Like its cousin manufacturing, distribution seems more about price than customer experience (CX). This makes it harder to engage executives in the importance of CX.
That is, until customers start churning, complaining that it’s too difficult to work with you. That’s where CX becomes critical. It’s not that price doesn’t matter – it obviously does! But a lower price isn’t sufficient when your customer isn’t confident your products will arrive on time. A superior customer experience will convince clients to stay with you even when you’re not at your best.
How do you make this case as a CX leader? You can’t use secondary research, such as those focused on stock price or revenue across many firms. You need to prove the benefits in your own data. The good news is that you can do this, though it requires a more expansive approach to customer experience than simply looking at surveys.
Customer experience has three primary ways to drive an improved business: improved retention, increased purchases, and decreased costs. While decreasing costs is an excellent way to show short-term growth, most executives get more excited about increasing revenue. So this is where I focus. (Note: referrals are a tiny source of revenue and are typically untrackable in B2B, so I don’t even talk about them. Unless you can physically count the number of referrals and their revenue, you shouldn’t, either.)
Here are different ways to drive organic growth through a superior customer experience – in language that your CFO can appreciate.
Unless you have sole-source contracts, retention is a big deal for distribution clients. The drivers of attrition are typically negative items, such as a consistent inability to deliver on time, low ATP (Availability to Promise), or complaints that sit unanswered for long periods of time. By tracking these operational issues and showing how they impact your surveys and attrition, you can help show the value of improving these factors as they turn into money quickly. Make sure you are analyzing these operational issues. I’ll share more below.
A superior CX likely won’t win you a ten-point increase in price. But if your customers are confident that you’ll consistently deliver on time with no drama, that can earn you two-three points. For distributors focused on value, this is a compelling – and testable – hypothesis. These high-value clients need their customer experience to be superior to average distributors to maintain those higher price points.
While CX can’t drive higher consumption, you can earn incremental orders when your clients split orders between you and competitors. Outside of private label items (see below), your competitors offer many of the same products you do. They may order from you for some locations and your competitors for others. Offering a better CX can convince your clients it’s in their interest to send more of that business your way.
A more direct way that improved CX pays is by nudging your clients to transfer orders for other products from competitors to you. As your experience improves, analyze whether your clients increase the categories of items they purchase from you. Clients who typically order widgets from you may start to ask about your ability to provide thingamajigs. Make sure you track this, too, as this is a direct outcome of the work you’re doing in CX.
Many distributors offer private label products that most customers don’t order. Private label products are often perceived as risky since your clients don’t have a history with them. Your company needs to earn the trust of clients before they consider this “riskier” option. You can test it yourself – look to see whether clients with higher survey scores purchase a higher percentage of private label products. I’ll bet you lunch that they do.
Start by dusting off that closed loop process you’ve been neglecting, as that’s the best way to discover the negative components of your experience that are likely causing the churn. Few things destroy a client’s confidence more than when a complaint goes into a black hole. CustomerGauge reports that after a complaint is filed you have 48 hours to follow up with a client. You don’t need the issue to be resolved in that time (that often takes longer) – but you need to connect with them.
Proving the revenue-based areas of business impact outlined above requires a higher level of analysis – and more data – than most CX programs use today. Showing reduced churn requires ordering data. Most clients never tell you they’ve churned, so assume that clients that haven’t ordered in XX days have churned.
Tracking price sensitivity requires the margin per order, and identifying incremental purchases requires that you track products per client on an individual client level, so you can analyze their survey results as compared to their ordering history. Make sure to analyze private label products independently, as that’s a category of key interest to your leadership.
Distribution is often seen as a price-based field. Price does matter – but improving the experience can help you reduce churn, reduce price sensitivity, sell more private label products, and earn incremental purchases. If that isn’t business impact, what is?