It has to be one of the most difficult aspects of running any business. Understanding the customer’s wants and needs is essential for a company to be profitable. But while achieving this can be costly and complicated, getting it right provides satisfaction on more than simply a practical level – it provides the customer with tangible evidence that they have a good relationship with their supplier.
The relationship between the two needs to be carefully handled, but it can be kept harmonious be simply asking the right questions to the right people.
For Greg Welchans, president at IT supplier Supplies Network, the questions can be part of a meticulous process. Around 99 percent of the company’s total sales are made through independent dealers and 70 percent of everything it sells finds its way directly to the end user.
"That tells us that 70 percent of our customers are stockless for a majority of their products. We’ve gone through a really exhaustive process over the last five years of developing really effective consumer-facing tools on behalf of our dealers. Because our dealer doesn’t stock anything it doesn’t do us any good to try to sell them products, but it does us a lot of good to develop tools that help them sell a lot of products."
The firm understands its customers are stockless and do not have a lot of resources to develop tools which would enable them to compete with the superstores.
"We’ve invested hundreds of thousands of dollars to give them the tools to look every bit as professional as companies like Office Depot, Staples and Corporate Express."
The company holds around six conferences a year at its specially constructed ‘world-class’ conference room within its facility near St Louis. Management from around 30 dealers and manufacturers spend three days sharing their ideas, via satellite conference calling if necessary, ending the event with focus groups featuring end users.
"These senior managers have taken time out of their week that they could be selling to come and give us feedback and understand our business – that’s when we really get intimate with them.
"We talk about the things that our customers need to grow their business, make them more effective and more profitable."
Intelligence
Most conferences are sponsored by a manufacturer, which presents products to the dealers. Supplies Network then registers the overall sales of those products for the next month and presents dealers with the results.
The firm also undertakes consumer research on behalf of its dealers, sending out emails crafted to look like they are from the dealer itself, but using Supplies Network’s technology. All the responses directly come back to the dealer, completing the valuable service the firm offers to aid understanding.
Taking this one-step further, sales intelligence firm Vecta delivers sales solutions for wholesale distribution companies. The UK-based firm has around 240 customers and a customer base that spans up to 10 sectors. About a third of the these – including OfficeXpress, Tollit & Harvey and Harper Martin – are in the office products industry.
Vecta’s success comes from the similar characteristics which operate within these targeted sectors. The companies tend to be selling thousands of products to thousands of customers. This makes it hard for them to gain any real insight into their customers’ buying patterns. It’s also difficult for their quota-hungry sales teams to collate any meaningful information within their large territories.
Vecta takes information from back office systems and uses it to highlight where a company has ‘sales leakage’ – areas in which customers are starting to spend less. The three key issues the company tries to address are sales leakage, identifying new sales opportunities and targeting the higher margin customers.
"Across the OP industry there is a recognition that companies are trying to make their sales teams think more strategically about how they manage their customers and where they are spending their selling time," explains Julian Cook, VP of product marketing.
"These sales individuals, either on the phone or in the field, are probably managing territories from 500 to 5,000 customers. And because of the large volume of customers and products, they probably don’t have any real understanding of what’s going on, on a day-to-day basis."
Cook says the OP industry has been a key market for the company since it was established in 1996.
"It’s an industry with a lot of consolidation, commoditisation of products, price deflation… classic characteristics of a very competitive business environment. Our customers are asking us for solutions which will allow them to change the behaviour of their sales teams and make them less reactive and more proactive. Allow them to arrange a meeting with their clients based on some knowledge of the customer and understand its individual requirements."
In the past many OP companies found gathering this data extremely difficult.
"Some of our customers would admit that historically they have done what we describe as the ‘milk round’. Every quarter they would open their Rolodex and phone their customers alphabetically. All these businesses want is to call their customers based on there being a new sales opportunity with that specific customer. That’s what sales intelligence can do."
This type of intelligence is often used by management and marketing to take a holistic view of what’s happening in their customer base. Based on that they can make very strategic decisions about their sales, marketing and product strategy.
"Because of this commoditisation, everybody is trying to compete with the big boys by expanding their product portfolios. This is a great thing for consumers because it offers them the one-stop shop and encourages loyalty to the independent dealers.
"But this creates a different type of problem for the salesperson, because they’ve now got to try to understand this ever-expanding product portfolio, including which products are relevant to which customers. Sales intelligence is able to automate that process for them. So rather than the sales person looking for the sales opportunities in a random and chaotic way, sales intelligence can flip that on its head and highlight which opportunities are the best and most relevant."
One long-term customer and firm advocate of Vecta’s software is UK office supplier Stat-Plus. The company, which specialises in the legal market, has been using Vecta to help drive its sales for five years.
Managing director Philip Lawson says Vecta’s ability to "crunch enormous amounts of data" attracted him to the company.
