As a follow-up to last month's column, in which I advised that understanding your core customer is a key to survival in a tight market, I want to continue to address the issue by focusing on how to develop a demographic profile of your customers and ensure that you are not “voted off the island.”
In conversations with Chris Rader of Rader Solutions, a construction supply information solutions provider in Lafayette, La., we've discussed the information readily available to an LBM dealer via its point of sale system. It doesn't really matter what brand of software you are using; they all basically do the same thing and will provide very similar information—if you know how to get at it. What I have found, and Chris has verified, is that in far too many instances dealers really don't know how to use the system they have and therefore fail to retrieve the maximum benefit from this investment.
Last month I mentioned several reports that are readily available to you—an inventory analysis report, an inventory turns report, a turn and earn report, an inventory usage report, and a GMROI report. Others include a vendor performance report or a days on hand report. While most of these are self-explanatory, some aren't being used in the manner in which they will help you the most—to learn more about who your customers are and how they shop.
Many dealers also overlook perhaps the most valuable resource they have—employees and customers. Simply ask, “What is going on in the market?” and listen.
Sounds simple enough, but what I witness in many cases are owners who have removed themselves from the day-to-day operations and customer interactions. You've seen it, too: You arrive at work with the best of intentions, planning your day and intending to focus on your customers and employees. But the first thing you have to do is return 15 phone calls and 24 e-mails from well-meaning friends and business associates. By the time you finish with all this, it's 9:30 or 10 a.m. and here comes the buyer who panics because you seem to be out of stock on 2x4x14 No. 2 pine, so you call your commodities supplier and make the buy, then listen to his tales of weekend exploits. You handle a few more calls and now it's time for lunch with your insurance agent—who takes two hours to tell you that you need more coverage because of construction defect issues and that your premium will increase by 35% without the added coverage.
Now it's back to work (with bad heartburn) and time to check e-mail again and return phone calls, to find your son/daughter has been tossed out of school for three days because the little darling called some tree-hugging freak a tree-hugging freak. Now it's time to sign paychecks, check the tax payment you reluctantly make to support a federal/state/local government that is totally ineffective at protecting independent businesspeople like yourself, and discover it's time to go home and deal with family issues. Wow! The entire day shot and not one meeting with a customer or salesperson. Sound familiar? (Except for the tree-hugging freak part.)
One very successful national pro dealer I worked with missed the boat entirely in its long-standing customer profile. The dealer was totally convinced that its core customer was the national builder. It wasn't until it dedicated the time to have some real conversations and perform a true customer analysis that it realized that its real customer was the small to mid-size local home builder/remodeling contractor. Once it had a clearer picture, it was able to appropriately focus its marketing and sales efforts for its “real” customers.
Take a customer to lunch—without your salesperson—and ask questions. What is happening in their business? What direction are they going to take next year? Any changes or modifications? Are they considering consolidation? Then look at your reports, especially your inventory usage report, match what you hear with what you see. Then ask yourself what business you're really in and blow up that business category. 2007 is rapidly approaching and if you want to be in business at the dawn of 2008, you've got to start planning now.