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Does your team view the distributor as a customer or as a partner in the market?
Implementing the right route to market strategy is critical to deliver distribution excellence. FMCG manufacturers must question whether their distributors are considered customers or partners, as it really does make a key difference.
If your brand or product is mass market, for example beverages and confectionery, with significant volume coming from multiple channels you will most likely focus on numeric distribution since the goal is to be in every outlet possible to capture the widest possible consumer base.
If, conversely, you are marketing more specialised or premium products like dishwasher tablets or organic breakfast cereals, your objective is to be in the small number of stores frequented by consumers of such relative luxuries frequent.
Your attention will be on the weighted distribution of your brand, rather than on penetrating as many outlets as possible.
Whichever camp your brand falls into, you face similar challenges in getting your route to market strategy right and realising its potential in a cost effective manner.
In the Middle East, although the retail trade in most countries is becoming more concentrated with fewer stores accounting for a higher proportion of sales, many FMCG principals still work with distributors for some or all of their business.
In some markets local legislation dictates that a third party involvement is required but even when this is not the case manufacturers do sometimes cede the distribution role to an external sales force.
If you are currently a manufacturing principal working with a local distributor, does your sales team view it as one of your customers or as a true partner in the market?
You might think this is a strange question to pose and wonder what difference beyond pure semantics it makes, but it does make a huge difference in defining and then managing the relationship.
Having worked for several multinational companies in different international locations and with a variety of distributors, I am convinced that the most successful relationships are those where a true sense of partnership exists.
So why is it that many sales people who manage a distributor relationship end up having regular confrontations with the third party whilst complaining bitterly to their colleagues that the distributor is only in it for the money or does not see the big picture?
Ironically, when this situation occurs, the fault often lies with the principal sales force and it is usually linked to a lack of understanding of the distributor role and to a failure to fully appreciate the distributor's point of view.
The problem occurs as the principal sees the distributor as a customer, who is there to be sold to rather than as an integral part of the supply chain.
This viewpoint has two main consequences. Firstly, customers are there to be 'sold to,' therefore the salesperson's objective should naturally be to push as much stock as possible into the distributor.
The potential for overstocking the distributor and them being left with slow-moving items is fairly obvious but it is amazing how some sales people ignore this.
Recently, I heard the distributor manager in a principal say, with a shrug of the shoulders: "That's his problem, he agreed to take the stock!" As a result of this approach, the distributor feels like a customer and so focuses on "what's in it for me," rather than on "what's in it for us."
If, on the other hand, the relationship is based more on partnership and 'sell-out', rather than on transactions and 'sell-in', the likely outcome is that both parties could achieve their objectives.
Most distribution agreements are for a fixed period so the distributor's horizon for critical decision-making usually extends no further than the next renewal date even if both parties talk of a long-term relationship.
So to those sales people who are charged with developing business through a third party distributor, I say don't be surprised if, when you treat them like any other customer they treat you in return as just another supplier.
Nick Pearson is managing director of Pearson Consulting. E-mail:
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. The company has launched its new website www.beyondsaleseffectiveness.com
