“Supplier-Distributor Relations”Prepared by : Prof. SEYED ALI FALLAHCHAY

Supplier - Distributor

Supplier: is consider as producers (Manufacturers) &

Importers in the marketplace.

Distributor: is consider as the industrial distributor. The

industrial distributor is a specific type of agent

middleman who distributes products in the market.

1. The Distributor’s Role in Marketing Strategy

The distributor’s role varied as a function of several interrelated factors, including:1. The manufacturer’s marketing strategy and

especially the basis on which he attempts to achieve a unique competitive advantage: quality, price, availability, applications, engineering and technical service, full line, technical product leadership and ,etc.

2. The strength of manufacturer’s market position, that is, whether he is a market leader or a minor brand;

3. The technical characteristics of the product,

especially the presence of strongly differentiating

product features among brands and the need to

make technical judgments about the best response

to customer requirement.

4. The importance of immediate product availability to

the customer or, conversely, the extent to which

requirements can be forecasted and planned for.

Market Coverage and product availability

The number of distributors required to cover the

market and insure availability depends on several

variables, most notably:

1. Total market potential and its geographic

concentration.

2. The manufacturer’s current market share and the

intensity of competition.

3. Frequency of purchase and whether the product is an MRO (maintenance, repair, and operating) item or OEM (original equipment) item;

4. Whether lack of availability could interrupt the customer’s production process;

5. Amount of technical knowledge required to sell or service the product; and

6. Extent of product differentiation, determining how important immediate availability is as competitive variable.

Market development and account solicitation

The primary responsible of distributor is servicing

demand, but he also had major responsibility for

soliciting new accounts and expending the size of the

market.

Technical advice and service

Technical expertise is important for many products

handled by industrial distributors.

Such as products were technological stable, customers

need advice in determining optimum product

specifications for a given applications. Thus, the

distributor’s sales people must have adequate product

knowledge to render necessary assistance.

Market information

Many manufacturers reported that their distributors

were of virtually know help as a source of market

information.

Distributors did not have current or complete market

data.

Issues in the relationship

• Direct accounts

• Distributor management

• Inventory levels

• Second lines

• Adding distributors and overlapping territories

2. How to Choose Distributors

Recruiting an agent is as important an act as taking on a

partner. You are, in fact, taking on partners when you

work with agencies.

When you recruit a sales agency, treat it as though you

were recruiting your own number-two person.

How to Choose Distributors

• Clearly define your own needs• Create a profile of ideal agency• Create a profile of your company• Developing your pre-recruitment plans• Recruiting by getting referrals from other agencies• Recruiting by getting referrals from other

manufacturers• Using directories to locate agencies• Advertising for sales agencies• Using recruiters to locate sales agencies

Why not create your own agencies?

If you have people who you know won’t stay once they

have reached the top of the sales department, why not

keep them by helping to set them up as sales agencies?

3. The Distribution Partnership

For manufacturers to effectively plan and implement

industrial distributor programs they must:

• Gain a deep understanding of distributor

requirements.

• Build working partnerships with distributors.

• Actively manage these partnerships.

Understanding distributor requirements and needs

• Monitor distributors

• Learn from companywide experiences

• Conduct market research studies

• Establish a distributor council

Note: the best way to learn about distributor

requirements is to get out into the field periodically and

listen to what distributors say.

Building working partnerships

Companies seeking to initiate or resuscitate distributor

relationships can take any of three approaches to

develop distributor program:1. Get the benefit of industry experience.2. Establish a position in the distribution marketplace.3. Devise a formal distributor marketing plan. This plan

should be written for the whole network and then broken down individually.

Building working partnerships• Develop sound communication – Communication

between the manufacturer’s order center or inside salesperson and the distributor’s purchasing manager is extremely important.

• Signaling commitment – manufacturers must demonstrate that they are committed to distributors for the long term. Manufacturers must refer all customer inquiries and requests to their distributors.

Finally, manufacturers that limit the number of distributors per trading area are indicating that they want their distributor partners to be successful .

• Passing the critical incident test – to deal with critical

incidents, a manufacturer must train its personnel,

especially sales and order center people, to be

sensitive to distributor’s key concerns, including

product delivery, pricing, and credit.

Actively manage these partnerships

• Manufacturers must coordinate sales activities with those of the transportation and manufacturing people so that delivery promises will be kept.

• manufacturer must develop a reputation for equitable policies that are consistently and uniformly implemented.

• Inform all distributors of any policy or program changes needed to resolve the issue.

• Manufacturers should plan for the future.

Successful partnership can be expected to yield the following results:1. Motivating for superior effort and performance

from both parties.2. An atmosphere of goodwill that produces a

willingness to overlook inevitable mistakes.3. A reduction in the distributor turnover rate and

consequent lowering of the manufacturer’s costs of bringing new distributors into the network.

4. Coordinated performance in the marketplace, with satisfied end users who are loyal to both the manufacturer and the distributor.

Changing Gears In Distribution Strategy

• Direct versus independent distribution• Selecting distributors- turning decision into action• Distributor management • Establishing objectives• Tracking distributor performance• Aiding distributors in developing a market• Reevaluation of distributor policy is a continuing

process.