The chemicals sold by this industry are a commodity. Every player is involved in a race to sell product for the bottom dollar – destroying profit margins.
My client's value added proposition was to stock an enormous amount of product in their warehouse to provide speedy delivery of products to their clients. Their value added proposition was not increasing profitability.
My client's customers would frequently run out of chemicals. Customers demanded same day delivery, refusing to pay for expedited shipment – which was costly, because the competition would provide expedited delivery at no charge.
I visited my client's customers and asked them to define the challenges they encountered utilizing the chemicals. Every client used a different manufacturer of equipment to process the chemical. The equipment experienced frequent service breakdowns disrupting production – costing the customer money. The chemicals were not the challenge; the equipment that processed the chemical provided the main a challenge to my client's customers.
I proposed stocking each of my client's customers with chemicals at the customer's location at no charge, until they consumed the product. My client was already stocking large quantity of finished chemicals at their warehouse. The cash flow impact was no different. Why not stock the chemical at the customer's facilities instead of my client's expensive warehouse space. This eliminated the unrecoverable cost of delivering an expedited a same day order.
My client was knowledgeable about the most reliable chemical equipment to process their chemicals. The equipment, built in China, did not have a North American distributor. I proposed we supply the chemical processing equipment free to the chemical customer. We would amortize the cost of the equipment lease into the price of the chemical. We trained my client's company delivery personal to perform preventive maintenance on the equipment and conduct an inventory count once every month, to determine usage of chemicals the preceding month.
I obtained the exclusive North American distributorship for the chemical processing equipment for my client – creating a healthy profit on every piece of chemical processing equipment my client installed in their customer's facilities. As a bonus – equipment sales inquiries turned into easy to convert leads for my client's chemical products.
My client billed the customer monthly for chemical consumed. We priced the monthly cost of leasing the equipment into the monthly cost of chemicals consumed by each customer. We increased our commodity chemical product margins. The customer could not use other company's chemicals without our delivery people discovering this fact. In reality, this was never a problem. Customers were loyal.
The chemical company's customer was grateful at being relieved of not having to spend their working capital for equipment. The customer no longer had to bear the ongoing cost of maintaining the machine that processed the chemical. The chemical company's customer never ran low of product. With our monthly preventative maintenance, clients experienced virtually no equipment failures, eliminating production delays. The chemical customer thrilled that we would inventory product on their premises at no cost and only bill for chemical product used. Customers bought into the value added program.
My client's sales increased 300 per cent, with fattened profit margins. The value added business model produced a healthy bottom line. The value added model freed up expensive warehouse space. The warehouse space became production space to meet the increase in sales.
This Canadian company produced a niche market off road vehicle that transported up to 6 people or the equivalent weight in cargo safely over land, water, and snow. The vehicle enjoyed a high profit margin. The target market was a 40 to 60 year old hunter. Hunting is a social activity. The off road vehicle transported groups of family and friends to normally inaccessible, fertile hunting terrain. Employing a convertible top, to stay warm and dry in inclement weather made the off road vehicle desirable to 40 to 60 year old hunters, who valued creature comforts.
The U.S. is a lucrative hunting market. The company was having trouble selling into the U.S. market. The off road vehicle was under 5 per cent of a retail dealers total sales – leading to dealer apathy for the product.
The off road vehicle manufacturer sold their product through geographically positioned distributors across the U.S. and their weak dealer network.
The manufacturer provided the distributors with a wholesale profit margin of $500 per vehicle. The wholesaler's retail dealer has a $1,500 retail margin per vehicle. I visited the U.S. distributors. The wholesalers were selling retail as well as wholesaling to dealers in their territory because $500 was not a large enough margin to run an exclusive wholesale business. Wholesalers would steal business from their retailers. This created dealer dissatisfaction and a large and constant retail dealer turnover. Recruiting new retailers was a constant and expensive challenge.
The off road vehicle has very little competition for a hunter, who wanted to carry multiple persons and cargo over land, water, and snow. After conducting a competitive analysis, I proposed increasing the retail price of the off road vehicle giving the wholesaler a $2,000 profit margin. The manufacturer did not give up any of their lucrative profit margins. The wholesaler used part of the increased margin to create a lead generation program that would drive prospects into dealer showrooms. The wholesaler would not compete with their dealer network.
I bought lists of hunters age 40 to 60. I created a hunting specific direct mail advertising mailer. The distributor mailed the direct mailer to the list. The advertising mailer offered a strong call to action. Inquiries received a free poster of the off road vehicle. The poster positioned 2 hunters in the front seat of the vehicle transporting a 1,000 pound harvested trophy moose located in the back of the vehicle, back to base camp. The poster was a beautifully photographed macho hunter poster, captioned – How the Experts Hunt. The poster was a hit. We also offered a free off road vehicle brochure to respondents.
Leads came flooding into to the distributor's office in the double digits – an unheard of direct mail response. I trained a distributor's employee to contact each inquiry and arrange an appointment to test drive the off road vehicle at the closest retailer to the prospects residence. The distributor's employee would call the retailer to alert the retailer's sales staff to the prospect's name, date and time of the appointment. After the appointment, the employee would contact the retailer for the result of the test drive. I quickly realized that the retailers did not follow up on prospects that test drove, and did not buy, when they were at the dealership. I trained the distributor's employee to call the prospect back to discover the prospects' objection. In many cases, the distributor's employee countered the objection and closed the sale for the retail dealer.
Many retail dealers were motorcycle, farm equipment dealers, and pre-owned automobile dealers. Retail dealers were thrilled when we booked hot prospects into their dealership. They were over the moon, when we followed up with prospects that did not purchase after a test drive, discovered the real objection, and closed the sale for the dealer.
Our test distributor was located in one state. The test distributor sold more vehicles in one state that the second highest volume distributor, who marketed the off road vehicle over 13 U.S. states.
The value added proposition of a wholesaler advertising, creating leads, booking qualified appointments into dealer showrooms and following up with prospects that did not purchase after taking a test drive was wildly successful and profitable for the manufacturer, wholesaler and the retail dealer network.