Innovate or Die: The Cost of Doing Business the Old Way in Distribution
Over the past few years, digital transformation in distribution has ramped up in terms of adoption rates and playing a significant role in business objectives. According to Distribution Strategy Group, a whopping 93 percent of distributors use an ERP system, and CRM adoption has grown in the industry with 50 percent of sales leadership accessing CRM tools multiple times a day.
Distributors must innovate to keep up with the changing landscape, lest they face the threat of being among companies that have failed during changing, and sometimes challenging, tides. Your customers and your vendors expect it.
Changes in this industry are numerous, and vendor expectations are one area that is propelling innovation forward. As John Allard, VP of distributor Clayton Controls points out, vendors used to be satisfied seeing total sales for the year. Now, detail is crucial; they expect distributors to show them the level of customer interest in their products and engagement throughout the year.
“Back in the day, as long as you had the sales numbers, you were great,” Allard said. “Now I need to have a lot more leading indicators to show the vendor.”
For many years, ERP systems have been the standard platform of choice in distribution, and while they remain critical for managing operations, finance, and other functions, they weren’t designed to be sales, marketing, or customer support solutions. They can’t drill down the level of detail vendors expect, nor do they make business intelligence readily accessible. To fully understand your customers and seize every sales opportunity, you need better visibility into every interaction.
Let’s talk about the real costs of clinging to outdated methods and why embracing new technology isn’t just a choice anymore—it’s survival if you want to keep up with changing vendor and customer expectations.
Missed Opportunities and Lost Revenue Equal Failed Businesses
Our world is spinning faster than ever, and your customers’ wants and needs are changing as a result. Innovation is no longer a luxury but a necessity for distributors looking to thrive in the face of evolving customer demands and market trends.
The world of distribution isn’t just about moving boxes anymore. It’s about relationships, insights, and making smart moves. If customers are leaving or sales targets aren’t being met, it’s time to assess whether your current systems are enabling your sales reps or letting opportunities slip away.
Customer loyalty is built on trust and the perception of value, and customer satisfaction stands as a cornerstone of success for any distribution company. A lack of innovation can lead existing customers to seek other alternatives. Speed plays a crucial role in keeping customers happy, and without the appropriate tools and technologies, distributors will struggle to respond promptly to customer inquiries and concerns.
This delay in response leaves customers feeling neglected and frustrated, damaging their perception of the distributor’s brand. This will inevitably result in customer churn and lost revenue.
Lack of Innovation Leads to Increased Costs
Distributors who fail to innovate can face increased costs in addition to missed opportunities. One of the most significant cost increases is associated with labor. If you’re sticking with the old way of doing things, ask your sales reps this simple question: “How much of your work day is spent manually entering data into a clunky system rather than interacting with customers and prospects?”
If their answer surprises you, it’s time to review whether your current processes are working for you and whether much of this drudgery could be automated with modern technologies. Manual processes typically require employees and take up more of their time, leading to higher labor costs.
Distributors who fail to innovate may also waste resources on outdated or ineffective marketing campaigns. Without customer insights, data-driven analytics, and cohesion between sales and marketing communications, advertising dollars may be wasted and ROI diminished. Automated workflows can help your team seize opportunities based on real customer data and a central source of truth for sales and marketing teams.
Cole Callahan, Director of Strategic Initiatives at Callico Distributors, felt the strain of disconnected sales, marketing, and operations data and invested in business intelligence software to offer a clear picture of every opportunity across the organization. Offering key insights from a single platform cuts out the need for extraneous add-ons and tools that can quickly add up, cost-wise, and create unnecessary complexity.
“We’re going from a totally siloed solution to being able to have visibility between these pillars of the business and being able to plan and react to what’s happening in each one of them,” Callahan said.
This gave Callico Distributors immediate access to real-time reporting instead of having to hire a consultant to prepare reports whenever they wanted to evaluate their best new sales opportunities or revisit pricing.
The Benefits of Innovation are Growth and Stronger Customer Relationships
Companies that become complacent will find themselves without the keys needed to unlock new market opportunities and expand their business horizons. Distributors who fail to innovate miss out on the potential to enter new markets, develop new products or services, and reach new customer segments. This can significantly impact the company’s bottom line and ability to compete in the long term.
A lack of innovation can manifest itself in several ways. Companies may offer outdated products or services that no longer meet customer needs, or they may fail to adopt new technologies and processes that improve efficiency and productivity. This can lead to a decline in market share, revenue, and profitability, and can ultimately threaten the long-term viability of the business.
For distributors, the consequences of a failure to innovate can be particularly severe. Customers are increasingly demanding modern, efficient solutions that meet their evolving needs, and they are quick to switch to competitors who offer these solutions. Consumers can buy products faster and more easily than ever before without needing to talk to a sales rep. In fact, 75% of B2B buyers do not even want to talk to a salesperson to order a product.
