How to Develop a Distribution Channel Strategy

Before one can contemplate a distribution channel strategy, one must first understand what is a distribution channel. Distribution channels are the sequence of intermediaries that goods and services pass through until they reach the end-customer. In the contemporary global market place, distribution channels take many forms, from wholesalers and distributors to retailers and web-shops, and everything in between. These can be broken down into two essential categories; distributors such as retailers that take ownership of the goods along the path to the end-user, and representatives such as agents that do not take ownership but facilitate the movement of goods or services.

Essentially, a distribution channel strategy facilitates the sale of goods and services in sectors or geographical markets that a company’s sales team cannot operate in directly for any given reason. The strategy may avail of any of the channels described above with different channels offering advantages and disadvantages depending on the type of company and its requirements. Successful companies will allocate appropriate resources to the upkeep of their distribution channel strategies because, in order for the channel to operate effectively, the company must maintain and exercise an appropriate level of control, communication and support to incorporate their changing needs.

Active and sustained communication with the distribution channels also serves to promote the exchange of ideas across culturally diverse markets through the central company. This movement of ideas may inform advances, not only in distribution strategy, but also in the companies overall sales strategy.

To develop an effective distribution channel strategy, a company must consider 5 primary factors: scope, expense, contribution, support and customer service.

1.     Scope – The objective of any sales strategy is to grow the company. Identify the target market and all the players in it; distribution channels, competitors and suppliers of complimentary products. Decide on a structured set of criteria that the distribution channel must meet in order to provide the best fit for your company. For example, the channel must have revenue of 2-5 million euro, have operated in the market for 5 years and stock no competitive products.

2.     Expense – Confirm the cost of establishing an indirect distribution channel strategy in your target market and compare it with the costs of setting up a network or direct sales team there. A direct sales team will incur all the expenses associated with processing, warehousing, distribution, invoicing and after-care whilst a distributor may incur lower margins through discount pricing. These costs will vary depending on the nature of the market and the goods sold, compare and make the right choice for your business.

3.     Contribution – As mentioned above, sustained communication your distribution channels may encourage the exchange of ideas, which will contribute to the cultural and structural growth of your business. A more tangible aspect of distribution channel contribution will be access to additional customer base and market knowledge that will lower sales and marketing costs associated with initiating market research and advertising campaigns.

4.     Support– As mentioned above, the sustained support and control of the distribution channel strategy is quintessential to its success. Support may take the form of a dedicated manager tasked with monitoring the distribution channel, identifying needs and offering knowledge based assistance or direct funding of sales and marketing activities. The level of support offered will depend on how significant the contribution of that distributions channel to overall revenue or the potential growth of the distribution network through that channel.

5.     Customer Care – As with distribution channels, it is critical for companies to identify the target end-customers as part of their distribution channel strategy. Key accounts may need to be reached directly by the company to provide customer care or technical support beyond the capability of the distribution channel partner. In this instance, the channel may be responsible for larger scale customer care for the majority of customers, leaving the parent company with ample resources to look after the key accounts.

Choosing an Export Distribution Channel

Once a business has identified the market/markets to export to, the next step is to establish who will sell the product/service to potential customers and how it will be sold and distributed. How a business organises their sales presence in export markets is one of the key decisions to be made by an exporter. The choice of selling method will be influenced by the nature of the product/service. It is important to assess the usual local distribution practice with regard to similar products.

There are 2 main ways of exporting to overseas markets, these are:

1. Direct Exporting

• Selling Direct from the exporter’s location

2. Indirect Exporting

• Opening Operations in Overseas Markets

• Using a Commission Agent

• Using an Overseas Distributor

1. Direct Exporting - Selling Direct

Some larger companies prefer to purchase directly from the manufacturer without the services of a middleman. This typically involves making frequent sales visits to the particular country, as well as telephone sales or accepting of overseas orders on an e-commerce website. This can be a straightforward, cost effective way of entering overseas markets; however, it can have implications. It may leave the exporter remote from customers, and unable to share the exporting workload with partners or intermediaries.

Advantages of Direct Selling

• Existing resources can be used to start exporting into the overseas market • Enables a business to maintain full and direct control over the process • It is a strategy that can be easily reversed • Profit does not have to be shared with partners or intermediaries

Disadvantages of Direct Selling

• A good knowledge of the overseas market is essential in order to locate buyers and establish business relationships

• The exporter will be responsible for logistics, unless the business commissions a specialist freight forwarder to handle this

• The exporter is often remote from customers

• The exporter is unable to share exporting workload with partners

2. Indirect Exporting - Opening Operations in Overseas Markets

This is generally the most costly and time consuming method to enter an overseas market, however, it can be the most rewarding.

