While some distributors continue to navigate the Covid-19 crisis they are also preparing for the “new normal.” What is this “new normal”? And how should distributors best prepare for it?
You’ll hear their perspectives on what’s going on in the distribution industry, how some distributors are getting out of survival mode and starting to manage the crisis in different ways, the "new normal" in distribution, the continued importance of personal relationships in the industry, and how this crisis has accelerated the shift to digital selling.
Other resources on how to navigate disruption through COVID-19:
Resources from the National Association of Wholesaler-Distributors (NAW) and the Network for Business Innovation (N4BI)
- Schedule a call with Mark
- Innovate to Dominate: The 12th Edition in the Facing the Forces of Change® Series
- NAW Blog
Resources from Modern Distribution Management (MDM)
Resources on PROS.COM
- Request a Free Consultation With a Pricing Expert
- PROS COVID-19 Resources
- Video: The Three Islands of Online Pricing: Practical Online Pricing Advice for Distributors
[03:05] Mark discusses what he is seeing as the new normal
[05:25]: Mark discusses how digital and virtual technologies can change the way that distributors go-to-market and create value
[10:00]: Valerie presents research about the rapid move to digital
[12:20]: John discusses some of the challenges distributors are facing, including online pricing
[17:02]: John provides practical steps that distributors can be taking the coming days and weeks
[19:00]: Valerie discusses tools and strategies that distributors can put in place today
[21:20]: Mark discusses distributor-customer-supplier relationships and loyalty in light of COVID-19
Richard: Hi, well welcome everybody to our cast, which is really aimed at distributors and offering some expert advice of around the crisis. It's Monday, April the 13th and clearly, we're several weeks into that crisis and I'm delighted to have some experts from the distribution and the pricing industry to join me. So, maybe we could just do a brief round Robin of introductions. So, Valerie, could we start with you please? ...
Valerie: Yes. Thanks, so much Richard. Thanks for having me here today. I'm excited to speak to you and Mark and John about really what's going on with distribution and pricing amidst this COVID-19 crisis. My name's Valerie Howard. I am a solution strategy director for PROS, for particularly for our pricing portfolio, so I manage the go-to-market strategy for that set of solutions.
Richard: Thank you, Valerie. And John from a modern distribution management. Maybe you could tell the folks a little bit about yourself as well.
John: Yeah, thank you Richard. I'm John Gunderson. I'm from Modern Distribution Management. We're a company that works with distributors all over the US and a lot of distributors all over the world. My background is as a pricing leader from distribution, helped run pricing for a couple of groups in HD supply and then Anixter, have a long distribution career. And what I'm going to add today is just really a little voice of distributor on this call and I'm really looking forward to it, should be a great discussion.
Richard: Well, thank you John and PROS is very proud to partner very closely with Modern Distribution Management as we have done for many years. So, we really appreciate you taking the time to join. And Mark, hi to you. Maybe again you could just introduce yourself to the folks.
Mark: Absolutely. And thank you for having me today. I'm here, I guess really in two roles. I'm a fellow for the NAW Institute for Distribution Excellence, and my latest work there is, Innovate to Dominate the 12th edition in The Facing the Forces of Change series, and this edition Innovate to Dominate, is really a roadmap to help distributors innovate. And the second thing about me is that my business is the Network for Business Innovation, which is about promoting awareness, advocacy, research excellence around B2B innovation. Something I think is happening more and more and it's in our economy and those businesses that help other businesses can help drive how we work and how we live forward into the future. Thank you.
Richard: Well, thank you, Mark. So, maybe you could talk a little bit about what you've been seeing and what you feel is the new normal and some of the advice you could give some of the viewers to this series on what they could do to prepare themselves, not only for getting through this crisis, but preparation for that new normal.
[3:05] Mark: Absolutely. I think one of my thoughts and the things I've heard in talking to distributors and in participating in discussions on innovation in face of the COVID crisis, is that it's important to realize that early reporting is not necessarily accurate reporting. It's common in any crisis, but I think what it means for the new normal is that the very early discussions about what the new normal is will probably be largely true, but maybe not be completely true.
