all locations has something on it every week. Whether it be factory training or a skill training we are always training for that competitive edge. We use problem solving methods to track all processes and look for continuous improvement in all aspects of our business. We are a customer service driven company. At Midwest Wheel we know the customer is No. 1.
MANUFACTURER DuraBrake Co.
Shaun Shroff, executive vice president of Marketing
TPS: What are the pitfalls of selling only on price?
Shroff: Pitfalls of selling only on price means denying the customer critical information which users often seek about the manufacturer, product specifications, unique features, performance capability of the product, life and disposal issues. All this can only be obtained from experienced technicians who know the form, fit and function of the parts and system.
We live in a litigious society where warranty issues and liability insurance are also a crucial part of customer need to know information. Distributors selling only on price are cutting corners only to focus on their profit and generally lack of service. In our own industry for heavy-duty wheel components such as brake drums and brake discs, we have found price-driven distributors buying counterfeit parts which have a part number of a reputable manufacturer and no identity. Counterfeit parts are a serious problem in the industry as this demonstrates ignorance of the buyer about the potential danger that lies ahead.
TPS: What is the single most important thing a distributor can do to define its value proposition to its customers?
Shroff: The single most important thing a distributor can provide to the customer is a full disclosure of the products they sell along with the benefit of hands-on experience with the products. Most reputable distributors in the U.S. have experienced and knowledgeable technicians interacting with the end users. This defines the distributor’s ability to provide the right parts at competitive prices. Good technicians and distributors keep their counter and shop personnel well trained in the field of their expertise.
TPS: How are a distributor’s product lines important to its
value proposition?
Shroff: Distributor’s product lines generally relate well with their expertise in the type of systems they serve with the parts they sell. Distributor’s product lines reflect the type of products they carry and the type of companies they represent. This brings me to the dramatic change that has occurred in our supply chain in the last two decades. Manufacturing has shifted from developed countries to emerging countries. China has become the manufacturing hub of the world where the majority of the global manufacturing occurs today whether by Chinese companies or offshore manufacturing arms of companies from developed countries. This is good trade if we optimize technologies from developed countries and use a lower labor cost to produce quality products competitively. In the last two decades there has been an evolution from bad quality product to now a lot of good quality product. Chinese companies can now produce good quality products and bad quality products. It is up to the sourcing manufacturers and distributors to protect their reputation by assuring quality parts to the customer at competitive prices.
TPS: How receptive are customers to learning about a company’s value proposition over simply the cost of a product? What is the most effective way for a distributor to communicate its value proposition?
Shroff: Most customers appreciate the value of knowledgeable and experienced technicians serving them, and often distributors serve a regional business which localizes relationships developed over years. Price is very crucial to remaining competitive. The best distributors are those that strategically balance service with pricing. The most effective way for a distributor to communicate the value proposition is through a relationship and trust that distributors develop by keeping customer’s best interests at heart.
TPS: How do you train and equip employees to effectively communicate the company’s value proposition?
Shroff: The distributor or its employees should never have to blow their horn about their capabilities. Actions speak louder than words. Ability to provide knowledge, service and professionalism to the customer will clearly communicate the company’s value proposition. Hands-on experience of the technicians to troubleshoot, install and uninstall parts, and operational knowledge of the system is priceless.
