Make smooth and fastest Distributor Network, How

Make smooth and fastest Distributor Network, How

   July 01, 2014       prabhakardalvi

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Increasingly distributors are replacing direct salesforces in industrial marketing. They cost less, they absolve the manufacturer from the burdens of credit control and they provide a wide geographical spread of stocking points. But in appointing distributors the manufacturer loses control of the sharp end where the sale takes place. How can the principal identify weaknesses in a distribution network and what can be done about them?

The first indication of a weak distributor could be a fall in his sales performance. The manufacturer has the advantage of being able to compare the sales of each distributor and plot all their performances over time. A weak distributor can be spotted as one whose sales performance is out shone by others. - Sharpening The Distributor Network

Of course relative sales performance may not tell the whole story. Distributors live in a competitive environment and some may suffer exceptional competition from other firms in their area. Nevertheless the warning bells will be sounded, and the principal will be able to discuss the problem with the distributor in good time.

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A second indicator of a weak distributor could be the growth of complaints which find their way back to the principal from customers. The nature of the complaints could be significant. Are they concerned with lack of stock, difficulty in obtaining sales service, poor back up, high prices, etc? The complaints can be logged and become an important discussion point for resolving with the distributor.

A third means of assessing the strengths and weaknesses of distributors is to pose as a customer. The Market Research Society sanctions mystery shopping as long as it is carried out within its code of conduct. The depth of investigation which can be undertaken as a supposed buyer can vary from the odd simple telephone call to a nationwide programme of organised visits.

Certainly the principal should telephone distributors from time to time to see how they react to a general enquiry. Things to look for are the speed and efficiency with which the telephone is answered and the ability of the receptionist to direct the call to someone who can handle it. However, if a larger study is to be undertaken, it must be coordinated and carried out in a professional and unbiased way. It will therefore require the services of a team of interviewers who can measure the response of the distributor at each stage of the buying process. The important things to look out for are italicised below.

Reception. This is most important since it is the first contact with the potential buyer. It is an area which tends to be handled badly, with inefficient receptionists who garble the name of the company and show conspicuous indifference to satisfying what may be an enquiry from a customer.

The sales person's initial approach. The prospective buyer is eventually routed to a sales person who should attempt to establish needs. In a recent mystery shop we carried out, the interviewers were told to enter the distributors and record the way in which they were approached by sales people. In one instance it became clear that even after three-quarters of an hour, the sales staff were not going to turn the conversation to business. The potential buyer might be there still if he hadn't finally taken the initiative and stated the nature of his enquiry.

Describing the product. Sales people are most at home when they can describe their products to a customer. However, it is not unusual for them to concentrate on product features at the expense of customer benefits.

Handling the competition. In most markets a customer can be expected to shop around. It is revealing, therefore, in mystery shop to ask the sales person to justify the company’s products. In a commercial vehicle dealer study where interviewers posed as potential buyers, one salesman was so flummoxed by the question, "Why should I buy your vehicle rather than a competitor's?" that he confessed he could not think of an answer!

Getting hold of the product. When a customer decides on the product, quite probably it will be wanted straightaway. Availability is therefore important. If the distributor does not have products in stock or cannot get hold of them quickly, the sale may be lost.

Providing a demonstration. Just as distributors' sales staff can give an acceptable description of their products, so too they are quite good at demonstrations. In the case of office equipment distributors, a demonstration is nearly always part of the standard sales routine. However, in the vehicle research referred to earlier, one-third of the distributors had to be prompted to offer a demonstration.

Offering discounts. Distributors frequently conflict with their principals about the high price of the products they sell. Yet in a recent survey on office equipment a quarter of all distributors offered a discount without being asked. A further half made the same offer after being asked. It seemed that distributors were all too eager to use price as the main sales weapon.

Following up the sale. Once the potential customer has left the distributor's premises, it is important that the enquiry is followed up either personally or in writing with a quotation. In the vehicle dealer study only a half of the "customers" were sent a written quotation even though all had asked for one.

Mystery shopping can expose weaknesses in the many stages of the distributors' selling procedure. It may be a valuable lesson for the principal to extend the research to include some distributors outside the company's network.

Making Correcting Weaknesses for Best ROI

The golden rule for helping a distributor improve its operation is "explain and train". Before raising criticisms of the distributor's business, however, the principal should attempt to understand the nuances of each locality. There may well be causes which are temporary or peculiar to a distributor, and these must be taken into account in any recommended changes.

A common weakness among distributors' sales staff is their failure to discover a customer's needs and relate the benefits of products to them. The sales person may fail to probe to find what the customer wants; may concentrate only on selling what the company has to offer. It may be thought easier to sell on price rather than push the benefits. The sales person needs training but this may not be within the facility of a small distributor. The principal should therefore assume the responsibility for both the sales product training and showing how to approach and convert prospects.

