The Age of Education

Do you remember when salespeople used to put their home phone number on their business card? Rarely did a customer phone them at home, but it was a sign that the salesperson was always available. Instead of phoning salespeople for information, customers now search the Internet. Customers in all industries now expect to connect at some level 24 hours a day, 7 days a week, 365 days a year. So businesses must always be accessible.

As consumers, we are spoiled. An auto dealership website that allows customers to book service appointments online at 3:00 AM would be viewed as progressive. Companies in a business-to-business industry may not be expected to take a phone call in the middle of the night, but it is entirely possible for an entrepreneur to be searching at 3:00 AM for information on software systems to manage production on the shop floor. By the time the software system vendors are open for business, that entrepreneur may have finalized a short list of companies to call.

In addition to search engines, customers often have a list of go-to websites for ideas or information on products and services. Some are fairly well known, such as houzz.com for home renovations. Others are obscure but have loyal followers in a niche community. A great example is DCrainmaker.com for products used in the sport of triathlon. This is an information-heavy site operated by an engineer and triathlon enthusiast. Both these sites influence consumer buying decisions. The Internet has provided transparency to buyers.

As customers, we don’t even have to speak to a salesperson to find information such as which companies provide a certain service, the price, and differences related to features. More customers are well informed before entering the sales process.

Even in industries where companies do not post price information online, such as commercial construction, competitors have to be more transparent than in the past. It’s entirely possible that a potential customer will review construction company websites to learn what type of work those companies have done and who they have worked for and to get a feel for their competency before contacting a short list for quotes or to be included on the bid list. It’s not that a construction company will necessarily be selected based on its website, but an online information search is now ingrained in the way people make purchasing decisions.

Let’s also examine how social media may have a role in our commercial construction example. A more progressive construction company may post photos of higher-profile projects on social media sites such as Twitter, Facebook, or Instagram. Few potential customers for commercial buildings will see these feeds. But some will. This type of information provides a window into the company culture. It adds a human touch to the company’s brand, essentially its reputation in the marketplace. Visit instagram.com/stratadevelopment for an example.

So what are the implications on strategy? Consumers are emboldened by having greater access to information. They are able to make better-informed decisions and to increase their demands on suppliers. The following are a few considerations for adjusting strategy to suit changing consumer behaviour patterns and an evolving competitive landscape.

Know how your customers buy

Listen to your customers and understand what they want and how they buy. Let’s examine a retail example. A common term used these days is “omnichannel” marketing. A clothing retailer, for example, may sell through a traditional bricks-and-mortar channel and also through an online channel. But the customer just flips back and forth, perhaps viewing products on the website and then walking into the retail store to try the clothing on and make the purchase. In this case, the online store had a crucial role in the purchase decision, despite the fact that the product was purchased through the traditional retail store.

Be the expert

In a world where too much information is available online, customers are overwhelmed and gravitate to brands they trust. Customers want to connect with a servant-leader. They respect subject matter experts that provide resource information to the market at no charge. Education builds trust, which leads to a purchase, repeat purchases, and loyalty. For example, companies that sell water purification equipment for remote locations typically offer product information sheets. But customers do not want detailed product information early in the process. A background document on the various forms of purification methods available to customers would be more valuable and would position the company that authored the document as an industry expert.

Interact with the customer

Have a dialogue. In some situations, that means a genuine personal conversation. At other times, it means the customer reads your content or interacts with your website and brand. They may never actually speak to a person, but interacting with the website or with the brand in a retail store can be similar to forming a relationship. For example, Allen Edmonds is a respected shoe manufacturer in the US. The company has a loyal following, partly because it offers a variety of widths and models that ensure a good fit. Customers can get extensive product information, including help with sizing, from the website. Customers can also provide reviews directly on the site. Although few customers ever speak to an Allen Edmonds employee, customer comments provide the feeling of a dialogue.

Predict the customer’s next move

If you understand the purchase process, and a customer behaves like they’re in a certain stage of the process, you can predict what their next steps might be. Consider the example of a home painting company. A customer who subscribes to an e-newsletter featuring design ideas has a high likelihood of taking on a painting project within the next few years. If they download a document titled “10 Considerations When Hiring a Painting Contractor” you can bet they are further into the buying cycle. That knowledge might encourage you to work more closely with these active leads. If your document suggests that one of the steps is to visually confirm that the contractor’s paint sample suits the decor of the home, your document could mention that a paint sample can be ordered online from your website and mailed to the customer’s home.
That final step takes them one step closer to a purchase.

We can expect to see companies continue to build their marketing and sales strategies around the needs of their customers. Company strategies are centring on delivering relevant products and services, providing useful information before engaging in the sales process, and nurturing customer relationships rather than just closing the sale. All of this is good news for customers.

