The Four Pillars of Differentiation for Distributors
In today’s global and digital distribution market, the rules of engagement have changed. Customer expectations have expanded from the traditional ones of cost, quality, speed, and flexibility to include convenience, on-demand information, personalization, prompting, and updating status, as well as social concerns such as sustainability and environmental responsibility. Increasingly, customers expect more, faster, and their way. In a world where Amazon is delivering within hours and new competition emerges as fast as a screen moves from one website to another, differentiation is increasingly key for companies looking to thrive and survive.
The Four Pillars (P’s) of Distribution Differentiation
Dr. William McCleave, a leading expert in supply chain differentiation and the wholesale distribution industry in general, outlines four pillars of distribution differentiation—Position, Pitch, Performance, and Proof—as essentials for any distributor seeking to distinguish itself in today’s competitive distribution landscape.
Do you have a “big idea” for differentiating your company in the current and future marketplace? Positioning is all about choosing the market space (and available resources) where your company can deliver unique and valuable offerings to meet its objectives and win against potential rivals.
Do you deliver well-developed and consistent messages focused on real customer needs? Pitch is all about developing and delivering market messages that directly tie company capabilities and value offerings to customer requirements, resulting in sales growth.
Have you identified critical activities that must be performed to meet customer expectations? Have you established performance improvement goals? If you don’t perform critical activities that meet or exceed what customers want while fulfilling your strategy, and constantly work to improve performance, you can be sure a competitor will.
Do you have an effective system in place to validate your value contribution to your customers? Validating your value to customers both builds loyalty and verifies your ongoing strategy.
Successful strategies are often about tradeoffs; when you look at the universe of what you have, where you do business, and who you do business with (i.e., products, services, markets, customers, suppliers, activities, capabilities), you need to ask: What do you emphasize? What do you de-emphasize? How do you leverage both your own experience and resources from others you work with?
At day’s end, a balancing act is needed between products, services attached to those products, and optional services you provide to add value beyond what competitors are doing. Determining this balance is key to successful differentiation.
Key Considerations for Adding Services
Before adding value-added services as differentiators, consider these points and actions:
- Make sure customer requirements are well understood.
- Establish a clear distinction between product-attached and optional services, and make sure both types are priced correctly.
- Develop and use a menu (or family of) service offerings.
- See that additional organizational burdens are considered—and defined processes in place—to manage new service offerings and opportunities. These could include, activities, labor and asset utilization, equipment and technology, billing and receivables, inventory, and distraction / risk factors
- Have confidence that your organization can sell new services and negotiate any new relationships these services may entail.
- Ensure that the service team puts processes in place to assure ongoing service improvement through standardization and the application of automation, tracking, and analytic technologies.
- Remember that not all “value-added” opportunities are worth pursuing, and assure that those pursued are.
Strategy is all about positioning an enterprise correctly. What will your company do—or what does it intend to do—to differentiate itself from competitors? Do you do what they do, but do it better? Or do you do something different? In finding the ideal market space, you need to know three things: market segments (i.e., who is and will be out there), market requirements (i.e., what they want and will want), and your own marketing capabilities and potential (i.e., what you can do and will be able to do). The intersection of these aspects is where your organization is most unique and valuable in the distribution market; which is the pure definition of differentiation.
Posted by Michael Lovelace, Director of Business Development, Distribution Group