Why the Best LBM Dealers Define, Measure, and Deliver What Customers Value Most
About 20 years ago, I wrote an article about a builder who taught me an important lesson about customer service. The lesson has stuck with me throughout my career. In fact, I think it’s even more relevant in today’s LBM industry than it was back then.
The builder in that article was what I called a “numbers guy,” and not just on price. He wasn’t interested in hearing us tell him that we had “great service,” as that was too generic. Everybody says they have great service. I don’t know of any company that says their service is just so-so. He wanted to know exactly what great service meant. What percentage of our deliveries would arrive when promised and what was our fill rate? How quickly did we do material pick-ups, and how soon would the credit be on his account? How would we deal with damaged material? And perhaps most importantly, how would we measure all of it?
At first, his expectations seemed excessive (at the time). Eventually, we realized something important. He was telling us exactly what we needed to do to earn his business.
Fast-forward to today. I continue to see LBM dealers spend a tremendous amount of time trying to figure out what customers want. Sometimes we make it more complicated than it needs to be. Ask them… and don’t just ask, “How are we doing?” That’s almost a useless question.
Ask…what are the 3 to 5 most important things you expect from your supplier? What frustrates you about doing business with lumberyards? What causes the biggest problems on your jobs? How important is delivery accuracy compared with delivery speed? How quickly do you expect your salesperson to respond? What information do you need from us before a delivery arrives? When we make a mistake, and we will as we’re human, what does a good recovery look like to you? What could we do that would make it easier for you to do business with us?
Those conversations can be incredibly valuable. Because here’s something I’ve learned after more than four decades in this business: Customers don’t all define service the same way.
One builder may always demand an early first-out delivery. Another doesn’t care whether the truck arrives at mid-morning, as long as somebody tells him when it’s coming. One contractor may value immediate pricing. Another would rather wait a while and know the quote is complete and accurate. One customer wants his salesperson on the jobsite every other day. Another wants to text a question and get an answer in five minutes. That’s why simply saying, “We provide great service,” doesn’t mean very much. Great service according to whom?
Service Has to Be Measurable
One of the biggest changes in our industry over the past 20 years is the amount of information available to us. Dealers today have far more data than we ever dreamed of having years ago. Yet I’m not convinced we’re always using it.
We can track data such as delivery performance, quote activity, sales activity, gross margin, credits, customer wallet share, and more. So, if we are going to promise great service, we should be able and willing to measure it.
Are we delivering when we say we will? Are orders complete, accurate, and undamaged? How many deliveries require a second trip because something was forgotten? How many credit returns are being generated? How quickly are customer problems resolved? How profitable is the account after we consider everything we’re doing for that customer? That last question matters…a lot!
Not All Sales Are Good Sales
I’ve said this many times over the years, and it’s prominently on my homepage: “Top line sales is for egos…it’s the bottom line that counts!” It is easy to become impressed by a large account: “This customer does $2 million a year with us.” Sounds great. But what does that $2 million account require?
How many deliveries per job? How many emergency deliveries? What’s the average dollar amount per delivery? How many returns? How many special-order mistakes? How much estimating and takeoff work? How many AR issues?
The highest volume customer isn’t necessarily the best customer (i.e., most profitable). And the customer who beats you up the hardest on price isn’t necessarily your least profitable customer either. You have to know the numbers. In other words, calculate your customers’ profitability index.
Don’t Confuse Service with Saying Yes
This is another lesson I’ve learned during my career. Some LBM companies believe great customer service means saying yes to everything. I disagree.
Can you get this delivered this afternoon? Yes. Can you make another trip because we forgot something? Yes. Can you hold that price? Yes. Can you stock this product just for me? Yes. Can you take this material back? Yes. Can you sharpen the pencil a little more? Yes. Eventually, all those yeses have a cost.
Great service isn’t giving customers everything they ask for regardless of the impact on your company. Great service is understanding what matters most to the customer and becoming exceptionally good at delivering those things consistently and profitably. There’s a big difference.
If your customer is highly unorganized, it is costing you and them money. If you are able to convince/help them to be more organized, both companies will experience less frustration and be more profitable.
Technology Doesn’t Replace Communication
We have tools today that didn’t exist when I wrote that original article. Customers can receive automated delivery notifications. Salespeople can access information from their phones. Orders can be tracked electronically. Quotes can be generated faster. Artificial intelligence is beginning to help salespeople and managers analyze information, prepare communications, research customers, and identify opportunities.
All of that is valuable. But none of it replaces a conversation. Technology can tell you that a delivery was late. A conversation can tell you why that late delivery mattered to the customer. Data can tell you that a contractor’s purchases have declined. Talking with that contractor can tell you why. A report can show you that margins are slipping. A good sales manager can sit down with the salesperson and figure out what’s happening.
Use the technology and the data…but don’t hide behind it. This is still a relationship business.
Define the Deal
Looking back, that’s what I appreciate most about that “numbers guy” from all those years ago. He defined the deal. He told us what was important to him. We determined whether we could profitably provide it. Then we measured ourselves against those expectations. That’s a much better approach than making vague promises about “great service.”
Imagine sitting down with one of your top customers and saying, “Let’s identify the three-five things that matter most to you when doing business with us. Then let’s agree on how we’re going to measure whether we’re delivering them.” That’s a very different customer conversation. And it changes the relationship.
You’re no longer just another lumberyard trying to sell lumber and building materials. You become a business partner. But there’s another side to that partnership. Your customer has expectations of you. You should have expectations of the customer, too. Such as reasonable payment terms, good communication, respect for your people, reasonable expectations regarding deliveries and returns, and pricing that is competitive but profitable. The best relationships work both ways.
The Question Hasn’t Changed
Twenty years after I first wrote about that customer, the tools have changed. The technology has changed. The amount of data available to us has certainly changed. Customer expectations have changed too. But the fundamental question hasn’t changed: What does this customer value—and are we delivering it better than our competition?
Don’t guess; ask…define it…and measure it. Hold yourself accountable for delivering what you promised. And make sure you’re getting paid appropriately for the value you’re providing.
“Great service” isn’t a slogan; it’s a promise. And if you’re going to make that promise, you better know the numbers.Top of Form
Mike McDole has 40+ years of actual LBM experience, including being SVP of a large regional pro-dealer, and is the principal of Firing Line LBM Advisors. He’s also partners with Greg Brooks of the Executive Council on Construction Supply and his LMS. Mike can be reached at 774.372.1367 or Mike@FiringLineLBM.com.
