As a manufacturer, success requires a solid relationship with distributors to help you expand into new areas and increase sales. The ideal manufacturer-distributor partnership can be categorized as a tactical and strategic relationship where both parties benefit from working together to achieve their short-term and long-term goals. A research performed by the National Association of Wholesaler-Distributors (NAW) suggests that both manufacturers and distributors share common goals. These goals concentrate on improved profitability, growth, customer experiences, and sales productivity.
In this post, we will take a look at the benefits and challenges facing manufacturers who sell through distributors as well as strategies manufacturers can employ for establishing a strong relationship with their distributors.
Benefits of Partnering With Distributors:
- Partnering with distributors reduces your administrative responsibilities and lowers operating costs. Most manufacturers delegate the responsibilities of managing customer service to their distributors. As a result, manufacturers that have built solid relationships with their distributors have no need to hire, train, and manage multiple customer service teams.
- Having a good distributor is key to establishing your products in new marketplaces.
- Most distributors are experienced at sales and marketing and understand very well the most effective way to sell to their customers.
- Using distributors means lower warehouse as well as lower inventory management costs.
- You can reap the benefits of using greater distribution channels without the need to have a physical presence in each territory.
Challenges with Selling Through Distributors:
- Maintaining brand identity as products pass through the distribution channel.
- Manufacturing too many new products that fail can leave distributors with warehouses filled with unsold product.
- You may not be the only brand your distributor represents.
- You forfeit the direct line to valuable feedback from customers.
- Some distributors have long payment cycles that may impact your production and cash flow.
Establishing a Balanced Manufacturer-Distributor Partnership
- Be transparent and define your shared goals. This is especially important if you are looking to establish a strategic partnership with your distributor.
- Keep an open line of communication. Communication is crucial in the manufacturer-distributor partnership. To resolve any unforeseen problems, use a partner relationship management tool that allows a flow of information and communication to occur in real-time.
- Consider your distributors as representatives of your brand. Your distributors build awareness, can share feedback, and provide valuable insight into end-user’s interactions with your brand.
- Align expectations and establish a clear vision of your distributor’s targets. We highly recommend that you set a measurable sales performance objective and regularly share these sales data with your distributing partners.
- Provide product and/or service training necessary for your distributors to clearly and easily communicate your product’s benefits to the end-user. Distributors who are familiar with their manufacturer’s products and business model can act as a gateway to a larger customer base.
- Incentivize your distributors. Design incentive programs that align with your objectives and motivate your distributors to sell your products.
- Use targeted analytics to help your distributing partners. You should periodically analyze distributors’ sales by collecting and reviewing point of sale (POS) reports. This will help determine which tactics are still driving success. Valuable POS data can help your partners understand the end-user even better. Alternatively, well-informed partners can provide vital insights and support.