Using Distribution Channels to Gain More Marketing Opportunities
Cooperation with distributors is an effective way to improve your bottom line. Before choosing a distributor, however, decide which are the channels that are appropriate for you and your company (retail, Value Added Reseller (VAR) or system integrator), create a business plan, and make sure you have a training program in place, same as when you define the criteria for recruiting a sales team.
Working with Distributors
Distributors are suppliers that buy wholesale quantities of goods from manufacturers and importers and sell them to other suppliers, usually retailers and VARs, which sometimes ‘upgrade’ a product before reselling it. Working with distributors as a marketing channel is beneficial, especially because buying through them is simpler, takes less time, and usually requires minimum logistics. They can be paid by credit card only after they sell the goods, unsold goods can be returned to them, and the goods can be stored in their warehouses.
Moreover, large distributors are well acquainted with the market, know who is the competition of retailers and VARs and who markets complementary products, have a large customer base and structured sales programs. These advantages enable businesses that choose to market their products via distributors to select the most suitable distribution channels to reach more customers more easily.
But working with distributors has some disadvantages. You do not always know who bought your product, and thus will not be able to build a direct relationship with the end user. Also, the commissions they request sometimes force you to increase your prices to make a profit.
How Do You Go about Finding a Distributor?
The more your area of activity interfaces with the consumer world and offers a better or more unique added value, the easier it will be to find a good distributor in either the offline or online environment. It is very simple. Contact the person that deals with your area of expertise in the offices of large distributors and present your product and its price to them. In some cases, your request will be handled by an entity external to the company, which provides the distributor with storage space and selects the best products to maximize the profits of both the stores and themselves.
Launching a collaboration with a regional marketing chain is similar to launching campaigns with national or international distributors, although it may take longer to establish a cooperation with them. The advantage is that regional chains do not always know the ‘rules of the game’, which lowers markups.
In any case, quality products, attractive packaging, personal relationships with the right people and knowing the rules of the game are always effective to establish a relationship with the distributor you want. They will give you an advantage over your competitors, while placing your products in a good location in their physical or virtual stores.
Finding and Choosing a VAR/System Integrator
Some traders prefer to work directly with a retailer, VAR or system integrator that as opposed to wholesalers and marketing chains, sell smaller quantities to the private/end consumer. Finding the right VAR and/or system integrator can be more challenging because, despite the fact that some system integrators have dozens of branches, most of them have only a single store.
Before beginning to work with these distribution channels, define the objectives of the cooperation accurately and select a suitable channel carefully. Most retailers, VARs and system integrators tend to focus on a specific market segment/product price range that are appropriate for their target audience in their specific area of operation. Moreover, finding the right VAR for you in terms of size, experience and customers involves an investment of six months to one year in training until the distributor closes the first deal. You also have to take into consideration that in the first year the VAR will need your assistance in terms of sales processes and implementation of your product, before it can successfully market it on its own.
Leveraging Distribution Channels
Very often, the marketing and promotion plans of a distributor are aimed more at reaping profits for themselves than at increasing sales. Understanding how the distributor/retailer you chose works and manages the sales process will ensure a better return on the commission you will be paying and a positive return on investment. It will also help you maintain better relationships with the physical or virtual store.
If you chose to work directly with a retailer, it is best to invest some more money and have your products placed at the front of the store, where there is a lot of traffic of buyers; this will maximize your product’s exposure and presence. It is also recommended to set up a stand or booth where people can try your product; if necessary, train sales people on how to use it. Other promotional tools include hanging signs all over a store, launching a sales campaign in the local press and granting discounts for limited periods of time (for example, over holidays). The same applies to virtual stores – make sure that your banner is placed on the page with most visitors; invest a bit more so that the distributor adds buttons/icons to the pages leading to your ads; offer a trial version, discounts, and more.
When you work with VARs or system integrators, use tactics like product trials in exchange for answering a questionnaire about the product, host professional conferences for customers, offer “buy one and get one free” or “buy one and get a discount” bundles, and provide discounts on support and service.
Approximately 70% of customers that visit the stores ask for the opinion/recommendation of a sales representative, and 97% of them will buy or not buy based on that opinion. In the case of VARs and system integrators, the percentages are even higher. To maximize your sales opportunities, in addition to selling to customers, provide incentives to the distributor’s sales teams. Make sure your marketing plan has clear goals, incentives and performance monitoring of personal sales targets. In the virtual arena, choose bloggers, analysts and thought leaders relevant to your field and provide them with information about your products, send them a video clip and trial samples, invite them to a professional conference so that they write about your product and recommend it in articles and social media.
As another of your sales channels, investing in your distributors is excellent marketing, sometimes even better than special sales to customers. Let your competitors invest on advertising their products while you invest the money you saved providing trial products to your distributors and training them. When the customers get to the stores, distributors will most naturally promote your products. To maintain the conversion ratio in the long run and make sure that your distributors promote your products, sell them your merchandise at a very low price, because they will always tend to sell the goods they already know.
Most distributors do not have marketing operations in place and do not excel in creating leads. Put at their disposal your marketing tools and embark on marketing activities that encourage them to work on your behalf; here are some examples:
- Publish professional articles in relevant media that the distributor can use as a tool that will help promote the product; cooperate with bloggers and trend setters so that they endorse your products
- Produce printed and electronic marketing collateral for the distributor, including product sheets, white papers, training videos, product images, demos with the products features and benefits, and more
- Launch marketing campaigns together with the distributor
- Hold targeted seminars and webinars for your distributors/resellers or provide them with one‑on-one training on your products
- Make sure your work plan includes a rebate budget that drives the distributor to work with sales targets; for example, for every month that sales exceed the target, a certain percentage of the income will be invested in marketing the distributor’s activities
- Offer to produce the distributor’s marketing activities in the framework of the budget the distributor ‘earned’; this is ideal when the distributor does not have its own marketing operation
The closer your cooperation with your distributors, the faster you will gain their trust and encourage them to sell your products. This will lead to a long term, mutually beneficial partnership with them.