Building a Future for Distributors and Dealers of Building Products
Volume 44, Issue 5 June 2005
How to Gain Profits
The Evolving Distribution Channel
How It's Driving Change in Marketing Strategy
by Jim Groff
In the building industry, products follow a channel of distribution from manufacturer to distributor to dealer and then finally to contractors and consumers. In the past, these different players served distinct roles in marketing a product or serving those further down the channel. In recent years, however, we’ve experienced several profound changes to the distribution channel—changes that should force all players to reconsider their roles, and how they market products.
Forward-thinking companies are replacing the traditional “cattle-chute” mentality with fluid, innovative approaches that turn the players in the supply chain—manufacturers, distributors and dealers—into partners. These partnerships can increase the likelihood of success for new products, enhance tracking and evaluation of marketing programs and, most importantly, boost sales.
Before exploring how this works in practice, it’s important to understand the primary changes that have emerged during the building industry’s evolution over the past few years. Some key developments:
• Competing products have crowded the marketplace. The industry introduces new or redesigned products at an increasingly rapid rate. Builders already have an astounding array of choices and dealers with whom we’ve spoken admit they have trouble keeping pace with product rollouts. This makes it far more difficult to introduce a product and differentiate it from others. As companies continue to add products, the smart use of marketing dollars—and the development of marketing partnerships along the distribution channel—becomes increasingly important.
• The balance of power is shifting down the channel. Historically, manufacturers handled most of the advertising and brand-building efforts, relying on distributors and dealers to help introduce new products. However, the industry has become a victim of its own success. Rapid growth has brought increased expectations. Contractors demand better service and dealers are looking for more support. That has some manufacturers and distributors searching for ways to provide both.
• Consumers are driving product decisions. Over the past few decades, manufacturers have spent their marketing dollars to reach consumers directly. The idea: create brand awareness and equity in the marketplace so consumers demand their products from contractors. In many cases, it’s worked. In this regard, the industry has mirrored pharmaceutical companies; instead of asking doctors for a pill to lower cholesterol, patients ask for Crestor® or Lipitor® by name. Consumers are asking builders for Andersen windows or Aristokraft cabinetry.
The result of these and other changes? Lines between players in the distribution channel are blurring and traditional marketing roles are giving way to new programs. As the following example shows, companies that embrace these changes can develop innovative approaches that benefit all the players along the channel.
Wolf Distributing Co., which serves dealers from Maine to the Carolinas, has become one of the nation’s largest distributors of kitchen and bath cabinetry and alternative decking materials. Wolf, which is affiliated with our company, Baublitz Advertising, recognized that relationships along the distribution channel were shifting.
Three years ago, Wolf joined with Baublitz to approach certain manufacturers about splitting the cost of hiring specialists to represent specific products for the manufacturers, with a particular focus on product rollouts. Wolf provides these specialists with sales training, a ready-made market through its existing dealer relationships and custom-crafted marketing collateral. The idea: boost sales for everyone involved.
To gauge its progress, the program includes a variety of rebates and other incentives to help measure increases in sales, growth of the customer base, geographic distribution of the customer base and other key information.
“In the final analysis, we wind up doing a lot of the marketing that manufacturers have traditionally done,” said Craig Danielson, president of Wolf.
Shared Marketing, Shared Success
To date, the program has yielded promising results, according to Danielson. Sales have increased for participating manufacturers’ products and product launches have been more successful. The specialist program is one way Danielson said his company has recast its role in the changing distribution channel.
“We’ve worked to transform Wolf into a sales and marketing organization with logistical capability,” Danielson said. “That’s a real contrast to the traditional distributor’s role as an order-taker and order-filler.”
Lessons to Learn
Wherever your business falls in the channel, you can take advantage of the changes that are currently transforming the way the industry manages marketing. The lessons to be learned:
• Partnerships will become critical to success. Many companies still operate under the assumption that it may be detrimental to work too closely with others. Manufacturers may be leery of losing market share by forging a partnership with a single distributor. Some dealers may be concerned that, in a cooperative effort with a distributor, they’re giving up too much information about their customers. But we’ve found that for our clients, the potential for increased revenue from strong marketing partnerships far outweighs the risk of lost business—or the risk of sitting on the sidelines.
• Marketing must be comprehensive. Danielson pointed out that even products of the highest quality can fail without a full-fledged campaign that integrates the various advertising, marketing and sales strategies. Further, these elements should be planned, coordinated and executed jointly by partners along the channel.
• Everyone should be concerned about creating a brand. Manufacturers must differentiate themselves from competitors, but a strong brand isn’t just for manufacturers. Distributors, dealers and builders must also define themselves to the other players along the distribution channel.
• Roles will continue to change. Everyone should spend time learning about emerging marketing trends and practices. As the building industry continues to evolve, those who don’t may be left behind.
Jim Groff is president of Baublitz Advertising of York, Pa.
© Copyright Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.