Jul 5, 2016

WHY WE NEED DISTRIBUTION NETWORK?



THESE SYSTEMS OF NETWORK BOOST SALES AND ENHANCE MARGIN BY,

Establishing the network and our targeted goal.

To have good expanded and established contacts.

New production introductions and launching.

Taking the maximum utilization of time and place in a particular place.

DISTRIBUTION SPREAD OUT OUR REACH

Industrial distribution businesses need sufficient skilled manpower and strong support to cover the entire market which can be fulfilled by industrial distribution so as to expand to reach the marketplace. Through this distribution any manufacturer can share the costs of going to market with many manufacturers who have the same problem.

DISTRIBUTION OFFERS ESTABLISHED CONTACTS

There may be more businesses with fewer customers by distribution. But the relations and contacts that he has established with customers may bring strong and good relationships forever in the near future.

The small distributor in any country with few lines and with no salesperson enjoys some very strong relationships with those customers who give him most of his business.

The value of company’s product line to distribution provides the foundation for exceptionally strong relationships. If, as a distributor, you are supplying more products to fewer customers, than the relationship becomes quite interdependent. You must continue to bring value to your customers by reducing his or lowering his acquisition costs and introducing new concepts that actually saves the customer money. You can bring such valuable processes in to the distribution system.

Good service starts with teaching the customer how to save money by incorporating your company’s processes in your manufacturing units.

NEW PRODUCTION INTRODUCTIONS

Sometimes Research and Development develops materials for very specific Original Manufacturers markets with a limited number of customers. Those opportunities are best exploited by selected distributor salesperson with account contacts and selected your company’s salesperson.

Other new product developments, such as parts or components which require assembling the main component or assembly in a particular design have much broader application possibilities. In situations where a new product development has broad market appeal, then a sell sheet, a sample of product or component or demonstration parts, and a team of salespeople can have major impact on the market place in a very short period of time. Salesperson should talk about new products through industrial distribution network.

USE OF TIME AND PLACE

People like to buy locally. They like to deal with a known distributor who can offer a level of support they trust. The individual distributor must therefore handle inventory, receivables, service and advice. And that is a fine for any company as he handles this more cost-effectively than we could ever manage.

Distribution is the most successful mechanism ever created to lower the cost of the company’s acquisitions, either as individual consumers or as companies.

TYPE OF COMPANIES MAKE GOOD DISTRIBUTORS

The distributor must talk to the customer. End users must include manufacturing and maintenance people who are involved with assembly- those who use or could use your products- as well as purchasing people. It makes sense to select distributors who have already had the right relationships.

Your selection process must distinguish between distributors who talk with end users and those who talk to other distributors. While the distinction between wholesaler and distributor is very clear in few countries, it is very unclear in several countries. Existing distribution in few countries falls into several categories.

WHOLESALERS WHO TALK TO ONLY RESELLERS

Major account suppliers, who provide just-in-time deliveries to many locations of a single account, and service the rest of the areas through resellers.

Those who serve the general industrial base where they have a presence and service the rest of the area through re-sellers.

Multi line, short line or sole distributors of your product.

All these distribution procedures have the advantage of making the product available in the market place. Remember, though, that wholesalers don’t talk to the end-users. Their customers are other distributors and their function is simply to sell the products line to all distribution.

Open distribution, direct from the factory or through wholesalers, means that any customer can buy your product from any distributor, regardless of who provides the support. These results in a line that distribution supplies but not a line they sell. And if this situation is not managed properly, then you have to bears sole responsibilities for creating new end user demand.

A product XZY, for instance, is sold very successfully through indirect marketing efforts. The manufacturers seek no sales effort from its distribution, only time and utility. Thus they have open distribution and offer relatively low gross margins.

However, we must use face to face selling techniques to create end users demand. Indirect marketing tools such as advertising and direct mail are very successful marketing tools if the customer knows he wants the products – and his decision is only when and which brand.

Yet indirect approach is unlikely to create new end users demand if the customer doesn’t clearly understand that he has a need. As long as you are in, this cut of product life cycle you will need salesperson, factory or distributor, to carry the word. Your new product development effort must succeed in keeping you in this position. When you are no longer missionary or value added salesperson, it is unlikely you will commend the profits you currently enjoy.

