Progressive Distributor - Direct marketing isn't only for the big boys

Direct marketing isn’t only for the big boys

Here are six easy, economical programs any distributor can start right away.

by Cathy Veri

I’ll let you in on a secret: Direct marketing isn’t just for the large catalog houses. It’s for every distributor, and every company that understands what it can do for their business.

To most of us in the distribution industry, direct marketing means the big catalog houses like MSC, Grainger and J&L. In truth, direct marketing encompasses much more. Personalized letters, phone calls, faxes, customized special offers, customer segment campaigns, sale flyers, product introductions and package inserts are just a few of the powerful tools that make up direct marketing.

Most distributors do not have an internal marketing staff. They usually pass marketing responsibilities to the sales manager or owner (or sometimes the secretary). That doesn’t mean you can’t do direct marketing. In a marketplace of decreasing differences between distributors and increasing competition for customers, it’s harder and harder to differentiate. Direct marketing can help.

Distributors of every size tend the needs of the same three customer segments as the catalog houses: new customers, current customers and customers that have not come back. Do you have programs in place, right now, that address these segments?

Most distributors won’t implement the simple programs outlined here. Why? Mostly because of misunderstanding (and maybe a little laziness). Direct marketing programs are not always expensive. And they’re not always hard to do. Here are six common sense programs good for growing your distribution business.

Call every new customer at least once
Call them within three to five days of placing their first order. Nothing is more impressive to a new customer than a company that recognizes when he/she placed an order for the first time. But very few companies do it.

Ideally, the salesperson who took the first order should make the call to the new customer. Or have the sales manager call. If you are a small distributor, the owner or president can even find time to call new customers (nice touch). Use the call to explain your company’s features and benefits, to follow up on the first order, to ask the customer questions about his/her needs and business, to inquire about other contacts who specify product. Perhaps even ask for a second order during the call. “What’s on your desk today?” is the easiest question to ask.

Encourage a second order from a new customer
What happens after your company gets that first order from a new customer? If the answer is nothing, read carefully: placing one order does not make a customer. Changing customer buying habits starts with getting multiple orders from a new customer. You can encourage a second order by telling your customer more about your company and sending him/her a special offer to place that second order.

You did something right to get the first order. Make sure you make an effort shortly thereafter to introduce your company’s additional capabilities. This can be done on the phone, but it’s nice to have a simple company brochure that tells the customer what you are all about. Or a simple letter might do.

In terms of inviting the second order, why not send a special offer? Perhaps the offer is for a special price on a product or range of products, or perhaps it’s a discount on their next order. The offer should be time-sensitive (expire within 30 days or so.)

I know one tool distributor that had a 48 percent response rate to a new customer program! The program was very simple: a phone call within three days of delivery of the first order, a personalized letter with a special offer for a 10 percent discount on the second order if it’s placed within 30 days. Forty-eight out of 100 new customers placed a second order within 30 days. A 10 percent discount on one order is nothing when you look at the lifetime value of an active customer.

The real cost of this type of program is the cost of a letter (8 to 10 cents) and the margin cost of the discount offer. In this case, the distributor used the inside sales team to make the new customer call, a personalized letter stated the offer, the letter and a catalog were sent with the first order. You can see how easy this program is to do. It’s smart, too.

Think about it: how many times have you bought something from a store and they recognized you as a new customer, sent you an offer to order a second time and called you to thank you for the order and introduce themselves? You can probably count them on one hand.

Other ideas for your new customer offers could include: 1) A vendor-specific offer on product (I’m sure a few of your vendors would like to sponsor a special offer for new customers; 2) An on-site plant review of inventory needs; 3) A discount with a minimum order value; 4) Free chemical analysis; 5) Incentives (free product, free gift, discount) to place the third and fourth orders.

Follow up on literature
If you send product literature to a new customer contact or prospect, follow up within five to 10 days of the request. Why? Most distributors don’t. They send vendor literature via first-class mail or UPS, costing anywhere between 32 cents and $10 each, but never call to follow up and close a sale.

The same is true for other industries. Case in point: I personally called 10 office supply companies last spring and requested catalogs or other literature. No one called to introduce their services or products, or to follow up on what they sent. Yet they all spent between $2.60 and $8 to send me the literature. Some of the companies are large, direct marketing operations, like Staples and Viking. Sounds crazy doesn’t it? It is.