A business can set up an overseas operation by:

• Opening a local office, using existing employees as staff

• Setting up a new business in the overseas market – a locally registered subsidiary company. This is subject to local regulations and legislation

• Partnering with a local business in the form of a joint venture, to set up the new business with shared ownership

Very few companies will be in a position to immediately set up their own office with resident personnel; however, this is often the long term objective in the key overseas markets. Furthermore, there are vital legal and financial implications involved in setting up in an overseas market. A company should seek legal advice from a solicitor and an accountant business adviser when considering this option.

Advantages of Opening Operations in Overseas Markets

• Enables exporter to plan long term sales

• Customers take a product more seriously when it is locally based, especially when after sales service is required

• A joint venture enables the company to share the risk

Disadvantages of Opening Operations in Overseas Markets

• An in depth knowledge of local employment and tax law is a necessity

• If things go wrong, this could lead to very high costs

• Multiple financial implications involved

3. Indirect Exporting - Using a Commission Agent

An overseas agent represents the exporter in the overseas market, sells the exporter’s product or service to the overseas customer and routes orders back to the domestic market. Once the goods are paid for by the customer, the overseas agent receives commission from the exporter.

The commission varies from 2% to 15%, depending on the nature of the goods being handled. Commission should be included in the price quoted to the customer. It is essential to recruit a commission agent that has extensive experience in the particular business context, as well as relationships with potential buyers.

Advantages of Using a Commission Agent

• Recruitment, training and payroll costs of using your own employees to enter the overseas market are avoided

• The commission agent is well placed to identify and exploit opportunities

• More control over price and brand image are maintained when using an agent – compared with using a distributor

Disadvantages of Using a Commission Agent

o The exporter is still responsible for trade logistics such as shipping o There can be a problem with after sales service when selling through an intermediary o After sales service can be difficult when selling through an intermediary

4. Indirect Exporting - Using an Overseas Distributor

A distributor buys the goods from the exporter, and then takes responsibility for selling them on to a third party. The role of a distributor is to find customers for the exporter’s goods. Distributors bridge the gap between the exporter and the end-user customers. It is imperative to seek legal advice before concluding a distributorship agreement.

Advantages of Using a Distributor

• Using a distributor enables a business to access international markets, and avoid logistics issues and risks associated with trade

• It is a lot more straight forward for an established distributor to introduce a new brand into the market than it would be for the exporter

• Distributors normally invest in the marketing of the goods in order to boost their sales

• Many distributors buy in bulk, to ensure they carry a stock of the goods they are selling; they also look after warehousing and inventory control

Disadvantages of Using a Distributor

• Distributors often demand significant discounts and liberal credit terms from exporters, in return for taking on trade related risks and burden

• There is a risk of losing control of the way goods are marketed and priced

• Distributors frequently demand long periods of exclusivity, so therefore it is essential that the distributor has identified a potential market and has extensive experience in selling the particular goods

• Whilst a commission structure can be employed to motivate a sales agent, this is not the case with a distributor

Useful tips when choosing an agent or distributor

• The agent or distributor should be selling to the same companies which interest you

• Agents and distributors must have relationships with potential customers

• Do not give the agent exclusivity for too large an area – ensure that the area allocated can be covered effectively

• Consult your lawyer in relation to the type of agreement you intend to enter into with a potential agent, and do not sign any agreement without approval from your lawyer

• Verify your distributors financial standing to ensure he/she is financially sound

• Agreements made with agents and distributors should be formalised in a clear written contract!

Key points that should be included in a contract with overseas agents and distributors: Checklist

• Names and addresses of the businesses involved and the nature of the relationship

• A clear description of goods

• The geographic location in which the company goods will be sold

• The price received from distributors for goods and the price an agent will charge customers

• The commission an agent is to receive

• Due date of payment, currency and exchange rate

• Termination date for the contract agreement

• Confidentiality clause

• Intellectual property – identify the rights the agent or distributor has regarding the use of company titles, brands, logos, etc.

