UPORG

Numerous manufacturers and service providers make the same errors in judgment over and over again when designing their go-to-market channel strategies. Market Strategy

The following are the most common repetitive misconceptions in business-to-business markets selling through distributors, wholesalers, dealers, etc. Distribution

Mistake #1—Expecting Distributors to Generate Demand for Your Product

Distributors service markets and rarely develop them. Demand generation is the role of the manufacturer. Some channels classified as “technical specialists,” will help to educate end users relative to new product and technologies and, therefore, can contribute to demand generation but ultimately demand creation is the manufacturers responsibility.

Mistake #2—Expecting Great Performance by Providing Distributors Exclusive Territories

The only good reason to grant a channel an exclusive territory or market for your products is the territory is new and requires the distributor to invest and you want the distributors to feel they will have an opportunity to recoup their investment. Even with this situation the timeframe for the exclusive should be limited.

Mistake #3—Expecting Your Partners to Sell to New Customers

Dealers and distributors focus on servicing their customer base. They evaluate new products and services to determine the best ways to grow revenues in that set of customers. While they may add new customers, typically you can expect 90% to 95% of the distributors’ revenues this year will come from the same customers they sold last year.

Mistake #4—Expecting broad business objectives to work equally well in every market.

Let’s say you have a “selective” channel strategy, wherein you select the best distributors in each geographic market. Based on our experience, this approach may land you distributors in secondary markets (think Des Moines, Dayton, and Fargo) that control 40% to 50% of the market. However, in major urban markets (Chicago, Detroit, and Los Angeles) this selective approach may get you distributors that individually deliver 5% to 7% of the market.

If your plan is to grow your overall market share from 25% to 30% you have a problem. You have 15% share markets and 45% share markets and managers often articulate similar growth strategies to your distributors in both. Using one number for everyone never describes the market accurately for everyone.

Mistake #5—Expecting your investment in various Strategies/Tactics will motivate Distributors to Promote Your Tertiary Product

If your products are tertiary to the channel, that is, the category represents ?1% of channel sales, then you have to adjust your expectations of the channel and avoid spending money on things that the channel will not utilize. We describe tertiary products as those that are “bought not sold.” Therefore, don’t invest in training programs for the distributor’s sales force, or worse, certification programs.

Mistake #6—Treating All Partners as if They Perform the Same Functions and Have the Same Costs

A common mistake made by many manufacturers is offering a discount structure that “treats everyone the same.” Clearly not all channel partners are the same. Those that perform more activities on your behalf will tend to have a higher cost structure and therefore require more margin. Those that perform fewer activities can afford to lower the price of your products to their customers if you are “overpaying” them.

Our philosophy, as succinctly summarized by one of our clients, “Do what it takes to serve the customer, and pay the channel that does the work.”

Mistake #7—Failure to Enforce Your Own Policies

Manufacturers are in the business of selling, not in the distributor termination business. We understand that. But many manufacturers have clearly defined expectations of their channels they fail to enforce. There are many other penalties that can be levied prior to termination but manufacturers must have an effective and functional penalty process. Channel Workshops

Channel partners are very observant. If they see that XYZ distributor did not put in the showroom you require and nothing happened to them, then it will be assumed that your requirements are requests.

If your requirements are really “required,” then enforce them. If you don’t, your channel partners will decide which policies they will support, for you.

Take a look at your channel strategy and see if you find any of these seven common mistakes that may be undermining your effectiveness with channel partners and jeopardizing the results you expect to achieve. If you would like our help in correcting these mistakes contact me at jhenderson@franklynn.com or visit http://franklynn.com