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For every distributor, there's a tale of growth. For decades, it’s centered on a much-used strategy: acquisition. However, acquisition is no underdog's tool. It’s a game where the big players, the ones with deep pockets, have the upper hand, equipped to seal deals, revamp operations, and await the eventual returns. Private equity groups, too, find themselves embroiled in this high-stakes game of acquisition.
Yet, as it stands, the hot market of mergers and acquisitions in the post-pandemic era is not constant. As sure as the tide, it will ebb. And when it does the distributors who have staked everything on acquisition might find the rug pulled out from under them. An acquisition spree introduces new layers to your business, from products to processes, from markets to technologies. And each layer you add, says distribution consultant Scott Benfield, makes the dance of growth that much more intricate.
Depend solely on acquisition and you risk neglecting the fertile ground of organic growth. Unlike acquisitions, these channels can scale both ways, making them far more adaptable. When the well of acquisition opportunities runs dry all you're left with is the knowledge of how to grow through acquisition. That’s a precarious cliff to hang onto.
The distributors that emerge victorious will be the ones well-versed in the dual arts of growth. Mastering organic growth is as essential as air for long-term success. To trigger large-scale growth across your diverse business acquisitions, you need a process that connects every rung of your organization, from the sales rep right up to leadership. Without such rigor, your company’s organic growth may slow down and eventually stop.
SEVEN WAYS TO DRIVE ORGANIC GROWTH IN YOUR DISTRIBUTION BUSINESS
Organic growth isn’t a single-threaded strategy. Success requires a diversified approach to building sales. How can you identify the right path to take to achieve your goals? Here are seven effective growth strategies electrical distributors should consider:
#1. Grow wallet share
To grow wallet share, your sales reps must have considerable knowledge of your product lines and the needs of your existing customers. Most B2B buyers purchase from multiple suppliers. Sometimes, that’s because your competitors offer better prices and quantities that are more convenient. Other times it’s because they don’t know you carry certain products, so they keep buying them from your competitor.
Your sales reps should feel empowered to probe and explore, knowing they’re helping the customer. It’s much more convenient for a customer to get everything they need from a single supplier.
When you grow wallet share, the goal is to win as much business from your customer and sell them everything they need across as many categories as they require. The goal isn’t to outsell your competitor. It’s to determine what customer needs are and sell the products from your catalog that fill those needs. To never miss out on a sale, you want to identify and fill wallet share gaps. Distributors winning at this organic growth strategy are arming their reps with the tools they need to see what customers might be buying from competitors so they can easily spot gaps in wallet share. The best reps say, “Hey, customers who buy sanding products from us typically buy wire brushes too. Where do you source yours?”
#2. Optimize product mix
One distributor shared that a quarter of their revenue comes from rebates. Ultimately, these efforts can improve profitability with existing customers. However, to optimize product mix to take advantage of rebates, you must have a clear view of what the customer is buying and match it against rebates that unlock better profit margins. Distributors that optimize their offerings are acutely aware of product lines, market data and shifting rebate programs.
#3. Expand customer base
Expanding a customer base means proactively acquiring more customers. The best way to do this is to get really good at prospecting. Many distributors try to prospect, but only a few get it right. The best distributors have a sales management tool that allows them to target prospects and track leads so they can nurture them until they become customers.
#4. Increase average order value
At its most basic, this strategy is a low-lift opportunity to get more customers to buy more on each order. Distributors that get this right show customers personalized recommendations when they browse online. They arm their reps with upsell recommendations when they’re on the phone or in the field — the easiest way to increase average order value (AOV).
#5. Offer add-on services
Distribution companies can differentiate themselves by introducing value-added services that enhance the customer experience. For example, technical support, training, warranties, maintenance, customization or consulting can improve customer loyalty while generating additional revenue.
