Improving Distributor Performance
Carlton Hoyt
Any bioscience company that sells through distributors is familiar with the problem: some distributors just don’t pull their weight. I spoke with a global laboratory equipment company recently that has about 100 distributors globally, excellent territory coverage, and no direct sales so all of their sales come through distributors. They told me that the 80/20 rule is in full effect with their distributors – 80% of their sales from 20% of their distributors. Even more extreme, over 50% of sales came from their top 4 distributors! They put in a great deal of effort trying to convert poorly performing distributors into well-performing distributors, but they were doing so in a very cost and time intensive manner and with moderate success at best. Admittedly, this is an extreme example, but Imagine how much a company like that would stand to gain from improving the performance of even some of their distributors.
If you sell through life science distributors, you are probably in a similar situation. You most likely have good distributors and not so good distributors (and probably some downright bad distributors), and wonder what you can do to improve distributor performance. We hear that same question over and over, and I thought I would share a few tips on how to get more from your distributors and grow global sales while improving your distributor relationships and building trusted long-term partnerships.
One of the most common factors in poor manufacturer-distributor relationships is poor communication. Note that poor communication can be both a cause and a symptom of poor distributor performance. Many companies set up distributor newsletters or make calls to them to ask open-ended or performance-based questions, and while these efforts are better than nothing, they rarely address core problems and often lead to one-directional communication. To improve your distributor relationship, and thereby improve your distributors performance, your communications should provide value to your distributors. One way to do so is to build a social-like platform for discussion and dissemination of materials and information. Customizable, easily built solutions from companies like Ning, SocialGo, or Groupsite provide inexpensive solutions that will not only get you communicating more with your distributors, but will also get your distributors talking amongst each other. Just remember when implementing any solution for communication – if your solution is not easy to use, distributors won’t use it. Chances are they’re not going to go out of their way to communicate with you.
Another common factor for poor life science distributor performance is motivation. In order for your distributors to sell your products, they have to want to sell your products. Are you properly rewarding distributors? Are you providing sufficient training and support? Are demo-intensive products eroding distributor ROI? Perhaps they have another product line which is their “bread and butter” and they are hesitant to place focus elsewhere? Lack of motivation to sell could be caused by many reasons, and each will have a different solution. Talk to your distributors one-to-one, build a relationship based on trust, then make use of that trust to get straightforward answers from them as to why they’re not selling. Sometimes the problem isn’t the distributor at all but other factors pertinent to a local or regional market that may appear to be problems with a distributor. Regardless, trusted distributors with whom you have build a good relationship will give you straight and honest answers.
There is also the chance that a distributor you have selected is not right for your company and / or product lines. If your product doesn’t fit their expertise, if the sales techniques required don’t fit their sales methods, if they offer too many competing products, etc., there may just be an irreconcilable difference. Sometimes there just isn’t anything you can do, and you need to be able to recognize that and move on.
Regardless of the reason, if a life science distributor has poor performance and isn’t improving (or you have reason to believe they won’t), you need to replace them. In future posts, we’ll discuss distributor selection, contractual terms that can be used to help motivate distributors up-front, and ways to replace distributors that will minimize disruption to your business.
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