Value-added services: Distributors consider the payback on ‘free’
Anyone who’s survived in business for more than a few days knows that nothing is ever really free—even if you don’t charge for a product or service, you still end up paying to produce or acquire it.
But even so, one of the most provocative findings in the MDM survey, Path to Profitable Services, is the number of distributors who are choosing to give something away, knowing they’ll get back something even more valuable—in the form of higher sales, market confidence and loyalty, or the opportunity to embed themselves more fully in a customer’s day-to-day operations.
“Many distributors, in fact, offer services as a value add and don’t charge their customers,” the survey report notes. That conclusion is particularly notable when you consider the top-tier opinions behind the research.
MDM conducts its annual survey to help Infor take the pulse of the wholesale distribution industry, styling itself as the only specialized source of “high-level in-depth resources” to distribution executives. Its credibility is directly linked to the business clout of its respondents: nearly half of them are C-level executives, the rest are middle to upper management, and the survey covers most of the major distribution sectors and all sizes of business.
Giving away to get something back
To understand the depth and importance of the trend, look no farther than the top five value-added services that distributors offered in 2017.
- An overwhelming 88.8% offered next-day/same-day delivery, only 55% of them at an extra cost.
- 5% provided technical or product training, but of those, fewer than one in five—18.8%—had attached a price to it.
- 5% had introduced flexible shipping methods, and none of them appeared to be charging extra for the option.
- 4% were supplying some form of inventory management service, only 25% as a priced extra.
- 3% offered jobsite delivery, 86.2% of them at no cost to the customer.
“Two-thirds of companies don’t charge for services because they say their customers expect that service at no cost,” MDM explained, referring to the segment of survey respondents who offer free value-adds. Half (49.4%) noted that their competitors attach no extra price to the equivalent value-added services, and nearly 15% said the added offerings didn’t significantly increase their costs.
And then, what might be the most telling number of all: 44.4% said they gained more value in their business relationships by not charging for added service.
Getting the word out
MDM did find that only one-sixth of respondents had conducted customer surveys to test the waters for added service fees. The majority, 58%, said they had introduced some extra charges with little to no pushback, while one in four said they had encountered significant resistance.
But the survey results also point to the promotional impact of giving customers the sense of getting something extra or special. Virtually all the respondents—nearly 92%—said their sales reps discuss value-added services with existing customers, and 37.4% bring them up with prospects. The offerings are good fodder for email and online marketing campaigns (59%), print marketing (56.6%), and website promotions (48.2%).
And just fractionally less than two-thirds (66.3%) have seen demand for value-added services increase slightly or significantly in the last year, while another 30% said customer interest has held steady. Only a handful said it had decreased.
The result is a crystal clear message for distributors: If you haven’t factored value-added services into your promotional mix, it might be time to start. And if your enterprise software or CRM module is what’s holding you back from delivering a competitive service offering, you might want to look for a cloud-enabled upgrade in your Christmas stocking.
- CloudSuite Distribution
- CloudSuite Distribution Enterprise
- Distribution SX.e