How to Choose the Best CRM for Distributors
CRM Software for Wholesale Distributors
- Wholesaler distributors have unique business requirements that are only satisfied with Customer Relationship Management applications built for their industry. For example, the best CRM for distributors is designed to support inventory carrying companies with real-time inventory visibility internally and across the supply chain. Applications that cannot directly support flexible inventory pricing, order processing and fulfillment are not as effective.
- The best CRM software for wholesale distributors is designed to accommodate many additional industry specific requirements such as mobile order processing, complex pricing, promotions, negotiated trade agreements and supplier rebates with bill backs, chargebacks and SPAs.
- The top 4 systems, as measured by market share and market growth, are Salesforce, Microsoft Dynamics, Oracle NetSuite and SAP.
Customer Relationship Management software is the underlying technology to support wholesale distribution business growth. Yet for most companies this application is little more than an electronic rolodex and fails to drive revenue growth. For those considering a new system, or possibly just redesigning their current application, this article shares several capabilities of how this technology can fuel business growth strategies.
It's important to recognize that CRM for wholesale distribution companies has different goals and requirements than the generic applications shared across many industries. For starters, business success measures are based on efficient and effective inventory movement.
Most Customer Relationship Management systems do not support inventory visibility, orchestration, and utilization. That's why most are not a good fit for this industry.
The technology must bring visibility to inventory pricing and logistics, and that includes trade promotions, deductions, negotiated (sales price) trade agreements and supplier rebates with bill backs, chargebacks, and SPAs. Yet most systems have little to no visibility to these things, leaving managers and sales reps scurrying to other systems and unable to deliver real-time response to customers.
That's why the best CRM for distributors includes key industry requirements such as simple and efficient order processing, pricing optimization to improve margins and supply chain visibility to improve inventory utilization.
These applications offer the tools to respond to fluid customer demand, logistics disruptions, changing market boundaries and the need for improved cost containment. And that's why they also offer the analytics to know when to expand into new channels and how to find the optimal balance among stockouts and overstocks to increase cash flow and free up capital that was previously tied up in inventory.
Choosing the Best Application for Your Company
When searching for the best distribution CRM software many novices focus on technology features. That's a mistake as features and functions may or may not deliver business results. A smarter approach is to lead with the most strategic business objectives and then identify the application capabilities that directly accelerate those goals.
The four most strategic technology-enabled objectives are to acquire more customers, grow customer share, increase customer retention and lower cost to serve.
I cannot cover as much as I'd like in a single blog post, so I'll focus on the capabilities I've used to deliver significant and sustained financial impact at many companies in this industry.
Technology to Increase Customer Acquisitions
This is a sales-driven industry. Improving sales productivity aids cost containment. Improving sales conversions drives revenue growth. Here are several software capabilities to do both.
- Customer segmentation
Many companies categorize their customers at a very basic level and based on what they buy. Segmentation can be used to define customers by their growth objectives, complimentary products that they are not purchasing, profitability to the seller, cost to serve and other factors that drive revenue growth and margins. Effective customer segmentation identifies the most profitable customers, the customers with the highest probability for profitable growth and those that are resource drains. This permits the company to focus its time and value-added services where it will deliver the most uplift.
- 360 degree customer view
Every vendor claims to deliver a 360 degree customer view. But most don't. At least not for companies in this industry. What most deliver is a customer view with company firmographics and contact demographics. What's needed is a complete and detailed history of purchases, fulfillment, returns, trade agreements, special pricing and profitability per order, item and customer. To achieve a 360 degree customer view in this industry you need 5 types of customer data - demographic, transactional, behavioral, environmental and social. From my experience, when sales reps have a complete and centralized 360 view, they improve productivity by 4 to 7 percent.
Technology to Increase Customer Share
Sales pros in most B2B industries allocate the bulk of their efforts toward winning new customers. Companies in this industry tend to focus more on growing relationships with existing customers. They earn an average of about 25% gross margin and 4 percent profit. Selling more products to the same customers lowers the cost of sale and increases slim margins. Here are two technology-driven capabilities to increase customer share and financial margins.
- Orchestrated fulfillment
Companies keep customers happy with timely order fulfillment that adheres to service level agreements. Distribution CRM software helps deliver orders on time, every time, while minimizing shipping costs.
But it's a difficult balance as salespeople must work with their customers and partners to align inventory with fluid customer demand. The challenge is exacerbated due to managing more inventory (SKU proliferation) over more channels.
The best solutions are designed to respond to these challenges. Accurate order fulfillment starts at sale order processing and displays real-time inventory quantities and available to promise. The order entry process facilitates the pick, pack and ship events. It uses the sales and marketing applications as the front end to improved demand forecasting. It uses partner relationship management (PRM) automation to manage fluid customer demand and it provides tools to streamline VMI (Vendor Managed Inventory).
The apps also offer seamless integration with ERP and supply chain systems so that all of these capabilities help get the right goods to the right place and the right time and at the lowest cost.
Sales order processing is incurring a sea change. Even small or unsophisticated customers expect to be able to place all or certain types of orders on demand, online, and with their mobile devices. And this demand will only increase as Millennials continue to fill procurement and inventory management roles.
Adding to the challenge, they expect more than just basic ecommerce. They expect product details and rich information content. They expect the ecommerce site to know their reorder points, SPAs and service level agreements. And they expect to complete the entire process online and without having to speak to a person.
For many companies, it's not that they don't do ecommerce, it's that they don't do it well. Delivering a poor ecommerce user experience, or an experience disintegrated with customer pricing or agreements, or a standalone or discrete channel experience will invite customers to look elsewhere. It will also encourage them to reach out to manufacturers or other sources and accelerate the disintermediation of the middleman. Fortunately, the best CRM software for wholesale distributors satisfies these essential ecommerce requirements.
Technology to Increase Customer Retention
Even with new customers coming in, company revenues, growth and valuation deteriorate when too many of them leave through the back door. Two ways to increase customer retention are to offer online self-service and engage customers at risk to prevent their defection.
- Customer self-service
Customers have lots of questions. They want to know things like where's my product? and why did you charge me this price? Online self-service portals can answer these and other questions on-demand, 24 by 7, and without incurring customer service labor cost.
The best systems offer self-service knowledgebases, chatbots, virtual agents and other tools that when properly implemented can handle up to 80 percent of routine customer service questions or problems.
- Customer churn prediction
The ability to improve customer retention delivers significant and sustained revenue growth. So, to aid that goal some systems can automatically calculate customer health scores and use AI algorithms to identify customers most at risk of churn.
Even better, knowing why customers churn is more powerful than knowing which customers will churn as it allows companies to fix the causes of churn and prevent customer attrition before it happens.
The Top 4 CRM Systems for Wholesale Distribution
While understanding how to choose the best CRM software for wholesale distributors is important, the most common question I'm asked is "what is the best CRM for distributors?"
The short answer, based on market share and my experience from having implemented these applications in this industry for more than two decades, is Salesforce, Microsoft Dynamics 365, Oracle NetSuite, and SAP. The longer answer and a deeper analysis is available at the top four distribution CRM systems.
If you are evaluating CRM software, you may want to consider our Salesforce Evaluation and Fit Analysis. For clients seeking a new or improved application, we start with a Salesforce review as this application has an extraordinary fit for this industry. And of course that's why this application is the market share leader in this industry.