The past few years the recurring theme at many industry events have used alot of words – Shift, Adapt, Outperform and more. I would say the overiding theme if I hae to put into one single word is disruption. And one of the recent sessions’ I was at the speakers posed the question to consider of “what if?” Earlier this year I presented at a conference of marketing / buying groups. And over the past couple of months we’ve had prospects / clients who we’ve spoken to regarding “distributor programs” (aka rebate programs).
The spark for disruption, or at least a “what if” discussion, emanated from one of the marketing group sessions.
The speaker was from an industrially-oriented marketing group.
What if rebates went away?
In one of that group’s planning sessions they asked themselves the question “why do our members belong to the group?” and, at the same time, said to themselves “it needs to be for more than the rebates.”
Which then begs the question of “what is the value of a marketing / buying group to its members and manufacturers if there are no rebates?” What is their value-added … beyond the concept of “networking” a couple of times a year if the rebate revenue stream dried up and hence operational funding?
And this could occur as manufacturers are thinking:
- “There are many of my competitors in the group.
- My growth rate has slowed significantly given that the number of conversions have diminished.
- I’m investing more in rebates as I’m offering ‘street’ ‘distributor programs’ to more and more distributors.
- As I develop ‘distributor programs’ ‘double or triple dip programs’ to retain business I’m developing the infrastructure to track programs.
- And my costs continue to increase as margins continue to tighten.
- And I’m measured based upon growth.”
So, this marketing group, and others, asked “what would our members pay for” and another group asked “what would our manufacturers pay for?”
Some of their offerings include:
- National account initiatives
- Collecting, standardizing and disseminating non-customer identified POS information.
- Content to fuel eCommerce sites
- Array of marketing tools
- Membership-targeted sales organizations to help “multiple / support” manufacturer sales forces.
- National advertising campaigns for members
- Digital marketing tools
- Group material buys to improve COGS
- Private / white label branding … a group’s brand, inclusive of marketing
- Aggressively negotiate “services” such as freight
- Recruitment and training programs
And more.
Which, combining this with the manufacturer trend of increased non-group rebate investments as well as other group expenses, starts to beg the question “what if manufacturers independently followed to decide to significantly reduce or eliminate their rebate paid through the groups and redirected those funds to the distributors that “matter to them” (rather than paying something to any group member who purchases from them regardless of how small the purchase)?” The “supporting” distributors get more. Would manufacturers get more “support / growth”?
Yes, this is challenging conventional industry wisdom that has been around for exactly 50 years … but is important for AD, IMARK, Net Plus Alliance and many mor
Beyond Marketing Groups
Thinking about a disruption session for your company? Consider utilizing this kernel of corn stress ball to reinforce the message.
While it’s doubtful this disruptive will occur in the near term, however, the “what if” exercise begins to create the opportunity to conceive different offerings and to explore what could add value … to the marketing groups but, more importantly, conceptually to your business.
When was the last time you challenged the conventional wisdom within your company to explore new ideas? You may uncover a kernel of an idea that can differentiate you from your competition and enable you to explore new growth opportunities.
As always, we appreciate your comments and suggestions
Buying / marketing group rebates have benefited both the independent distributor and smaller manufacturers. Without the collective volume of these groups, many independents would not qualify for a rebate and without the existence of these independents, many manufacturers would be hard pressed to find a channel.
The “forced savings” (rebates) often provide virtually all their net income before taxes and allow them to be competitive with the national chains.
If the independents were to dry up, many manufacturers without favored vendor status with the chains would find themselves on the outside looking in. Fewer channels to market would greatly alter the industry as we know it.
Distributors pay lip service to the marketing in these groups, but it’s clearly a secondary consideration.