Black and Blue Battle
Tips For Winning Against The Web
Industry companies today face a new and difficult competitor for pen sales – online, low-price companies.
Sherry Kennedy just can't seem to escape it. Quite often, she says, customers come barking to her about the latest low-priced pen deal they found online, demanding to know why she can't offer the same. "It is a headache, a tremendous headache," says Kennedy, owner of A-Z Specialties (asi/490860), a distributor in Duncanville, TX. "It is my pet peeve. People ask, 'Do you have competition' as a business owner? I say, 'only the Internet.'"
Kennedy's dilemma is becoming more common among distributors in today's marketplace. Increasingly, they're finding themselves up against cutthroat Internet players that base their entire sales strategy on pricing alone. What's more, of course, is these online sellers are working outside the established supplier/distributor/end-user industry business model, letting them operate on the thinnest of margins.
No doubt, it's not just distributors feeling the online price pressures, it's suppliers as well. While industry executives say stiff online selling competition occurs in almost every product category, writing instruments attract the fiercest fights on price. "Every time you turn around there seems to be another order-direct company that has popped up," says Chris Flynn, national sales manager for Fields Manufacturing (asi/54100), a supplier based in St. Cloud, MN.
Part of the problem may lie in the fact that end-users are becoming savvier in searching for promotional products. Too many corporate marketers who once relied exclusively on distributors for all of their product ideas now "go online at 11:30 at night, find something and pick it," says Harris Cohen, president and CEO of All-In-One (asi/34256), a supplier based in San Diego. "We see a lot of that and I think there's going to be more and more of that."
Cohen may have pinpointed the source of the problem for promotional products companies today. Buyers are more inclined now to research products and promotional programs online before even contacting a distributor or vendor to get a quote or advice. And, when it comes to pens, this leads a purchaser to come across hundreds of websites that are prepared to sell them imprinted writing instruments at an extremely low cost.
"We're seeing this play out dramatically in business-to-business sales, the fact that customers these days are much more empowered with information," says Matthew Dixon, executive director of The Corporate Executive Board Company, a business consultancy based in Washington, D.C.
Today's customers "have a much better sense about their own issues," Dixon adds, and "have a much keener sense of what they have to pay for products and services" because they have access to so much more information via the Internet.
Trends seem to indicate that by the time a distributor hears from a given client it's very possible he's already made up his mind. "The average customer is about 60% of the way through the decision process before talking to a salesperson," Dixon says. "Twenty years ago, distributors had to sit down with the customer and the customer had no way to really understand what kind of promotional products" they could get. The distributor "had to actually teach them that stuff."
Of course, that's just no longer the case, as today's buyers can simply scan the Web to know what's out there – and in the case of imprinted pens, easily make a purchase without ever speaking to a traditional ad specialty provider.
Betrayal or Just Business?
Partnerships between distributors and suppliers to offer unprecedented service and product offerings is one way the industry is fighting back against online companies. But that relationship has grown more complicated lately, as well.
Recently, after meeting with a client, Kennedy wrote an order for 3,000 pens from one of the industry's largest pen suppliers. She wasn't halfway to her car before the customer ran out to stop her in the parking lot and showed Kennedy a catalog in which she'd found the same pen for four cents less, from a Web-based company unaffiliated with the industry.
As Kennedy found out, this industry supplier was selling pens to the online firm her client had discovered. The cost was pennies less than the supplier normally offers to industry-affiliated distributors, simply because the online company was purchasing pens in such bulk that they could negotiate lower price points.
In this case, the price "was less than EQP," Kennedy says. Kennedy says she called the pen supplier to complain that this was corroding the industry's business model and was told, "we're still going to sell them our pens."
In fact, the appeal of doing more business is tempting industry suppliers to sell their products to online vendors for less, even if it means hurting the business of preferred distributor clients. In Kennedy's case, it left such a bad taste in her mouth that it caused her to pull back orders from this particular pen supplier, a company she's worked with for years.