• Exclusivity – what rights the agent or distributor has to the goods

• Jurisdiction – Identify which country’s laws apply to contract

Qupact has launched an app to help companies find different types of sales channel partners to develop routes to market. Register for a FREE trial today and find Export Sales Partners and develop a Distribution Channel Strategy. http://www.qupact.com

3 Steps to Develop a Successful Channel Partner Program with DataPACT

See how DataPACT APP can help you develop a sales channel strategy. Looking for distributors in Germany, France or elsewhere in Europe? Qupact will find them for you! Get 10 channels for free! Qupact has launched an app to help companies find different types of sales channel partners to develop routes to market. Register for a FREE trial today and find Export Sales Partners and develop a Distribution Management Strategy. Signup today! Visit http://www.qupact.com

Sales Channel Development APP Sign Up Today!

See how DataPACT APP can help you develop a sales channel strategy. Looking for distributors in Germany, France or elsewhere in Europe? Qupact will find them for you! Get 10 channels for free! Qupact has launched an app to help companies find different types of sales channel partners to develop routes to market. Register for a FREE trial today and find Export Sales Partners and develop a Distribution Management Strategy. 
Signup today! Visit http://www.qupact.com

How to Build Relationships with Overseas Companies

Products, technology or price don’t buy mindshare – it’s all in the relationship. For exporters looking to nurture relationships with overseas companies, the Canons of Channel Management can transform the approach to channel management, writes Brian English of Qupact International.

A number of years ago we were helping a company in Cork to assess why its sales channels were not performing and what needed to be done to derive more revenue from them. One channel, in particular, was something of a mystery as the product fit was perfect and the customers it was dealing with were the exact targets that the Irish exporter was looking for. It was based in Norway and the deeper we probed, the greater the mystery became. Finally, we asked the obvious question – when was the last time you visited this partner? And the answer floored us – between seven and eight years ago!

If there’s one thing that 25 years of channel management has taught us, it’s that it’s all in the relationship. Products, technology or price don’t buy mindshare; this is something only a solid and enduring business relationship can capture, and the biggest challenge for the typical mono-lingual, island-dwelling exporter is cultivating and nurturing a long-term relationship with an overseas partner.

Over the years, we have honed a set of principles, which we call the Canons of Channel Management. We stick them on exporters’ walls and drill them into sales managers and CEOs up and down the country. Together, the Canons crystallise an attitude to a company’s channel partners that has to be shared by everyone in the exporting organisation. When they are fully embraced and used to inform day-to-day decisions, a company’s whole orientation towards its external sales partners – its feet on the street in overseas markets – is transformed.

1. Resources: Place your channels at the centre of your universe and organise your resources around them

An exporter needs to recognise that its channels are a legitimate part of its sales organisation and not an external add-on. Only when it embraces this philosophy will it be able to adequately resource the channel sales support organisation. This includes everyone from materials planning to after-sales service.

2. Reward: Know who in the channel is ultimately responsible for sales of your products and identify everyone who is rewarded for selling them.

In every channel partner, you need a champion. He/she is the person who has a vested interest in your products or services succeeding. His reward may be monetary or it may come in the form of kudos, peer recognition or the satisfaction of his customers.

3. Risk: Never expect the channel to take a risk with its business that you would not take with your own

Too many manufacturers expect their channels to take risks – with creditors, inventory, regulations and margins – that they would never take with their own businesses. This is a real acid test of the exporter’s level of understanding of the partner’s business.

4. Relations: Remember that the end-customer relationships are the channel’s, not yours – that’s why you’re using the channel in the first place

In the complex, global economy we live in, customers very often trust and rely upon their local suppliers on whom they have depended for many years and who have given them loyal service in good times and bad. Exporters often forget why they engaged the channel in the first place – because it owns these relationships. Continuing to remember that and respecting the channel’s value in the supply chain is vital to build long-lasting relationships.

5. Face Time: Maximise face time

Once in seven years is not enough! As an exporter, you need to plan to see your channel partners on a quarterly basis for the first year or two and after that, at least twice a year. Break bread together and make small talk, whatever it takes to build a person-to-person connection and see them whenever you can.

6. Loyalty: At all times, demonstrate unswerving loyalty and long-term commitment

We often compare channels to life partners and, when it comes to loyalty, there is no better analogy. Once trust is betrayed, it is very difficult – or impossible – to rebuild. Years of hard work can be undone with a single, bad decision driven by a lack of communication, greed or misunderstanding of a situation. In the final analysis, the relationship is not between companies, but between people, and it is therefore built on trust and loyalty.

