Discussion on business innovation has been heard everywhere over the past decade-plus, and this includes wholesale distribution. Though not historically seen as change management leaders, distributors have enacted innovation within their operations at an accelerated pace in recent years — sometimes out of necessity — and many of the top distributors in various markets are just as much of a technology innovation company as they are a distributor of products.

But what does innovation actually look like in terms of return on investment? ROI, after all, is the ultimate metric that executives want to track when it comes to any capital endeavor.

That’s what the team at Prokeep looked to find out. Via discussions with thousands of distributors throughout 2023 and a survey of the some 2.5 million contractors who use the Prokeep platform to order from those distributors, the company was able to gauge where the biggest open innovation opportunities still are, and how to realize them.

Prokeep — a conversation hub platform for distributors that drives communication with customers — has released a “25 Innovations for Distributors in 2024” handbook to help these firms identify areas of their operations ripe for change management; address how they can go about driving initiatives forward; and ways to better future-proof their business.

While I won’t touch on all 25 here, I wanted to address some of the overarching takeaways from Prokeep’s research.

Proactive > Reactive

Given the now constant state of disruption across distribution — most notably illustrated by direct and still lingering impacts of the COVID-19 pandemic — distributors have been forced to spend much of their time reacting to sudden market changes, and less time doing things that will differentiate them from competitors. But those firms that have been able to address the latter while dealing with the former have been able to gain separation, Prokeep suggests. The platform provider alluded that technology tools that were once revolutionary in distribution — ERP and CRM systems, and eCommerce come to mind first — have been table-stakes for a number of years now.

“Sure, you have an ERP system, and that was a big change at the start of the 21st century. But today, leaders in distribution are taking the next step by building digital ecosystems — interconnected technologies that store business information, manage tasks and keep everything flowing seamlessly — to enhance business efficiency while enabling sales and marketing to pull in more revenue,” Prokeep’s report stated.

This sentiment was reflected in research out of B2B distribution technology advisement firm Applico, whose newly-released “Leaders vs. Laggards Index” of billion-dollar+, publicly-traded distributors shows that the EV/EBITDA ratio between the ones investing in digital and innovation is about a 4X difference over the past five years. That difference peaked at over 11X in late 2020 and early 2021 and has since settled.

The firm notes that the difference in stock price gains has likewise considerably widened as of late between these “leaders” and “laggards,” with leaders seeing their five-year stock price lead grow from approximately 15 percentage points in September 2023 to 61 points at the end of 2024 — up 255% overall in that time period. Laggards’ stock price indeed increased as well, but by 196%, or just above the S&P 500 return rate.

No Plan = Planning to Fail

Without a plan behind it, innovation is just an industry buzzword. Prokeep’s report noted that change management outcomes miss goal expectations 50% of the time — due to strategies that are implemented without a proper plan. Distribution executives and teams can all talk the talk of innovation, but walking it an entirely different animal. For example, Prokeep shared the findings that 63% of distributors create a marketing plan, but only 1 out of 3 of them find their marketing efforts to be effective. That’s quite a disconnect.

“I think that there’s a general apprehension to drive messaging outbound,” Prokeep CEO Jack Carrare told me. “Distributors rely on their relationships and want to build them. Any opportunity where you can drive the right message at the right time to a customer — simple things like order updates — shows transparency. These could be opportunities for a training session or a counter day or to buy something at a discount that’s been sitting in the warehouse for a while. A lot of our [distributor] customers I know are apprehensive about potentially hurting relationships with those types of messages, which is why I think a low percentage of distributors act in that way. But it’s an incredible opportunity to drive better relationships and demand through a smart, targeted strategy.”

To address this planning gap between goals and results, Prokeep advised following these five steps to manage innovation:

Identify new trends — Gather news and industry reports about shifts in buyer expectations, new solutions, and what leaders are experimenting with. Think about these holistically, what they mean together, and how you can use this to springboard and prioritize new strategies.

Experiment with short-term sales and marketing strategies — Build a plan of attack for short-term investments so you can see quick ROI. Make sure these strategies solve for creating a more frictionless buying experience and keep your business top of mind.

Invest in future-proofing your digital strategy — Start building a digital ecosystem, connecting technologies to ensure a smooth and accurate transfer of data and communication records. This is a massive head start and will ensure your success with new technologies on the horizon.

Measure success — Use data collected from your short-term experiments and from new technology optimizations to analyze business outcomes and identify opportunities for improvement and what was successful.

Iterate (rise & repeat) — Always keep innovation at the forefront of your business planning. Once you’ve experimented and found success, it’s time to start the cycle over. Gather new intelligence, make bets and measure.

Prokeep’s handbook took deep dives into each of these steps and what they look like in practice. Its analysis and advice covered sales and marketing tactics that included:

• Outbound messaging & upselling
• SMS marketing
• Personalization
• Price advantage transparency
• Internal incentives
• Customer reward programs
• Co-op advertising funds, and 
• Optimizing your online presence

Digital Investment Strategy

When it comes to any business innovation, taking the first step toward it can be a major challenge, whether due to decision paralysis amid the number of technology options, a lack of leadership alignment on what the goal should be, or because such a goal is often ambiguous — sometimes there is no tangible end result.

Prokeep advises that a great place to get started on moving your digital strategy forward is to connect the digital tools you’re already using — like your ERP, business texting technology, CRM, smart lockers, etc. — with an application programming interface (API). Doing so cuts out the manual step of inputting information and eliminates manual efforts.

“What jumped out in our results was that distributors were really eager to try do things, but the biggest hurdle was ‘how do we get started?’” Prokeep Director of Growth Marketing Brooks Young told me. “So that’s what we tried to lean into and say, ‘You don’t have to do all of this at once. Here are three or four things that you can start doing to have an impact on your business today.’ That’s what we’re starting to see more and more of. People are like, ‘Man, I have enough priorities right now. I can’t take this on.’ So, we wanted to make it really simple and show them some bigger, longer-term plays that they can lean into for the future, but at least for now, here’s where they can start to make an immediate impact.”

Prokeep’s report had a wealth of research data on AI and BI implementation and distributors’ priorities for each, along with insights on the advantages that communication software provides compared to managing customer communication with disparate functions. 

Find much more distributor innovation research and insights in Prokeep’s handbook here.