Admittedly, some suppliers say it's too enticing to turn down web-based companies even if that means undercutting pricing for other distributor clients. "We can't be getting the best pricing if these people are selling products for 20 cents less," Kennedy says. "We get special pricing. OK. But we don't have best pricing."
But the disloyalty works both ways, suppliers say. There are distributors who complain about a lack of support from suppliers, then turn around and say, "they had a good sized order and they went overseas" directly to an unknown factory instead of working with an industry supplier, "and it's no big deal" to the distributor, says All-In-One's Cohen. "I'm sitting right there!" Cohen adds, appalled at distributors who are unaware of the callousness and insensitivity of their comments.
What's more, suppliers admit that online vendors often give them more marketing might. "Whereas the distributor gives us exposure to that geographic area, an online company gives us exposure across the country," says Jay Soltan, director of sales for GMG Pen (asi/55583), a supplier in Lakewood, NJ, who prefers to sell to industry distributors despite their potentially limited marketplaces.
Combatting Online Competitors
There are plenty of ways, though, for distributors to fight back against after-hours and online searches among clients, experts say. And, what keeps clients loyal may not be what distributors would assume, according to Dixon. "I think in this day and age it's necessary, but no longer efficient, to build customer loyalty," he says.
By that, Dixon means loyalty is not so much about being nice to clients, remembering their birthdays or even making sure orders are shipped on time and artwork is correct. Instead, he says, it's about answering marketing and strategy questions for clients – helping them to use promotional products in a way that will lead them to gain market share. By doing so, distributors are providing a service that online firms simply don't offer.
"How are you using promotional products? How can you steal more market share? These are the kinds of questions and answers distributors should be presenting to clients these days," Dixon says.
Making clients see beyond the cost of customer service and other benefits that online companies don't provide is also key. Too often clients take customer service for granted and don't think they're worth the value of a few extra pennies per pen, experts insist.
"All the customer sees is, ‘those are extras, but I've been able to live without those extras, so I don't see the value'" in paying for those, when an online retailer costs less, says Tim Riesterer, chief strategy officer for Corporate Visions, a marketing messaging company based in Incline Village, NV.
In other words, "identify those things that you do that you believe make a difference to the customer" even if the customer might not know it, Riesterer suggests. The most important thing, he adds, is to identify differences that online companies don't offer, and then demonstrate that difference to clients through surveys, competitor comparisons, and stories. The goal is then proving that doing without those services could undermine the client's business and ultimately diminish their market share.
Certainly, some suppliers are also willing to help distributors match prices for special occasions – to help them retain long standing clients or prevent them from losing a large order. "We do offer a service called Prime Price Match on like items," those identical products found online but at a lower price point, says David Fiderer, director of marketing for Counselor Top 40 supplier Prime Line (asi/79530).
But the real competitive advantage comes in offering unique products that online firms simply don't have, Fiderer says. In Prime Line's case, Fiderer suggests pairing its top-selling stylus pen with a tablet case or padfolio. At All-In-One, the company has created pens with full-color wraps and interchangeable pocket clips that can be molded into various shapes, Cohen says. More suppliers are following suit, offering combo packaging.
And executives like Bill Mahre, president of Hugo, Minnesota-based ADG Promotional Products (asi/97270), which supplies Saratoga Pens, warns that there may be hidden costs among online vendors, something he thinks distributors should educate their clients about. For example, set up fees are often higher, Mahre says, and often pen prices are only good for a few days or a week.
"You might see an item that is set up at $1.29, and they use that as a prospecting tool," Mahre says. "Everyone else in the market might be at $1.49, but that might be a short-term offer – like somebody's going to have to react to it today or tomorrow. Then the next time you want to repurchase that, now it might be at $1.79." Or, Mahre says, online companies might say their set up fee is $25, but not inform buyers that there's more than one set up fee.
For more tips and strategies for increasing sales of pens, and yes, battling the low-price online competition for this business that is so prevalent today, turn the page and check out the next article in our Writing Instruments Issue series.
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