And I think the opportunity for distributors as distributors and their customers begin to get a little bit out of the survival mode and start moving towards the future, but still managing through the crisis, is that distributors can actually help customers and lead them towards the future and help customers understand what the new normal might be, right. And that's important.
I think that's some of the early things that are being talked about are things like because of social distancing, customers will buy a lot more online and that distributors, employees will work at home. And those things I think are very true, but there are other things that might flow from those also, right.
There's an opportunity for maybe down the road for distributors, not just to offer a new normal, which is a lot about online buying, but maybe using things like augmented reality to collaborate with customers in a live sense. Bring back in data and analytics where maybe customers and distributors can look at the data and talk about it online and come up with collaborative solutions.
Richard: And one of the things that you've also talked a lot about recently, is that distributors have a lot of importance and priority and reliance on their field sales teams. I have lots of different channels, not only field sales but inside sales and branches and of course increasingly online. So, that's really, the new normal is there is a real mix of those types of channels and probably has a huge impact on that field sales resource. So, maybe you could talk a little bit about some of those dynamics that are going on.
[5:25] Mark: Yeah, absolutely. One of the big findings in our research for Innovate to Dominate was that distributors really any B2B company, but especially distributors are thinking a lot about how digital and virtual technologies can change the way that distributors go-to-market and create value. And what's often overlooked is the need to do human centric innovation at the same time. The realities of your plans include both what you do online and what you do when you're working human-to-human, person-to-person with your customers. Then you get more value out of it for your business and for your customers. And if you think about the sales force, the field sales force, which is primarily about human interactions with your customers often in the field, but sometimes on the phone, there are disruptive things happening as customers migrate to make more of their purchases from the distributor, online, right.
And that in the context of channel strategy and thinking about how what the future of your human or field sales force may be, the next step is to say is what's left a survivable role for working with customers. It may or may not be, right. But we can apply data and analytics to make that highly valued or highly valuable support that a field salesperson can provide to kind of upgrade their role. And as we've been pushing on this as we're thinking about it and try not to forget about the human side of sales. Five topics have kind of come up in conversations I've had. One is that we might use data, analytics, artificial intelligence to help the salesperson know the next best account to call on, we might try to take our annual reviews which are using backward looking, how were the purchases, how do they get unfold for the customer over the last year and make them forward looking, so maybe something or active sourcing using data, analytics, artificial intelligence again.
A third area is to help your customers adopt artificial intelligence and other data tools in their own sales and marketing efforts. But to do it in a way that it creates collaboration with the distributor, so the distributor can help guide and support the customer's sales and marketing efforts. A fourth area is to ask the customer to apply or to contribute some of their own data to the distributor's data and really create a total cost of operations, TCO sort of analysis where it's not just about purchase price and delivery specs, but it's about the results and the data that show how the products that a customer buys from a distributor actually create results in the customer's business.
And then the last is, as we talk a lot about how the global supply chains may transform a bit, right. Because there's risk associated from buying remotely, particularly if you buy it remotely just to get low cost, low labor costs or efficiencies there, right. That we might actually move the supply chain metrics towards predicting risk, looking for signs posts in the news and the way business is conducted, so that distributors can help customers have kind of a real time assessment about the risk that their supply chain is creating in their business. Watch for signposts in the news to my point that those risks might become manifest and then think about in advance, about how you can help your customers mitigate risk if as if another or the next supply chain crisis comes along.
Richard: Yeah, and thank you for that, Mark. And he's very interested in that some of those threats that you're talking about is listening to customers, listening to the market and then using those insights to do things differently. And of course, two of those things are the rapid move to digital, the rapid move to different channels. And of course, one of the strategically levers are of course pricing. So, making sure that you've got the right offer at the right price at the right time through those channels. So, Valerie maybe I could bring you in because you've been doing a huge amount of research looking at that kind of move to digital, which is only been exaggerated with what's been going on over the last few weeks and continues to go on and how important the experience and the online pricing is. Maybe you could give some comments and advice around that, as a topic.
[10:00] Valerie: Yeah. Thanks, so much Richard. Yeah, we've been doing research in this area for a couple of years now. It started in about 2018, we went out and we worked with ... we surveyed businesses, we surveyed their C-suite and we wanted to understand where they were in their digital transformation strategy. What their thoughts were on moving sales from these traditional channels to digital e-commerce portals, maybe partner portals. And a lot of them said, "Well, that's something that we're planning for at about 2023," I think it was about 62% said, "By 2023, we'll have more than half our sales through digital channels."
