Someone once said,
“Data is important. Once analyzed it becomes information.Information analyzed becomes knowledge, but knowledge, when utilized, can be powerful.”
The output, from a business viewpoint, is increased intelligence to enable decisions to be made. The more you know, the better the quality of your decision-making.
Everyone has experienced the benefits of improved marketplace intelligence. Think of the plethora of financial newsletters that espouse stock opinions; the websites that support fantasy baseball leagues; and resources like ACNielsen, who pioneered the concept of market share in 1935, which tracks television audience ratings to justify advertising rates and tracks consumer purchasing preference from over 13 retail channels, and J.D. Power & Associates satisfaction studies which are used to improve customer service and as a sales tool. Each is a piece of information that someone uses to determine “how to win”.
Within the electrical industry there are a number of customer and product data tools that can be used to help:
- Understand the current position of your company in the eyes of your customers, suppliers and employees to assist in the development of your strategy.
- Identify which markets to serve
- Determine what lines to carry, or to stock more aggressively
- Identify expanding product categories, and products, to stock and sell.
- Understand sales opportunities
- Uncover underserved / undersold product categories
- What to stock, how much to stock, what not to stock
- Understand stocking and pricing trends
- And more
The key to winning is knowing more about your market and your customers than your competition. To do that, you need data to convert into information.
Distributor Data Points
Distributors currently use some intelligence gathering tools. They include:
- Qualitative Resources
- Customer satisfaction surveys
- Customer perception surveys
- Focus Groups and Advisory Councils
- Customer interviewing
- Quantitative Resources
- Manufacturer Information from NEMA, anecdotally, or from systems like Sylvania’s “The Source” or Leviton’s MKIS
- EW Hotspots, www.ewhotspots.com
- Products from DISC, www.disccorp.com, such as DataSearch, MarketTrack, and CountyLines
- Dodge reports
- Information from Dun & Bradstreet, www.zapdata.com, your local Chamber of Commerce and state and federal resources.
Let’s start with a brief overview of each tool:
Customer satisfaction surveys: Most customer satisfaction surveys are conducted on an annual basis and consist of asking customers questions on different service attributes. Many are conducted via hardcopy with some recently moving to be e-surveys. The key to the effectiveness of these surveys is development of the questions, although the data is “a moment in time” and hence, if done annual, is an aggregate of customer experiences which could be clouded by a recent experience.
Another customer satisfaction trend which is emerging takes its roots in the automotive and retail sectors – ongoing customer satisfaction initiatives (CSI) where customers are asked, after each transaction, to rate the experience of that transaction. Next time you visit Staples, or your wife visits Home Depot, check the bottom of your receipt and take the online opinion survey.
Customer Perception Surveys: These types of surveys can be very effective in helping you identify your strengths and weaknesses versus your competition. Traditionally they ask respondents to rate decision-making criteria in order of importance and then ask the customer to rate your performance as well as your competitors from whom they purchase. Combined with open-ended questions, valuable, actionable, information can be elicited.
Focus Groups, Advisory Councils and customer interviewing: Sometimes the best way to gather information is to talk to people. Depending upon the issue and the audience, focus groups, advisory councils and one-on-one interviews can provide a wealth of information, especially if the effort is conducted by a knowledgeable third-party. Why a third-party? The third-party enables an environment for an unbiased conversation, provides anonymity and a more comfortable, non-sales, environment for the respondent. A “knowledgeable” third-party can “read between the lines” and ask ad hoc, pertinent questions to solicit additional input.
Manufacturer Resources: While many of us think that manufacturers should have good information tools that can be used at the local level, the unfortunate reality is most don’t. While many have access to NEMA information, this information is based upon shipments, is typically for a broad geographic area and the information is frequently not shared throughout their organization. Some manufacturers have taken the step to create their own resources, a la Sylvania’s The Source and Leviton’s MKIS, both of which are databases that these companies make available to their distributors to support local market research and lead generation efforts. Other manufacturers may offer comparable.
According to a fairly recent survey of 70 distributors conducted by CMG/ARA, only 33% were providing POS information to more than 3 manufacturers, and 50% were receiving some level of competitive research from their manufacturer. Unfortunately, Rockwell, Philips and Square D, were the only manufacturers consistently mentioned as providing information, such as key items to stock and market share.
National Data Resource: Other popular data resources which can be very effective at providing local market information, potential, market segment sales projections, and product category projections are Electrical Wholesaling’s EW Hotspots (www.ewhotspots.com); DISC’s (www.disccorp.com) array of electrical industry specific data which is projected based upon government statistics and has a 22 year track record of accurately projecting industry performance; and project-based resources like Dodge reports or residential housing starts. Sources like EWHotspots and DISC can be good tools for determining local marketplace share and identifying additional local marketplace and segment opportunities.
An informational area that has lacked within the electrical industry is the ability to mine POS information. This is especially true for distributors who can mine their information but have nothing to compare it against. Most manufacturers who receive POS from distributors utilize the information solely for sales compensation. Distributors, to date, have not had a resource to compare their customer purchase information versus regional or national averages. This is changing with the growth of Vista Information Services, a division of Activant.