Test this program for two months and measure whether it makes a difference in new orders, quote conversions, product sales, etc. You don’t need a fancy computer system to track your success. Simply record each literature request and review whether or not an order was placed within 30 to 60 days of the follow up.

If you honestly don’t have the time to follow up, ask the vendor for help. Send a copy of the literature request to the local representative and put him/her to work for you.

Before sending literature, ask for the order

Leapfrog the call-literature-call cycle for a sale and ask for the order there and then. Perhaps you can offer a full refund if the product isn’t right. In the case of cutting tools, you often can’t accept returned merchandise, but for almost anything else, a risk-free purchase often earns you an order.

Often, the caller on the phone will make a purchase with some salesperson persuasion. Requesting the information is really a formality and most likely a habit. You probably routinely ask for information to be sent to you because the salesperson does not do a good job explaining what it is. You trust what’s printed on paper more. Most salespeople miss this opportunity to add value.

Win back customers that have gone away
Do you have a system that recognizes when a good customer has gone away? Do you even know how many customers are inactive? If you’re like most distributors, you don’t. The information is probably in your computer system somewhere, you just haven’t run the report. Nor do you know your customer retention rate. Retention rates show two things: 1) How many customers from last year came back this year, and 2) at what spending level (if they spent $4,000 last year, did they spend more or less this year?)

Sometimes efforts to reactivate customers turn into a last-minute, often unsuccessful, attempt by your field salesperson. A smart alternative is direct mail, with an invitation to come back. But first, you need a mechanism in place to alert you when a customer has dropped off. And you need to know what kind of customer he/she was (spending level/category).

This can be done by querying the “last order date” field on your computer system. Even the least sophisticated business systems have dates associated with orders placed. If your in-house staff can’t figure it out, send your order history to an outside computer consultant to find the data. It will be money well spent if you can win back even a small portion of the “gone aways.”

Think about how the magazine industry does it: you start getting renewal notices for your Sports Illustrated subscription well before it expires. The magazine begins warning you that it’s going to expire. And once it does, you are flooded with offers, letters from the editor and even phone calls to come back, usually at a discounted rate.

While your company may not need to be as aggressive as Sports Illustrated, do something to try to bring back customers. Marketing studies show it’s five times more expensive to activate a new customer than it is to sell to a current or former customer.

Perhaps in your business, 12 months is too long to wait to reactivate. Think about what time frame is right for you, and what your approach or offer should be, and do something to get the business back. Perhaps you’ve lost business because your contact left the company. You may not need an incentive. A simple, personal letter from the salesperson, sales manager or owner of the company may do the trick.

Better than mail, call the customer who has gone away. Have your senior salespeople make these calls. Prepare them with answers to objections and empower them to make decisions to rekindle the relationship and even generate an order. Some companies offer “bounty” rewards for reactivating customers, where salespeople earn a percentage of the sale in commission.

Write to your customers on a regular basis
Forget newsletters for a minute. When was the last time you sent an old-fashioned letter to your customers? Price increase letters don’t count. If your only communication to the customer is through your field salesperson, beware: it’s not enough anymore and probably never was.

Communication to the customer does not have to be a newsletter filled with company tidbits and the occasional personnel photo or crossword. Instead, put your pen to paper and tell the customer about the good things happening at your company. Customers are interested.

The letter can be from the salesperson who manages the customer account, or it can be from a manager, director or owner. What’s important is that it’s genuine and personal. It needs to project a personality for your company. If the owner has a good sense of humor, be funny in the letter. If your company has a serious approach to cost-saving solutions, project that in your letter.

Invite vendors to participate in the communication. They might provide an article, product news, a case study or something else of interest. Your customer base is a valuable audience. Make sure whatever you send them is of value.

The same holds true for your vendors. Communicating with them on a regular basis, by letter or other printed means, does a lot for vendor support in the field and for joint marketing efforts.

Get started now
In direct marketing, 80 percent of the work is thinking. Only 20 percent is action.

The six ideas suggested in this article are time-tested, effective, yet easy to produce direct marketing methods. If you spend time thinking about your customer base and your company’s unique capabilities, you’ll discover additional tools to help you promote your business. Each tool should provide enough information to solicit a sale, right then and there. It’s a one-step sales process. Some of the very best direct marketing programs are simple ones that virtually any company can implement.

The key is to get started now.

Cathy Veri formed Marketecture in April 1999, which offers direct marketing services and consulting to distributors and manufacturers in industrial distribution. She can be reached at cathyveri@hotmail.com.