What is The Role of Distribution in Demand Generators?

Last week I visited a client who asked me about “the channel”. Specifically, they wanted to know:

• “What drives distributor product selection, what is the food chain, what’s the value of each.”
• “Are distributors proactive in creating opportunities and selling our types of products?”

And, as a little background, they focus on a segment of the market that is probably valued at $750M – $1B, are industrial, more spec or premium-oriented. Their business is project and MRO-oriented and “98% driven by customer requests and/or supported by their reps.”

Aside from a discussion of their strategy and recommendations on how to capture share of mind, the broader question becomes

• What is the role of distributors?
• Are / do distributors proactively seek business and promote manufacturers?

Concurrently, after sharing the Executive Summary of NEMRA’s Manufacturer of the Future report (and if you want a copy, email me), a distributor asked:

• “What (does) the manufacturer believes the role of distribution is regarding demand creation, sales strategy, etc.”

And this is from a privately-owned distributor.

The challenge is that these are broad questions where a “one-size fits all” answer is insufficient.

• There are distributor salespeople who will proactively recommend products based upon understanding their customer’s needs.
• There are distributor salespeople who are very service oriented and prefer to receive / service orders.
• There are distributor salespeople who do both, and it depends upon the customer and the opportunity.
• And there are many customers who are not called upon by a distributor salesperson and learn / know what they need, conduct their own research, and “order” what is necessary or delegate the brand decision to their contractor (hence contractor quotation / bidding and value-engineering opportunities.

So, given that there are “thousands” of distributor salespeople in the market, there are that many ways of answering the question. Unfortunately, distributors are not consistent across their sales platform in supporting a manufacturer. Distributors, and rightly so, are focused on supporting their customer (the source of their income).

Beyond Distributor Salespeople

Further, manufacturers share that trying to get distributor management, purchasing / supplier relationships, marketing, training, branch managers, inventory management, and salespeople on the same page for a strategy and then execution of the strategy is …. monumental!

With consolidation and the advent of large, and very large, distribution centers, many of the largest distributors are focused on seeking operational excellence because that fits their model.

Few are actively seeking to invest in more outside salespeople (putting more “feet on the street”) to serve more customers. Some of these feel that customer interaction is / should be digital, which is a challenge in creating demand / seeking specifications as digital, inevitably, is customer-driven self-service and/or transactional. There is nothing wrong with this and, in fact, it is a requirement to serve all customers at some point … and customers want this flexibility.

But, from a manufacturer viewpoint, is it the only way to generate demand?

Can / Should Distributors Be Brand Loyal?

One of the findings of NEMRA’s Manufacturer of the Future report is that leading manufacturers want their manufacturer representatives to generate more demand and, in most cases, interact with more contractors / end-users within their market. They are looking, longer-term, that consolidation will continue, and that the role of the rep is to help the distributor move product from the distribution center to the user as well as generate demand by creating brand preference so that the distributor will fulfill the brand request.

As a national chain, and for that matter, almost any distributor, the “prime directive” is to serve the customer and generate revenue. Without sales, yes, there is no business, so distributors sell either what the customer wants or what will earn them the business. This may conflict with a manufacturer’s goal … promoting “their” product / brand.

In essence, manufacturers question distributor brand loyalty and their ability to help the manufacturer take share within a defined territory.

Assessing if a Distributor is a Demand Generator

To help manufacturers and distributors,

• What should the role of distribution be regarding demand creation, sales strategy, etc…”

The NEMRA 2020 Rep of the Future Report (available free to member representatives and manufacturers by contacting NEMRA) and its resultant 5 Pillars, outlined ways that manufacturer representatives could benchmark themselves (and use as a blueprint) and ideas for how manufacturers could evaluate their representatives. Should / could something similar be developed for distributors? What defines a “demand generating” distributor? A “best in class demand generating distributor”?

So, the second question is

• What are / could be the attributes of a demand generating distributor?