7. Honesty: Be honest and transparent in all your dealings

It’s certainly possible to deceive all of the people some of the time or vice versa, but it’s never possible to build a lasting business relationship unless there is openness and honesty between the partners. Dealing with a channel conflict openly, with full disclosure, is more likely to strengthen a relationship than to damage it.

  

Qupact International is a Dutch-based consultancy with a company in Dublin, that specialised in sales channel development. Its CEO, Brian English, is Irish-born and educated and has been living in the Netherlands for more than 20 years.

Written by: Brian English, CEO, Qupact International  – consultancy specialising in sales channel development

Channel Development Pricing Agreements

Legal Issues – Channel Development Pricing Agreements

The creation of the single market has brought many advantages to companies throughout Europe who can export with ease to customers throughout the EU – something that was impossible just 50 years ago. However, as in every walk of life, freedom brings with it tremendous responsibility. In this case, the responsibilities that companies have to exploit the free movement of goods, capital and labour without compromising consumers’ freedom to put their suppliers into competition with one another.

The EU hates price controls, cartels and restrictive practices aimed at artificially maintaining price levels, either through price-maintenance agreements or by restricting supply in order to drive prices up. The continent is littered with examples of companies that have felt the wrath of the regulator in this regard.

So, bear in mind when you’re putting together your pricing or discount structures for Europe, that restrictive practices (like agreeing minimum resell pricing with your distributor) are likely to land you in the worst can of trouble.

Differential pricing can also be a major problem because, as a supplier you are not allowed to create advantages or disadvantages for competing distributors through your pricing strategy. Does this mean that all EU distributors have to be able to buy at the same price? Basically, if they can theoretically compete with one another, yes!

Now you could certainly argue that a Tesco store in Spain doesn’t compete with a Tesco store in Wolverhampton and that you can therefore offer them different pricing. This argument is reasonable and probably wouldn’t cause you any difficulties. You can also allow your pricing to reflect transport costs if your ship DDP or sales volumes. But if you sell a product that can easily be sources across national borders, then you need to be very careful.

For example, if you’re selling machine parts to OEMs in Germany that could buy them as easily from a distributor in France as in Sweden. Then you have to make sure that neither the German, French or Swedish distributor has a competitive advantage over the others that is based on price.

If you’re in doubt, get professional advice before you start setting prices and creating precedents. It’s a hotly monitored area in EU practices and you’re responsible for knowing what you’re doing within the freedoms created by the single market. For more information visit http://www.qupact.com

Channel Partner Management

The Importance of Channel Partner Management

Partner management, also called channel management or relationship management, is one of the most important activities companies have to have under control. If third party channels are going to be your preferred Route to Market, place them at the centre of your business universe and place your processes and resources around them.

At Qupact we see channel management not as something that is “additional” to your company, but as the life-blood of your business. Companies should be engaged in a support process for the channel partner, rather than in a managing role by lecturing the channel partner on how to do better.

You can add as many processes as you like to this diagram; the main point is that channel partners should always be at the centre of the business if they are your Route to Market. It can be the case that your channel partner is performing poorly. It is then important to understand the reasons why. Is it the margins? Or the training? Or maybe the cash flow? Together with your channel partner, you should attack the problems and try to solve them. Fixing is almost always preferable to starting over.

For more information visit http://www.qupact.com/

Develop Sales Channels

Available Sales Channels

Many people lose the will to live when it comes to differentiating between the different types of channel partners that are available in export markets. One man’s ‘dealer’ is another man’s ‘agent’ and people often use the terms ‘wholesaler’ and ‘ distributor’ interchangeably.

But don’t let the jargon fry your brain!

Channel Development

Apart from licensing, franchising and joint ventures, you can pretty much split all of the other types of trading partnerships into one of two categories: Representation or Distribution. If you think what you are really doing with a channel, it will be either a commission arrangement or a buy/resell relationship. 

Distribution Channels
It doesn’t matter what the text in the agreement says – if your partner buys the product from you and sells it to someone else, it’s a distribution arrangement. If he has continuing authority to negotiate pricing with customers on your behalf, he’s a rep. Here’s a split of some commonly used terms to describe partners, showing which type of arrangement they constitute.