The principal may wish to manipulate the performance of the distributors' sales people by offering them sales incentives. Distributors have mixed views on principals' incentives. On the one hand they provide a boost to the sales staff's salary and so allow the distributor to recruit a higher class of personnel. On the other the distributor who allows a principal to make a payment to sales staff must concede a loss of control.

The installation of systems and procedures at dealers can help eliminate some of the weaknesses. For example, if it is important that a follow up takes place after the initial sales call or demonstration, it would not be difficult to set up a system which reminds the sales of this next step.

Systems can be devised for every part of the sales sequence. For example, a rule could be made that the telephone is answered before it rings more than three times; another might ensure that a customer is not kept waiting for more than five minutes in the showroom. Restrictions could be placed on the offering of discounts.

Of course all procedures and rules need policing if they are to be continuously observed. Further, it must be recognized that within a small distributor, overt bureaucracy is unacceptable and often unnecessary. So any procedures suggested to the distributors should be simple. They should be sold-in as ways of helping the distributor improve performance. A heavy hand is unlikely to work.

{{ The Guest Post Blogger organization was not involved in the creation of this content. - Dalvi Prabhakar B., Founder & Digital Manager (SEO,SEM,SMO) }}

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Using Distributors with Time and Stratergy - Prabhakar

Using Distributors with Time and Stratergy - Prabhakar

   July 01, 2014       prabhakardalvi

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Over the last few years we have carried out a number of surveys to examine the effectiveness of distributors in industrial marketing. There is no doubt that there are many unhappy marriages between manufacturers and their distributors 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.

Distributors, merchants, dealers or factors are characterized by two features. First, unlike agents who take a commission, they buy stock for re-sale. Second, they are usually but not always appointed by the manufacturer to cover a specific geographical area or sector of the market. Typically the distributor is a small company, perhaps with only one or two branches. It may be privately owned and managed by the proprietor, an ex-salesman who has opted for a life of greater independence.

The ideal environment for a distributor is a market with many small customers and where the level of sales service required is high. 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 technical service. Their stock of products means customers can have instant delivery.

A difficult technical problem may require referring to the manufacturer. Simple repair work may be handled by the distributor. Distributors are, therefore, an efficient means of selling car parts to garages, tools to industry or components to electronic companies. They are inappropriate for selling complex industrial plant, computers or castings. If distributors are not performing well, the manufacturer should ask if their job could be better undertaken by a sales force or agency. Distributors will never prove successful if they are used as a cheap alternative to a sales force - they either fit the conditions or they do not.

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. The product range they carry may be deep as well as wide with a variety of items from high to low value. In a recent interview, the marketing manager of an air tool company complained bitterly that his distributors were more interested in selling expensive compressors than tools which cost on average only a couple of hundred pounds each. Distributors are not necessarily the wrong way to sell air tools but certainly this company had the wrong distributors.

After Christmas sale (Photo credit: kevin dooley)

Poor distributors can be recognised 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. Counter staff may lack selling experience. A recent survey of packaging distributors asked the proprietors 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.

Distributors do not shrink from criticising manufacturers. They point to the all too frequent practice whereby the manufacturer takes the rich pickings for his own sales force leaving the distributor with the crumbs. Worse, the distributor may be encouraged to build up sizeable accounts only to find this business has been short circuited when it suits the convenience of the manufacturer.

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. Many are glorified shops relying heavily on counter sales. A token entry in Yellow Pages may well be the sum of their marketing effort. ----  The When And How of Using Distributors

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 in the packaging survey said that not only did they receive little or no support from their principals but they even had to buy their own sales literature!

Territories are a frequent bone of contention. This may be due to the loose definition of boundaries placing one distributor in conflict with another or it could be the result of the carving up of one area into smaller units.

After studying a number of different markets in which distributors are used we have arrived at the conclusion that wherever this sales channel fails it is most likely to be due to shortfalls on the part of the principal. Distributors are, after all, selected by the manufacturer rather than self-appointed. They 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. In a recent exercise carried out for a manufacturer of solenoid valves it was easy to see that the reason it achieved the lion's share of the market was that it treated its distributors as if they were company employees. Regular conferences bound them together and provided 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. If the distributors find it inconvenient for their people to visit the principal's factory for this purpose then a scheme should be devised for on the job training.

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. Snap-on Tools, for example, have hundreds of distributors selling tools to garage mechanics from vans. Snap-on insist that every van is laid out in the same way and that each distributor wears a uniform. And the distributors are happy to comply because they know that this approach sells more tools.

Provide assistance with Marketing. Marketers take it for granted that everyone knows which directories to look in for a list of prospects, how to organise 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.

{{ The Guest Post Blogger organization was not involved in the creation of this content. - Dalvi Prabhakar B., Founder & Digital Manager (SEO,SEM,SMO) }}

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