159. Distributors: Get Re-Bundling Flexible

Your Standard Service Bundle?

When you quote a customer a “price”, what are the services that are bundled (“for free”) into that price? A typical distributor-bundle includes costs for: outside and inside reps, pick, pack, shipping, and trade credit. Bigger customers usually get extra services “for free”. Small ones may have a minimum order size requirement and/or an un-bundled freight charge. (A tough sell with Amazon’s free shipping policies.)

Standard-Bundle Shortcomings:

For many small house accounts, their high-margin percent for small sales yields margin dollars that are below service-activity-cost dollars for a loss. Change the terms to make these accounts profitable. And/or, accept that your higher fulfillment cost structure can’t compete in the small-order space.

For largest accounts: custom-designed replenishment solutions beat standard service-bundle selling. 3PL firms and integrated sole-supply distributors use teams to co-create (with the customer) the ideal system. Pricing is the sum of the costs of the a la carte service activities. Some more trustworthy, progressive contracts are open-book.

  • The rep’s role? The customer decides, and rep compensation varies accordingly. To play and win you must know your activity costs, be customer-centric first, and be rep-centric second.

Internet competition will increasingly sell your most-net-profitable SKUs for less. But, e-sellers won’t have your bundled-in costs for outside and inside reps; or paper-based, trade credit. And, e-sellers don’t use conventional mark-up methods that create SKU cross-subsidies. 

  • Get SKU, net-profit analytics to rethink your mark-ups. And, install a dynamic web order entry calculator. Then, customers can choose what services they want or not. And, prices for products will further vary based on dollar-volumes for both line items and the overall order. For an example of such a tool, check out: https://www.optiquoteapp.com.

Many next-gen buyers will want to do maximum buying activity via their phone, 24/7. They will want human e-assistance and on-site rep visits only as requested. They won’t want to pay for just-in-case, routine rep-calls bundled into product prices.

  • Reps! Start surveying your customers about how they might like to shift to e-buying and adapt accordingly. And, report changing, customer expectations to your IT/EC staff. Create customer-back, digital services and e-selling before your competitors.

New, Business Model Re-Bundles?

With cloud commerce capabilities, new, unbundled and re-bundled, selling models will emerge. But, to create and offer them profitably, you will need cost-to-serve statistics at the line-item/SKU level. For a C-suite, virtual, review session on re-bundling possibilities, be in touch. bruce@merrifield.com 74656e745f5

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