#6. Upsell existing customers
Customer service doesn’t have to be a cost center. Customer service representatives (CSRs) should routinely offer higher-tier products or services to current customers to drive greater margins. However, to do this well, CSRs need the right tools to figure out their customers' needs on the fly. Distributors that do this well, like MSC Industrial Supply Co., arm CSRs with AI-powered insights to make recommendations in real time. For every $1 they spend on AI recommendations, MSC’s CSR team generates $3.50 in profit.
#7. Expand product offerings
Distributors can introduce new products that appeal to different customer segments. This approach helps attract new customers and diversifies the product base. To do this well, distributors should engage in ongoing training and development for sales teams to deepen their product knowledge and familiarity with an ever-changing roster of products. The goal should be the “endless aisle” that makes it easy for customers to get everything they need in one shop – including long-tail items.
All these approaches require considerable investment in enhancing your team’s product and customer knowledge. Well-informed and knowledgeable sales and customer service teams are critical to organic growth. In the past, the effort to drive accountability and product knowledge was labor-intensive and manual. Today, technology can provide the insights and measurability you need to drive organic growth.
DRIVE ORGANIC GROWTH WITH BETTER PROCESSES
Organic growth strategies require vigorous human accountability and smooth workflows for communicating information and tracking sales activities. How do you track customer buying data across multiple sales channels, ever-changing product lines and even the ups and downs of inventory?
No DIY manual approach exists that can effectively drive organic growth, or any simply no way to maintain the rigor of consistent processes across a distribution business. If you want to move the needle and scale these strategies, you need technology designed to support organic growth in distribution sales. While best practices in human processes fuel organic growth, the technology provides the rigor and that single consistent thread to systematize behaviors that add bottom line revenues.
Sales management software gives CSRs and direct sales reps everything they need to become trusted consultants to their customers. The most robust tools offer the following:
● A recommendation engine that takes backend customer purchase and preference data to suggest upsells and value-adds.
● Integration of products across all sales channels for increased sales diversity.
● Actionable insight on sales activities for managers to improve their coaching efforts.
● A user-friendly format that gives even the most inexperienced CSR or sales rep help with what and how to sell.
● Suggestions for categories customers are underspending in, or bundles to increase closed revenues per sale.
● A single screen where a sales rep can access product data or promotions in the hands of your sales team so they can quickly emphasize the right items to the right customers.
● Integration with all sales channels and customer data across your entire organization.
A robust sales management tool integrated with all your systems can establish and maintain rigor around your organic growth strategies from sales reps to leadership. The right tech tools change behaviors in consistent ways to drive market share.
This software applies intelligent best practices that increase sales volume by making it easier to sell more. Instead of giving your sales rep a spreadsheet with data, an AI-enabled sales management engine steers them toward the right products and pitches to maximize your organic growth strategy.
Managers can quickly see how individual reps are doing and whether projected sales goals are attainable. They can use this insight to coach sales reps to be more effective before a sales goal is missed.
THE RIGHT TOOLS FOR ORGANIC GROWTH
Many distributors fail to leverage the endless possibilities of organic growth models. They may acquire competitors for a time, but the businesses they’ve acquired aren’t connected. While this can work for a while, this strategy loses its punch if your business stops growing from within.
If you want to keep growing your business without relying on factors out of your control (like acquisition opportunities drying up), it’s vital to have a strong, step-by-step plan that connects every level of the business.
Sales rep level. Your sales team needs a simple system. They should know who they are selling to and what they are selling. This makes their job easier and helps the business grow.
Manager level. Managers need a way to watch over the sales reps and their work. This keeps everyone focused on growth.
Leadership Level. Leaders need a way to see how managers are doing. Are they keeping the team on track and moving the business toward its goals?
Most distributors will benefit by improving their organic growth efforts even if acquisitions remain a central growth strategy. As we’ve learned over the last few years, the next disruption is just around the corner. Don’t miss out on organic growth strategies or waste time manually trying to move the organic growthneedle.
