How distributors can align the right messages with the right customers.
As a distributor, you know that packing slips provide an excellent opportunity to promote your business. That’s because your existing customers are the best source for growing sales. It’s a no-brainer that you should want to reinforce your value proposition whenever you send a package to one of your happy customers.
You’re going to print the packing slip, anyway. As a distribution industry leader, you’re probably using a software application such as UnForm to professionally display your company logo along with details of the order on the packing slip. After all, your customers like having confirmation in-hand on what’s inside the box and where they bought it from. The packing slip may also prove useful in case the shipping label gets damaged in transit. What this also means is that the incremental costs associated with paper and ink used to print a promotional message on your packing slips is virtually nil.
However, many distributors give little thought about the message. Too often, distributors waste this valuable opportunity by printing mundane packing slip messages such as, “Thank you for your business.” Although it’s nice to be nice (as mom might say), the problem is that undifferentiated messages such as these do not promote more of the kind of business you want to do. How can it be otherwise when the text has little to do with how your company relates to its individual customers?
“Sales and Marketing Optimization: Developing Competitive Value Propositions in Distribution” is an excellent resource for distributors who want to learn how to communicate more effectively with their customers. Published by the National Association of Wholesaler-Distributors’ (NAW) Institute for Distribution Excellence, the book suggests that distributors deliver focused messages that are designed to resonate with the various customer groups they serve.
On that point, the NAW recommends that distributors use Customer Stratification to gain greater insight into their customers. Testing the variables of buying power, cost to serve, loyalty and margins, Customer Stratification segments the distributor’s customers into four groups, as follows:
- Core – customers who are most loyal and profitable
- Opportunistic – customers who pay good gross margins but are not loyal
- Marginal – customers who do not provide high revenues or loyalty
- Service Drain – customers who generate low profits and have a high cost to serve
Understanding how an individual customer aligns within the Customer Stratification model can empower the distributor to fine-tune its marketing message. The products and services that are most relevant to the customer should be emphasized, accordingly.
So, how does the packing slip fit into this? As suggested above, the packing slip is a high-visibility touch point for communication that tends to be underappreciated by many distributors. We are suggesting that you think about the humble packing slip anew.
A caveat is in order. We do not want to imply that packing slip messages can substitute for a comprehensive customer communication strategy! The thought experiment is intended to help you think about the problem using a familiar example. Ultimately, you should want to apply these concepts to everything you do.
A technical note is in order, too. Your Customer Stratification software will need to pass each customer’s value into your enterprise resource planning (ERP) system. Then, you can apply the concepts discussed below and program your document management software to dynamically output to the packing slip. (The screenshot above shows the Customer Stratification Type displayed in the Customer Inquiry screen in Infor Distribution FACTS, a leading ERP for wholesale/distributors.)
So, how might you leverage the insights gained from a Customer Stratification analysis to deliver on-point packing slip messages that resonate with the four customer groups you serve? Consider the following examples:
Core – The packing slip message sent to Core customers might be crafted to highlight a value-added service your company can offer to these, your most valuable customers. For example, you may have sales engineers on staff whose specialized knowledge of the industry is useful to customers who want to bid on complex construction or industrial projects. Or you might have opportunities to rent equipment to customers who otherwise wouldn’t have the need to purchase the item. And so on.
Applying business logic from your ERP application and outputting the data through your document management application should be used to personalize the message. To continue the example above, if you know that a Core customer has purchased an item from a product class that you support with in-house sales engineers, your message might read: “Did you know that we support [PRODUCT CLASS] with industry experts who can help you win more bids? Call us today for details.”
Simply put, the goal of the packing slip message to Core customers is to explain how your company’s value-added services can help them be more successful.
(Of course, Core customers should be getting much more than specialized packing slips. From the moment the order is received to when it’s picked, packed, shipped and delivered, your people should know that they’re handling a VIP customer. But that’s another discussion.)
Opportunistic – These customers tend to buy from you when their primary suppliers are out of stock. Put another way, Opportunistic customers represent your competitor’s best customers. To win over this customer group, the NAW advises that you do not resort to price cutting. That’ll only turn Opportunistic customers into Service Drain customers (see below).
Instead, consider inserting a packing slip message to inform Opportunistic customers that you can do more for them. Let these customers know that you can be their go-to source for more of what they need. Again, a best practice is to output variable product information from your ERP system into the document management application that outputs the message onto the packing slip: “If you like [PRODUCT X], call to ask us about [PRODUCT Y]”.
The dynamic generation of personalized packing slip messages might seem like a small thing, but it demonstrates that you understand your Opportunistic customer’s needs. It can be an important point of distinction that helps you win more business.
Marginal – Due to their low revenue and low loyalty, you should avoid over-committing your valuable sales resources on Marginal customers. Behavior modification is necessary if you wish to maintain mutually beneficial business relationships.
This suggests a packing slip message that encourages Marginal customers to access low-cost resources such as your self-service Website. Combined with the insertion of variable data, the packing slip message can work towards the goal of alleviating pressure on your customer service representatives: “Visit XYZ.com for greater selection and pricing on your next order of [PRODUCT CATEGORY].”
Packing slip messages should be part of your strategy to lower the cost to serve among Marginal customers.
Service Drain – Service Drain customers typically purchase in volume and have a good degree of loyalty. The problem is that Service Drain customers are net money losers because they demand a high level of service from you. It’s critical that you communicate the value your company provides as a way of nurturing a more constructive, win-win business relationship.
Your packing slip message should affirm your value proposition to Service Drain customers. Output a message that relates to the specific industries you serve. Once again, an interface between your ERP system and document management software is helpful for inserting the appropriate message. For example, if you know from the ERP that the customer is classified as a manufacturer, the message might read: “Got lean? Learn why manufacturers say that our JIT stocking services are second to none.”
Service Drain customers need to know that your services are worth paying for. Reinforcing your value proposition with packing slip messages can contribute to building your brand and improving your bottom-line profitability.
As you can see, how you choose to use the packing slip matters. Placing the right message with the right customer can play a small part in your greater communications strategy of helping your distribution business cultivate more of the kind of business it wants to do.