This post originally appeared on INSIGHT2PROFIT.com
Many manufacturers treat their distributors equally. They offer everyone the same discounts, the same promotions, and the same training programs.
However—not all distributors work equally hard for your business.
In this article, we’ll look at how the right distributor plan can help you get the most benefit from your distributor relationships and drive the business objectives you want to achieve.
What Exactly is a “Distributor Plan”?
A distributor plan formalizes the key aspects of your distributor relationships, namely:
- What should the distributor be doing for you?
- What should you be doing for the distributor?
- What’s the reward for success?
How does this help? It allows you to incent the right behaviors and get everyone working toward the same common goals.
For each distributor relationship, you should have specific goals, which will in turn drive the specifics of your plan.
Let’s look at an example.
Common Goal: Rapid Growth
Now that you have a goal, begin answering the questions we mentioned above.
What should this distributor be doing for me?
To grow rapidly, you might ask that the distributor hold a certain amount of inventory at all times.
What should I be doing for this distributor?
Holding excess inventory can be risky. To compensate for this risk, you might specify higher margins for the distributor on those products.
What’s the reward for success?
Here are some options:
- Build in incentives for the distributor’s sales team to hit specific targets, offering rebates to the distributor once those targets have been reached
- Offer to co-share certain marketing expenses to help the distributor and sales teams get there
- If you prefer to directly train and certify the sales reps who represent your product line, you might encourage compliance by specifying higher discounts for distributors whose reps complete your certification
Don’t Reduce Your Spend; Instead, Optimize
Because all distributor relationships are not equally fruitful, your plan needs to direct your money and attention to those distributors that bring you more value.
It’s not necessarily about reducing your overall spend; it’s about redistributing your spend to get the most bang for your buck.
This may mean you spend less in markets that present fewer opportunities. It also allows you to increase your spend in areas with more upside, including growth markets, high margin markets, and markets with highly engaged partners.
Analyze Your Distributor Relationships With These Questions
Before you build your plan, you need to go through some exercises to understand the nature of your distributor relationships. For each distributor on your list, run through these three categories of questions.
Distributor Strengths: What are this distributor’s strengths?
Ask yourself questions like:
- Is this distributor exclusive to my brand or do they carry my competitors’ brands?
- Do they have warehouse space for inventory?
- Do they actively train their salesforce?
Support Initiatives: How well am I supporting this distributor?
Ask yourself questions like:
- What margin expectations do they have, and does my pricing support this?
- Can I offer favorable payment terms or discount structures to incent this distributor to focus on meeting our sales goals?
- Would product training help my distributors improve their expertise and selling efficiency?
Brand Strengths: What could we be doing better in relation this distributor?
Ask questions like:
- How strong is my brand in relation to other brands this distributor carries?
- How well do we market and support our products?
- Do this distributor’s customers know my brand and ask for our products by name?
Turn Your Distributor Analysis Into an Action Plan
Use a Google Form Template with the above questions saved and make a copy for each distributor relationship. Once you enter your answers into the form, Google will automatically create a spreadsheet to store your answers.
At your next pricing team meeting, use the spreadsheet as discussion prompt to create a step-by-step plan to optimize your relationship with each distributor.
To save you time, we’ve created a sample template you can use to get started. Click here to download our free Distributor Plan Template.
You can copy this template to your Google account and use it to store your answers in a spreadsheet.
Get Better Insight Into Your Distributor Relationships with Strong Data
You need to be able to assess the markets you’re winning, the ones you’re not, and the overall health of your financial relationship with your distributors.
To that end, your analysis should include metrics not only on distributor performance, but on market, customer and product segment performance as well.
Look at all of the factors that can impact profitability, including:
- Price (both wholesale and retail)
Once you’ve armed yourself with the right insights, you can make smart, strategic decisions about your relationships moving forward.
Your clearly defined distributor plan allows you to focus both your time and resources where they can serve you best: on the distributors who are doing more for your business.
By helping your distributors succeed, everyone wins.
The right analytic partner can help you assemble the data you need for the insights that will drive your distributor plan. To find out how INSIGHT2PROFIT can help you unleash the power in your numbers, download this report.