Karen E. Klein Q: My new company is a wholesale distributor of wrought iron products to retailers in the Western U.S. I need to formulate a marketing strategy but have found little guidance on how to market effectively as a small-business wholesaler. Any ideas?
-- E.B., Sacramento
A: Marketing yourself as a value-added reseller requires great skill these days. "Most who do it successfully are legacy companies that leverage personal relationships extremely well," says Tom Barnes, founder of Atlanta-based marketer Mediathink.
Why are things so tough? Traditionally, the core value-added proposition for wholesalers revolved around distribution. Having a middleman who effectively managed distribution problems worked for manufacturers as well as for buyers. But today, things like supply-chain-management software and lean manufacturing techniques have diminished much of the value of that middleman.
TAP MANUFACTURER KNOWLEDGE. This isn't to say your task is impossible. Being small still gives you a distinct advantage. But to leverage it, you need to focus and specialize. "You must figure out how to price and distribute like the big guys and communicate the specifics of the unique and special level of services you provide that bigger wholesalers can't meet," Barnes says. "Specific expertise in esoteric skills around your product can be a compelling point of differentiation to communicate."
Your first ally will be the manufacturers whose products you're distributing. They should provide you with information on the businesses you'll serve and pass along inquiries from potential accounts. Request that the manufacturer also provide you with customer segmentation data, which should give you some perspective on who your most profitable customers might be, where they are, and where you want to focus your sales efforts.
Once you have some figures on your target market, you can begin evaluating marketing tactics, explains Steve Rapier, executive vice-president of Artime Group, a marketing consultancy based in Pasadena, Calif. "A good rule of thumb is to use direct response to reach a small market [50 or 100] and advertising to reach a larger one [in the thousands]," he says. "Understanding where your retailers are located is important when evaluating local options, like Yellow Pages and chambers of commerce. If a large number are concentrated around a metro area, then it becomes more viable to use some form of mass media to reach them."
PREPARE LITERATURE. Rapier recommends BusinessWire, a service that distributes press releases about your company to local media and the trade publications that serve your industry. "This is a cost-effective, efficient way to position yourself as a valued wholesaler in the media that your target audience reads," he says. "It costs about $125 for the Southern California market. It also offers instructions on how to write a simple press release on its site, businesswire.com."
A Web site that showcases your products, offers online ordering, and prominently features your contact information is an absolutely essential marketing and sales tool, says Henry Spitzer, president of Topanga Oil Products, a Sylmar (Calif.) wholesale distributor of bulk motor oil and automotive equipment. Your Web site "doesn't have to be too elaborate," says Spitzer, who founded the 37-employee family-owned company 33 years ago. "The simpler you make it, the better."
You'll also need a print piece that can serve as your catalog, mailer, and handout, he says. Consider using Yahoo Search Marketing (formerly Overture) to bring potential customers to your Web site, Rapier suggests. "There were 22,914 searches for 'wrought iron' alone in March," he says. "Currently, the top bid is around 40 cents, but the cost for different words or phrases could be as low as 10 cents per click, depending on position."
RESEARCH TRADE SHOWS. As you begin to make contacts with your retail customers, remember to get your name in front of them frequently and from several different directions. "Hit them with your name and your products in various ways: in person, by mail, by phone, and by Web mail," Spitzer recommends. "And realize that quite often, you'll need to reach more than one key decision-maker in the company you're going after. In our business, if we don't know at least three people at the car dealerships we sell to, we're making a big mistake."
Many wholesalers sell and market at industry trade shows, says Ken Keller, president of STAR Business Consulting in Valencia, Calif. "They buy a booth, send out preshow mailers, and make appointments for retail buyers to come to the booth during the show," he says.
Trade shows can be very expensive and time-consuming, so you're probably best attending one or two before you sign up as an exhibitor. "One way to build your strategy is to learn who your direct competition is and initially do just what they do," Keller says. "Find out where they advertise and which trade shows they exhibit at, and look at their Web sites to see what they're doing online."
GRIN AND SHAKE. The bottom line is that business is all about relationships. "People buy from people they like," Spitzer says. "If you have a lousy personality, you're in trouble." He and his five-member sales team attend industry meetings, participate in golf tournaments, and knock on a lot of doors.
"Especially when you're starting out, it's important to meet your customers in person whenever you can," according to Spitzer. "People like talking to entrepreneurs, to the head of a company. Owner-to-owner conversations are especially good. Even if you do nothing but go in and press the flesh, it's invaluable." In the wholesale world, it seems, there's one essential function at which the small distributor clearly outshines technology: the handshake.
Have a question about your business? Ask our small-business experts. Send us an e-mail at Smart Answers, or write to Smart Answers, BW Online, 45th Floor, 1221 Avenue of the Americas, New York, N.Y. 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally. Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues