>My previous article, “Distributors, Good Bad and Indifferent”, talked about distributors and the various options and routes to market. This article is aimed at those companies who have decided the Distributor route is right for their strategy. For ease of understanding, I will describe the ‘supplying company’ as the ‘Supplier’ during this article.
I have previously explained how important up front research, due diligence and general strategy is when selecting a partner to be your Distributor. Indeed the word ‘partner’ is deliberately chosen, as the relationship must be considered one of joint responsibility. The day a Supplier describes a Distributor as a ‘Customer’ is a sad one, as the motives for selling to them will be misguided.
A Supplier will never have control over its Distributor, and it should not try to do so. However with thoughtful and planned management, the Supplier can influence significantly the thinking and strategy of the Distributor.
A shared vision is important, but often the root cause of misunderstanding if the vision is interpretted differently by each party.
So how do we go about singing from the same sheet?
First, the companies must have a similar ethic to developing business. For example they must both dedicate effort to external sales, they must both spend money on marketing, they both must have a culture of entrepreneurial flair. Hopefully much of this has been ‘ironed out’ in the due diligence process, and it cannot be stressed too much how important the prior research and due diligence is. The ‘chemistry’ must be right! Clearly a ‘can do’ Supplier wants to work with a ‘can do’ Distributor, therefore the culture within the Distributor business will either make or break the relationship.
Second, the Supplier must be able to ‘sew seeds’ in the Distributors mind, that enables the Distributor to develop ideas in line with the Suppliers thinking. Therefore the Suppliers ideas become the Distributors ideas. That way (hopefully) all buy into the sales plan. The sales ‘plan’ must be written with inputs from both parties, with agreed actions. It must be realistic, with some ambition built in, no different from any sales plan. Both the Distributor and the Supplier must commit to the actions agreed. The Supplier must maintain a level of responsibility, commitment and support to ensure this works for all, as it is in the interest of both parties. Fairly obvious, but all actions must be apportioned to an individual, and given a time for completion or action. The plan must be dynamic, easily updated, and reviewed by both parties regularly.
The Supplier must take the responsibilty to train the Distributors team in its products, and must not forget the latest product development updates. Market and Product bulletins will be a key part of the relationship. Make sure that this is communicated in a way that all Distributors can benefit from.
Now all of this is all very good, but what about the new Sales Director, that has inherited Distributors from the Boss or his predecessor. And to make matters worse, several of them are not really performing. How do we deal with this?
First, check the contractual arrangements for the Distributor in question, their terms of engagement (if these exist), and also understand any terms of severance (should this be necessary). Talk to your Boss, check that any drastic action you may have in the back of your mind is not going to drop you into the ‘muck’, as you are just about to axe his all time buddy!
Second, it is imperative that a meeting takes place with both Manufacturer and ‘Poor Performing Distributor’ around the table. At that meeting both sides must state their aspirations for the business. Invariably the Suppliers aspirations will be more ambitious than those of the Distributor. The skill now is to bridge the gap between what the two parties aspire to. What does the Supplier need to do to help the Distributor perform better, and by when? What does the Distributor need to do to make more sales, again by when? What do both parties need to do to resolve the issues? Again, planting seeds is important, so that the Distributor develops ideas along the lines of the Suppliers thinking. A specific action plan needs to be put together to meet the immediate objectives, with a longer term ongoing plan to sustain the higher levels of business, once growth has been achieved.
Formalising a reporting structure is a key strategy. Careful consideration regarding a format is important. Too complex and the Distributor will procrastinate, or even worse, ignore. It needs to be easy for the Distributor to deal with. It needs to be in a format that allows the Supplier to benchmark each Distributor.
The frequency of reporting is also a consideration. For high volume fast moving products, perhaps a Monthly report is needed. With longer sales process items (eg Capital Equipment) a quarterly report may suffice.
Expect some resistance to formalised reporting. The Distributor may need to be coerced, even incentivised. Explain that reporting from all Distributors will allow a better flow of success stories and cross referalls, hence greater business opportunity. And for those who stubbornly refuse to report, and are not performing well, now is a chance (contract allowing) to sever business relationships.
There will always be an element of ‘Us and Them’. And of course the Supplier must respect the fact that the Distributor has other priorities too, as they are likely to represent other suppliers. However, getting the Distributors together once every 12-18 months for a conference, training and inteliegence sharing event is likely to pay dividends for the Supplier. It will engender a sense of worth and belonging for the Distributor.
“All this is all very well, but my Company has 25 Distributors, they are baswed anywhere from New Zealand to Alaska, Singapore to Brazil. How can I reasonably be expected to do all this?” A very reasonable question. First, a network of this size will need more than one person to manage it. Second, it is important that you take the time (albeit sometimes infrequently) to visit all Distributors. For those far away, it can be prudent to engage the services of a specialist Sales consultancy local to the Distributor, who can monitor the Distributor with 6 or 12 weekly progress meetings, and instill good sales practice at the same time. An independent Sales consultant will understand the Suppliers objectives, the local culture and trading conditions, and provide an unbiassed assessment of the progress and challenges.
It is interesting to talk to Supplying companies who believe the Distributor route has failed them. It is always the Distributors fault, or is it? Perhaps a recognition of joint responsibility may have yielded an all together different outcome. And perhaps now, on reading this, the realisation of this responsibility is becoming apparent.
Some Suppliers have recently stated to me that “We believe we can do an equally good job in the territory without giving away all that profit.” I cannot argue with this view one way or another as there are many options to doing business. Of course each come with a cost associated to them. Careful consideration of overheads, employment, local laws etc are vitally important.
The underlying message is that you need to work with your Distributors to gain the rewards. Both time and money must be invested. Mutual respect and spirit of cooperation are key.
Happy partnerships, and hopefully happy Sales!
Ian Thomas FInstIB
T: 0870 787 7590