Your company expects its distributors to be knowledgeable about its products, capable of recognizing company’s application and in most cases recommending a product. Company expects them to create end users demand on their own and in partnership with us, working diligently to surface ever more opportunities.

As the line grows in importance to your distributors, company must manage the distribution- resale equation. It is not realistic for your distributors to work in partnership with company if the product is available on every street corner. Finding the right balance between selective and open distribution will be critical to your success.

Distributors engage in a consistently different mix of business. A good mechanical seal or shaft distributor, for example, will have excellent relationships with major Maintenance Repairs and Overhauling users yet would be unlikely to call on a hospital or hotel as their product line is too short to justify a sales call.

On the other hand, big mill supply houses concentrate on a broader business base. Their wider product line offering will easily justify perusing a hotel account.

Yet neither mill supply nor seal are focused on the OEM product business In this case you should target one of an emerging – and successful – group of particular product distributors. It is in our best interest to identify these suppliers as potential your company’s distributors.

The objective in each case is to identify the distributor best suited to the particular marketing area.

Company pricing must balance the cost of teaching people how to exploit this technology with the benefits derived. Pricing to value provides the maximum amount of resources to teach people how to use these products to save money. If we could price everything exactly right the customer would save enough money to justify the change and enjoy some savings, while your company would maximize its income to fund ongoing product development and customer training needs.

It therefore follows that we have a responsibility to our customer and to our ourselves to contain all costs which do not increase the number of successful applications or increase the capabilities of our product line, i.e. if we spend too much on warehousing we will fall short of the optimum recourses to add applications through our process engineering effort. Thus we will fail to maximize the growth.

Price to value must recognize that to maximize the results, both warehousing and marketing must be efficient. Thus distribution has to be part of the mix. Multi line houses spreading their costs over many lines provide the most cost effective solution to effective market access.

The concept of price to value must strike a balance between the values of your product in a particular application with the relative size of the end user.

Distributor and company’s activities are the only common sense approach to managing distributor’s relationships when the manufacturer expects more than time and place utility. This partnership is not a mystical. It requires planning and commitment. A plan should be written with all those distributors you expect to work with in the coming year at least 3 and probably not more than 8. The plan must be an easily understood one or two page document which summarizes the action steps agreed on by your company and you. It is no more acceptable to set a distributor growth target without a plan, than it is to accept a salesperson’s growth sales target without a plan.

TO CREATE THE PARTNERSHIP GROWTH PLAN…….

The plan must deal with three areas:

Retaining the existing businesses.

Project closed recently or being worked on.

Other growth activities.

Taking care of existing business is the number one priority. It doesn’t make a lot of sense to work on new opportunities while an equal quantity falls out of the bottom of the funnel. That simply supports your competitors. If taking care of existing business is the number one priority for you, then it must be his priority in establishing the distributor partnership planning. You must know who and how much their existing your company’s customers buy. Existing customers should be ranked and those customers that give the distributor 80% of his business should be included in the plan. The plan must define who will do what to maintain this important business.

PROJECTS CLOSED RECENTLY OR BEING WORKED ON

In a well managed territory, the company salesperson and your distributor salesperson will close the projects during the year, which in turn provide built-in growth.

There will be projects or application on the salesperson’s project list that will likely close in the current year. These projects must be reviewed, plans established and a forecast prepared. Again, this will most likely be a short list. If this year’s list is expected to generate a sum amount and, on average, will have six months of production, then a sum % of increase can be added to the forecast, bringing it to a total previous amount plus additional growth among, other Growth Activities.

Once you have set your plan to keep existing business, forecasted sales growth from projects closed in the previous year and expected sales from pending projects, it is time to turn your attention to additional growth activities.

The good opportunities is that your bag of alternatives to grow the business exceptionally deep.

You have leads from advertising.

You have leads from trade fairs.

You have target market plans.

You have distributor promotions.

You can conduct seminars and training to customers.

You can conduct in house seminars (plant seminars)

You have direct mail opportunities, product or market oriented.

Each of these activities has a value. Measurement and experience will allow you to forecast the value of each of the above with reasonable accuracy.

We demand great things of ourselves. Those demands should include a distributor partnership plan to ensure successful results.

















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