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Serving the customer.

Serving the Customer

Every wholesaler has customer service policies, although they may be informal or may not even be thought of as "service policies." Therefore, it's important to start with a definition of what we mean by "customer service policy."

A customer service policy states how much service, what type of service and the frequency at which the wholesaler will provide service to each class of accounts. A class of account is typically defined by customer type and by size.

An example of a customer service policy for a particular class of customers might be: Independent grocers with weekly volumes of 100 cases a week or more will be pre-sold twice a week and merchandised once a week.

Why is a Policy Important?

Today's market is complex. The classes of accounts, mix and levels of services, and number of packages offered have increased. The optimal frequency for account servicing is no longer clear-cut. Today's market requires that strategic customer service policy decisions be made by upper-level management and implemented at every level of the organization.

When many beer wholesalers think of a customer service policy they think of B.U.D. or A.B.C. account classifications. These types of account classifications were the basis for customer service policies that were effective ten years ago. At that time the industry was growing, there were fewer products, fewer market segments and fewer levels of service provided to the different market segments.

When the business was simpler, all accounts were sold and delivered either once or twice a week. Merchandising was a special service that was incorporated into a driver or salesman's daily duties. There were large accounts (A), medium-sized accounts (B), and small accounts (C). Account size largely determined service requirements and dictated the extent of services retailers could demand.

This environment generated unspoken customer service policies that governed sales and delivery frequency and were geared primarily toward keeping the customer happy. This was and still should be the main goal of the customer service policy.

Today's business climate requires that customer service policies be more strategic and less informal. There are several reasons for this.

First and foremost, the market is more complex. There are more classes or license types of customers. For example, account classes in the off-premise segment include chain groceries, independent groceries, convenience stores, liquor stores and hyper stores. On-premise accounts include at least this many different classes. Ten years ago there were only two segments, the on-and off-premise segments; further breakdown of these segments was unimportant. In the 1990s, 15 or 20 different classes of accounts won't be uncommon.

The size of a customer is constantly changing. The big accounts are getting bigger and the small accounts are getting smaller. This requires clear guidelines for how different accounts should be serviced. Five or ten years ago, small accounts were serviced at least once a week. Today, a wholesaler may service large accounts three or four times a week and small accounts may be serviced weekly, every other week or once a month.

Customer service policy decisions need to be more strategic due to the increase in the number of packages offered by wholesalers. An account buying 15 cases of only one package a week must be serviced differently from a customer buying a total of 15 cases a week consisting of six different packages. The more packages, the more complex and specific the customer service policy must be to meet the needs of the different customers.

Another major change over the past five or ten years that has increased the need for customer service policies to be more strategic is the mix and alternative levels of services the wholesaler is willing to offer. Five or ten years ago, the only regular services provided by most wholesalers were selling and delivering beer. Today, a single wholesaler can offer pre-sell, driver-sell, tel-sell, scheduled merchandising, weekend pull-up and weekend delivery, to name a few, depending on the individual account's needs and the wholesaler's overall sales plan for that account. To compound the level of complexity further, the wholesaler may offer any of these services between one and five times a week, biweekly, or on an as-needed basis.

As markets, products and services offered become more complex, the variations and the importance of a well-defined customer service policy have increased tremendously. The wholesaler must use the customer service policy as a major link between the company's marketing plan, profit plan and sales execution plan. (See diagram 1).

The remainder of this article will discuss some of the basic considerations that management must address when developing a customer service policy. Because the development of a customer service policy is essentially a strategic decision, many of the steps will need to be carried out by upper-level management. This development process will need to take into account brewery requirements, competition, customer needs and company goals.

Brewery Requirements

The key role for any beer wholesaler is to balance the needs and goals of the supplier with the needs of the wholesaler's own business to ensure that both are served properly. The wholesaler cannot develop a customer service policy irrespective of the desires and needs of the brewery. Like it or not, the brewery and the wholesaler are partners.

The service demands or requirements of the brewery must be weighed on the basis of the importance of the brewery. For example, an exclusive A-B wholesaler is going to accept more of the demands made by A-B concerning service levels than a multi-brand wholesaler would accept from a third-tier brewery.

The demands of the brewery must also be weighed regarding their practicality, potential effectiveness and profit impact. If an importer requests that an on-premise specialist salesman call on every restaurant in the market weekly and rejects the use of tel-sell, this demand would have to be considered unreasonable. If on the other hand a supplier suggests weekend pull-up for all large off-premise accounts, the wholesaler should give serious consideration to incorporating the brewery's suggestion into the company's overall service policy.

Supplier demands must make sense for the wholesaler. Will the demand increase sales and provide a long-term benefit? Will the demand help the wholesaler accomplish long- and/or short-term profit objectives? These are upper-level management decisions; the wholesaler will lose control of his profits if he allows the brewery or the sales supervisors, or, worse yet, the salesmen to determine service levels.

Competitive Service Levels

From a strategic standpoint, it is important for the wholesaler to evaluate his company and the competition from the standpoints of overall service, quality of people, responsiveness, and effectiveness. This can be done on a total market or individual market segment basis. (See diagram #2).

After upper-level management completes the chart in diagram #2, they need to determine if their overall service relative to the competition is acceptable. If not, then they need to identify which components (quality of people, responsiveness, effectiveness, service-frequency) and type of service (i.e., merchandising, weekend pull-up, etc.) are lagging behind the competition and can be improved.

