Succeeding in the catalog channel

Advice for manufacturers on how to gain attention from catalog distributors.

by Tom Halpin

Nine out of 10 supplier salespeople take the wrong approach when dealing with distributors. They are ill-prepared, can’t sell, don’t understand marketing, haven’t researched their target or all of the above. I should know. I was formerly a merchandising manager of a large Midwestern distribution business and often listened to the sales pitches of suppliers to determine if their products were a fit for our business. Many supplier reps failed to understand my responsibilities as a merchandiser and instead viewed me as a buyer, which was a big mistake.

Here’s an example of the kind of pitch I’d get from a “C” player.

“Tom, I’m not sure if you’ve ever heard of us, but our business was founded in 1400 by an eccentric old man with a curiosity for widgets. Six hundred years later we are a significant player within our market; our widgets are of the highest quality; and we think, if given the opportunity, we could jointly sell a lot of product. As a matter of fact, to start, I’d like you to consider promoting our new product in an upcoming direct-mail flyer. What do you think?”

The pitch may not sound that bad, but in today’s world, it certainly won’t yield an advance or a sale.

Why are so many salespeople mediocre?

In periods of economic growth, mediocre companies and salespeople can survive and even grow. During times of economic decline, their shortcomings become glaring.

Too many businesses are OK with the status quo and lack the courage to take a fearless inventory of their sales and marketing organizations. They don’t ask themselves questions such as, “Does our value proposition have teeth?” Or stated another way, “Does our offering rock the customer’s world at all levels of the supply chain?” They also fail to rank salespeople to determine the effectiveness of their team. These problems tend to be cultural, and the same companies generally blame the economy for missing their sales goals.

Many manufacturers that sell through distribution deal with many different distributors, ranging from local and regional distributors to catalogers, integrators and commodity managers. Many manufacturers discover that working with a cross-section of distributors makes for a solid channel strategy. However, engaging them all with a one-size-fits-all approach will surely fail.

This brings us to catalog distributors. I often compare industrial catalogers to the “L.L. Bean” or “Lands End” of the industrial world. They are mass merchandisers of many product categories and offer end-users a broad range of products at multiple price points.

In addition, they offer best-in-class logistical support. For instance, end-users can typically order until 8 p.m. EST and receive product the next day at UPS ground rates. Obviously, many end-users value their logistical excellence and the ability to source product through a one-stop shop.

When you think of the catalog channel in the United States, companies such as Grainger, McMaster Carr, MSC Industrial Direct, Fastenal and J&L Industrial Supply come to mind. There are also catalogers that specialize in specific product categories such as Lab Safety and Newark Electronics. Within this channel, the game is entirely different from local and regional distributors, commodity managers and integrators.

Traditionally, catalogers vie for the spot-buy market by offering end-users unsurpassed product breadth with outstanding service levels. To create value for the end-user, catalogers use a methodical process for new product additions and develop processes to support their service levels. Successful suppliers understand how to position their offering to catalog partners and how to integrate themselves from a process perspective.

Positioning your business in the catalog channel
Let me now offer a recipe for making a terrific sales pitch. As a merchandiser, the following information helped me make well-informed business decisions. Smart suppliers will make this information the cornerstone of their pitch to prospective catalog partners. Although it addresses catalogers in particular, many of the ideas can help suppliers approach other types of distributors as well: 

• Define your market for the merchandiser or product manager and size it for them.

• Estimate your market share by product family.

• Is the product offering an inherently good catalog product? A good catalog product has a finite amount of product attributes, a part number and a price. If the product is made-to-order, configurable or manufactured to a drawing, it probably doesn’t fit the catalog model.

• What is the distributor discount? A good supplier can help the cataloger establish list price. Is there an established manufacturer suggested resale price (MSRP) and is the “street” willing to pay that price? If your MSRP is a figment of your imagination, take a step back and help your catalog partner get closer to reality.

• What is your competitive position in your market? Market perception maps (bubble charts) are an effective way of communicating this information.  

• Have you looked at the cataloger’s existing offering today in the product category of interest? Does the cataloger have a brand strategy? If so, where does your offering fit? Does the size of the market warrant another price point? If your price point duplicates an existing brand, why would the cataloger consider your product? Be prepared to make your argument.

• How many SKUs are in your program? If possible, provide your catalog partner with some drill-down information that illustrates how your offering matches up to the competition on a SKU-to-SKU or product-family basis.

• What is the initial inventory investment required?

• Are there a handful of SKUs that should be promoted frequently? If so, identify the part numbers and recommend which channel is optimum and at what price point?

• Based on aggregate demand across your business, what is the weighted margin of your program?

• Based on competitive catalog houses, what are your revenue estimates in years one, two and three?

• If the cataloger offers multiple go-to-market opportunities (direct mail, Internet, field sales, outbound telesales), which channel will provide the best return on investment (ROI) for your product line?

• Lastly, how will you support your catalog partner? Product training is a given, but is your company adept at supporting outbound telesales and collaborating on e-commerce promotional initiatives? Differentiate yourself from the competition once you’ve successfully won the business.

Why do so many manufacturers hit a wall when trying to add new product at prospective catalog partners? Most catalogers have formal product rationalization initiatives, where product and price-point redundancies are removed. As far as new product additions, catalog houses are generally interested in filling application gaps, price-point gaps or adding lines that are a strategic fit to their business.

Whatever the driving force, all product additions are generally ranked based on ROI. If manufacturers read the bullet points above, they’ll discover that building a proposal touching on each point will generate interest from a potential catalog partner. •

This article originally appeared in the May/June 2004 issue of Progressive Distributor. Copyright 2004.

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