Distributors can be Much More Than Just Order Takers
The usual limited view of a distributor is someone who stocks your product, waits for an order, delivers it and then takes a percentage larger than the value of his service. Many distributors, though, are capable of adding a great deal of value to your brand.
If you simply focus on lowering the distributor’s income opportunity or the expense to you, you’ll usually see a commensurate drop in attention to your products and sales. This also opens the door to a competitor to get the distributor to promote their brand at the expense of yours. They could end up the ones to harness the potential of a distributor instead of you.
It’s not that distributors are here to stay, or that there are no alternatives. You can choose to invest in your own distribution system instead, and some will follow the trend of grocers and other large retailers by setting up their own warehouse or distribution system. Also, it probably won’t be long before businesses like FedEx moves further into distribution and challenges those distributors who simply take orders.
In the meantime, consider focusing on improving the performance of your distributors.
Helping Both One-Step and Two-Step Distributors
One-step distributors are like dealers who happen to be specialized in one type of product, such as roofing or siding. Just like a dealer, they have a showroom, sales people, a counter and an inventory of products. And like with dealers, you must follow the same three-step process to success.
- You need them to carry you. If they don’t carry you, they can’t sell you.
- Become the preferred brand or company they deal with.
- Help the distributor outperform his market and sell more than his competition.
With two-step distributors, it’s the same approach — except for step 3, you need to help them assist their dealer customers in outperforming their markets.
Why Does the Distributor Carry You?
The first step involves doing your homework. You need to take a fresh look at why the distributor carries your type of product and shape your strategy accordingly. The reason is almost never as simple as “To make a profit.” It can include the following:
- He has to. There are products his customers expect him to have. They are part of a project, and the customer ideally wants everything from a single distributor so he doesn’t have to waste time going elsewhere. The problem with many of these “have to carry” products is there is often no margin. The market has established a price too low for the distributor to make a good profit. If your product is in this category, then it’s a commodity. You need to out-service the competition, develop a business-building promotion or innovate to make your product superior.
- It’s his business. A roofing distributor has to carry shingles. A plumbing distributor has to carry bathing fixtures. In this scenario, you have an opportunity to help the distributor grow by drawing more customers because he carries your brand. You can also help him improve his margin by showing how to upsell your product line.
- It’s an add-on sale. To sell additional items along with main products, you need to focus on helping the dealer remember to ask for the order. The easiest and cheapest way to do this is simply by training or temporarily incentivizing his sales staff.
- It’s a traffic builder. If you have something new, unique or in limited supply, your product can help drive traffic for the distributor. It can help him convert new customers from other distributors as well as make add-on sales to your product.
- It’s extremely profitable. If you’re fortunate enough to find yourself in this situation, keep in mind it’s probably temporary. While it lasts, though, you should help the distributor make as much as he can while he can.
Conduct Some Detective Work
Next, it’s time to do some sleuthing. Talk to the distributor’s customers and prospective customers. Find out what they think of your product category, your brand, your competitors and all the distributors he can potentially buy from. Do they prefer a certain product, brand or distributor? What do they look for when shopping in that category?
If you can, shop your distributor and the competition. You’ll learn invaluable information that can help the distributor become more successful. You can easily find what customers think about each distributor — who has the best product knowledge, inventory, delivery, products, attitude, credit, etc.
Distributors love to hear what they are doing well and what they can do better. They are usually too busy to find out this valuable information on their own. When you provide it, you are showing them you are not just trying to sell them more but instead aiming to make them more successful. This is how to become their preferred brand in your category.
Now use your research to develop a game plan based on why the distributor carries your product and what customers think about the distributor and his competitors. With this knowledge, show the distributor how he can improve his business on his own as well as with your products.
Your goal in selling a distributor is simple: get more than your fair share of their attention. For example, if your product represents 5 percent of their volume or profits, you should aim to have 7 to 10 percent of their attention.
Distributors typically carry hundreds, if not thousands, of products. The majority of their daily business is consumed by simply filling orders. If someone asks for your product, a distributor will sell it. You need to either have more of them asking for your product or persuade the distributor to sell or suggest it more often. This is usually easy to do, because most of their other suppliers don’t think this way.
Become Their Centerpiece
- The distributor’s sales people have to focus on something.
- They need to display someone’s products in their showroom.
- They need to feature products in their flyers, promotions and events.
In All of These Cases, it Should Be Your Product
By making yourself an asset to distributors, they’ll become more of one to you. If you rise up from the thousands of brands they might carry as one of their favorites, you’ll benefit from their advertising and sales staff exponentially more than the competition.
Don’t look at your distributor as just an order taker, or he’ll see you as just another brand