Focusing on Selected Distributors

Over the past month we’ve spoken to a number of manufacturers who have intimated that they are channeling their sales organization to focus their efforts on fewer, more profitable, distributors. These distributors typically are financially strong, larger, more aggressive, marketing-oriented companies that purchase (or are open to purchase) a wide product mix from the manufacturer. In other words, they are the more committed, loyal distributors.

At the same time, some distributors are identifying ways to develop, or refine, their preferred supplier list. These initiatives focus on select performance criteria and inevitably also involve rebate / marketing group support.

The essence of these initiatives is that resources can be mutually focused; stronger, more profitable “partnerships” can be developed; and that together the business can be grown.

Historically most manufacturer “distribution programs” (i.e. Signature Service type programs) are rebate focused. And while rebates have become an integral component of the electrical industry (and essentially an ante into the game), these programs have the ability to help manufacturers segment their distributors, especially if criterion is used where the distributor essentially determines their level in the program.

An example of this can be seen in a new distributor program that Motorola is launching for its Enterprise Mobility Solutions group. The program is based upon points for volume as well as customer satisfaction, vertical expertise, accreditation and more. The points get totaled and Motorola’s channel partner is then placed into one of four categories to determine support, pricing and rebates.  The concept isn’t unusual in many other industries.

For an electrical manufacturer this could relate to volume, mix, stock vs. project, transaction costs, marketing support, training activities and more.

In an industry where almost 50% of the distributors are in a marketing group, and and many distributors are now essentially “double dipping”, manufacturers should consider alternatives to their distribution programs if they are serious about wanting to focus their energies on “top performers”. According to one manufacturer, this is about trying to do more with less. More sales through less distribution and with less expenses.

• Manufacturers – what criteria are you using to focus, or in some cases, pare, your distribution?
• Distributors – are you streamlining your supplier list? What criteria are you using?