Buying Groups … Their Value? Their Cost?

The rebates and networking are big. AD’s recent Clean Energy initiative has been very helpful in educating us about the solar, wind, distributed energy and other markets. While it’s not many dollars yet, at least we feel knowledge about the market, can spot opportunities and now how to respond. I’d like to see more market segment initiatives to help us expand our business

group’s seem to be focused on being communications systems for manufacturers. Their systems help get our messages out to our customers, sometimes better or faster than our reps, but their data isn’t always the most accurate. IMARK seems to have more communication tools. But why does everything need to cost extra $ when we’re already sending them alot of money in the form of rebates. Don’t these groups have operating budgets?

Interesting topic. the biggest values for us are the 2 you alrady stated – rebates and networking. Rebates are key to our bottom line. Don’t know if manufacturers over time have just increased their pricing to cover the rebates. For us, over the years, it has generated over $20 million. I guess I should thank my manufacturers.

AD’s marketing and sales planning helps us to develope successfull programs for growth with our strategic partners.The AD NAM is crucial in setting the environment to have our key partners in one place at one time. There are also considerable savings thru the groups because they negotiate and more importantly track and deliver the incentives.

Buying Groups… their value? Their cost? Great question!
Buying Groups are a competitive “game changer” for new product/solutions entering the market. Take AD Clean Energy and Electrical Divisions for an example… companies doing direct sales looking to get into a distribution model are well served as Affiliates are looking for new opportunity and Clean Energy clients are looking for a broader reach. For a lot of new clean energy companies going through a Capital Raise (which happens frequently)that sell direct and can struggle with adoption rates and credibility issues… Capital Firms are looking for Distribution models that can take a clean tech opportunity far and wide… getting approved as a Supplier to an organization made up of 500+ Distributors with 3000 locations is a “valuation changer”.
It gives Capitalist the security of knowing there is a channel and a buyer. Selling direct is 100 phone calls to qualify leads & buyers to close 3% of the opportunity on average… or the company can educate 500 companies with in the AD Family of Affiliate Members; and perhaps only 10 of those AD Affiliates latch on to the new AD approved Supplier product offering in the beginning… when 10 Affiliate Companies may represent 350 locations X the amount of product units sold… there is your Game Changer! The costs associated with Distribution is marginal in comparison to: Hiring Internal Staff: HR, Direct Sales; Liability insurance and I can go on… so the percentage given up to the channel is marginal compared to the reach and volume that AD can bring to a company… The value proposition to New Clean Energy companies is that AD brings relevance to a new Product by granting access to the club… Companies selling Direct have to go through tremendous Due Diligence for each sale until they create a “Buzz” in the industry through “Push” marketing to sales. When the AD Brand does due diligence on a New Co., Clean Tech Product to be distributed through the AD channel… it brings instant recognition that a $23B “marketing machine” has placed its seal of approval on the product and opportunity. The significance of that alone is a draw for new market entrants who want to be “Pulled” into a channel. Due diligence is a big cost to companies, and many look for references from well established players in the market (AD)… It is a service not often talked about but one of the most relevant and valuable to the Supplier/Manufacturers; Affiliates and most important the end-user client relationship.
The markets are changing and Clean Energy is the future as it is the most topical vertical facing real issues that require real solutions. There can no longer be a me to approach… illustrated by the increased sales of LED… it is here to stay!
My example is if your a lighting supplier “partly” in the LED game chances are you will have to wait ten years before you can compete to change a bulb that a competator sold your client.
It is happening everywhere with all clean tech products; so AD’s embrace of clean energy solutions is very relevant… first to market is paramount as technology is moving so fast; that if you are not on the ground floor; your not going to make it to the Penthouse with the $$$$$$$$$$$ and great view. With AD the views are great!

The AD Clean Energy division sounds great based upon the previous comment, however, as a small electrical manufacturer that can’t get into a group, perhaps there could be something for those of us to get visibility. Seems like IMARK and AD only want to focus on the established electrical manufacturers.

It’s fine that we’re talking groups, but doesn’t the same question apply to CED, Sonepar and some of the other national chains? We pay a tariff at corporate but they can do little to influence the field, and then regions ask us for more money. Aside from extortion in hopes of getting the order, where the value? We haven’t seen any marketing benefits from any of the chains unless we work at a branch level

I can’t imagine in 2012 not being in a buying group. As a mid sized distributor, I don’t think I could approach the percentage on remittance that I get from being a member of AD. The networking and marketing assistance is invaluable. As far as rebates, the advantages are numerous…rebates from dollar one on all lines, management and confirmation that rebates promised are received, and, of course, negotiations leveraging much larger volumes. For us, AD is truly a leveler between mid sized independents and national chains.

Interesting….from a distribuors point of view they are a financial play (rebates), a product/supplier sourcing play, a place for market planning and a forum to discuss common challenges/issues in the industry.

I think a good question would be where are the marketing groups in thier life cycle?

Initially they got thier arms around many manufacturers and collectively organized the “rules for the road” through the combined purchasing power of independent distribution.

Today, when 80% of a distributors business is done with 12-15 suppliers or less……

All networking is not created equal! Our industry has many “lifestyle” businesses and while networking with them is valuable from a social perspective, networking to improve my business needs to be done with the select few who are focused on continual improvement, innovation and growth. I see very little in the way of innovation coming from the large national and global distribution companies. They’re too big and bureaucratic to respond to the needs of the local markets, and profits get funneled off to a remote ownership entity. I think AD does a remarkable job of selecting distributors who are large enough to make an impact in their markets, yet remain growth oriented and innovative. There is significant value in this type of networking.

What does AD refer to?

Manufacturers probably get more bang for their buck from buying groups than any other marketing activity in which they engage They get a “share of mind” and preference at member distributors that they could not otherwise get. The value recieved for cost incurred easily trumps the value of most local reps, promotional programs, NAED, golf tournaments or other expensive entertainment, dinners, etc. I would drop any number of other business development activities before dropping or cutting participation in a buying group. If anything the challenge is to find a way to design more incentives for the behaviors needed in the marketplace that can be delivered through the effective vehicle that buying groups offer. Buying groups tend to produce better results for rebate dollars paid because, in most cases, independent distributors are more effective “Market Makers” who deliver the full distributor value proposition in the markets they serve more consistently and effectively than ANY of the national chains. Bottom line, buying group member distributors are MOTIVATED to do business with the suppliers who support buying groups and its hard to think of anyone who ever went broke aligning to the enlightened self interest of a customer.