"The holy grail of targeted marketing is directing a question to a customer that is relevant for them and us. That means not only understanding the customer does buy but also, most importantly, what the customer doesn’t buy.
"This means working with accurate data about what products customers have stopped buying, and that is the starting point for developing further dialogue with each particular customer."
Instantaneous
Stat-Plus uses the technology to provide its sales force with relevant information about the customer on a pocket PC.
Having the technology literally in front of the salesperson means they don’t have to break the meeting by going to the boot of the car to find documents or phone the office.
"What we want to show is an instantaneous response to the customer’s questions," says Lawson. "The software brings to our attention what products our customers have stopped buying, if their circumstances have changed and if they are in danger of moving elsewhere. We still have to do something with the data, but it gives us a much closer feel for the business."
Lawson says having quick and easy access to the data also strengthens the firm’s relationship with its customers.
"It gives the customer a greater reliance on us. Our selling stance has always been to try to help the customer in whatever way possible rather than them having to remember what they ordered last time. We are offering the customer that information immediately if they want it, and the fact they have to ask our sales people reinforces the value that the account manager brings to the relationship." Trying to provide a service for a very busy industry like the legal profession means Stat-Plus have to be efficient, fast and take on-board the responsibility of controlling the entire stationery order.
"We tend to deal with senior people within the customer base who don’t have time to worry about things like individual product codes when ordering their stationery. Our account manager becomes their in-house stationery buyer. It’s a very close relationship and it’s why we retain customers and our sales staff for a long time."
Paper stationery firm John Dickinson has utilised a more traditional source of data gathering, market research, to launch a new range of recycled products.
The result sees the company expanding its Black n’ Red range and a new line of ‘green’ Basildon Bond in January 2007. All major stationery catalogues are carrying the range and John Dickinson has seen pleasing interest from all the major wholesalers.
It all started last year, when the company started seeing a gathering of interest in recycled products and all things environmental. Before launching the new lines the company went through three stages of market research to ensure what it had noticed on a macro level was accurately reflected in the attitudes of stationery buyers in the office.
The process of discovering customers’ opinions began with an online survey in November 2005 which attracted about 500 respondents and asked people for their views on the environment and their use of recycled paper.
The results highlighted a definite sense of environmental consideration and revealed that peoples’ environmental concerns were depressing demand for paper products. This prompted the firm to perform qualitative research with focus groups which included purchasers from a range of different-sized offices. John Dickinson took this opportunity to float the idea of Black n’ Red made with recycled paper to see whether it ‘had legs’. The positive result firmly set the wheels in motion.
Opportunity
The company looked at this potential problem and saw an opportunity. John Dickinson found that people would carry on using the same number of notebooks and paper products if they were made from recycled paper. It appeared that if peoples’ concern about the environment was depressing sales then the antidote could be recycled paper-based products.
"Our gut feeling was that this was coming of age as a mainstream issue," says Mark Beaumont-Thomas, brand manager.
"Up until now recycled products have sat in a bit of a ghetto and appealed to a fairly narrow demographic.
"When we did the focus groups we found that people did understand that recycled products are improving but there was a lack of knowledge about what was on the market – there was still this lingering theory that recycled paper was of poorer quality than the standard product."
The last piece of the plan, and what truly sealed the idea as a "goer", was a highly successful stand at Crme 06 last May, the UK’s annual show for PAs and secretaries held in London’s Olympia venue.
The firm handed-out a questionnaire (accompanied by a full goody bag) which garnered an impressive 2,500 responses. The audience of potential customers was ideally placed to give John Dickinson the information it needed. "It encouraged a large number of responses from a broad range of PAs and secretaries working in a variety of industries. Often they are the purchaser of stationery and/or the ‘chooser’ deciding on behalf of the CEO what gets used. They are a highly influential audience and one very well worth understanding the views of," adds Beaumont-Thomas.
One of the questions asked if the quality and price were equal then "would you buy recycled paper and notebooks over non-recycled" – to which, unsurprisingly, people answered "yes".
"In a sense that part of it’s a bit of a no-brainer, but 84 percent said they would actually buy these products – an overwhelmingly majority."
But the questionnaire then cleverly pushed the issue, asking the respondents if they would pay more for such products. Only 28 percent said they wouldn’t pay more, while 50 percent said they would pay 5 percent extra and 5 percent said they would pay as much as 10 percent extra.
"The fact that over 70 percent of people said they would pay more is a very good barometer of how attractive these recycled paper products are to that audience."
For Supplies Network, Stat-Plus and John Dickinson, understanding what’s going through a customer’s mind has been an essential and successful aspect of establishing themselves as players in the market. All have gained positive reputations among their customer base, which has helped strengthen their brands. They would all agree, this was money well spent.
