Recently I've had the opportunity to chat with a quite a lot of manufacturers and distributors about using direct online access to sales and service for customers and vendors — i.e., a sales portal — in their business strategy. We talked about the specific challenges they are facing, new changes in their industry, and how the Web seems to be the root of much of the change in technology.
What I’ve learned is that manufacturers and distributors are slow to adopting a Web-based sales portal in their business strategy. I discovered a few common — yet extremely important — threads in our conversations.
Top 3 Web-based Business Challenges for 2017
- Few manufacturers and distributors are ready — and only moderately willing — to begin using the Web as a tool to increase revenue and build better business relationships
- Few manufacturers and distributors are using advanced business-to-business (B2B) marketing techniques, such as content marketing and persona development strategies
- Few manufacturers and distributors feel that “eCommerce” — or digital sales and marketing technology — is an important part of their business future (yikes!)
To be honest, the last one shocked me. After pondering this for a few months, I think I have a better understanding of why they are not thinking about moving into this new direction. It comes down to the fact that historically manufacturers and distributors — because of their size and the complexity of their core business — are usually the last to adopt new sales and service or marketing technology. It’s simply perceived as too difficult for them.
In this article, I’m presenting several points about how the Web is guiding business growth for the manufacturers and distributors that are adopting online technology (including eCommerce). Hopefully these points will help you understand where your business is heading and how you can make a gradual transition in the inevitable digital revolution.
General Consumers (that's everyone) are now completely comfortable buying online
Consumers have been buying products online since the late 1990s. Granted, the folks doing the buying in the early days were taking a risk in utilizing new technology. But, by 2005-2008 it became a very common part of daily life and many security measures were in place to help buyers feel more comfortable. Today buying daily-use items, diapers, gifts, technology, or even ordering groceries is commonplace. General consumers are accustomed to researching products online, reading reviews and educating themselves about their options before they make their buying decision.
This trend has eased its way into the B2B world. Because people are now accustomed to this process in their personal lives, it’s becoming an expectation in their business lives. If you can research which camcorder is the best option for your family, why not research which [insert big business product here] is the best purchase for your company. Also, data shows that when buyers find a supplier that utilizes Web technology to help them make informed buying decisions, those buyers develop a loyalty to that supplier.
Big business is now in the Early Majority stage of the Web’s Technology Adoption Lifecycle
The technology adoption lifecycle bell curve described in Geoffrey Moore’s “Crossing the Chasm”
It seems that larger business organizations are shifting into the early majority stage of the technology adoption lifecycle. If you're not familiar with this term, it refers to the adoption path in which the masses begin using new technology.
Stage 1 – Innovators — the "techies" that must have access to new technology before anyone else
Stage 2 – Then the early adopters — people who are excited to be the first person to use the new technology
Stage 3 – The early majority — people that adopt the technology once it’s proven and bug-free
Stage 4 – The late majority — people that use the technology because it’s becoming mainstream
Stage 5 – The laggards — people that use the technology because they are forced to
It seems to me that the majority of businesses are now using Web technology not only for marketing their business but also for managing operations and customer relationships. They are engaging with customers online, educating users, allowing purchases online, and building business relationships.
However, this majority doesn’t include many manufacturers and distributors. They've told me themselves they have a reputation for being “late to the game” when it comes to sales and marketing technology. While most businesses are now utilizing Web-based tools to increase efficiency, improve customer relationships and drive up revenue, this new territory is a bit “scary” and unknown to manufacturers and distributors. Plus, they don’t seem to have the time to resolve the complexities of their specific business with Web technology, and they usually can’t even envision how they would use the technology in their business.
Manufacturers and distributors simply aren’t convinced that their investment of time and money will pay off.
There is some truth to their concerns. Simply put, building a Web application to help manage a manufacturer or distributor's business online is a lot of work. Very hard work. But the payoff is much, MUCH more than many realize.
Once the Web-based solution is in place, and running like a well-oiled machine, it automates much of the manual work that employees have been doing for years. Just imagine: Buyers now able to research products, build sales quotes, receive approval from management, and place orders online without needing to call a sales representative. Imagine the hours that have just been saved for that sales representative. (Not to mention the cost of labor and overhead!) No more taking orders over the phone or educating customers time and time again about the products.
The commom argument to this point is: “Well, our business and products are too complex. Buyers will have too many questions, and our website can’t answer them all.” Enter the age of content marketing!
