Ways to Increase Market Penetration

by WOHe

As sales manager for a kitchen and bath distributorship in the
post-World War II years, I was favored with occasional visits from
executives connected with most of our suppliers. Invariably, their
conversations turned to the subject of “market penetration.”

As an exclusive distributor for our major lines, “market share”
was all-important. Our main office and warehouse were located in
Washington, DC, although our assigned territory included northern
Virginia, most of Maryland and part of Delaware. Our sales revealed
that our market share in DC, as well as in nearby Virginia and
Maryland, was strong, but the important Baltimore market didn’t
measure up.

After much deliberation, we decided to open a branch showroom
with limited warehousing to serve the Baltimore market. We soon
learned that this satellite location gave us the kind of
credibility that we had previously lacked.

What follows are some of the market-share and other benefits we
derived from our Baltimore showroom and warehouse:

  • Dealer business.’
    Our salespeople now enjoyed the benefits of a nearby showroom that
    their dealers could use with customers to supplement their own
    displays. Dealer personnel attendance at our Baltimore training and
    product meetings increased, since the long trip to Washington was
    no longer necessary. Dealers thought of our company as local rather
    than as foreign which implied better service for them. Since we
    shuttled Baltimore deliveries and pickups from our main warehouse
    in Washington to our Baltimore branch facility, service was faster
    and more reliable.
  • Builder and property management
    sales.’

    Builders couldn’t tolerate late deliveries and, because of this,
    most of our competitors were Baltimore based and were, therefore,
    the preferred source. With our satellite showroom and warehouse,
    however, builders were able to bring their prospects into our
    showroom to inspect our cabinets and select their appliances. In
    addition, we carried some backup inventory for builders who built
    just a few homes at a time. Volume builders were delivered their
    materials on direct trucks from DC.
  • Factory attitudes.
    Visiting factory reps felt that their time in Baltimore was better
    spent since their base of operations was closer to our customers.
    This was a morale booster for our salespeople, as well, and they
    gained stature by virtue of our local facility. Factory sales
    managers stopped harassing us about market penetration as our
    volume and recognition grew in the Baltimore market.
  • Effect of satellites on cost of
    operations.’

    Contrary to our earlier convictions, our overall cost of operations
    versus volume was reduced. Our satellite facility’s
    overhead versus sales was far lower than Washington’s, where our
    department heads and executives were based. They were able to
    supervise Baltimore operations by phone and weekly visits.

Another way
Despite the success our Baltimore operation enjoyed, we resisted
the establishment of another satellite in northern Virginia. Our
rationale was that the distance between our suburban Virginia
accounts and our main showroom was far less than the distance to
Baltimore.

As I look back, however, I realize we made a mistake. To reach
Washington from Virginia, one must cross the Potomac River. Even
George Washington found that to be a challenge! It still represents
a geographic and cultural barrier that is meaningful to dealers and
their clients, as well.
Because of this factor, our Virginia-based customers rarely
utilized our excellent Washington showroom and Virginia-based
distributors managed to enjoy sales with little competition from
us.

Eventually, we did open a Richmond, VA satellite facility 110
miles away, with moderate success. But the population in northern
Virginia represented better potential at that time than Richmond
and south of there.

Today, without question, we would have opted for a satellite
facility in suburban Virginia, nearer to our Washington
headquarters. Such a facility would have added volume without much
increase in administrative costs compared to our Richmond showroom
and warehouse.

Opening satellites
Many kitchen and bath product distributors located in metropolitan
areas have bitten the bullet and opened multiple satellite
showrooms in their territories.

High-profile examples include Kitchen Distributors of America
(KDA), serving the Chicago market; Kitchen Suppliers, Inc., serving
Detroit and its environs, and Reico Distributors, covering the
Virginia and Maryland suburbs of DC, as well as Baltimore.

These are but three examples of distributors opening satellite
showrooms in large metro markets. The distributors I’ve just cited
are also “whotailers,” serving both retail and wholesale
customers.
These whotailers, along with proliferating branches of Home Depot
and Lowes homes centers, represent important future competition for
retail kitchen and bath dealers. Single-location dealers in large
metro areas need to follow their lead and expand their own
operations in order to maintain market penetration, volume and
profitability.

Those dealers who lack the capital to open satellites should
seek out other single-location dealers in their market who are
facing a similar dilemma. A friendly merger that results in a few
satellite showrooms will enable those dealers to increase
advertising exposure under a single trade name, reduce overhead,
gain name acceptance and better attract competent personnel located
in close proximity to their facilities.

All of these elements would enable the dealers to compete
successfully even with the home center chains. They’ll find, too,
that their leverage with, and support from, their suppliers will be
enhanced by their increased visibility.

Markets aren’t static. Population and wealth grow whether or not
our businesses are in a position to profit from the growth. Doing
nothing can only serve to diminish your importance to your
suppliers.

Allan Dresner, CKDe, is a Washington DC marketing and management
consultant with a broad background in kitchen and bath
distribution. He conducts seminars for cabinet distributors, and
serves as a consultant to firms in kitchen/bath distribution. He is
a member of the NKBA’s Hall of Fame.

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