Differentiating Service Levels
Ask a successful distributor to list out the top reasons for their success. Most responses will include strong supplier partnerships, well-developed supply chains and local market knowledge. However, many distributors claim that the biggest key to success is a never-ending pursuit of customer satisfaction. But what exactly does customer satisfaction mean in an environment where B2C expectations are spilling into the B2B world? And what about cost? How much investment (in digital tools, distribution centers, human capital, for example) is required to be truly customer-centric?
Being all things to all customers can be an expensive and inefficient approach. However, underinvesting in customer-facing resources and tools can erode a distributor’s value. So what is a commercial leader to do?
Successful distributors differentiate commercial service levels (CSLs) based on customer need and value. Alexander Group defines CSLs as an agreement to provide a particular level of interaction (in product, responsiveness, support, terms) to a particular type of customer. CSLs take into account customer needs, but companies should base CSLs on the importance of a customer to a distributor. Appropriately differentiating CSLs enables distributors to allocate finite resources to meet the needs of a diverse customer base.
This four-part series will explore the inputs required to define and differentiate service levels. We will also examine the four components of AGI’s CSL framework:
- Part 1: Inputs – gathering opportunity data, voice of customer and other information required to build CSLs
- Part 2: Capabilities & Responsiveness – differentiating product and service offerings, response time, solution customization and lead times
- Part 3: Support – differentiating access to the resources (e.g., sales, marketing, service & support), technology and tools that span the buyer journey
- Part 4: Terms & Pricing – differentiating the payment terms, shipping practices and pricing agreements
In each installment, AGI will bring to bear industry trends, project learnings and the latest distribution benchmarks. The goal of the series is to encourage distributors to think about the value of specific customers and tailor service levels to strike the balance between customer satisfaction and cost to serve.
To learn more about our point of view and experience solving growth challenges for clients, please visit Alexander Group’s Distribution practice or contact a Distribution practice lead today.
Read Part 1
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