The Road Less Traveled: Alternative Ways of Reaching Customers

Whether you sell a service or a product, expansion often requires decisions about how you plan to connect with new customers and get what you sell into their hands.

Let’s start with an unusual example: a law firm. Consider the situation facing a firm with expertise in the legal and regulatory requirements governing export and import activity. A business such as this may represent and advise clients on issues such as trade and economic sanctions, export control laws, and anti-terrorism controls.

If the partners in this firm intend to attract clients for this niche service, there is a limit to how fast it can scale up through promotion, referrals, and networking. What alternative methods might be used to generate revenue? One option is to work as a contractor with other law firms that lack this narrow expertise. Essentially, working through a different law firm is a new method of distribution.

The law firm is no different than an industrial company preparing to sell outside its home market. Both have options for working collaboratively with other companies to distribute products and services.

Strategy requires trade-offs

At the heart of the question of how to expand your market is whether to sell directly to the end user or through another company. Selling through an intermediary requires trade-offs. You will have to give something up to get the benefits you seek.

Let’s use an equipment manufacturer as an example. The company can sell directly to customers and it will take on 100% of both the risk and the reward. It also takes full responsibility for all functions of the business, such as financing the expansion, sales and marketing strategy, and production. A lower level of involvement could involve selecting a local company to resell products. This company would be a local dealer. In that scenario, the equipment manufacturer is taking on far less of the frontline responsibility to run a profitable business in that new market. Essentially, the equipment manufacturer is giving up some profit to work with a competent partner that brings different strengths to the table.

In some industries, there is another intermediary layer between the manufacturer and the customer. In this scenario, manufacturers sell to distributors that can store product and distribute to local dealers. In many industries, the terms “dealer” and “distributor” are used interchangeably, but the point is that your business must determine what specific value it is best suited to provide as a product or service moves through the chain of companies that lead to the end user. Your strategy, built around this insight, must embrace trade-offs, such as giving up some margin for a specific required benefit.

To evaluate trade-offs, it is crucial to properly understand the benefits of a potential arrangement. Selling through an intermediary puts you in touch with customers quickly. Usually, most of these new customers would never have the opportunity to buy from you directly. Intermediaries can also provide crucial knowledge related to what motivates customers and the process they follow when buying your product. Convenience is another valuable benefit. For example, as an alternative to hiring an experienced sales rep with an existing network, a local dealer can provide an immediate established presence in a local community with sales and service infrastructure.

Selling through an intermediary also has several drawbacks. It almost always provides lower margin because of the need to allow for a reasonable markup on the product or service. But other, more subtle disadvantages also emerge, such as losing direct contact with the end user. This loss could be a real problem for a manufacturer that has traditionally closely tied product development to customer feedback. Lack of customer contact may also result in commodity-style price competition with other suppliers.

Know your strengths

The arrangement between your company and an intermediary can be structured in several ways but should be appropriate for both companies’ strengths.

Some highly technical companies, such as those in the life sciences, choose not to market a technology or product themselves. In some cases, the cost of building a manufacturing facility and marketing the product may be prohibitive. One option is to license the technology to a strategic partner with existing production and marketing infrastructure. In this arrangement, partners pay a fee to use a technology in the manufacturing of their own products.

As well, some technical companies lack certain expertise, such as local market knowledge. I see this fairly often when a company begins expansion outside its home market. This may be an appropriate situation in which to sell through a dealer network of local companies with an established sales and service market presence. Alternatively, it may be wise to sell through sales agents, which are essentially local independent salespeople willing to work on contract.

Focus on your strengths and shore up your weaknesses. Ideally, your company would develop the skills it needs to expand independently. But it may be less expensive, quicker, and more effective to work collaboratively with a different company.

You're getting married

Distribution partnerships require close relationships. Many entrepreneurs describe the relationship as being similar to a marriage. There is a courting stage, during which you learn about the partner. And it can be difficult and painful to get out of the contractual relationship. But when a distribution relationship is working well, you wouldn’t trade it for anything.

As with marriage, seeking a partner to help you access a new market is difficult. It is most often a long process involving personal contact with many people. Spend time in the local market to understand who the good performers are. Depending on the industry, this may involve meeting directly with end users or walking through potential dealerships. Personally, I find it tremendously helpful to speak with customers and ask which local dealers they prefer to buy from.

A distribution partnership with another company is appropriate if you are open minded about growing the pie rather than focused on capturing all possible value in the market for yourself. For a partnership to work, your company will have to trade some of the margin for something of value that you do not possess. The result can be highly profitable, but the key to success is often the effort put into making the relationship work.