Wednesday, September 9, 2009

Building a Distributor Network

Establishing a distributor network is often the first order of business among manufacturers launching new products or product lines. Setting up this network can be a daunting challenge; however, by simply following these four steps, this network can be effectively created.

  1. Outline Your Plan
  2. Find Distributors
  3. Close the Deal
  4. Keep Them Happy

Outline Your Plan
When you seek out distributors you must be ready to explain the features and benefits of your product(s) and make sure you can provide the tools the new distributors will need to be successful. Don't put the car before the horse. Before you start recruiting new distributors, you need to do some leg work and ask yourself some hard questions:

  • Is your product truly ready to go to market now?
  • Do you have a fulfillment plan in place and can you meet the expected service levels required?
  • Do you have a distributor agreement with commission structures and legal issues resolved?
  • Do you have a new distributor packet of instructional and promotional materials, camera ready flyers or brochures, samples, order forms and whatever else would be needed to enable your new distributors to be successful?
  • Do you have a touch campaign outlined for future follow up with distributors?

Find Distributors

Once you're satisfied that you've thoroughly outlined your plan, here are some suggestions on ways to find distributors:

  • Go to industry trade shows and talk to people as appropriate trade shows will draw the distributors.
  • Advertise the availability of distributorships in appropriate trade journals.
  • Utilize online forums, social media networks, and other industry specific website portals.
  • Call companies that sell complementary products to yours and ask who they sell through. With complementary products, it is possible that both you and the other company will benefit through the same distributor selling both products together.
  • Call the distributors of your competitors and pretend to be a customer to get information on who they use. Some of these distributors may not be happy with their current arrangement, so they may be willing to change to your product line.

Close the Deal
Know that most distributors sell many products, so when asked to take on something new, the first consideration is whether the product will be profitable. Here are some questions that factor into the profitability analysis.

  • What is the distributor's margin?
  • Is the product or line truly unique?
  • Are the distributor's competitors carrying the product?
  • Will the manufacturer be a competitor?
  • Can the product be sold into other markets serviced by the distributor?

Keep Them Happy
Equally important as competitive pricing is providing and maintaining excellent service levels as service is a very important factor impacting successful distribution. Maintaining good fill rates and shipping products promptly allows the distributor to keep inventory levels lower while facilitating more desirable inventory turns, both of which add dollars to the distributor's bottom line.

Although price and service are important, there's an old saying that must be considered...'Out of Sight, Out of Mind.' Unless you follow up with your distributors, be it email, phone calls, promotional mailings, or even visiting their business. Putting yourself in front of your distributors on a regular basis, reminding them of the reasons they should be promoting and selling your products, and rewarding them for their efforts is possibly the most important part of maintaining a distributor network. If you sign them up and forget them, your distributor "bucket" will have a huge hole in it -- as quickly as you add distributors, you'll either lose them to the competitors or to other products or will have more than your fair share of zero dollar producers.

The bottom line on establishing and maintaining an effective distribution is to look at things from the distributor's perspective. Get to know distributor issues and how distributors function. Communicate to the distributor how your product line enhances their business. Demonstrate your ability to market your products effectively. Finally, help make the distribution channel efficient through proper packaging, reliable shipping, good fill rates and frequent communication. This will drive cost out of the channel, get your products to market faster and put your distribution network to work for you.


Brian Casto said...

Followed you LinkedIn item to this site. Indeed setting up and managing Distributors can be a challenge. We at Group 19 do this for our customers. Contact us if you want to work with us.

Kamal said...

That is a simple approach. I am perplexed at the distributor part, where are we going to find motivated distributors that are hungry for the business.