Since 1992, Vista has been managing a service designed to capture sales information in other industries. Activant shared the concept of Vista with IDEA in 2003 and, with the encouragement of IDEA, began developing an electrical industry market intelligence service based upon POS information.
When asked why IDEA encouraged Vista, Mike Rioux, president of IDEA commented, “Highly successful supply coordination is dependent upon shared information between trading partners. This information may include product/price files, inventory levels and point of sale (POS) data and more. POS information provides distributors and manufacturers alike with powerful marketing intelligence and insights including market share, trends, price points, brand and product performance and popularity as well as sales volumes, all key components for a company’s strategic and product planning process.” IDEA is focused on data warehousing and electronic interchange to “chop” costs out of the channel. Vista complements IDEA as it is focused on product level market intelligence.
Currently receiving information from almost 70 distributors, national chains and independents. throughout the country, Vista has experience in the hardware, lumber and automotive industries of gathering product level information, confidentially aggregating the information for comparison against regional and national trends and then projecting the information. The resulting information can then be used by manufacturers and participating distributors to identify opportunities to individually grow their business.
The company has been building its electrical infrastructure for the past 18 months and is preparing to provide information in six product categories: power supplies, incandescent and fluorescent lamps, ballast, dimmers and electrical test materials with switchgear and lighting fixtures coming shortly, quickly being followed by other categories.
Participating distributors, of which over 95% are NAED members, represent over 12% of the industry sales volume, helping provide accuracy to the system. As more distributors participate, the quality of the data will increase and reliance upon projections will diminish, but to date, the projections have essentially mirrored manufacturer estimates and NEMA generated information, but at a more regional level.
What is Vista?
Vista purpose is to track, and project, item level product sales, based on information gathered at the distributor point-of-sale. Participating distributors and subscribing manufacturers receive detailed information on sales, brand market share, marketplace potential, top selling SKUs, average pricing more. The reported information, which is protected via high security levels and with participating distributor names never revealed, differs for distributors and manufacturers.
From a process viewpoint, the data is timely. Information is electronically sent from the distributor to Vista, who then normalizes the information for processing. To date Vista has integrated with all of the major ERP systems and only needs flat files from a distributor.
As many know, distributors have historically been reluctant to share product quantity information with manufacturers or third-parties. Current distributor panelists explained why they participate with Vista:
- “We agreed to provide data mainly because what manufacturers come to us with, is not even remotely accurate. NEMA might be good for manufacturers, but it is useless for a distributor.”
- “We have not had accurate market potential information presented to us by manufacturers other that Rockwell and even their figures leave something to be desired. The information will help us gauge what we may not be selling that we should be selling.”
- The value to us is that we can see across a region, what is being sold. The NEMA numbers are too broad and manufacturer salespeople don’t understand it”.
When distributors were asked in the fall survey was what type of information they would want to receive in exchange for submitting POS data to a third-party, distributors responded:
- Total sales by product line
- Total sales for each SKU, by product line, by SIC
- What products are being sold into my market (that I am not carrying)?
- Benchmark pricing information
- Top 100 SKU’s per manufacturer, based upon units sold
- Product/product category sales potential
- Product, and manufacturer, share in my market area, by market segment, by manufacturer
- Local and regional product price points
- Top new product SKUs
- Estimated market potential for product category and/or SKU
- Top 10 items or Top 3 categories for time period
- Product usage by SIC
- National, and ideally regional, inventory turns by product
While Vista will not be providing all of this information, participating distributors will receive much information that will enable them to better identify opportunities to improve their business as evidenced by the sample report that distributors will receive
Manufacturers who have subscribed to view the aggregated information see the potential to better understand distributor needs and understand local market trends. According to one manufacturer, “the Vista information has the potential to significantly improve our sales and marketing planning with our partners. We could then provide product category guidance based upon local/regional information rather than national data. Key strategic information such as average unit price/SKU vs. competitive products, pricing trends by market segment, local growth rates, up-sell opportunities and more would be available”.
While getting POS data from distributors would be the “holy grail”, according to another manufacturer, gaining predictively accurate information that could guide manufacturer decisions and that benefits participating distributors would help improve distributor sales and profitability. Better sales strategies could be developed, more informed pricing decisions could be made, and inventory would be better managed.
Increase Your Intelligence
The adage of “the more you read, the more you learn” holds true for improving market intelligence. The more data sources, both quantitative and qualitative, that you can access, the better the quality of your decisions and the ability to drive your business to improve sales and profits.
As the distributor definition of marketing expands to incorporate market research, usage of cost-effective quantitative resources such as DISC, EWHotspots and Vista will become more critical to capturing market share. As you think about 2008 and beyond, how can you improve your market intelligence?
For more information on Vista Information Group, visit:
- http://www.vistainfoservices.com/services/electrical-distribution or
- contact Scott Schaufelberger at
- 925-449-0606 x16241