Tom Hammel 2017-10-03 01:52:22
IBS IS ELEVATING CUSTOMER RELATIONSHIP MANAGEMENT TO A SCIENCE Generally, when a distributor says, “We’re not a typical STAFDA house,” one’s inclination is to begin looking for things that prove them wrong. But Industrial Bolt & Supply Inc. (IBS) of Auburn, Washington is actually a different breed — more of an industrial MRO distributor than a “typical” STAFDA house. And when a business does things this differently, there is a lot to explore. How much differently? For one thing, IBS doesn’t sell power tools, hand tools, lasers, rebar, concrete bagged goods or fall protection. Its line card lists fewer than a dozen recognizable brands. The company’s few safety product lines are limited to consumable products, which holds true for all IBS products — the company goes to market exclusively with consumables that produce frequent, repeat business. The company’s single warehouse-based location serves a territory that covers Washington, Oregon, Montana, Idaho, Utah, Nevada, Colorado and North and South Dakota and Wyoming. IBS also provides customers with free customized parts storage systems and provides Vendor Managed Inventory (VMI), SDS sheet management and other services for them. The company’s “calling cards” are metal and hold parts. Nonetheless, STAFDA runs deep here. IBS is a privately held family business and is a “typical” second-generation succession story in some regards. IBS is also a loyal STAFDA member and has been since 1980. Michelle St. John, IBS president and treasurer, is a second-generation STAFDA board member, following in her father’s footsteps. But she is definitely stepping out of her parents’ shadows in her new role as STAFDA’s 2018 president. Michelle is also making history as the first female president in the association’s 40-plus year history. Derek Butcher, Michelle’s younger brother by five years, is IBS’s CEO. After a carefully executed seven-year succession process, Michelle and Derek purchased the company from their parents in 2007. That said, as in many family companies, Derek and Michelle have both worked for IBS since they were kids. As part of the succession plan, both siblings have held virtually every position in the company. With her sales and marketing background and history working for Proctor & Gamble, Michelle manages sales, sales management and marketing for IBS. Derek, who in addition to four years in sales, also worked as warehouse and operations manager, now supervises the latter two areas of the company. THE IBS BRAND IBS’s number one brand is IBS product; the company specifies and private labels an amazing 80 percent of its key product lines. This branding strategy, created by IBS founders Jack Butcher and his wife, Linda, when they launched the company in 1977, holds true. Today, in the face of Amazon and other online competition, it is more valuable than ever. “Branding is key to our proposition, Michelle explains. “It’s one of the insulators that protects our margins and also protects us from threats like Amazon. We brand as much as we possibly can. If you look at the categories where we make our highest dollar sales — abrasives, cutting tools, chemicals and electrical products — probably 80 percent of our products are IBS branded.” Over the years, IBS has developed private label relationships with some of the biggest names in the industry, labeling some and having others produced to IBS specifications. “The biggest challenge many of our customers face is cutting through work hardened materials like stainless or exotic metals that are really difficult to cut,” Derek explains. “Consequently they burn up their tools and need frequent wheel change-outs. So we’re always looking for manufacturers who will partner with us to develop products that are going to perform better in those expensive labor and material applications. “We might alter the composition to provide a feature that you can’t get from another product — perhaps a longer life or faster cut, depending on a specific application.” The exclusivity created by the IBS brand counters one of the small distributor’s biggest deficits, the buying power disadvantage against larger competitors. “We don’t promote many brands other than our own because we can’t compete head-to-head on price with larger competitors who can buy better,” Michelle says. It’s no secret that larger companies can buy better, but if we can offer enough ancillary value, bundle it with a free cabinet for their shop, out-work the competition and provide services such as shop organization, training and safety programs, plus buy back their dead inventory to bridge that value gap, then we can win.” So, instead of competing brand for brand, IBS positions itself as a collaborative solutions provider for its customers. It uses a multifaceted system to demonstrate, document and reinforce the value it brings to customers in exchange for slightly higher margins, which in turn enable IBS to provide more services to those customers. Make no mistake, this is labor intensive selling, but when done right, both IBS and its customers profit; IBS via higher margins on sales and customers with gains in productivity and profitability. In addition to the IBS label and unique product formulations, IBS differentiates its products with smarter packaging, too. Cans of IBS spray paint, for example, illustrate the color both on the cap and on the can itself because IBS salespeople often noticed that cans of paint in customer shops were missing their caps and it was maddeningly difficult to identify the color inside. IBS aerosol products are also color coded, such as green for cleaners, red for lubricants and so on, again, for easy identification. “It’s all about labor-savings,” she explains. “Our goal is to turn our customers’ maintenance departments into profit-centers, and that means helping them reduce equipment downtime and labor costs in as many ways as we can.” LOYALTY IN A BOX This visual management strategy also applies to IBS parts cabinets, which are typically provided to customers free of charge. The cabinets and bins then become the sites for VMI replenishment. Inside the lid of each black and gold IBS parts bin is a full-sized chart showing the location, type and actual size of the bin’s contents. Further, the cabinets and bins themselves have color-coded labeling systems that make finding various products quick and easy — electrical parts, fasteners, brass parts, screws and so on. “The lid charts show the part number and full description,” Derek explains. “The parts organization that we provide with our bins and cabinets makes the mechanic’s job easier to do. The faster they are, the more profitable they are, and that’s our job — to make them profitable.” For parts or products that don’t fit easily into bins, IBS provides visual management labels for wall boards or other storage areas so customers can see at a glance how many of a product they have on hand and when they need to order more. “Once we have created a spot for a particular product, replenishment becomes really simplified and manageable,” Derek explains. SOURCING IS CRITICAL This emphasis on “demonstrably productive products” makes sourcing a key function at IBS. Marketing director Thomas Whalen has been with IBS for 10 years. In addition to his marketing activities, Whalen also sources new products for