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For HVACR Distributors, Digital Challenges are Opportunities

The digital revolution that has taken hold in HVACR distribution provides opportunities to succeed or fail, based on how well the distributorship is aware of the potential for error. New programs are available to streamline the sales process, prevent error and compete more successfully.

Earl van As, vice president of Marketing & Product Management at ecmarket, developer of Conexiom sales automation software, sees the following challenges as potential opportunities that distributors should capitalize on in 2018. Among Conexiom customers are, APR Supply, Johnstone Supply, Morrison Supply, and Heating, Air-conditioning, Refrigeration Distributors International (HARDI).

1) Restructuring the sales team to create customer relationship equity. If 20% of existing customers contribute to 80% of business, inbound sales carries the highest risk of customer switch. van As says this means that understanding each customer and their unique behaviors will help to build on customer relationship equity to maintain profitability.

“We find that within wholesale distribution, the majority — and it can be as high as 90 percent — of business is lost to a competitor during the point of transaction,” van As says. “What we mean by that, is when that order is entered or processed — someone may enter the order and type in the wrong product or the wrong address. Or there may be a delay. We call these ‘critical selling events.’ That’s what outbound sales should be focused on: identifying when a critical selling event has occurred by a competitor, and jump on it, to win the business,” van As explains.

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Screen from the Conexiom Executive Dashboard program.



2.) Responding to the elephant in the room: surviving the age of Amazon.
Mr. van As says Amazon has elevated customer expectations and experience while leveling the playing field for smaller players, so how can distributors and suppliers compete with the Amazon empire.

“From a fulfillment standpoint, Amazon has created new expectations for consumers and businesses, for how quickly an order is fulfilled, pricing expectations, and inventory management,” van As explains. “When you look at the entire wholesale distribution industry, Amazon does give an opportunity for a smaller distributor to compete. The competition may be in new geographical areas or it may be reaching out directly to a consumer.”

3) Distributors look to typical digital touch points like e-commerce, for data that informs strategic decision making. However, with up to 80% of orders still being placed via email, a large portion of insights are missed. Unstructured email data can be reorganized and analyzed with the right tools to deliver a true view of customer activity.

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Earl van As: majority of sales are lost at the 'point of transaction' due to human error.

“Email is not something most people think about when they want to start making decisions based on their sales channels,” van As says. “They will typically look at their e-commerce website, to see who’s ordering what, when, and how often it need to be replenished, etc. What you can do, is provide tools. We provide one that will analyze emails and give an organization insights into their business operations and needs. But because there are so many orders placed through email, a lot of the distributors we deal with — more than 80% of their orders come over email channels, or phone, or walk-in.”

4) Re-examining the cost to serve different customers. With a lack of comprehensive sales process data, van As says distributors are looking for ways to gather more insight into the cost of serving each customer to help them make decisions that increase margins.

“If you ask most distributors about the cost to serve, they’ll typically look at the total sale or gross margin, to measure if they’re successful, or to help forecast company growth,” van As says. “That is important, but they also need to know what transactions look like with their largest customers, from order to fulfillment.

“A question they should ask themselves: Which customers require multiple ‘touches’ from order placement to delivery? They should also look at where efficiencies can be implemented, to help reduce the load on transactions while also keeping customers happy."

5) Addressing the impacts of digital transformation. A major downside of digitizing business processes is the possible erosion of customer satisfaction, which is a critical factor of success. There are solutions that allow businesses to reap the benefits of digitization and simultaneously maintain high quality customer service.

“‘Digital transformation’ has become a major buzzword. When many organizations and distributors think about digitizing business processes, they don’t necessarily look at what will uphold quality customer service,” van As explains. “They typically look within their organization and ask, ‘What are the transformations we can put in place that will improve productivity, or make business processes more efficient?’ That’s important, however, often those transformations are evaluated based on the cost to implement, the expected cost savings, or the speed of implementation. “

He says two things happen when that’s your focus:
“They end up proceeding with some sort of transformation that’s meant to increase efficiency and reduce cost; and they don’t take into account the risks associated with the actual end customer. And, they proceed with a transformation knowing there may be a risk to customer satisfaction; but, operational savings is the deciding factor. They end up not having a genuine understanding of the risk to customer loyalty. So when we talk to organizations about digital transformation, we recommend looking for transformations that increase efficiency and productivity but also increase customer satisfaction,” van As says.

“Sales order automation, which is what we provide at Conexiom, is a great example of a digital transformation that can actually increase customer satisfaction because you’re eliminating errors by removing human involvement in the order, but also reduces your cost to serve, because you’re not paying someone to manually enter an order,” van As says.

Learn more about Conexiom sales order automation and invoice automation at www.conexiom.com.

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