It’s all about the content — content marketing, that is
Multiple research studies from Forrester Research, Pew Research Center and GE Capital have all shown that a staggering 80-85% of buyers use Web tools such as Google and supplier websites to research products and industry information. The suppliers that are early to the game are reaping the rewards of their effort, but how are they doing this? They are curating content about products and the industry for their buyers and potential buyers. Then, using that developed relationship (achieved through inbound marketing), they gain new customers and new orders, as well as more loyal customers. They are doing this while developing stronger authority in the marketplace.
This isn’t a coincidence or a “secret sauce” tactic. It’s Content Marketing 101. For years, marketing professionals and advertising agencies have preached that the glory days of advertising, i.e., paid media, are over. Those tactics simply don’t work like they used to. Now, to win at the game, you must put your efforts into providing customers with high-quality information in the form of blog articles, white papers, product details, videos, podcasts, etc., on your own website, i.e., owned media.
Again, this is “scary” new territory for most manufacturers and distributors, but the companies that are adopting this methodology (Grainger and Supply House, for example) are dominating the market.
“We can’t compete with Amazon,” you say?
Another complaint and/or fear that I heard from the manufacturers and distributors I've interviewed is this: “We can’t compete with Amazon.” Their prices are too low, their system is too good, and their service is too fast. These are all valid points but they are missing one opportunity to surpass Amazon… knowledge sharing.
Amazon is not in the business of helping customers find the perfect product. They are in the business of helping customers buy the product. Amazon is not interested in educating buyers. They just want people to buy from them. They are not an authority in any one market segment. They don’t have experts on their team that provide decision making wisdom to buyers. They don’t worry about these things, and this is where you can beat Amazon.
The reason companies like Grainger and Supply House are doing so well online is simply this: Their websites are designed and constructed to communicate and educate a very specific buyer persona. They are not only using the Web to help users buy products, they are also using the Web to help buyers become more knowledgable in the buying decision. And return to them again and again, because they were so helpful!
This is a hole in the Amazon strategy, and one that should be exploited to beat Amazon. Use your site to build relationships with your customers and gain their trust and loyalty. Price is a key factor in the decision making process, but it’s not the only factor. Ask someone what their primary motivation is for buying, and they'll SAY price. Big data proves otherwise.
Make your Sales Portal a knowledgebase to stay ahead of competition
Due to suppliers building their sales portals or B2B eCommerce sites as knowledge,bases they are providing their buyers the opportunity to use their sites as research tools. This is a great strategy, and buyers love it. The problem is that now buyers are expecting this from all suppliers. This is a significant problem, and it’s one that manufacturers and distributors who want to be successful have time to get ahead of, now. I’d estimate that they have until late 2017 to take action on this opportunity. Losing buyers to more informative suppliers may be painful now, but imagine when the competition is so strong that catching up will feel impossible, like pushing a huge boulder uphill with one hand.
Additionally, if you’re thinking that your particular market is too big to be dominated by small companies with just a blog, think again. Read about the dilemma between 3D Systems, a large enterprise in the 3D printing space, and FormLabs, a small startup of young ambitious engineers. [Note: Back in late 2012, FormLabs smashed their Kickstarter funding goal of $100,000 in merely three (3) hours and surpassed $1 million in funding in just two days!] This is a modern day example of David vs. Goilath, and a story that can be told over and over. Small businesses that are using the right Web tactics are bringing big businesses to their knees and disrupting “old business” styles on a daily basis.
- Uber vs. the Taxi industry
- Simple vs. the Banking industry
- AirBNB vs. the Hospitality industry, etc.
- Alibaba vs. you
Here is a list on Singularity Hub with more examples:
"12 Industries Disrupted by Tech Companies Expanding Into New Markets"
The future for manufacturers and distributors is bright as long as they begin adopting new technology — soon. Building out Web-based systems that include B2B eCommerce Sales Portals, knowledgebases about products and the industry, and engaging with customers through their "owned" Web channels are all important keys to succeeding online. There will be many manufacturers and distributors that lag behind the masses. Unfortunately, they are the ones that may not make it far into the next decade. Think of the many famous brands of manufactured products that no longer exist or dominate the economy, such as Remington typewriters, Viceroy cigarettes, Sony-Ericsson phones, Concorde airplane and Kodak cameras. No one wants to fall victim to Darwinian theory!
According to Charles Darwin, “Species that survive are not the largest nor the most powerful, not even the smartest or changing or improving fast; no, the species that survive are those that are best suited.” Perfectly applicable to your business climate, whether you have a small or large manufacturing or distribution company, you must be attentive to survive and stay relevant.