Know-How Exchange : Strategy

It's like being a little bit pregnant-- which is close to my heart as I just got word grandbaby #10 is on the way...

Anyhows-- you are making the leap and not much to protect yourself-- either you are or not.

But by same token-- manufacturers always zig and zag and distributors know this. I have worked with several co's that went exclusive distributors, fired them, regrouped, on and on...

Instead of deciding "if" this will work out-- put your resources to making it work out. And if it isn't-- its not the end of the world. These business decisions happen all the time.

I'm with Carol - only I'm going to be more blunt.

You should listen to your new/proposed distributor.

What's the point of them becoming a distributor if the first year they have to develop the market from a stone cold motherless zero because you decided to hang on to all the existing customers for twelve months?

And how does that look to those other customers - "We appointed a distributor, but you don't have to deal with them"? The ideal time to cut them off from you is right now when you appoint the distributor.

And your strategy does you no favours either. You'll still have the overhead costs of dealing with the other customers while at the same time taking on the responsibility of developing the new distributors sales and marketing skills and product knowledge.

I think you'd be better off making a swift clean clinical cut - over to the new distributor. Announce it to the marketplace - and "appoint" them, don't "name" them. Then invest time and resources to work alongside the distributor, immediately visiting together with them every existing customer to explain how the change works and how it benefits the end customer - them!

Good luck.

This is an onging problem and as your company expands you will need to continue to define it.
A distributor policy needs to be created to define these. I have worked on both sides of the distributor-manufacturer equation and could provide some specific thoughts on how to get started.

You want to protect your customer base. The distributor wants instant customers in order to fund the heavy investment in pioneering a new line. You need to set some definite guidelines on what you expect from the distributor and when the distributor can expect you to turn over the existing business and its corresponding increased revenues.

The true experts have already weighed in on this. My inclination is to agree with Carol and Chris. Your exclusive distributor is going to make a substantial investment on your behalf and will be a lot less eager to do so if you're essentially undermining his exclusive arrangement.

You want your distributor to succeed, don't you? If so, then you should probably support and encourage him all you can -- including turning over existing customers to him. If you commit yourself to his success right up-front, he'll notice and appreciate it ... and you'll be on your way to having a loyal and hard-working distributor in a market that's important to you.

The alternative is setting him (and you) up for failure. He won't be able to justify the investment to build YOUR business in his market, and it won't happen.

He's right on this one. At least that's my take.

And if you need more specific advice, let me recommend you contact Frank Hurtte. He's the master when it comes to this kind of issue.

I'll agree with them also. If you decided to sign up an exclusive distributor, you need to make them an exclusive distributor. If you sell around them, at best they will not be happy. At worst, they will go away.

I don't think you are as exposed as you think you are.

Keep open communication, you won't know every single order, but you will know the big buyers.

The value of a distributor is they generate their own leads. They should be in aligning but not in competing businesses. You can feed them leads and pull thru sales-- but lead generation is the value they add.

Do you have a local rep that will be servicing the distributor? They, or you, should be in there on a regular basis-- handling business issues and making some calls with the distributor. Adding a rep can pull thru sales. Some manufacturers bypass the rep -- in that case make sure you schedule regular conference calls as well as site visits. Inspect what you expect. Create milestones. Know the major players. And when it's not working -- cut it sooner than later.

I've worked with manufacturers who go from manufacturer reps to employee reps to distributors then to selling direct-- and back full circle again. While transition isn't exactly seamless, you will get added customers who will continue to buy your product-- no matter the distribution method.

Distributors are like everyone else. They don't want to be micromanaged, but they don't want to be left alone either. Sometimes it's like herding cats.

Make sure your distributor is adding value. There are some out there who just want to take orders and add their % for handling paper. I had one tell me "well gee it just doesnt' sell" -- product will never sell, it can't -- people sell. I learned that one wasn't a good match for my product the hard way and I carried them too long. I was the territory rep and I was carrying them while they sweetly added 35% for carrying the paper-- which added a layer of cost that was making me pricewise at a disadvantage.

Value they can add is first-- knowing and having good relationships with your clients. Some carry inventory. Make sure your product is important to this distributor and they understand it. if they say "well see how it goes"-- don't do it Spend the time with them to understand there is a marketing plan in place -- even if it's informal.

It's hard to give up control. But it can be a very efficient method to get your product placed.

Good Luck