Progressive Distributor - The new service approach

The new service approach

A few weeks after Jack Kacsur bought General Rubber Company 10 years ago, his largest customer dropped a bombshell on him. The company planned to re-evaluate its supply base, meaning General Rubber risked losing an account it had held for 20 years.

Kacsur successfully negotiated a new deal with the company, in part because he agreed to provide a new bin-stocking service for the customer, which later evolved into a line-stocking service.

Kacsur learned some valuable lessons from the experience. First, you can never take customers for granted. Second, it doesn’t matter how long you’ve done business with a customer or what you did for them in the past. What matters is your ability to remain flexible to your customer’s changing service needs today and in the future.

Historically, most distributors have been paid for providing such services by building enough margin dollars into the cost of the products they sold to cover their expenses and earn a little profit.

In the future, however, progressive distributors will offer customers new services and charge for them rather than building them into product margins, suggests Adam Fein of Pembroke Consulting. In his article “Succeeding with fee-based services” (page 16), Fein says the new “Facing the Forces of Change: The Road to Opportunity” report indicates that wholesale distribution executives at companies of all sizes expect to charge fees for at least some services within the next four years.

Fein offers a few guidelines for distributors thinking about charging fees for services. First, a fee-for-service approach will succeed only if distributors offer services that have a direct impact on the customer’s profitability and operations. Second, customers will demand accountability, which means distributors must be capable of proving specific, measurable results. Third, trying to charge fees for old services will not work. Distributors must come up with new services that customers value.

Kacsur deserves applause for devising a service to keep a customer happy when the account was on the line. Now, his job — and yours — is to uncover new services that help customers improve their profits and operations enough that they’re willing to pay for those services.