Quit Relying on Distributors
When it comes to meeting someone you’ve spoken to over the phone – but not in person – you can’t help but have a preconceived notion about them. As I was waiting to meet Dominic Mazzone, a serial entrepreneur and Canada’s digital guru, I expected to see someone that was, well, geeky. What I ended up seeing was a bit more art than science in a tailored Italian suit that looked more like a young Pacino than a Mark Zuckerberg. After interviewing him it all made sense as the magic formula for digital transformation isn’t all about tech, but more a blend of art and science and this combination is about to turn the manufacturing model upside down.
MB: Dominic, you deal with all kinds of different industries and businesses but what are the real blind spots out there right now when it comes to manufacturing and distribution?
They seem to change day to day but the blind spot that is most glaring lately is plain old denial. People hire me to bring about change, and to do that I need to be a denial killer. I always bring that to my own businesses, my clients and when I speak publically. So in that spirit…the days of owning a business and putting it on auto-pilot to churn out money for 30 years, are gone. The days of a business being handed down from generation to generation and surviving under the same business model, are gone. And the days of letting distributors own your end customers, are gone…however, most businesses and especially manufacturers still don’t want to face this, hence all the denial.
MB: Definitely some tough realities but are you saying that manufactures should break their distributor relationships?
Absolutely not, but what I am saying is that manufactures need to form a relationship that most of them don’t have, an end-customer relationship. Distributors are a necessary evil that block the end-customer relationship and they are in the “sell as much stuff as we can for the highest margins” business so the day you can’t provide that anymore, your relationship with them is over. As soon as you become undesirable either through your pricing, products, delivery, or anything else a new competitor can provide that you can’t, you’re gone. If you are sitting there thinking there is no way your distributors would do that to you, or you have rock solid agreements that won’t allow it, then what about the new distributor that pops up and crushes your “loyal” distributor and leaves you out in the cold? This is the reality today and its war, but those that have armed themselves with great weapons have a great shot at winning.
MB: What are the weapons?
Smash everything you know and create a platform that lets you actually own your customers and emblazon your brand in their brains. The easiest way to do this is through an aggressive and comprehensive digital strategy. I am not just talking about a website. I am talking about a way to bring in tons of customers into the brand, get them into the culture, get a hook into them and make them loyal. Give them tools, make it easy to do business with you, and for God’s sake actually sell them something.
MB: I can hear your excitement about this but give me an example.
Sure. Let’s say you’re a shoe manufacturer and you sell your shoes only through distributors because you are in fear of angering them if you sold direct. These distributors sell your shoes and about 100 others, and they constantly grind you on price. Then you decide to get smart and digitally transform your business. You create a strong brand and a website that is more than just a static brochure. You create an incredible front door right that makes it exciting to walk through. When your customers arrive to the site there are a lot of things for them to be able to interact with, thereby interacting with your company. I call this “Dynamic Interaction” and its part of my 4 pillars of digital transformation. Your customers are now excited enough to actually do something, and low and behold, they spend time on the site interacting, but the real centerpiece is that they can buy a pair of shoes. This is just the first step because now you own this customer and you can market to them and sell them more things and it also allows them to bring more people into your world, not your distributors. In addition to this, digital marketing is kicking in to bring new customers to your site and once they have arrived, we use tactical strategies to follow people around the web for the next 500 days to continue to get your brand in front of them. YOU FINALLY OWN THE CUSTOMER!
MB: This is a 2 part question. 1. I know it is happening but it’s hard to believe that following someone around the web is actually allowed? 2. Aren’t distributors going to get pretty cranky about you selling online?
You’d think it would be illegal but it’s not and Google is one of the main providers of this platform that is being used everyday. We do this for all kinds of clients and I have done this for my own businesses, and have had great results. In fact, for certain industries that have competitors with strong Facebook followings, we can actually target your competitor’s followers and place ads in front of them. It’s the Wild West out there and it’s good to be Wyatt Earp.
Distributors aren’t going to get cranky if you structure the deal right. In fact, imagine someone comes to your site and the functionality of the site tells them, “You are 10 minutes away from a location that has the shoes you want.” This is completely easy to do and it will help push business to the stores, but now you own these customers and they are going to the stores with your shoes in mind. In addition, there are other ways to structure this to bring the distributor in on the sale but you’re in the driver’s seat because you own the customer. I don’t care if you are selling something like fasteners, a relationship can be built and your brand can be built into a juggernaut.
MB: So this isn’t just a switch to marketing, it’s actually a switch of the model itself.
Exactly. People are waiting for you to tell them what to do. This is what makes Apple so successful. I have owned Apple products and I am not a fan, but what I am a fan of is their marketing because they create experiences, not products. They have actually been able to make you feel like you’re 17 and there is a party going on, and if you don’t buy their products you’re the loser at home watching reruns of the Love Boat. In my eyes, Apple is a marketing company that happens to make products. Not the other way around.
It all starts with having a fantastic brand that people can relate to, and brands can be built. Some people might think that they have a boring product and there is no way to brand it. I say that is absolute B.S. Because who would have thought you could brand duct tape or glue? I can’t help but buy Gorilla Glue or Gorilla Duct Tape when I have a choice. That’s good branding, and I promise that there isn’t a company out there that can’t be branded to smash their industry.
However, this shouldn’t be viewed as a science experiment. It’s a giant artistic white board session and there’s nothing more exciting than taking a company that has been stuck in a model and transforming them into what I like to call, Customer Acquisition Engines. It just brings the energy of the company and its employees up about 100 notches, leading to a surge of revenue growth. There is almost nothing more exciting to watch, and for manufacturing companies this is imperative because it allows them to quit relying on distributors and own their customers!
Mark Borkowski is president of Mercantile Mergers & Acquisitions Corp. Mercantile is a mid market M&A brokerage firm. He can be reached at www.mercantilemergersacquisitions.com