Unfortunately, I think unfortunately for a lot of businesses they're during this crisis and they're being forced to accelerate beyond that pace, right. A lot of sales right now, a lot of engagements have gone virtual and if you don't have a digital channel effectively set up, you're struggling a little bit to interact with your customers in some cases.
So, what we've seen, if you may have seen this meme on LinkedIn where it's a little graphic of asking the audience what drove your digital transformation strategy, was it your CIO, your CTO, or was it the COVID-19 crisis? And in a lot of cases people are saying COVID-19 is really forcing everybody to have this business continuity plan in effect for both their internal employees, but also engaging with their customers. So yeah, I guess to answer your question, the research has shown that businesses were expecting to move to digital channels, but today's crisis has accelerated that incredibly.
Richard: Thank you, Valerie. And it really has been dramatic with what we've seen and what we've heard. And John, maybe I could bring you in here because I think that's a good segue. You've lived this, both through previous crisis and in previous roles and now and clearly distributors are probably behind the curve as an industry as far as offering that optimize experience and that moved to digital.
[12:20] John: Yeah, I think Mark and Valerie both had good points. I was really focusing on Mark's point when he said that, now supplier meetings or meetings are going to be forward looking versus backward looking. I think that's a key point. I think distributors have talked about that being the way they wanted to go. I think they're actually starting to do it for the first time today cause almost every meeting is backward looking, now you're like, why look back, last we were doing business two months ago is turned upside down, we got to come up with a forward looking plan.
And I thought what Valerie said where she said ... I got to look at my notes. 62% of distributors saying they were willing to make the move by 2023 in your survey. I got a feel that got moved up by three years, almost overnight. So, I think that has a lot to do with it. And I think a lot of it comes from, Mark was talking about at Richard, most distribution is such a face-to-face selling environment. It is just so human-to-human driven that, that is over always over rolled the online discussion.
The CEO hears from his top salesperson, "Hey the $2 million account told me he wants this." Then you set up a whole business to try and service the $2 million year account. And what's really changed now is, right now people at the end ... the end used customer doesn't care where it's coming from anymore. And I think there's some big risks. I mean we were talking; you and I were talking about this last week, there's some risks for distribution. 3M has been under assault for not managing their supply chain for price gouging. And I would guess if you're sitting in an office in Minnesota, in Minneapolis, in 3M, you're evaluating your supply chain because you don't want the bad press and you're really going to cut out those people that are hurting you, but you're also going to start selling it yourself direct to manage costs when possible.
So, I think online pricing has just gotten more critical for distributor and it's really all the conversations I'm having. Everybody is drinking the true serum right now and it's not just talk, they must do something about it. Then to follow up on your comments on how difficult it is, there are many pricing things inside distribution which make pricing online hard. So, for example, in the electrical business, there's a lot of inter stock cost on a product that when you sell it, it is a special pricing agreement. It gives you an automatic discount to a certain level or there are products that you do, that you build, that you buy in an inflated price. But when you package them together, like building an electrical example, when you build a panel board, all the pieces you put together, when you actually create the order, you get a discount from the manufacturer.
So, it actually ... only at the order point do you get a true price, that's a competitive price. So, those have been always impediments to helping a distributor move forward. I hear from manufacturers and distributors alike; they're working hard on fixing those today because they realize they must have a relevant price. Like Valerie said, not necessarily the lowest but competitive to compete. And I think there's just a big change coming and distributors who do have the digital platform and figure out the pricing dynamics are going to grow above market versus those who do not. And I think it's that simple going forward in 2020.
Richard: Maybe I could just move the conversation to some of the practical steps that you could all recommend that distributors think about and maybe you could just offer some advice to distributors and what they can be doing differently and what they should be thinking about in the coming days and weeks, not months and years.
