Harvard Cases

HARVARD CASES

Case 14
WESCO Distribution, Inc.


Synopsis


In June 1997, Jim Piraino, VP of marketing for WESCO Distribution, Inc., is preparing for a yearly review meeting with WESCO CEO Roy Haley. Haley wants the firm to reach annual growth goals of 6% to 8% in revenues and 12% to 16% in profitability over the next five years. The centerpiece of this growth strategy is theNational Accounts program, which WESCO has developed to serve its major industrial customers in response to recent changes they have made to their business processes. However, as of June 1997, the NA program has not delivered the expected increases in sales and profitability.

Jim Piraino has to give Haley his recommendations for the future of the NA program, in particular, whether WESCOshould continue to pursue NA business with the intensity it has in the past, or whether to assume a more reactive stance and offer the NA program only when it is requested by current customers. As well, he must account for how WESCO will achieve the desired increases in profitability and overall revenues when its current program already seems to be encountering difficulties in generating the desirednumbers.


Use


Although the "customer" is at the heart of marketing strategy, "effective customer management" is still not a very well understood concept in industrial marketing practice. This case can be used to explore the difficulties encountered in developing and implementing new ways of customer management in mature industries such as component parts, industrial raw materialsand consumables,[1] and other similar industries. These industries are characterized by an environment in which competitors are able to offer equivalent products at competitive prices and vendors/ distributors have to use service rather than product characteristics to create differentiation and add value to customers.


This note was prepared by Professor Das Narayandas with the assistance ofResearch Associate Sara Frug for the sole purpose of aiding classroom instructors in the use of WESCO Distribution Inc., HBS case No. 598-021. It provides analysis and questions that are intended to present alternative approaches to deepening students’ comprehension of business issues and energizing classroom discussion.

Copyright © 1998 by the President and Fellows of Harvard College. Usedwith permission.

In the 1990s, the standard response of these vendors has been for them to set up a National/Key/Major Accounts Program. While in principle these programs are a good idea, since they lock customers into long-term agreements with volume commitments, there are several factors that can derail this effort. Vendors are learning the hard way that not all of their customersare interested in getting into these agreements. Further, they are finding out that many of the customers who get into such agreements are only interested in getting lower prices in addition to more service from the vendor/distributor,[2] and are not willing (or not able) to work with the vendor in a mutually beneficial mode. As the case highlights, the true benefits from these programs come whenboth sides put in the effort and the investments to make it happen. By using WESCO's partially successful national accounts program as the foundation, this case analysis helps students develop a better understanding of how to develop, implement, and effectively manage a National or Key Account Program with major customers.

The case is also rich on distribution and integrated supplymanagement issues, and can serve as an effective recap of the distribution module if taught in a business marketing course. Finally, the case has a lot of information on trends in buyer-vendor relationships through the 1980s and '90s.

Given the complexity of the situation and the information provided, the case is best taught in a second year MBA elective such as business marketing, service...