EXPORT NEWSLETTER: AGENTS OR DISTRIBUTORS

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It takes a long time to develop good distributor-supplier relationships; unfortunately, it only takes a short time to destroy them, especially with all the tension inherent to a market slowdown.  

There is no doubt that there are many unhappy marriages and that the commonest causes of friction are misunderstandings as to when and where this channel should be used and how to get the best out of it.

    

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Export agents or Export distributors?

Hard to imagine, perhaps, but win-win is dead. To the extent that they ever existed, the days of shared prosperity are over. Distribution businesses and manufacturing businesses work at legitimate cross-purposes because their paths to profit and growth are very different.

There are certainly codependent aspects that warrant collaboration, but these aspects only represent a portion of the relationship. There are aspects where individual best interests are actually in conflict when considering the long-term interest.

Distributors choose the best suppliers available to create their ideal customer offering. Suppliers work hard to build a distribution channel that meets their needs. But, once these relationships are created and aligned to the needs of the parties involved, they immediately start becoming dysfunctional. The reasons are varied: For example, distributors add new products that create conflicts with others of manufacturer and distributors suppliers relationships.  

Both parties require growth, but the methods themselves create conflict. Resolving these situations as they arise often creates short-term revenue losses. Most distributor- and supplier-executives choose not to hurt short-term revenue and instead try to work it out through discussion.

This appeasement practice often leads to death by a thousand cuts over a multiple-year horizon. At some point, the channel becomes so dysfunctional that major surgery is required. The reluctance to deal with small conflicts as they arise is the other root cause of the destructive relationships

The ideal environment for a distributor is a market with many small customers and where the level of sales service required is high. But the spread of customers is difficult and expensive to reach with a directly employed sales force who are more suited to dealing with a limited number of large buyers. Distributors generally aim to win business on sales rather than service. Their stock of products means customers can have instant delivery.

Even in the correct marketing environment the use of distributors is not always successful. Many distributors make the mistake of expanding their product range to an unmanageable level, with the result that selling effort is dissipated. This gives rise to the commonly voiced complaint of manufacturers that distributors are order takers and not order getters.

Poor distributors can be recognized by their low level of stocks. Since an important role of the distributor network is to provide immediate access to goods, poor stocks will result in poor service. The same person who carries inadequate stocks is likely to be the one to complain that the manufacturer is letting him down with deliveries which are too slow.
Staff employed by distributors may sometimes leave a great deal to be desired.  Staff may lack selling experience. A recent survey of exporters asked the distributors whether they would be prepared to let the manufacturer train their sales staff in one of the product lines. Only a minority were interested in the offer, even though it would have cost them nothing except the opportunity cost of their employees' time.
Manufacturers are also accused of being interested only in selling into distributors and providing little help in selling out. Distributors rely on a strong demand puff for their products. Distributors want customers who ask for a product by name and this demands strong branding. Manufacturers should not assume that distributors are interested in switching customers to another brand at the point of sale. Small distributors may lack the time and trained management for planned marketing.
It usually falls upon the manufacturer to provide marketing support. This can range from the provision of display material for the showroom through to media advertising or mail shots aimed at drawing a response and directing it to the distributor. A number of distributors say that not only do they receive little or no support from their principals but they even had to buy their own sales literature!
Distributors need a helping hand and may not get it. They can hardly be blamed for placing their own limited time and resources behind products which sell easily and make money rather than those which are hard to sell and provide little profit.
There is no single recipe for the successful appointment and management of distributors but here are some ingredients which are worth considering.
Seek specialists. Distributors who specialize in a narrow field tend to be the most successful. They understand the needs of their customers better and know where in their territory the potential lies.
 

 Treat distributors as part of your own company. Regular visits and conferences bound them together and provides an opportunity for sorting out problems.
Just as a manufacturer would not dream of sending a new salesman on the road without product training, so too should distributors' staff be trained. I
Set strict codes for merchandising. Contrary to the belief of some manufacturers, distributors are quite prepared to conform to a tightly controlled formula for merchandising goods - as long as they know it works. . And the distributors are happy to comply because they know that this approach sells more .
Provide assistance with Marketing. Marketers take it for granted that everyone knows which directories to look in for a list of prospects, how to organize a direct mail campaign and where to place ads. Distributors are likely to be managed by good salesmen and poor marketers. Any assistance that the principal can provide in marketing the products will improve the relationship and help both parties sell more products.
Make the business worthwhile. If a manufacturer decides to use distributors rather than another marketing channel, he should not begrudge the distributor his margin. This margin saves the manufacturer from having to invest in cars, salesmen, depots and expensively high stock levels. The margin he provides should be sufficient to cover the distributor's costs and provide a profit incentive.
Keep the distributor interested. Distributors are under constant pressure to take on a new range or a new supplier. Any manufacturer who becomes complacent about its distributor network is putting it at risk. If it is good there will be many who want to steal it. Distributor incentives and prizes, newsletters and constant support in the form of visits are essential to keep the distributor interested and stop it being tempted away.


Once a Distributor is appointed it is essential that they are managed professionally.
A poorly managed distributor will normally fail to deliver the sales and profits expected.