BGC Helps Wittco Standard Leverage Its Value...and Increase Profits Case Studies
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While the threat posed by foreign competition on American manufacturers has been well-publicized (and politicized), domestic distributors have been quietly coping with another modern-day challenge-the Internet. Just ask John Massie, president of Wittco Standard, a family-owned dealer of office and graphic arts equipment serving Northeast Ohio. After four decades in business, the Witt family's decision to split their Ohio business from the larger West-Coast operation meant that Wittco was suddenly a much smaller fish. And, although it was familiar with its small pond, the company found itself swimming against a tide of online discount equipment suppliers. Wittco had established a solid customer base in Northeast Ohio but was losing orders because of price. How could it convince customers not to sacrifice local service for the ocean-floor prices of anonymous Internet suppliers? And can a small business really compete with the rest of the world?
Founded in 1960 by Francis Witt, John Massie's father-in-law, Wittco Standard thrived as an independent office machines dealer selling primarily to the church, school, and print-for-pay markets. From the beginning, the focus was on equipment. The company sold, serviced, stocked, and dealt supplies for a number of manufacturers including Standard Business Systems, MBM, Martin Yale, and, more recently, Xerox. Nine years ago, when John Massie stepped into the leadership role, he began transitioning over to solutions selling. As a provider of "finishing systems" Wittco sets up and services equipment systems for customers who need to produce their own quality finished documents-for example, church bulletins, educational study guides, and company handbooks-at affordable prices. More than half of the company's sales are accounted for by duplicating machines, small printers that improve on the speed and low cost of copy machines through the use of ink-based processes that deliver multiple high-quality documents quickly and inexpensively.
When Wittco Standard split from its larger partner in 2004, John Massie found himself running, in effect, a brand new business from the same old office. With the company totally under local family control, Massie enjoyed the freedom and the obligation to grow a small business in a changing marketplace. Acting on an "enthusiastic referral" he called Andy Birol for help.
THE BGC SOLUTION:
Wittco had a unique opportunity for a fresh start, so Andy quickly focused John Massie on the critical questions of Best and Highest Use® and target market. "He gave me an assignment" said Massie, "and walked me through figuring out what we're about and where we are directed." Andy discovered that the company was not leveraging its greatest strength. "Over the years we have received a number of unsolicited letters from customers who wanted to thank our service technicians," said Massie. Andy pointed to the letters as evidence of Wittco's BHU.
When Andy drew clear distinctions between a company that is product-based and those that are service-oriented, Massie realized that Wittco was stuck somewhere in the middle; while it provided far too much service to be able to slash prices and compete with online dealers, the company was not positioning itself on the basis of its expertise, and it wasn't selling the value of "buying local." "We were providing service above and beyond what we could afford," said Massie. "I came to realize that we were giving an awful lot more than people were paying for - and maybe they would be willing to pay for those services if we asked them."
To identify those "best customers," Andy proposed a staircase solution, a visual model of five steps of service customers can choose. With the bottom step representing the Internet "drop-ship" model, each stair contains additional value all the way up to the highest level, which offers a comprehensive package including priority service for repairs, discounted supplies, and loaner machines. "People want options," said Andy, "and they want to control their own destiny." By absolving the company from service obligations and clarifying customer expectations, the lower steps allow Wittco to compete with discounters even as it attempts to sell customers the highest service plan that meets their needs. "These are people who value time over money," Andy said, "and they will pay a premium if you can make their life easier."
Since the company could charge higher prices - and enjoy steeper profit margins - for the top service levels, Wittco's overriding sales goal became clear. With Andy's help, Massie implemented a new commission system to reward sales people who excelled at "stepping up" customers to higher service packages. They also designed an ordering process that encourages customers to see the value of extras, such as free delivery and discounted supplies, offered through the higher service tiers. According to Andy, this is nothing less than a system-wide change. "When John 'got it,' he really got it," Andy said. "He saw a chance to create a niche in the marketplace and he went for it. We have developed a complete sales and marketing plan to sell new services for target customers on each step of the staircase."
"The hardest part," said John Massie, "was to internalize the change and understand the need to emphasize value of service in order to show customers why they should pay for the higher levels. We've had to learn to really listen to their needs and explain the benefits of our plans in ways that apply to them."
The payoff is the company's improved ability to deliver unique service and support to customers who pay for it. The staircase system "allows us to define customers who value excellent service and identify which machines are mission-critical for their operations," said Massie, who cited the example of a mortgage company trading documents between banks and borrowers. For this company, a broken fax machine isn't a hassle; it's lost productivity that is money out of their pocket. For companies that depend heavily on certain equipment, a comprehensive service plan is an insurance policy against lost business.
At the opposite end of the spectrum are customers who "don't need or never buy" service plans, and they are required to initial documents outlining the types of services they have been offered and declined. By creating clear expectations in the minds of the customers, Wittco is protected from over-delivering. Massie credits Andy with helping him realize that "if you don't charge for service, a lot of people don't really value it."
Still in progress is the development of new marketing materials and corresponding literature to explain and sell the added value Wittco provides. Massie continues to work closely with Andy, and he is already pleased with the results. "Andy is very direct and very tough," he said. "He forces me to get objective and serious about what's important to our business and coaches me to make decisions." And Massie believes this is just what a small business owner needs. "If it's a nice guy up there spouting theory with no action behind it, when the check is cashed you've got nothing to show for it," he said. "Working with Andy? Sometimes it's not easy," he added with a laugh. "But it's been very rewarding."
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