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The majority of online transactions, in B2B wholesale markets, are migrations of existing business online. The reason for this is twofold; existing accounts with existing business are the most efficient to move online and some 40 percent of all accounts are activity negative profit producers. Moving them online gives a positive operating profit contribution or, at the least, allows them to lose less while maintaining sales volume.
As e-commerce grows, distribution and non-traditional firms serving traditional distributor sectors, will use technology as a competitive advantage to grow organically online. They will target problem applications and customer hassles with greater precision, less cost, and a clear message using product/market strategies, content syndication, and automated marketing. Or, they will develop new platforms of commerce that give a better price, “thin-slice” an underserved segment, and rearrange the value chain for a better deal. The quicker traditional distributors build-out their software platform and begin to consider these pathways to organic growth, the more ably they will compete online.
Application targeting, content syndication and online marketing
Distributor sales require a lot of work to be done to provide solutions. Solution selling, before the advent of e-commerce, was a growth model in distribution intended to move the industry away from commodity sales. The idea was, and still is, to find a customer pain-point or an application where there was excessive re-work, failure or both. With the advancement in online tools of automated marketing and Product Information Management (PIM), in combination with product managers, the ability to solution-sell is increased exponentially. To understand application or solution selling online, I first offer the classification of products where solution selling is most fertile. In Exhibit I, I have the Storage and Shipping Attributes on the Y axis and Lifecycle Stage of the product on the Horizontal axis.
To use the quadrant, review the appropriate attributes of storage, shipping and lifecycle. For instance, there are products that are easy to store and ship, but mature. With these products, the objective is to put them online as quickly as possible while reducing sales support and brick and mortar locations. My experience is that these products are easy to put online, reduce operating support, and offer a reduced price.
The Southeast quadrant shows Transactional (cost-out) distributors disrupting traditional full-service distribution. Products in the Southwest quadrant are new in the lifecycle, but easily stored and shipped. They are good candidates for online solution selling. These products are new or unique in their application. Often, they are more technical in function and, hence, more sales and marketing support is needed to consummate their sale.
To successfully market these products online, there should be content syndication with automated marketing under direction of a product manager. In the example, a new technology for water filtration for both residential and commercial is shown. The manufacturer is willing to work with the distributor to co-op the costs of online advertising and pull-through marketing to the food industry including: institutions that have a food-service facility, architects, engineers, nutritionists, and traditional install contractors.
The wholesaler product manager reviews the features, benefits, and advantages of the product with the vendor and makes sure the online content contains the most current information. Then, the product manager reviews key segments online and key decision-makers’ email addresses within these segments. To facilitate the dispersion of the marketing message, the content is syndicated across the segments using the PIM software. An example is in Exhibit II. In the Exhibit, marketing events are located on the Y axis and product attributes and select content are on the X axis.
To understand how the matrix is used, look at the Launch Email on the Y axis. It uses content header, market focus section, general product intro, primary features, secondary features, specific models, applications, and six other parts of the online content. And, this is only one of the marketing events. There are different content messages of the new product going to the target audience in various online catalogs and adds. Additionally, the product manager can use traditional spiffs and sales collateral with the sales effort. The advantage of syndicating content and sending it via automated marketing (in this case an email and online catalog campaign) is that it has elements of consistency and scope, and the message is dove-tailed with different media for maximum pull-through.
This type of solution selling requires product managers that are familiar with the technology, supportive of vendors, and can plan the online marketing effort. However, the combined effect of the different messages delivered across the potential user/influencer base is far more efficient and effective than yesteryear’s strategy of sending the sales force out with cut-sheets.
My experience with the combination of content syndication, automated marketing, product management oversight, and vendor support is quite good. Well-targeted campaigns offer scope, message specificity, and repetition at an affordable price. However, the preparation in software and customer databases to drive the solution selling is considerable. Often, email addresses are pulled from the Customer Relationship Management (CRM) system and put into the PIM’s syndication engine. Hence, email addresses and job functions must be clean and updated for the campaign to be effective. Other catalogs or ‘zines’ can be done as needed to the target segment(s).
The future of online solution selling and new models of online business
Solution selling online has the same goal as solution selling done by the sales force. Both aim to increase topline revenues with unique solutions and new products that offer a total cost advantage while differentiating the firm from a “commodity hell.” Online tools and product managers that drive solution sales are not inexpensive. But, over time, they are far more efficient and effective than the personal sales call. Often, wholesalers will combine online solution-selling efforts with new models of selling, including product or process consultants who have in-depth knowledge of a specific application or technology.
This article is part two of a three-part series. In my next column, I’ll go over new online models using e-commerce and how they slice apart the value chain to give the user a customized experience and often with a much better price.