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Specialists drive value in turbulent times

by Frank Hurtte

Frank HurtteDuring the past 60 days, we have experienced the financial equivalent of three trips around the Tower of Terror roller coaster ride. Top this off with a new U.S. president and a new Congress, and we might compare our times with a journey through the spin cycle of a business washing machine. We have heard tales of Wall Street, Main Street and now even our street has changed a bit. Never before has the Specialist been challenged with helping their organizations redefine their approach to customers more quickly.

My book calls Specialists "Profit Generators." Their mere presence is about producing customer value. Salespeople sell, customer service folks enter orders and warehouse people ship product. But Specialists add that "fairy dust" we call value. This is a special value. It's beyond the intrinsic worth of products and technology listed in catalogs.

Now consider this: The changing economic landscape has changed the way our customers perceive value. We can either flounder in our efforts to swim against the current of change, or we can harness the power. Let's drill into this.

During times of economic expansion, customers place highest value on the ideas you present that drive growth. For example, if your idea allows them to increase the outflow of products by 4 to 5 percent, you have contributed great value. But as the fluctuation trends downward, things change. The highest value shifts from growth to cost reduction and avoidance. Further, customers' adversity to risk takes a giant leap forward. Walk a mile in their shoes, taking a big risk in tough times can be career and/or company threatening.

Please note, I said they place the highest value. It doesn't mean other things lose their value, but the value changes. Let me illustrate this with a short story from America's past. Families in covered wagons trekked across the great wilderness with all their worldly possessions loaded aboard. When the mountains turned to desert they were faced with a choice - grandma's piano or a couple extra barrels of water. While that fine musical instrument still had value, for the next 300 miles water shifted to a higher value. Today's economic situation has put some companies into a similar mode with cash flow. They want to hold on to more of it for longer periods. Align your value statement with this thought and the forces of nature work with you.

So the real question is how can we present the value of cost avoidance without cutting our price? Let's consider four ideas that will move you closer to the answer.

1) Energy Saving Products
Energy costs continue to spin upwards, so we need to think about how we can suggest products that reduce energy costs. Kilowatt savings applied to electricity costs should already be part of your every sales presentation. So should savings in natural gas and the heavy oils used to operate industrial processes. Sometimes, steam or heated water is sold as a utility and thought of as energy.

The cost differential between standard and energy saving products continues to drop. No replacement order should ever be placed without considering conversion to the more energy efficient model. Let this be your differentiator.

You know the products with lower energy costs. Make sure your salespeople are well schooled in the topic and include your capability to provide the most energy efficient products. Further, there are promotional activities you can do to drive home this value. Here is a short list:

Energy Efficient Lighting Walk-through
Energy Efficient Motor Survey
Energy saving fans and air circulator evaluation
Electronic Drive evaluations
Filter Replacement Scheduling

Provide recommendations, and more importantly, keep records of how much energy was saved, the cost of kilowatt hour and the cost of any steam, diesel or heavy oil saved.

2) Offer Repair vs. Replace Evaluations

Your customers routinely replace items that might just as easily be repaired. Electronic devices come to mind, but the list can include other products where a Specialist might make a difference by setting up a procedure for an evaluation to determine the proper action.

  • Extension Cords - are they repairable?
  • Electronic Boards of all kinds
  • Solenoid Valves - moving parts can be replaced
  • Electrical Motor Starters - contacts and coils are easily replaced
  • Lighting fixtures - ballast bad? Is the whole unit being scrapped for that reason?
  • Cutting tools - can they be resharpened?

Position your company as the watchdog for repairable items. Log the savings. How much can you eliminate from the waste stream? Each of these items represents not only a measurable savings in the repair vs. replace equation but often represent savings in landfill charges. (Note: printed circuit boards and other electronic devices often require special handling in their handling and disposal.)

So how does this help you drive more sales to your company? First, the margins for repair are high, often very high. You turn out to be the hero and make money too. Secondly, when the product is un-repairable, you naturally get the sale. Help your salespeople position the company this way and you will lock your competitors out of future business.

3) Replace Personnel Costs
Scan your daily newspaper for layoff headlines. When times are tough, companies save money by scaling back on people. Specialists need to direct their sales teams to products that might result in lower labor costs. If your product costs $10,000 and it replaces just one $20/hour worker, the product pays for itself in three months.

Work with your sales team to find applications that eliminate the need for labor and you can drive your customer's purchasing activities. To get you thinking here are a few ideas:

  • Lighting that lasts longer - eliminates the need for labor used in frequent replacement
  • Pre-Assembled anything - the customer saves labor in assembling on site
  • Automated Vision Systems - remove the need for inspectors
  • Quick connect limit switches - hardly any maintenance time required for changes
  • Kitting/Preassembly - save labor by doing some of the work

Reduce the number of labor hours with your bundled products and services and you build an attractive case for buying your stuff - right now. Remember, if you are calculating labor costs with a customer, use the cost of labor, benefits and other associated expenses. This is often referred to as the "burdened labor cost."

4) Safety as a cost avoidance
Building Hoover Dam in Nevada cost 112 lives, nearly 30 men lost their lives building the Brooklyn Bridge and 14 workers died building the Empire State Building. Society today simply does not tolerate this tragic loss. On the electrical front, OSHA's David Wallis has gone on record as saying, "GFCIs saved between 600-975 lives in the construction business alone from 1990-1996."

Your customers are committed by law to maximizing worker safety. Many organizations have discovered that safety is good business in a financial way too. The "dollarization" of safety is not straight forward, but most companies understand that safety equals money.

If you are responsible for products with safety applications, move these front and center in your promotional activities. Work with your salespeople to develop relationships with the safety managers and HR professionals responsible for safety. Safety applications have a way of finding a budget in even the poorest economic times.

A parting thought
These tough times are the absolute best time for building market share for your products. Use the natural flow of business patterns to fine tune the way you direct your products to market and your customers will view you as a strategic resource - a business partner. Understand this value and you won't find your margins slipping.

Frank Hurtte of River Heights Consulting is author of "The Distributor Specialist: Customer Champion, Profit Generator!" It is now available from the National Association of Wholesaler-Distributors. Contact him at frankehurtte@riverheightsconsulting.com.

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