[17:02] John: Yeah, yeah. Richard, I would say the biggest thing, and we've talked about it a lot, is you for non-account customers that many distributors have, that come in that could be good customers, you've got to find a way to create a relevant price and make the transaction easy. Many distributors have set up their online pricing profile to be, if you're on account, you get a sign in, you get behind a firewall, you actually see a decent price and you can transact and because of that they miss a lot of opportunities. So, that is one thing that I think is critical. The other thing is, if you've got products online, you must work with a pricing provider and do some scraping on various sites to get a feel for what the pricing ranges are.
John: So, you can scientifically set a relevant, not lowest price in order to win. And I don't want to use an Amazon term, but you really kind of got to be close enough to win in the buy box. And I think those are the two big things that distributors must do today. And I think it's difficult to do on your own with your pricing team, but you got to know what price is out there in order to kind of be competitive. And in the past as a distributor, the only price you were concerned about was what the other distributor was verbally telling a customer, those days are over.
Richard: Thank you, John. And Valerie to that point, clearly that moved to digital, it's just so important and you have a lot of experience in some of the tools and the strategies that distributors can put in place today, because in the majority of cases they have a lot of the information and the data required already in their business. They just must turn that data into actionable insights to be able to offer that optimize experience.
[19:00] Valerie: Yeah, that's right. There is a lot of data at hand to help them understand how they can make pricing available online at a market relevant perspective without, I think driving profit leakage, right. Or running into our pricing war. The other thing that John just talked about that I thought was particularly interesting was something that we've seen also with our research and businesses that we've worked with is that they are moving some clients through partner portals where they get their special pricing and then maybe they have an eCommerce channel that they look at it in very separated functions. So, how do you start to bring that together, right. Because, most customers are interacting through a range of channels. In fact, I think we've talked with this group before about how it's going to be a proliferation of channels to reach your end customers in a lot of cases.
So, our perspective is that yeah, you want to manage that from a coordinated perspective. A lot of what we help our customers with. The most innovative customers today are now thinking about this from a real time price calculation perspective where we have ... we're helping our customers to embed those price formulas so that whenever a customer is pulling up the catalog or even their personalized view of the catalog, those prices are being calculated in real time so that they are the most market relevant perhaps in this competitive pricing that makes sense for that customer at that point in time for that unique buying experience.
Richard: Well, thank you Valerie. And that's interesting because Mark, one of the quotes that you always talk about is distribution is about relationships across all these channels that both Valerie and John have talked about. So, clearly, it's so important to support those relationships with ... and you talked about analytics, you talked about AI, you talked about data. So, maybe you could talk about those relationships turn into innovation, which turns into value, which turns into optimize the revenue and of course distributors live and breathe by margin. So, maybe you could give some practical steps in the short term that distributors can think about to make those ... and often cases force change and force improvement.
[21:20] Mark: I think to me one of the foundations of a very strong relationship with customers or with your suppliers is a very ... is a tradition and processes around having frank and open conversations. Right, it's very hard if in kind of pre-COVID-19 crisis, it's very hard for distributors to engage customers in a way that talks about the future, right. It's just hard to get customers to tell a distributor what innovations they should create that would be most valuable to that customer, right? But we're in a situation now with the crisis that there are many ad hoc and some planned conversations going on with customers that are open and frank and rich and consequential. And I think distributors can think about those conversations and how they work them into an ongoing process, an ongoing commitment for working with customers as we rushed to survive with the current crisis.
Mark: One of those is trust and transparency associated with putting your prices online. The real root cause of the root question around that kind of transparency and the trust that comes with it is, how do distributors create loyalty in the long run? Right, and I think that's a question that hasn't really been explored in the digital age for distributors. We know how we've created loyalty in the past, which are usually measured as output metrics, share of wallet, repeat purchases, things like that. Going forward, we need some input metrics. What are the things that distributors can do to create loyalty in an era where more, more and more prices are out there because they're being transparent. That also flows into John's comment about manufacturers may be looking to control their supply chain more proactively or even thinking about going around their supply chain and selling direct to customers more frequently.
Richard:Yeah, that makes sense. And thank you everybody for such practical advice. Now, you all have some really good resources which are available now. We will post all those links to make sure that everybody has access to all of you. And really appreciate you taking the time from your busy schedules to share that insight and advice. And I'm sure we'll all get together again very soon and follow on for this conversation. And thank you everybody for watching.
John: Thank you.
Mark: Thank you.