IBS, primarily from STAFDA and ISA member companies, although his team also periodically attends the National Hardware Show, The National Industrial Fastener Show, the National Safety Congress and FABTECH. “STAFDA is the only show that I do every year,” Whalen says. In sourcing, Whalen’s top priority is finding suppliers of high-quality, innovative consumable products that will private label product for IBS. Those products with clearly demonstrable benefits for users make it easier for IBS salespeople to demonstrate them for customers. “Demonstrating our IBS branded products in front of a customer is a major differentiator for us,” Whalen adds. “Anyone can go into a Home Depot and look at products, but unless they know what a product can do, it is of no value to them. Demonstrations are where we really shine with our customers — showing them how our products will help them be more effective, and showing them the value that we bring them.” IBS’s top product categories include abrasives, chemicals and spray products and cutting tools. Whalen observes that safety products have taken off for IBS in recent years, too, but as always, IBS focuses exclusively on consumables, which in the safety category means gloves. RELATIONSHIP SCIENCE Demonstrations also help IBS manage the customer relationship and establish a pattern of documented added value. The IBS Customer Bill of Rights, given to each new account, lists as its first promise, “IBS customers can confidently expect: High quality products guaranteed to perform as demonstrated.” Simply put, the secret is to only make promises you already know you can keep. Then repeat the process with new solutions. This requires some deep diving into customer processes for opportunities, but it also gives IBS another handle by which to direct relationships. Essentially, IBS elevates relationship management to a science. “Even with products that our competitors carry, our salespeople go out and make sale after sale, simply because they demonstrate them,” Michelle says. “The product could be as simple as a drill tap and yet we continue to use it as a prospecting tool every day. We might ask, ‘If you’re drilling and tapping, you’re using four tools in multiple steps which may take up to five minutes, right? If I could show you a way to do it in less than a minute with one tool, would that save you time?’ “And that is exactly our value proposition: how can we help you do more with the tools that we provide so that you have more time to focus on those things that make your operation money.” Product demonstrations set realistic performance expectations in the mind of the customer. The result is a cumulative history of positive performance, both for IBS products and its salespeople, which is fundamental to IBS’s goal of positioning itself as a true value-added partner for its customers. “Value added literally is our identity,” she adds. “If we’re doing our job, the customer will profit from their relationship with us. They might spend a premium with us, but that bit of extra margin enables us to provide the services that we do, such as free parts cabinets, managing their inventory, sourcing special needs and many more. How hard we’re willing to work for our customer is one of the core factors that separates us from our competitors.” The IBS formula of full service also puts the company into a broad range of markets, from agriculture, heavy equipment, autobody, facilities and transportation to municipalities, military and mining. The average IBS order is about $350, but each sale is all in consumables, so each invoice is replicated again and again. “SUBLIMINAL” SELLING IBS sales reps provide VMI services and survey each customer’s processes and product usage habits to ferret out areas for process and productivity improvement. IBS conducts time studies, measuring the time it takes for workers to access the parts they need from task to task, then proposes ways to trim nonproductive minutes and eliminate off-site parts runs. Getting feedback is an ongoing process. “We constantly solicit feedback from our customers, our salespeople and our internal people,” Michelle says. “One of our core values is to cultivate a culture that is constantly improving, so we’re always asking what can we do to be better? We conduct proactive business reviews where we ask things like, ‘What haven’t we brought you? How would you rate this relationship?’ If they rate us an eight, we ask, ‘What would we have to do to be a 10?’” All of these services give IBS the tools it needs to cultivate and manage customer relationships on an almost subliminal level. “We do all this surveying and feedback gathering to help us manage perceptions,” Michelle explains. “We try to create expectations that are manageable, then deliver on them, and then manage the perception. We want to understand their perception and live into that. We ask, ‘Did your order arrive as expected? Did your product perform as demonstrated?’” Time after time, IBS sells on and reinforces the messages in its Customer Bill of Rights, which serves as the cornerstone of each customer relationship. FACING GIANTS Today, in the face of Amazon and other goliath competitors, the IBS business model and Customer Bill of Rights face their greatest challenge. However, Michelle reports that in the last 10 years, IBS has had seven of its best years ever, and 2017 is its best year yet. “I love competition; we’re a better company when we face competition. So while Amazon is a threat, everybody who survives is going to be better because of it. Manufacturers have to be part of that equation — they need to protect their distribution channel.” Amazon has defined the customer experience and set expectation standards, but Michelle believes that smart distributors can create a customer experience that goes beyond what Amazon can provide. “Amazon is a source, but they’re not a resource,” she says. “We want to be a source, obviously, but more than that, we want to be a resource. Our challenge is to make the connection so profound and the relationship so satisfying and mutually profitable — with services and solutions — that our customers come to depend on us as indispensible partners.” “In spite of Amazon and other e-commerce competitors, I still think there is going to be a need for people who do what we do,” Derek adds. “So we will continue to have that face-to-face communication and selling technique that is going to improve our customers’ lives. We are solution oriented and we’re going to keep showing our customers that there are better mousetraps in the world. “And, as Michelle mentioned, we are developing our e-commerce platform right now too, into a vehicle for our customers to look up invoices, technical information and repeat purchases. We want it to become a satisfying extension of our relationship with customers, one that expands our avenues of communication with them beyond the purely face-to-face element, even though our most prominent face is our salesperson.” All of this just scratches the surface of the IBS difference. If you get a chance to meet and speak with Michelle St. John as she serves her year as STAFDA president, you will be richly rewarded with fresh perspectives and keen business insights. There truly is an IBS difference and it is well worth exploring.
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