As a note from Allen Ray: This is a Duplicate Post from 1-22-2015 due to some technical difficulties. All comments previously submitted have been re-created.
It tis the New Year of 2015 and most distributors have successfully handed over demand creation to their customers. That’s right. You read it correctly. Very few distributors are actually proactively in the business of demand and value creation.
Nay, Nay say some of you.
The actual business that distributors are now in, is responding to customers needs and fulfillment of orders. The distributor’s customer has been so successful in telling the distributor(s) how they will buy, that distributors are using more and more Special Pricing Authorizations (SPA). Which would cause most business people to want to conduct error free business and increase margins. Such is not the case. The order fulfillment function for many of these distributors is based on price and generally everything else is secondary. Some distributors will jokingly laugh and say that their sales people have taught the customer how to buy. I suggest you need to change your thinking.
During the 3rd quarter of 2014, we asked a fairly large number of distributors about just how smoothly their own business operations were running and were they increasing their margins. Along with those questions, we talked about creating demand and value services. We are happy to report that many distributors were having banner years with some bragging about increased margins. The problem was the most doing the bragging were in the center part of the US and one suspects it might have something to do with Oil and Gas.
Back to the subject of demand creation. just listening to distributors talk about their businesses, most don’t talk about demand creation. Many will talk about taking market share, but they equate that with taking a project, not creating new demand for product. Demand creation is about looking at a number of different existing and potential customers and actually making the call to sell products and services. In other words looking at new customers/markets to sell your brand and products to.
So the two sixty four dollar questions are:
• Is this a distributor role?
• How do you as a (manufacturer / rep and distributor) go about creating real demand for your goods and services in today’s market place? What are you doing that works or is demand driven by those who decide to invest in development?
8 Comments
Very well timed with NEMRA just around the corner. We as reps have been asked to hire more and more end user salesmen to create demand. But our distributor partners. See this as a threat to them. Only the really forward thinking Dist. see the advantage of a strong rep doing what he should do create business for his dist. & for his factory. but with that all said the Dist. is allowing us the reps to control more and more of the market. As a rep I am good with this as my products become more in demand and I get to say who we work with. Just wish factories would pay us more for these hires we do. or even bonus us out for achieving these goals.
Submitted Anonymously on 1/22/15 at 12:03PM
My goodness this is timely. Demand Creation! Don’t have it.
In some cases we need some tools from manufacturers.
But most of the time, I’ll admit anonymously, that I want and need to coach my sales people to plow that field or area for new customers and soon to be customers by creating new demand.
Allen is right when he says that too often we rely on SPA’s (or meet the price)to convert particular projects or temporary customers who disappear when we don’t match their price. We fail to sell value and services.It’s like a Catch-22. I put emphasis on creating new demand or even new demand from older customers and just like that we are back to matching prices only to have the same customer chew on our fingers for a better price for their “temporary loyalty”.
There are times when I think my grandson is right, is like a TV game show: Match the Price or The Price is Right.
I have spent 36 years building this business to come down to Meet the Price.
Thought provoking Allen.
Submitted Anonymously on 1/22/15 at 11:29 AM
Excellent and timely topic Allen. I’m meeting with a electrical distributor to discuss demand creation later today .
> We have been told over and over to ask people about their problems then focus on solving them. That’s solution selling. That is NOT demand creation.
Demand creation was a big part of my success at +40% accelerated growth in 2014 at two key distributor partners.
I’ve used this story to help teach the demand creation concept:
► What is demand creation?
A shoe company wanted to grow internationally so they hired two advisors and had each of them fly across the ocean to the same emerging country then report back the opportunities for growth. The first advisor reported that there was no opportunity because no one wears shoes. The second reported there was INCREDIBLE opportunity, everyone needs shoes.
Which advisor understood demand creation?
Demand creation focuses on helping others with solutions even if they don’t know there is a better way.
That’s why studying and identifying trends is so critical. Treads leads to issues. Issues leads to possibilities. Possibility leads to solutions.
That’s why I’m passionately committed to helping electrical distributors with demand creation.
Submitted by Doug Ales, https://www.linkedin.com/in/dougales, doug.ales@gmail.com on 2015/01/22 at 10:41 am
I don’t think we even talk in terms of Demand Creation. It is poach from each other based on price.
Some manufacturers say that Special pricing helps our margins….we have not found that to be true. They claim it is exclusive pricing, but guess what, someone figures a way around that.
Allen, we talked over the years about Demand Creation….maybe you have a much different slant on it than I do.
It seems to me that in one of our markets, there are three too many distributors…..
I have heard the reason that virtually all electrical business has been reduced to price negotiation. The additional question I have for you is: Is this the same group of customers that a manufacturer has influenced. And then: Many make the argument that their (distributor) margins are better using a SPA’s. Is that true in your case? Are your margins generally better?
Demand Creation requires a different line of thought by management and sales people. In general you are looking at selling a concept/unknown need (say energy saving audit and etc.) that requires the buyer to step outside of their normal purchase routine and in some cases they have to allocate budget. You are having to identify the buyers (what’s in it for me) and get the buyer to spend money or get it allocated. So do you think that your sales personnel have a hard time thinking that way? Or are your sales people very comfortable with the way they go about their business?
If we offered a one day seminar for your company to create Demand Creation lines of thought, would it be worth it to explore it?
In response to this anonymous response:
It is true that in certain markets, price has evolved as the driving force for some distributors to take projects. Other distributors have decided to service their customer base in selected markets.But that is not creating new demand. That is customer dependent.
Demand Creation requires that distributors look at Brand New uses for product, services and if necessary a change in purchasing habits.”All angles have to be worked”. I have a standing bet with 4 distributors currently, that their sales people drive buy more new business (outside their comfort zone)every day, instead of seeking new demand for your products and services. The down side to this is, if you are not proactive in seeking new demand, others will find it and you are back to playing the price game.
I love the shoe story by Doug. 🙂
My belief is that we do not create demand. That title goes to the ones who decide to build something – be it a machine or a building.
What we can and should do, is seek and identify opportunities to add value. Recognizing opportunity when no one currently wears shoes and concluding that eventually everyone will buy them is they key to getting there first.
Lose the words “loyalty” and “demand creation” from your vocabulary. In the end, all customer loyalty buys you is an opportunity to match the available price (not a bad thing).
Distributors service marketplace demand and are not afforded the margins required to truly create it. Demand creation typically requires larger investment, more risk and needs greater margin to support it. That is why we have copyright law and patents.
Once the marketplace establishes the price, customers buy from distributors who they trust and make their job easier. Price is assumed.
From Anonymous “I love the shoe story by Doug. My belief is that we do not create demand. That title goes to the ones who decide to build something – be it a machine or a building.”
Thank you. I respect your wishes to remain anonymous on this forum. Please feel free to contact me directly if you would like to discuss this further.
Here is one example of how I’m using demand creation http://bit.ly/foodaudit
…and here is how I’m gaining access to the correct end user connections
http://bit.ly/TopDogStudy
Of course, these are brief glimpses, edited to fit within reasonable article lengths.
I hope you find value in this content. If you are attending APW, http://bit.ly/ABBAPW I’d welcome a meeting request from you.
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