Mark Mallinder, marketing director of independent builders merchant EH Smith, told delegates at the BMF Conference in Malta how the company transformed its “broken” collection business model into a profitable operation.
The EH Smith marketing journey began three years ago, when the independent merchant realised they had a problem.
“We’re exiting the recession, and we realised we had a problem – our collection business model was broken,” said Mark Mallinder.
The company looked at a variety of solutions, such as changing the shelving, improve the lighting and create a positive environment, but none of that was working.
“The more we unravelled the problem, the bigger the problem became,” said Mallinder.
After more research, they realised the big solution to their problems – knowing your customer. They asked themselves two fundamental questions about their customers, who they are and what they wanted from their merchant.
“We thought we knew who are customers were, probably like you do, builders who are bacon butty eaters, big boot wearers, The Sun readers, beer drinkers and hairy bottomed blokes. Is that representative of who we sell to? Of course not, that’s a stereotype. That’s problem with stereotypes, they’re based on a small amount of truth. We pigeonholed the whole entire group into one area and there is a huge danger of doing that in the merchanting industry. The danger is we inadvertently treat our customers differently to how we treat ourselves.”
EH Smith decided to embrace the principles of retail in order to make the changes required.
“It doesn’t mean our trade counters have to look like a perfume counter at Debenhams, that’s not way I’m saying,” said Mallinder. “We have to adopt some of the retail principles. We have to make them work for our industry.”
What EH Smith did was introduce a number of “easy abc” retail principles into their own branches. Firstly, they made sure all stock was well laid out and presented cleanly, making sure promotions were on offer for customers.
A wide range of products were introduced because “builders like choice”, completive prices became important as the advent of mobile phones and smart media means builders can check for any prices.
A logical “common sense” branch layout is also critical. “Work out what are the key products, where should they be in store, what customer journey do you want them to go on, what products do you want sat next to, these type of things must be thought about.”
Merchants have to allow for browsing and self selection, and so the company opened up parts of its warehouses so customers can see the huge wide range of products and the prices as an extension of the shop floor.
Knowledgeable staff is also important for customers. “It’s such a USP for our industry and we should never let that drop,” says the marketing manager. “We have to make sure they’re Knowledgeable because that’s what customers want, the advice and expertise.”
The physical change of the branches is one side of the story for EH Smith, the other was looking at how they engaged with customers.
“You have to communicate well with your customers,” he said. “But when you’re communicating with your customers, you’ve got to have great communication. I know that sounds cheesy, but it’s true.
The results of EH Smith’s marketing strategy undertaken in the three years demonstrates how successful the project was. Footfall increased by 30%, collected sales were up 32%, collected profit increased by 22%% and added an additional £3m of collected turnover. They also made a return on the investment in less than a year.
“These were game changing figures for us,” said Mallinder. “All of this was only possible because we took the time to question and understand our customers.”