Building a successful manufacturing enterprise takes more than just focus on facilities, equipment, process, and products. It requires identifying sales channels and building relationships with distributors. Even if you sell directly to customers, you still need distributors to help you quickly penetrate new markets, expand geographically, and generate significant income. The traditional B2B commerce model has been mutually rewarding and economically beneficial for manufacturers and distributors. But that doesn’t mean it isn’t without tension.
In today’s post, we’ll touch on the vulnerable spots in the manufacturer distributor model and look at how suppliers can forge stronger relationships with their distributors.
Sources of Friction in the Manufacturer Distributor Relationship
Even established partners are not immune to tensions that can build over time and negatively impact sales performance and the business bottom line. Rapidly creating too many new products that fail can leave distributors with warehouses filled with unsold product and a frown on their face. Selling direct can be another source of emotional antagonism if not handled properly. Poor packaging can also put a strain on an otherwise good relationship. Aligning expectations and good communication are key to reducing friction.
Building and Reinforcing Balanced Relationships
As a manufacturer, it is your responsibility to reduce relationship tensions. For efficient distributor management, make sure you know what dealers expect from you, make sure their expectations are realistic and then meet those expectations. Remember that fostering healthy business relationships with the distributors that bring your goods to market is as essential as producing goods.
What do distributors expect?
Distributors don’t want much. They just want defect-free, well-selling products that are delivered on-time and in good condition. They want the product pipeline regularly updated with new or improved goods and want to be informed on product changes in advance. They demand low procurement prices and generally are in favor of you establishing a manufacturer’s suggested retail price (MSRP) for retail sales. They want access to any special deal you may be offering. Merchandising support and assistance resolving technical issues are also desired.
As you consider how to nurture relationships with your dealer, follow these key principles:
Treat distributors as brand representatives
Just because there’s a commercial component to your business relationship, don’t think of distributors as retail customers. Think of your distributors as brand ambassadors that build awareness, gather feedback, and provide valuable insight into customer interactions with the brand.
Share best practices and provide product training
Provide the training and materials necessary for distributors to communicate the benefits of your products and brand. The more dealers know about products, technical capabilities, and performance qualities, the easier it is for them to market your goods. Hold regular brand training sessions to keep your dealers in the loop.
Define and communicate goals for sales performance
Don’t wind up being dissatisfied with a distributor’s performance because you didn’t communicate your sales vision and goals. Setting a clear, measurable performance goal and providing performance data will help both of you to get on the same page. Track sales performance and recognize partners as they reach the targets you set.
Use creative incentives
For a relationship to prosper, make sure to properly incentivize your distributors. Craft a well-designed incentive program that incentivizes end sales and not just building inventory. This helps keep incentive programs in line with your organization’s objectives and motivates distributors to sell proactively Make rewarding retailers for enhanced sales a part of your incentive strategy too.
If you don’t have a dedicated person that helps dealers resolve technical issues such as product repairs or maintenance, you must provide complete information on how to manage problems as they arise. Provide educational resources such as manuals and instructions. Share extensive technical information on your products. Enriching product knowledge of your dealers you increase customer satisfaction with these products.
Consider offering your distributors an exclusive territory in exchange for a greater products promotion or reaching a specific sales target. Be consistent in your pricing policies. If you sell direct, offer distributors products or sizes that are exclusive to their channel.
Never stop communicating
Always keep communicating. Never sweep problems under the rug. If you need to change prices, provide at least one month notice. Ongoing, two-way communication prevents issues from growing, identifies shared core values, and keeps the focus on sales efficiency. It makes for a lasting manufacturer distributor relationship.
- When cultivating the relationship with your reseller, treat this bond as a partnership both sides should commit to.
- To unlock the value of selling through the distribution channel, make sure to have a clear vision of your partner’s expectations. What can you undertake to meet these?
- Is there a clash of interests at the moment? Can you offer a compromise without compromising own business objectives?
- Keep your distributors informed on your development plans. Are you looking to сreate a greater variety of products you expect distributors to market? Let them know.
- To enable distributors successfully promote your brand, educate them on your products.
- Revise your manufacturer-distributor relationship to define whether your partners receive enough incentive and technical support.
- Set up a clear pricing structure. Should you adjust pricing, do it in a most painless for a dealer way.
We hope these practicable tips will help you reevaluate and maximize your relations with distributors. Have you ever faced the manufacturer distributor relationship crisis? Tell us how you managed to overcome it in the comments below.