Money makes the world go ’round. And for decades, manufacturing and marketing money-handling supplies made Block and Co. go ’round. But changes in the financial industry threatened to stop the company in its tracks.
The $90 million-plus Wheeling, IL-based company consists of three groups: the Block Division, a $25 million direct merchant with 21 field sales reps and 13 inside sales reps; ECD, the smallest group, a manufacturer of cash drawers; and MMF, the largest division, which manufactures document carriers, coin bags, shipping tags, and numerous other bank and office supplies that it sells to the likes of Office Depot and Staples. Coin wrappers and cloth lock bags kept Block’s sales steadily rolling along from its founding in 1934 until about three years ago. That’s when consolidation within the banking industry reduced the number of players in Block Division’s target market.
Even before then, increased use of debit cards and credit cards had been leading to a decline in cash transactions, which in turn meant a decline in purchases of cash-handling products. Compounding matters, the 9/11 terrorist attacks raised new security concerns, causing some key products to become obsolete. The cloth lock bags, for instance, were replaced by tamper-resistant polyurethane bags.
“There was a change in terms of what the Federal Reserve was telling banks in what they needed to do,” says Block vice president Barry Litwin, who is also general manager of the direct division. “It was evident that the business was facing dynamics that needed to be addressed.”
When Litwin came on board in July 2003 — he’d previously been at Archibald Candies and signage supplier LabelMaster — he gathered his troops for an offsite summit. “We totally dissected the business for three days,” Litwin says. The result was a three-year strategic plan by, and for, the company. Litwin presented the plan to the board of directors, received an undisclosed amount of funding, and began executing the new strategy less than three months later.
Out of the “commodity dungeon”
So what was this new plan? “A customer survey told us that our competitive advantage should come from service excellence and personalization,” Litwin says. “In order to compete in the very competitive market for bank operating supplies, we adopted a strategy mission of customer intimacy and decided to rebuild our business model around the unique service needs of our customers.”
That meant transforming the sales team from order-takers to a consultative resource for clients. “Block wanted to be a valuable resource to their customer,” says John Hirth, president/founder/CEO of Arlington Heights, IL-based consultancy Selling Dynamics, who worked with Block’s inside telesales and field sales teams. “They wanted to sell products that help solve problems.”
For example, if a customer is speaking with a customer service rep or an inside sales rep and asks about the price or availability of specific item, rather than simply answering the question, the rep now asks follow-up questions, such as “What product are you using now?” or “Is there a reason you’re looking to buy this type of product?’ This helps position Block as the expert and strengthens the relationship.
Because of the added value of the new consultative approach, Hirth says, customers would be less likely to quibble on price. “It ultimately takes Block out of the commodity dungeon,” he says.
In their new role as advisers to their clients, the sales reps learn more about what the customers — and the market as a whole — needed. For instance, a growing problem in banking circles is check washing, “when someone takes a piece of acetone tape and removes the amount listed on the check and puts in a different pay amount,” says Bill Heinrich, a former Quill and Boise executive who is now Block’s director of merchandise. To help its customers address the problem, Block plans to partner with another company to offer security pens with inks that can’t be erased.
Customers also told Block’s field salespeople that in addition to supplies for tellers’ stations, they needed products for other parts of their properties, such as safety items and signage. So Block has added about 2,000 such SKUs to its product line. In 2003 half of the products in its 192-page core catalog were teller-station supplies. This year only 40% of the items in its 300-page catalog are teller supplies. New items range from parking signs to bottled water to toner for copiers, fax machines, and printers, “which is something we didn’t offer before but which every bank has,” says product manager Trish Goldfarb.
Checks and balances
Today the Block Division mails three catalogs with an annual circulation of about 350,000. The company mails 100,000 copies of the full-line Block & Co., as well as 80,000-90,000 copies of a 98-page book targeting nonfinancial institutions, such as casinos, hotels, and insurance companies, and a 98-page catalog of best-sellers.
That’s a far cry from 2004, when Block’s circulation was hovering at around 500,000 with six editions, including several books selling subsets of product lines, such as deposit slips and stamp sets. Each of the specialty editions mailed to different job titles within banks, such as marketing managers, item processing managers, and tellers.
“We ended up consolidating our marginal-performing smaller titles and redirected the savings against our main book, which expanded in page count 50%,” Litwin explains. This strategy enabled Block to increase the frequency of mailing, to three times a year for each book from just once a year.
The reinvention extends to the way Block’s merchandise is presented on the page. “Two years ago the catalog was functioning as a bag full of stuff,” Heinrich says. “We took that catalog and repositioned it in a way that made sense.”
For example, previous catalogs started off with pages of coin wrap holders. “We sell a lot of those coin holders, but that doesn’t exactly say to the customer, ‘We are the money-handling experts,’” Goldfarb says. “Money-handling experts carry currency counters, coin sorters, and counterfeit detectors. And we just started [leading off the catalog with such products] this year.”
On the money
Litwin is pleased with Block’s growth so far, noting that results are tracking above plan. Catalog sales are rising in the single digits; the effect from the overall catalog contribution across the multiple channels including direct, telesales, and Internet “is forcing our significant overall growth,” Litwin says.
Of course there’s still work to be done. The company intends to continue expanding its merchandise breadth and gaining new customers. To that end, its recharged sales force is ready to respond to marketplace changes.
For example, when Office Depot announced in September that it was folding its domestic Viking Office Products catalog business, Block’s sales team sprang into action. The reps called on accounts likely to have ordered supplies from Viking and secured a number of them as customers through its Block One Money program. The program grants customers who make Block their primary supplier such benefits as reduced pricing and expedited shipping.
Litwin cites the ability to move quickly in the face of industry changes, along with a canny merchandise expansion strategy and the willingness to offer new services, as drivers of Block’s growth. And perhaps its growth and change, as much as money, that make the world go ’round.