Eight Strategies to Maximize Your Distributor Relationships
Whether it’s communicating production goals with shop workers, discussing supply chain challenges with logistics companies, or covering terms for financing a new piece of equipment with a lender—the manufacturing industry is one of relationships, partnerships, people and sound processes.
No matter your products or size of operations, having strong business relationships with your distributor(s) is a major factor in longevity and success. When leveraged to their highest potential, a great distribution partner can gain far-reaching non-tangible benefits beyond simply selling your products.
Here are eight actionable strategies manufacturing business leaders can use to get the most out of their distributor relationships.
1. Offer Sales Training the Same Way You Would to Your Team
The same way your business development or sales team is trained to promote your products, your distribution partner should be trained to know its functionality differentiators, improvements and selling points.
Consider offering training and providing any marketing materials you have to your distribution partners. This not only allows them to market your product more effectively, but it illustrates reciprocal success goals for each other as long-term partners.
2. Use Valuable Feedback to Your Advantage
Your distribution partners likely have experience with many different products, including your competitors, which can provide valuable insight into customer needs. As such, they have first-hand knowledge of what customers are looking for and asking about, as well as not-so-obvious pain points.
This presents a valuable opportunity to ask your distributor to provide feedback on exactly how customers view your products. What questions do customers typically have? What do they like about your products? What are their related challenges? This valuable information will provide constructive ideas on how you can improve which, absent this feedback, would ordinarily take significant time and costs via market research. Also, consider asking your partners if you can join their sales calls to hear directly from customers.
3. Set Reasonable Sales Goals
Not all distributors are the same. When expanding into new markets and areas, it’s important to begin with reasonably achievable goals first and then increasing them periodically.
To be an effective partner with your distributor, you must understand both their liquidity and capacity. Don’t set goals that are unrealistic relative to your distributor’s size or market. When goals are within reach, your partners are more likely to strive to achieve them. Lastly, make sure you reward your partners for exceeding the goals.
4. Choose Your Partners Wisely
On the surface, it may seem prudent to have your products available in as many stores as possible, however, that is not always the case. Sometimes, it is more effective to limit the number of distributors and allow them to market exclusively to a particular geographic area. This limits competition between distributors for your products, allowing them to focus on selling the product rather than competing to do so. Distributors that have to compete against others to sell the same products have less incentive and may not consider the relationship with you to be a strong long-term partnership.
5. Offer Flexibility
Whether it’s due to unforeseen financial hardships or necessary price changes, it’s important and beneficial to offer your distributors flexibility when possible. These types of concessions should work both ways, which will allow for the parties to understand each other’s loyalty. If your organization is ever in a position where it needs flexibility, distributors are more likely to reciprocate.
6. Use Royalty/Rebate Exams to Your Advantage
A royalty/rebate exam is the practice of auditing existing vendor contracts to maximize the value of both parties as well as ensure that each is continuing to uphold their respective contractual obligations. These audits are just as valuable during the middle of a contractional period as they are during the renewal process. Establishing a culture of compliance by conducting these exams periodically, instead of only when issues arise, creates a good control process that fosters trust and transparency between the parties.
7. Leverage the Blockchain
Product procurement and customer interaction can find value with the use of blockchain to create a more transparent supply chain; make sure to include your distribution partners in the discussions. By engaging your distribution partners to discuss the potential implementation of blockchain, they can provide valuable feedback regarding their own capabilities and communicate their view of customer needs.
8. Always Have a Contingency Plan
Finally, if disaster strikes—whether it be natural disaster, economic downturn or something completely unexpected, like COVID-19—work with your distributors to have response plans that help prepare both parties for the unexpected. Your organization should conduct annual risk assessments that include a comprehensive review of the distribution channel’s entire ecosystem.
Ultimately, manufacturing leaders are in the business of effective strategic partnerships from material sourcing all the way to product consumption. For business leaders to get the most out of their distributors, or any strategic vendor relationships for that matter, it begins with asking questions and connecting with their contacts as true business partners rather than simply resources.
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