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In an effort to differentiate themselves, many distributor salespeople fall into a dangerous trap. They promise value-added services to customers without understanding how much it costs their company to provide those services. What’s more, since very few companies bother to find out which services specific customer segments value, salespeople take the easy way out and offer the company’s entire service package to every customer.

For example, distributors often ship products next-day when two- or three-day delivery would  suffice. Or, they maintain a supply of dedicated inventory in their warehouse for a customer even when a manufacturer or master distributor offers same-day drop-shipping of those products.

At a time when distributors ought to be helping U.S. manufacturers lower their supply chain costs, many persist in throwing away valuable resources. As U.S. manufacturing continues migrating to Mexico and the Pacific Rim, competition will grow more fierce among distributors fighting over a shrinking industrial base. You can bet that salespeople — under pressure to look better than the competition — will recite a litany of all of the value-added services their company offers.

Distributors waste a shocking amount of money every year providing services to customers who don’t need those services. The best way to compete for customers is not to offer carte blanche access to your entire service offering. Instead, distributors must do a better job of identifying and aligning services with specific customer segments.

It may require you to continue serving your most profitable customers the way they’ve always been served, but create different business models for the others. For the least profitable customers, you might need to transition to a catalog, telephone sales or an e-commerce business model. For customers in the middle, you might need to create a model that drives their profitability higher by applying only those services they value and withholding unnecessary services unless they’re willing to pay for them.

This editorial appeared in the March 2003 issue of Progressive Distributor magazine. Copyright 2003.

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