I recently wrote this article for a sister publication of HVACRTrends, ElectricalTrends (and did you also know we publish Industrial Supply Trends and US Lighting Trends?)

I’m sharing it because it is about contractors. And the reality is that contractor behavior across construction trades is very similar.

The big difference for the HVAC industry, and it is similar in plumbing, is the repair / service part of the business. It is a much bigger percentage in these industries than in electrical, but electrical has greater diversity into the industrial (MRO and OEM) segments.

But the article is about what business attributes drive contractor satisfaction and what determines customer loyalty with loyalty defined as “repetitive buying behavior.”

My idea for this article emanated from a recent speaking engagement at the Electric League of Western PA where I spoke to 200 contractors, distributors, reps and manufacturers on improving project profitability. The central message was simple: if contractors and distributors want to improve profitability, they need better communication that reduces unnecessary labor hours across the project lifecycle. It’s a combination of reducing procurement, project management, and product installation hours.

Winning the business is “easy” as it ties to relationship, products, availability (if applicable), credit capability (especially for large projects), and competitive pricing.

Why isn’t price THE decision driver? Because for the largest of contractors, they’ve narrowed down the number of distributors who will receive 80% of their business.

And while relationships are important, it is no longer the golf and donut driven type of relationships. It is relationships that are built on trust and repetitive, consistent, performance.

What contractors want from distributors

The key to understanding how to serve customers and earning the second order or gaining market share and preference, is understanding their desires.

For years Channel Marketing Group has helped distributors understand their customers’ satisfaction via our Uncover initiative. Through this process we craft a customer satisfaction index (CSI) for a distributor and can segment it to territories and branches.

The model is built off of the one that JD Power developed for the automotive industry. We ask customers what they expect, how the distributor performs, and then run an algorithm to develop the index.

Over the years we’ve captured input from over 10,000 contractor personnel. I shared what is important to customers because, if we want to help them be more profitable, and want to be more profitable ourselves, we need to understand their expectations of us and how we perform … in their eyes.

While understanding what’s important to a customer is vital and can impact distributor operations (I had one client that, when we presented the findings, along with some suggestions, had 3 pages of notes to make changes. Another client, when the results were presented, committed to increasing branch level inventory for A and B items … and sales performance and CSI reflected the impact 12 months later), as important is lasering in on what drives customer loyalty.

A year ago, we conducted research for ITA Group about contractor loyalty (and wrote a research report on it which is available here.)

The key drivers of contractor loyalty are:

And while loyalty is in the eye of the beholder, understanding what psychologically drives someone and what the differentiators can be is the difference between maintaining share and taking share.

At the end of the day, you want to build as high of a moat around “your” customer as you can so that they WANT to do business with you.

At the end of the day, between looking at customer satisfaction attributes and customer loyalty drivers, it boils down to three things (because most people like to keep it simple and best remember lists of three):

1. Service
2. Price
3. Availability

What this means is

1. They want to be serviced how they want to be serviced, and efficiently, in a frictionless manner.
   • And they need technical support when they need it, or available online (spec sheets, installation information, etc.)
2. They expect a fair / competitive price.
   • Between tariffs (since rescinded but no one has seen a price reduction) and commodity prices, everyone expects that pricing can be competitive with a little pushback, if needed.)
3. They need the product when they need the product.

During Covid, availability was the most important thing as collectively we learned the term “supply chain”. This has mitigated. Generational change and the advent of more advanced communication systems, coupled with information transparency provided by portals and supported by an expectation that electronic communication should hasten information delivery, access to quick (near instantaneous) support is an expectation.

Consolidation is giving distributors greater technological capabilities to develop offerings, and integrate with manufacturers, to request / transmit information. Larger customers talk to manufacturer management on a more regular basis than ever before (and manufacturers cater to them), so the contractor (customer) now has a seat at the table to express their needs … and distributors and manufacturers are eager to please.

While the basics of customer dynamics remain the same, the priority of each continues to move, and it changes by customer. Distributors need to constantly adapt AND be flexible enough to address multiple sets of expectations simultaneously based upon the customer segments they serve. Keeping close to the customer, gaining VOC, tracking customer specific expectations is a game of three-dimensional chess.

Questions distributors should be asking

• Do you know what is important to your customers? Or only to your key customers based upon what your outside salespeople tell you or what management hears when they visit key customers?
• Are you familiar with your key customers’ project management systems and asking how you can support them / integrate (or provide content for them?) Are they familiar with your eBusiness tools? (Most distributor salespeople cannot carry this conversation and are reticent to have the conversation.)
• Do you know your customers’ loyalty drivers? Are you marketing to them?

If you’d like to learn more about our Uncover initiative, download information here, or reach out.

And, if you also sell electrical products, consider attending the NAED Marketing Summit August 3-5 in Indianapolis. I’ll be there. Register as an industry non-member. Here’s a link to an article I wrote on the conference, and here’s the link to register.

If you stop by the Channel Marketing Group table (or grab me in the hallway) we can discuss (and those who do will receive a $1000 CSI project discount.)

• We have a similar process for manufacturer reps called Uncover for Reps.