In the high-value scientific instrumentation business, international distributors are our allies in the campaign to sell our fantastic products. Often manufacturers work with exclusive or, at least sole distributors in any one region. In return for this exclusivity, these distributors don’t sell directly competing products. Yes, it’s war out there and our competitors are our enemies. Thankfully, our distributors are our allies. So why won’t they tell us what is going on?
Why don’t they share customer information? They won’t collaborate on marketing plans for their territory. Even when a user is having difficulty using our products they often won’t let us speak directly with them. Sometimes, they won’t even tell us who this mysterious problem customer is. We’re on the same side, right! Well, not exactly…
Distributors and manufacturers have overlapping needs and, like any international alliance, as long as those overlapping needs remain then the relationship can stay strong. But overlapping needs are not the same as a life-long commitment. Needs change and eventually they will cease to overlap. Our relationships with distributors are often more like teenage flings than marriages. Think casual dating rather than wedding bells. Both sides want something now but are ready to move on when the wind changes.
Consider the distributors perspective. They want to sell your product because that is how they make money but if they are too successful then you, as a manufacturer, may be tempted to replace them by inserting your own salesperson or office in the successful region. So, from your distributors perspective, a natural result of their success may be their demise! We need to think about how that belief may affect their behaviour.
The expectation that success will inevitably result in loss of their distribution revenue stream causes a number of distinct self-defence actions:
Secrecy is about control of information and control of information is about power. To quote Frank Herbert, “He who can control a thing, can destroy a thing” and in the powerplay between distributor and manufacturer, keeping customer lists secret is the number one weapon. It simply makes it hard for a manufacturer to continue in a region after they dump the distributor.
2. Reduced marketing
The fear that at any time a manufacturer may dump a distributor after only giving a paltry few months notice also affects things. Why engage in expensive or time consuming
marketing activities aimed at generating sales in one or two years time when you may not even be the distributor then? Of course the smart distributor tries to keep relationships with their manufacturers sweet by engaging in some token long-term marketing activity but their hearts aren’t in it. Yes, again we see the difference between a youthful relationship and a marriage for life. You wouldn’t expect a diamond ring for a summer fling!
3. Fear of growth
This one is the real conundrum. Manufacturers pressure distributors to sell more and more but distributors know that if they are too successful then the manufacturer is likely to bypass their services with a brief “thank you”, otherwise known as a termination letter. Distributors also fear one product line becoming too big a percentage of their business for the same reason. If they rely on one product line and that evaporates then their whole business may collapse.
So as a manufacturer what can you do. Firstly, accept that you have somewhat different long term goals than your distributor does. Don’t pretend to each other that you are attached at the hip for life. You aren’t and you and your distributors know it. State what you want to achieve during your relationship with the distributor and then accept that the distributors actions will be informed by that knowledge.
Secondly, like any relationship, work on establishing openness and trust. Trust is a two-way street. We need to share genuinely useful information with our distributors if they are to be expected to reciprocate. Try keeping your distributors informed about bad news as well as
good. Tell them about known technical issues before they start hearing the customer complaints. Tell them if you're feeling the pressure of competition in your home market so they can prepare for it before it happens in their region.
All these pitfalls can be condensed into one statement. Distributors are afraid of what will happen when the relationship ends. At Red Box Direct we recognised these potentials early in our evolution and decided to address them head on. We modelled our relationship with manufacturers to make the time that a manufacturer decides to go it alone a positive for us and for them. Aligning our motivations with those of the manufacturers we work with means we don’t fear the inevitable, we embrace it. Your success is our success and vice versa and that is something worth thinking about!
February 8th, 2021
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