The next element upper-level management must consider in developing a customer service policy is actual service levels provided by the competition. This must include service levels and frequency for pre-salesmen calls, delivery calls, driver-sell calls; how often a merchandiser works the accounts; and how often each level of management is calling on the account. Management must determine which levels of service the competition is providing to each class of accounts or license type.

While the old concept of "we're servicing the customer this way because that's how the competition is servicing them" has to weigh into the wholesaler's development of a service policy, it cannot be a sole criteria behind service decision. Completing the competitive analysis in diagram #2 by license type, allows the wholesaler to see how he is competing in various different market segments. The wholesaler can then compare his current level of service to his marketing plan and his competitive strategy. Analyzing the competition and incorporating this as a factor into the wholesaler's marketing plan is a key step in developing an effective service policy.

Retailer Requirements

The service requirements of the retailer have to weigh significantly in the wholesaler's customer service policy. The wholesaler must ensure that reasonable service requests from retailers are met. Obviously, the larger or more prestigious the account, the more weight the request will have in management's service policy decisions. The other end of the spectrum is the three case a week account that requests three deliveries a week. Each wholesaler has to decide how to handle both types of account. The large market share house can afford to "over-service," but it is costly. The small market share house cannot afford to over-service but usually these wholesalers are desperate to capture every additional case sale they can.

It is critical that the wholesaler link these types of decisions to his marketing plan. What is he trying to accomplish in each license type or class of accounts? How does service impact that group of customers as well as the wholesalers overall costs?

The wholesaler cannot have 1,200 accounts and service each differently on the basis if their demands irrespective of factors such as current volume, potential volume, and cost to service. The absence of a customer service policy will often result in improper service (too much as well as too little) being given in accounts.

How much service a wholesaler provides is a tough question which cannot be completely answered. Nonetheless, the wholesaler must ask it. The amount of service provided will be the main determinant of the wholesaler's overall costs and investment in the market. More service means more deliveries, sales calls, trucks, cars, drivers, merchandisers, salesmen, etc. This investment in service should yield a return, which is measured by increased sales and market share.

The concept of return on investment must be utilized in determining how much service a wholesaler can afford to give. If the wholesaler invests more in service, will he get a greater return, namely an increase in sales? This question must be viewed from both short- and long-term perspectives.

Short-term return on investments is usually defined as one year or less. If a wholesaler has declining brands and profits are being squeezed, he may be forced into decreasing service, and thus his investment, to ensure short-term viability.

If a wholesaler has high debt due to an acquisition, he is often forced to choose between decreasing costs (which often means decreasing service) to make sure short-term profits can fund the debt or investing in the market (i.e., increase service) to make sure his long-term investment pays off and to increase his security through market share growth.

If a wholesaler has a 50 percent market share, his high profits may allow him to afford to over-service market segments that will not offer a short-term return. The wholesaler may choose to do this as a defensive strategy to prevent competitors from getting a foothold. This same wholesaler can also afford to provide excellent service to the larger customers, thus ensuring maintenance or growth of this 50 percent market share. This is an effective strategy because he is in a position where he can afford to do it. In many markets, this is the A-B wholesaler; he can afford to spend more than anyone else because of his market share.

What if the number two or three wholesaler in the market cannot afford to spend dollar-for-dollar with the market leader? This wholesaler will have to make choices based on how much they can afford to spend and which market segments are priority markets in the short- and long-term.

By choosing which segments to invest in and which segments to cut back in, the wholesaler is basically reallocating his limited resources (money in terms of people, equipment, and time) into the markets he feels most important to the accomplishment of his short- and/or long-term goals.

An example would be a wholesaler who is not the share leader in package sales and has a 20 share in the draught business, and is losing money in draught. At the same time this wholesaler feels he cannot afford to add merchandisers and weekend pull-up people from the major supermarket chains. Whether he knows it or not, he is investing in draught in hopes that sampling will help long-term sales (which may happen). But he is also losing short-term sales and long-term market share and profits in the supermarkets. If he is in a financial position where he must decide to support either his draught business or his chain supermarkets, what should he do?

Choices of investing in one market segment versus another and balancing short-term and long-term profits are critical to the development of a customer service policy. These are strategic decisions made by upper-level management that can be communicated to all levels of the organization in a comprehensive service policy.

As margins continue to decrease and as distribution costs continue to increase, each wholesaler will be faced with the challenge of better managing customer service. The wholesaler must look at his short- and long-term objectives and determine how he wants to allocate his resources (service) based on anticipated returns (sales and gross profit).

No longer can all accounts be treated equally. No longer can salesmen and supervisors be allowed to make service policy decisions. These decisions have to take into consideration the wholesaler's long- and short-term goals and financial posture-tasks that are the domain of upper-level managers.

Strategic planning is often defined as the process of setting short- and long-term objectives, defining the resources available and necessary to attain these objectives, and deciding how to allocate these resources to best accomplish the objectives. It is time for the wholesaler to apply this in the important process of customer service policy development.
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Title Annotation:beer wholesalers
Author:Verno, Joseph J.
Publication:Modern Brewery Age
Date:Sep 10, 1990
Words:2301
Previous Article:One man's view: Walter Driskill offers his perspective on the issues.
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