B2B Buyers Are Customers, Too: How Wholesalers Can Improve the Customer Experience

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1 Brief By Matthew Petersen and Rob O Regan NO. 56 B2B Buyers Are Customers, Too: How Wholesalers Can Improve the Customer Experience SAP Center for Business Insight Brief Q&A Case Study Inquiry E-Book 1

2 Wholesale distribution is a US$4.9 trillion industry whose post-recession growth has outpaced that of the the U.S. economy. It s also ripe for disruption. More-demanding customers, the rise of e-commerce, and the growing competitive shadows of Amazon and Google threaten the long-term sustainability of traditional wholesale distributors in virtually every sector, from building materials to hotel supplies. It doesn t help that wholesale distributors have, for the most part, been slow to embrace digital channels. While distributors in areas such as technology have built viable e-commerce extensions to their business, those in more mature industrial sectors often see 5% or less of their revenues come from online sales. The entrance of Amazon and Google into the space isn t just intimidating because of their scale. These digital giants are also importing a consumer mindset shaped by a seamless shopping experience and customer-friendly concepts such as free shipping and overnight delivery foreign concepts to many business-to-business (B2B) companies, to be sure. Bringing the Amazon Experience to Work But B2B professionals are consumers too. The people in charge of buying commercial housekeeping supplies or electrical components now expect the same experience they had when buying books on Amazon.com over the weekend. For wholesale distributors, the goal is to make it as easy as possible for customers to purchase everything they need the virtual one-stop shop for their facility or project. As customers needs and expectations change, businesses must adapt their approach, says Scott Clifford, vice president and CIO at Graybar, a leading distributor of electrical and communications products and related supply chain management and logistics services. The value proposition for us is about connecting the right products to the right customers in the channel they prefer. We have product data from thousands of manufacturers that we process on a daily basis. Our ability to aggregate all of this data gives us a tremendous advantage in the marketplace. More mature industrial sectors see 5% or less of their revenues come from online sales 2 Brief: B2B Buyers Are Customers, Too: How Wholesalers Can Improve the Customer Experience 2014 SAP AG or an SAP affiliate company. All rights reserved. NO. 56

3 Wholesale distributors are working to improve the customer experience in four ways: Learn about behavior Some wholesalers are utilizing more than just forecasting and transaction data; they re also layering in behavioral data and, increasingly, customer research to develop more insights about what their customers really want. HD Supply, a large industrial distributor in North America, has developed a multifaceted feedback collection program that incorporates customer feedback from customer calls, sales representatives, customer surveys, and anecdotal customer input. A dedicated Voice of the Customer team analyzes customer data weekly to measure, evaluate, and identify areas for improvement or expansion. The objective is to proactively identify, prioritize, and improve customer processes and fine-tune product and service offerings, according to David Kahn, vice president of the Hospitality Supply group within HD Supply s Facilities Maintenance business. Our Voice of the Customer program is focused on assessing the customer experience from start to finish, capturing customers needs and desires, and using that input to drive our business decisions, says Kahn. A key measuring stick for the program is Net Promoter Score (NPS), a popular loyalty metric among consumer marketers. An NPS between 50 and 80 indicates that a company has an efficient and sustainable growth engine. In 2012, HD Supply achieved a score of 76 the same as Amazon. Redefine your most valuable customers Traditionally, wholesalers believed that their biggest customers were their best customers. That s not always the case; customers that buy less or less often may actually be more profitable and may thus be a better target for nurturing and loyalty programs. The key is the ability to dig deeper into customer data to identify the most or least profitable customers and to understand why and then to figure out what to do to maximize the value of the relationship. Graybar launched a pilot program in 2013 to determine the relative profitability of each customer as a way to improve both operational efficiency and the customer experience. A team began analyzing a year s worth of transactional data, along with historical cost data and other key metrics, such as share of wallet for each customer, to determine customers current and potential profitability. The sales team used that information to re-engage with less profitable customers to discuss changes that would benefit both sides. For example, a customer that placed multiple small orders each day through different departments might save money by consolidating those purchases into a single order sent daily through the procurement department. In the distribution industry, there may be very good reasons for a bunch of small orders, especially when dealing with contractors serving different job sites, says Clifford. But the data at least allowed our salespeople to have a conversation with their customers about opportunities to create more value. NO SAP AG or an SAP affiliate company. All rights reserved. Brief: B2B Buyers Are Customers, Too: How Wholesalers Can Improve the Customer Experience 3

4 Increase visibility across the supply chain Last June, after installing speech analytics software in its call center, HD Supply discovered that average call times were increasing for customers who called to check on the status of an order. The reason? Call center agents pulled data from one system to track when an order shipped and from another to confirm when a customer received it. Connecting those two systems gave agents instant access to both the shipping and receiving information, improving the experience and reducing call times. Bring the business to your customers At HD Supply, ipads for the field sales force complement paper catalogs for browsing current inventory at a customer location and give salespeople instant access to a customer s account. For field sales teams in the Hotel group, the ipads include brand-specific guides that show products that meet each hotel chain s specifications. Having all of that on an ipad is huge benefit to us and to the customer, says Kahn. Developing a deeper understanding of a customer s transactions, behaviors, and needs is critical for companies in any industry, and wholesale distributors are no exception. A tailored experience adds value to customer interactions, driving loyalty and competitive advantage. Matthew Petersen Matthew Petersen is industry value advisor, Consumer Industries, Wholesale Distribution at SAP America. Rob O Regan is founder and principal of 822 Media, an editorial and content marketing consultancy. There s more. TO LEARN MORE ABOUT HOW COMPANIES ARE TRANSFORMING THEIR BUSINESSES, DOWNLOAD 4 WAYS TO MAKE CUSTOMER EXPERIENCE THE HEART OF YOUR BUSINESS The SAP Center for Business Insight discovers and develops new research- based thinking to address the challenges of business and technology executives. 4 Brief: B2B Buyers Are Customers, Too: How Wholesalers Can Improve the Customer Experience 2014 SAP AG or an SAP affiliate company. All rights reserved. NO. 56

5 2014 SAP AG or an SAP affiliate company. All rights reserved. No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG or an SAP affiliate company. SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG (or an SAP affiliate company) in Germany and other countries. Please see for additional trademark information and notices. Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors. National product specifications may vary. These materials are provided by SAP AG or an SAP affiliate company for informational purposes only, without representation or warranty of any kind, and SAP AG or its affiliated companies shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP AG or SAP affiliate company products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty. In particular, SAP AG or its affiliated companies have no obligation to pursue any course of business outlined in this document or any related presentation, or to develop or release any functionality mentioned therein. This document, or any related presentation, and SAP AG s or its affiliated companies strategy and possible future developments, products, and/or platform directions and functionality are all subject to change and may be changed by SAP AG or its affiliated companies at any time for any reason without notice. The information in this document is not a commitment, promise, or legal obligation to deliver any material, code, or functionality. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and they should not be relied upon in making purchasing decisions. SAP Center for Business Insight Brief Q&A Case Study Inquiry E-Book 5

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