News

Source: Modern Distribution Management, October 25, 2003

By Thomas P. Gale & Dr. William R. McCleave, Jr.

Beerman Precision, New Orleans, La., is a $10 million power tool distributor with a distinct twist. Less than half of its annual revenues comes from product and accessory sales. A complete array of services around all its products -- repair, parts, service and rental -- positions the company as a power tool specialist with deep expertise in its chosen field of competition.

A better description might be to call Beerman a power-tool support specialist that sells what it services. Its parts business accounts for about a third of sales; the rental business is about 20%. Repairs are less than 10% of sales but a key piece of the technical-expertise pie. The sum of Beerman Precision's efforts has been to create a bedrock position in the customer's mind that the company backs up what it sells and has the application knowledge and product depth to deliver the right tool for the job.

Over the company's 55-year history, it has built several specialty capabilities in niche areas.

• The company rents specialty products that customers can't find elsewhere, such as hand-held pneumatic band saws for use in chemical plants and oil rigs where electric tools pose a spark hazard.
• Beerman acts as a tier-two supplier to large rental houses and industrial integrators on specialized equipment.
• The company built a reputation as an expert in high-tonnage hydraulic jacks, up to 1,000 tons, and also pioneered several technical designs for this type of specialized equipment. It has also become a hoist specialist.
• Where a rental company may carry one or two brands of a specialty tool, such as pipe threaders and benders, Beerman may carry six or more brands to cover a broad range of applications.

These differentiators are based on a match of strong product brands, technical services and customer-focused policies. Customers often rely on Beerman to recommend the right tool for a specific application.

This second-generation distributor with 44 employees and two branches (New Orleans and a branch in Gulfport, Miss.) doesn't go head-to-head with the "big-box" retailers, as president Marc Beerman explains, "Milwaukee Electric may have 350 tools, but a large retailer probably only carries about 17. We have a much greater line depth," he says. "Our message is that if you make your living with tools, you'll walk out [of here] thinking you got a good deal, that you will be treated right after you buy the tool."

Focused market approach

Beerman Precision has done a great job matching its product knowledge position with its three primary customer segments: fabrication, construction and industrial. Beerman built its technical expertise through hands-on experience. The company handles a large number of repairs as a factory warranty center. If a tool breaks during the warranty period, customers get a free loaner. That uptime guarantee is one of many performance touchpoints in Beerman's service positioning that has differentiated it from the big-box outlets as well as other general-line distributors that sell power tools.

Beerman is also one of a shrinking number of authorized factory repair centers in the state, funneling additional referrals from other distribution companies. As a result, Beerman is known as the place where a contractor can take multiple brands of power tools for repair. The company takes that a step further: A contractor can make one call and have Beerman pick up all his tools for service and repair, rather than ship to multiple repair centers.

The company latched onto differentiation decades ago in its parts business. As the master factory-direct parts depot for more than 80 manufacturers, Beerman maintains an inventory of more than 50,000 SKUs in its warehouse for hoists and air, electric and hydraulic power tools. The company built another focused niche out of this strong warehouse: a business as a master distributor of repair parts for tool repair shops nationally, primarily in small towns.

It differentiated from competitors by assembling hydraulic jack repair kits from its deep inventory and repair knowledge. For one- or two-person shops, which most small towns have, these repair kits are a strong value-added difference that Beerman has been providing for decades.

Message with meaning

In each core niche, Beerman Precision delivers a consistent message that reinforces its support role with customers. Its tagline is "Make the right decision: Beerman Precision." The theme ties the company together, for customers as well as employees. And Beerman makes sure that not only its performance matches the message, but that the customer realizes the value of the service and support Beerman provides. That's a key to maintaining margins.

To meet a growing market outside its traditional industrial base, Beerman opened a branch focused on the contractor segment near the primary development areas of New Orleans, with a store tailored to that market's needs. The store is heavily focused on power tools, as opposed to some of the more industrial hydraulic equipment and services at its headquarters location.

