So you and your company have worked hard to create the perfect offering for the marketplace and now you need help getting it to market. All the work you did previously could amount to little, if you now make a bad distribution choice. Even worse, a bad choice could render a fatal blow to your company.Presumably you did a lot of research before you began your product development. Beginning with a very clear understanding of customer needs and an analysis of the competition, you would have then done a thorough analysis of the numbers such as market demand, market trends, profit projections, and finally, a check for alignment with your company's mission and goals. Choosing a distribution strategy involves the same steps and requires just as thorough a level of analysis. So what's on your checklist?

• The marketplace and your customers - What are their needs? Rank your customers by size and importance, and begin to analyze their requirements. Customers are not equal, and they have varying and changing needs. A huge mistake is offering the same solution to all customers. Ask your major customers what they need in terms of service and availability. You will find differences among them and they will have very distinct needs from smaller customers. The lesson to be learned is you will need channel alternatives, and possibly different distributors for different customers.
• The competition - Check out your competitors, beginning with the strongest. How are they handling the market? How many channels do they use? Are they embracing e-commerce and e-trading? Do they have a local presence in key geographic markets? Is there anything you can do differently to be better?
• Viability - Can you afford to access the market the way it needs to be serviced and still be competitive? Does your business case make sense? Does your company have the necessary resources?
• Corporate fit - Does your choice of distribution fit with your business model and image? There is no point in choosing a distributor known for consumer goods if you are marketing specialized medical equipment to hospitals. And, selling high-end goods in a budget concept store will deplete the value of your brand.

In today's fiercely competitive global marketplace, development of your distribution strategy deserves as much attention as your product, pricing, and promotion strategies. Distribution is a major cost component and is touted by many as the last remaining cost frontier. Some predict it will be the breeding ground of the next generation of billionaires.

Tempted to handle distribution yourself? Step back and look at the trends in business today. You simply cannot be good at everything, and if you are not spending most of your time doing what you do best, then you are not being fair to yourself or your shareholders. Companies are striving to be both effective and efficient - good at their core business and profitable at the same time - better with less cost than the competition. Some firms excel at certain aspects of the distribution process because that area is their specialty. This is the premise behind today's trend to outsourcing - engaging specialists to undertake specific functions that they are uniquely positioned to do better. For most successful manufacturers, distribution is an outsourced activity. Technology and e-commerce play an ever-increasing role and, the bigger your customers, the bigger those roles. Every firm needs an Internet presence, and that will include the ability to process orders online, if not now then in the near future.

In today's business environment, you need more than one channel. Some customers will be best served by offering them a choice of channels. Sales increase with the number of alternatives the customer has. Embrace technology but never lose sight of the need for personal contact with key customers. They need to see and hear from the people behind the brand. Be prepared to be innovative and willing to change as your customers' needs change. Global competition and global opportunities require very different solutions from previous traditional approaches.

What criteria should you use to select a distributor? Following are a few key performance criteria:

• Previous experience in your markets with current or similar customers and products
• Service capability including ability to inventory and provide value added services
• Marketing support for you and your customers
• Financial strength
• Synergy of existing product portfolio and appropriateness of  their stable of competing products 

While these are key considerations, they relate largely to the distributor's past performance. Your customers' needs, your competition, your goals, the reputation of the distributor, and the fit of their values and with those of your own organization should be your drivers in selecting this important channel partner. 

A recent industry survey of one group of buyers in Asia, where the largest and fastest growing markets in the world are located, accounting for more than $30 billion of purchases in 2006, rated product quality (quality of brands carried) and reputation as their 2 top selection criteria for distributors. Reputation has become increasingly more important and it now ranks almost equally with quality as a determining factor. In addition, close to 50% of the surveyed Asian buyers prefer to deal with local distributors that obviously would have both presence and an easily assessable reputation.

None of this should be a surprise. Repeat business is predicated on relationships, and reputation is a key factor in all relationships. Choose distributors who are reputable and who operate with integrity. Incur the expense and take the time to meet the principals and staff personally. Check out their reputation by visiting customers in the area. Formalize your agreement via a written contract and be specific but fair in your demands. Commit to regular 2-way communication and budget for periodic face-to-face meetings. Your distributors become your partners, and you have to be proud to be associated with them. Your reputation, brand name, and success will depend on how well your distributors are perceived by your customers.

 

Written by Gerard Edwards MBA, P.Eng, CME, CSE - VP Incisive Marketing Inc.  First published in Sales & Marketing Executives International’s Marketing Times  September 2006 – reprinted with permission