Distributor Selection
Carlton Hoyt
Having worked with a large number of manufacturers, it seems that there’s almost as many different processes to grow distribution networks as there are companies looking for distribution. However, there does seem to be one method that’s all too frequent: find a distributor that’s “good enough” and run with it.
This admittedly sounds counter-intuitive – after all, why would anyone want a distributor that’s only “good enough” – but it happens surprisingly frequently. It’s easy to get a bit lazy when it comes to distribution. Identifying and qualifying distributors is a tedious, time-consuming, and sometimes difficult process. Many manufacturers don’t have a good understanding of the distribution landscape in many geographies. There’s always a large amount of uncertainty when it comes to distributor selection, so many people turn to gut instinct. Whatever the reason is for not vetting a sufficient pool of distributors, it can carry a huge opportunity cost.
Think about the difference in performance between one of your very good distributors and an average one. For most companies, the 80/20 rule is in full effect when it comes to distributors – 80% of their distributors are mediocre, while 20% are very good or exceptional. (I’ve heard a number of manufacturers state this rule should be changed to 90/10 when applied to distributors.) While it’s a stretch to say that all of a manufacturer’s distributors will ever be exceptional, this indicates that there is a very large amount of room for improvement. Not all of this improvement can come from better distributor management; some improvement needs to be rooted in better selection of distributors.
The first critical step to selecting better distributors is to create a profile of what a high-performing distributor would be for your company and product line. What are the most important strengths and capabilities you need them to have? What functions will you need them to perform? What skills and knowledge must they possess? What signals will you look for that would indicate a distributor would meet these needs?
The second critical step is to ensure that you’ve successfully identified all of the relevant distributors for evaluation – and engage with them. With success being dependent on a such a broad array of factors, it’s important to engage with many distributors to learn more about them and feel them out. Unless you’re literally using distributors as order fulfillment centers, their interest in distributing your product line is often the most important factor in their success. Interest is something that you can only gauge by speaking with distributors, so it’s important to engage with a number of distributors to enable you to accurately weigh your options.
Distributors are central to the success of many life science manufacturers. Depending on the market and the product line, the difference between an excellent distributor and a mediocre one could be anywhere from thousands to millions of dollars per year. With so much at stake, isn’t it worth the effort to ensure that you’re selecting the best distributor available?
