Recently, I spoke to about 200 contractors, distributors, and manufacturers at the Electric League of Western PA on improving project profitability. The central message was simple: if contractors and distributors want to improve profitability, they need better communication that reduces unnecessary labor hours across the project lifecycle. And this drives contractor satisfaction, loyalty and results in increased distributor sales.

Winning the business is “easy” as the core decision drivers are relationship, products, availability (if applicable), credit capability (especially for large projects), and competitive pricing.

Why isn’t price as important? Because for the largest of contractors, they’ve narrowed down the number of distributors who will receive 80% of their business.

And while relationships are important, it is no longer the golf and donut driven relationships. It is relationships that are now built on trust and performance.

I shared research, albeit from years ago, that highlighted that 77% of an initial sale is the salesperson, the rest is the team. But account retention (or repeat ordering) is based upon the team.

Back to reducing manpower.

How distributors can reduce contractor labor hours

There are two labor areas that can get impacted. One is within the control of distributors. This is the post-procurement process. Once the PO is received, how can the distributor be the best possible communicator. How can they be proactive. Share information. Be frictionless.

We talked about contractor project management systems and how distributors, ideally, would become integrated into those … or at least for now, understand them.

The other labor area is on-site. Part of this is material / asset management – storerooms, jobsite trailers, VMI, racking, etc. The other part is product – recommending labor saving products, pre-fab, cutting / labeling / striping, bending, etc.

What Matters to Electrical Contractors and What Makes Them Loyal

It starts with understanding what contractors want. This is VOC at a macro level. It may change somewhat in your market. It may change based upon residential, commercial and industrial contractors as well as for industrial accounts (MRO and OEM usage.)

And these insights should be corroborated with interviews.

What electrical contractors want from distributors

The key to understanding how to serve customers and earning the second order or gaining market share and preference, is understanding their desires.

For years Channel Marketing Group has helped distributors understand their customers’ satisfaction via our Uncover initiative. Through this process we craft a customer satisfaction index (CSI) for a distributor and can segment it to territories and branches.

The model is built off of the one that JD Power developed for the automotive industry. We ask customers what they expect, how a distributor performs, and then run an algorithm to develop the index.

Over the years we’ve captured input from over 10,000 contractor personnel. I shared what is important to customers because, if we want to help them be more profitable, and want to be more profitable ourselves, we need to understand expectations.

While understanding what’s important to a customer is vitally important and can impact distributor operations (I had one client that when we presented the findings, along with some suggestions, had 3 pages of notes to make changes. Another client, when the results were presented, committed to increasing branch level inventory for A and B items … and sales performance and CSI reflected the impact 12 months later), as important is lasering in on what drives customer loyalty.

A year ago, we conducted research for ITA Group on contractor loyalty (and wrote a research report on it which is available here.)

The key drivers of contractor loyalty are:

And while loyalty is in the eye of the beholder, understanding what psychologically drives someone and what the differentiators can be is the difference between maintaining share and taking share.

At the end of the day, you want to build as high of a moat around “your” customer as you can so that they WANT to do business with you.

At the end of the day, between looking at customer satisfaction attributes and customer loyalty drivers, it boils down to three things (because most people like to keep it simple and best remember lists of three):

1. Service
2. Price
3. Availability

What this means is

1. They want to be serviced how they want to be serviced, and efficiently, in a frictionless manner.
   • And they need technical support when they need it, or available online (spec sheets, installation information, etc.)
2. They expect a fair / competitive price.
   • Between tariffs (since rescinded but no one has seen a price reduction) and commodity prices, everyone expects that pricing can be competitive with a little pushback, if needed.)
3. They need the product when they need the product.

During Covid, availability was the most important thing as we all learned the term “supply chain” and began to understand overseas shipping. This has mitigated. Generational change and the advent of more advanced communication systems, coupled with information transparency provided by portals and supported by an expectation that electronic communication should hasten information delivery, access to quick (near instantaneous) support is an expectation.

Consolidation is giving distributors greater technological capabilities to develop offerings, and integrate with manufacturers, to request / transmit information. Larger customers talk to manufacturer management on a more regular basis than ever before (and manufacturers cater to them), so the contractor (customer) now has a seat at the table to express their needs … and distributors and manufacturers are eager to please.

While the basics of the customer dynamics remain the same, the priority of each continues to move, and it changes by customer. Distributors need to constantly adapt AND be flexible enough to address multiple sets of expectations simultaneously based upon the customer segments they serve. Keeping close to the customer, gaining VOC, tracking customer specific expectations (after all, isn’t that why companies invest into CRM … to personalize experiences wherever feasible?) is a game of three-dimensional chess.

Questions distributors should be asking

• Do you know what is important to your customers? Or only to your key customers based upon what your outside salespeople tell you or what management hears when they visit key customers?
• Are you familiar with your key customers’ project management systems and asking how you can support them / integrate (or provide content for them?) Are they familiar with your eBusiness tools? (and trust me, most of your salespeople cannot carry this conversation and are reticent to have the conversation … it’s a control thing.)
• Do you know your customers’ loyalty drivers? Are you marketing to them?

If you’d like to learn more about our Uncover initiative, download this overview, reach out, or, if you are attending the NAED Marketing Summit, stop by the Channel Marketing Group table (or grab me in the hallway) and we can discuss (and those who do will receive a $1000 CSI project discount.)

• We have a similar process for manufacturer reps called Uncover for Reps. The same discount applies.