Simply put, customers will grow impatient with outdated platforms that hinder them from purchasing quickly and at their convenience. Competitors who are more innovative with their tech stack and tools will be able to identify and capitalize on new trends and opportunities, such as integrating their eCommerce platform with their CRM to use online buying behaviors to strengthen customer support and conversations.
Distributors who embrace innovative tools will also enable themselves to grow their product catalogs by having the right data to show vendors at the right time. Failing to have reporting that convinces vendors to sell more products with each distributor is a missed opportunity. Having the right tools that show vendors they’re getting a better return on investment is going to set you up for success.
Innovation in Companies Starts with The Right Technology
Distributors face intense competition from both traditional and emerging players and not only need to stand out in a crowded landscape but utilize tools designed specifically for their needs. Recognizing a need for better customer relationship management that extends beyond the capabilities of your ERP is a great first step.
However, traditional CRM software can also incur extraneous costs associated with customizing these systems specifically for distributors. To avoid these pitfalls, distributors need to find the right tools designed to help them win more.
Continuously investing in research and development, exploring new technologies, and fostering a culture of collaboration and adaptability separates winning companies from those barely getting by. By embracing innovation, distributors can stay ahead of the curve, meet the changing needs of their customers, and maintain their competitive advantage in the marketplace.
Let’s take a look at a few essential innovations in distribution technology.
Business Intelligence
Making decisions based on gut feelings might give you good results in your daily life, but in the competitive world of distribution, data is king. Winning distributors have a full, clear view of their data and use that information to take action. Failing business either aren’t regularly conducting data analysis, or they have no easy way of achieving this due to outdated tools that make a mess of their insights.
Business intelligence tools offer a clearer, more comprehensive view of sales, inventory,
and customer information with distribution-specific dashboards, reports, and scorecards built in. Sales and marketing workflows become more efficient and make critical processes faster and easier. By drawing in advanced analytics from your ERP and CRM, BI frees up time, gets everyone on the same page, and houses your data under one roof. With actionable insights at your fingertips, you can stop shooting in the dark and start hitting bullseyes.
CRM
Customer relationships are the foundation for winning more deals today and more market share tomorrow. Relying on your ERP isn’t going to keep you on par with competitors or customer expectations. ERP add-ons are clunky and expensive, and traditional CRM tools generally don’t integrate well with existing ERP systems. The key to innovating is selecting a distribution-specific CRM that pulls in ERP, eCommerce, and sales data and makes it accessible to everyone in dashboards that recommend their next best actions.
A CRM powered by BI leads to more profitable conversations with key insights accessible in seconds. You can pull in all of your customer interactions and utilize automation to see your best opportunities and act on them with the right messaging and offers. Companies that have failed to innovate in distribution are not tapping into the power that advancements in CRM technology are already providing to leading distributors who are outpacing competitors.
For Allard and Clayton Controls, adopting a modern CRM solution built for distributors has significantly improved sales performance by incentivizing his sales team with KPIs directly tied to customer interactions that are visible within their CRM. Allard can view all activity associated with closed-won or closed-lost deals to coach or reward his team. This innovative approach leads to stronger sales performance and improved customer satisfaction.
“There are so many facets to winning or losing deals,” Allard said. “But when the CRM is used to its full potential, it sets the sales reps up for more at-bats. The more at-bats, the more hits.”
eCommerce
Over the last decade, eCommerce has seen the quickest growth in distribution and is expected to become an even larger force in the coming years. Relying on offline sales tactics and disregarding the opportunities that digital transactions have is a blind spot you simply can’t afford to have in 2024 and beyond.
While you’re dusting off the Rolodex, your competitors are sealing deals with a click. With innovations like eCommerce and CRM integration, distributors can gain deeper insights into their customers’ online behaviors to improve conversion rates. Business intelligence from your ERP and CRM can transform your online store into a revenue builder. Distributors who fail to keep pace with competitors who are embracing this digital innovation risk losing customers to competitors who can provide the desired offerings.
Pricing Intelligence
Setting prices but allowing override after override is certainly one way of doing things. But innovative pricing optimization tools are going to make your life easier by speeding up complex analysis and customer segmentation, pulling in data for better forecasting and customized pricing recommendations.
Intelligent pricing practices are going to bring in a greater return on investment and drive profits by offering the right price on the right product to the right customers at the right time. A lack of pricing optimization tools in distribution means a lack of innovation, plain and simple. Innovations in pricing software are your tickets to setting prices and charging the right amount based on real insights.
Join the Future with White Cup
By waiting too long to adopt modern tech and tools that offer visibility across your company—from inside sales reps to customer service, marketing, and outside sales to operations—you’re leaving money on the table. To keep up with (and ideally outpace) your competitors, distributors must adopt tools to understand their customers better, win deals faster, and rake in more revenue.
See how White Cup’s suite of products and services, from distribution-specific CRM to BI, Pricing, and eCommerce integration, is helping more than 850 companies win more. Schedule a free consultation today.