Radio advertising positions Beerman as "the tool guys" during morning and afternoon drive times with small homebuilders, a fragmented market that traditionally has been difficult to reach. The campaign has been extremely effective in building the "Beerman brand" with this market. "If you compare the cost with what another salesperson trying to penetrate such a diverse group could do, it's cost-effective," Beerman says. The company leverages manufacturer co-op money to make it a win-win. "We have extremely high name recognition in our market and that helps."

Line and margin management

While the company sells up to 200 product lines, its core business revolves around the top 10 to 20 lines. In part, matching the high-service capabilities with the niche product areas allows Beerman to maintain healthy margins.

"Margin maintenance is king," Beerman says. "Our rental business is key to what we do and is our growth area. Positioning with good products really makes a difference. We try to follow the product lines who truly understand the difference of a true tool distributor and puts programs in place to allow us to prosper."

The company watches financial indicators carefully. Beerman has a dedicated credit management person stay on top of receivables, and monitor the health of larger customers. It benchmarks internal performance using industry PAR reports. "If you don't watch the finances, you can be the best salesperson in the world and sell yourself out of business," Beerman says. He also meets with a local peer business group regularly, where the 10 participants "really tear each other up." It's a critical sounding board for Beerman.

Strategic shift

Beerman Precision evolved in the mid-1990s from a focus on tool sales and a strong parts business -- heavily dependent on the health of the Gulf Cost oil business -- to a more diverse offering. But the offering revolves around its core focus of powered tools. Beerman, who "eats and sleeps" the business his father built, developed a strategic plan on how to position the company to adapt to changing customer markets and needs. "One of our advantages is that I think we embrace change better than most distributors," Beerman says. "You can't have stale people in the organization."

Beerman's key differentiator is that it has chosen markets where it knows it can have a distinct advantage and then matched its strengths to those core markets. How do you keep your people fresh? A structured training program for employees includes a dedicated trainer on how to use the technology the company has invested in. Beerman has carefully stayed off the "bleeding edge." Instead, its focus is on using technology to the greatest advantage without losing focus on its core mission. Product training takes place at least twice a month, with both factory and internal sessions. The company also leverages its membership in its buying and business group, Evergreen Marketing Group, which has a strong focus on training.

Beerman's key differentiator is that it has chosen markets where it knows it can have a distinct advantage and then matched its strengths to those core markets. Instead of trying to sell against large rental companies, for example, the company has created alliances with these companies by providing specialty items the larger companies can't support.

Marc Beerman is quick to point out that focus is a critical part of success: "You have to be careful where customers try to take you," he says. "You have to be sure that it fits your strategy." This company brings a strong message to its chosen markets as a power tool distributor: repair, service and rental of the products it sells. It delivers that message with an integrity that customers have latched onto -- they know they can count on Beerman to treat them well, that the company is committed to helping them produce results. Where many rental companies will throw a rental tool back on a shelf, Beerman has a quality-control process in its rental operations. A tool is tested after each rental against factory specs and tagged as "rental ready" with the inspection date. The tool is re-tested if it remains on the shelf for more than 45 days.

Beerman Precision identified construction contractors as a market segment beyond its traditional industrial customer base that it wanted to develop. It opened a branch strategically located in the primary suburban development area of New Orleans. The branch has an extensive showroom and counter area where contractors can see and handle a broad array of power tools. The small-homebuilder market the company was trying to target was fragmented and hard to reach, so Beerman selected radio advertising during peak drive times as the delivery vehicle for its primary message: "Make the right decision: Beerman Precision." The company leverages co-op advertising dollars from manufacturers to help fund the cost of the radio spots, which cost less than adding an outside sales position. It has effectively built the company's image and visibility in this market as well as in its traditional customer base. Employee pride is sparked by hearing the ads as well. "The radio ads help to tie the company together," says President Marc Beerman. "Customers listen and hold onto the message and it reinforces our commitment to perform, to see it through to make sure it's right."

Beerman Precision's focus is creating customers for life. Based on specialty product and service niches, the model is a winning combination that makes Beerman a successful differentiator.

This article is an excerpt from our book, Stand Out from the Competition! Four Pathways to Differentiate Your Wholesale Distribution Company.

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