For more information visit http://www.qupact.com

Get The Channel Management Strategy For Boosting Your Business

If you are looking for better growth and development of your business, there is nothing better than the best sales partner to assure you the best results. Yes, all you just need to find out talented, experienced and amazing sales partners who can assure you the best results all the time.

We all know the current market very well and can easily find a lot of competition in almost everything products and services we found around us. However, this becomes a very complex challenge for all to earn by running business very well. So, here we come up with the best solution will help you to enjoy amazing growth and sales, you have ever expected before.

So, are you ready to know more about the best company which can assure you to give various services to take your business to the next level? Here is the complete information.

Why don’t you try out the below suggested source, which is here to upgrade your business by boosting your goodwill and sales? Yes, the same company is running its services and operations since 2002 and generated great revenues for various industries. Yes, you can also be a part of the same Channel Development if you are looking for the best services. Here are the services which you must consider-

Market mapping

Market mapping is all about analysis of market and make sure to generate various information by accumulating great data. All you just need to hire the same and experts will learn everything about your company and accordingly will check the market to come up with the best conclusions. Yes, they relate your company to the market and make sure to give you the best Channel Management Strategy to accomplish mission and vision of the company.

Market entry strategy

If you are a newbie and looking for great sales, you can expect to have a multi-tier and route to market strategy will definitely help you to enter in the market successfully as well as making great list of customers easily. Yes, it doesn’t matter what company you are forming and who you are, experts will help you in each and every cases and assure you the best results only.

Partner search

Are you looking for the best partner who can help you in pushing your sales? Well, with the help of Export Sales Channels team you can expect to have one or more partners from your target markets. Yes, and once you will get the same you can assure to have a great sales and access in each and every target market, successfully.

Competitive analysis

Competitive analysis is must and this will help you to build up better strategies than your competitors. Using the best experts, you will surely get the best Export Sales Partners as well as you will aware with the strategies opted by your competitors to beat you up. You can assure to know all the strategies and by intelligently manipulating the same you can easily make great fortune for your business.

For more information visit http://www.qupact.com

Finding Sales Channel Partners

Do you need to find European distributors or sales partners?

We have assisted companies in the successful recruitment of reps and distributors in the UK, France, Germany, Spain, Italy, Sweden, Finland and South Africa.

Finding the right partner is one of the most important investments you can make to develop your export market! The wrong partner can waste your time and lose you the opportunity of finding sales for your products and sometimes it can take 12 months before you are certain your partner has the ability to deliver on your sales and marketing targets.

If you are looking for better growth and development of your business, there is nothing better than the best sales partner to assure you the best results. Yes, all you just need to find out talented, experienced and amazing sales partners who can assure you the best results all the time.

We all know the current market very well and can easily find a lot of competition in almost everything products and services we found around us. However, this becomes a very complex challenge for all to earn by running business very well. So, here we come up with the best solution will help you to enjoy amazing growth and sales, you have ever expected before. So, are you ready to know more about the best company which can assure you to give various services to take your business to the next level? Here is the complete information.

Why don’t you try out the below suggested source, which is here to upgrade your business by boosting your goodwill and sales? Yes, the same company is running its services and operations since 2002 and generated great revenues for various industries. Yes, you can also be a part of the same Channel Development if you are looking for the best services. Here are the services which you must consider-

Market mapping

Market mapping is all about analysis of market and make sure to generate various information by accumulating great data. All you just need to hire the same and experts will learn everything about your company and accordingly will check the market to come up with the best conclusions. Yes, they relate your company to the market and make sure to give you the best Channel Management Strategy to accomplish mission and vision of the company.

Market entry strategy

If you are a newbie and looking for great sales, you can expect to have a multi-tier and route to market strategy will definitely help you to enter in the market successfully as well as making great list of customers easily. Yes, it doesn’t matter what company you are forming and who you are, experts will help you in each and every cases and assure you the best results only.

Partner search

Are you looking for the best partner who can help you in pushing your sales? Well, with the help of Export Sales Channels team you can expect to have one or more partners from your target markets. Yes, and once you will get the same you can assure to have a great sales and access in each and every target market, successfully.

Competitive analysis

Competitive analysis is must and this will help you to build up better strategies than your competitors. Using the best experts, you will surely get the best Export Sales Partners as well as you will aware with the strategies opted by your competitors to beat you up. You can assure to know all the strategies and by intelligently manipulating the same you can easily make great fortune for your business.

If you are looking to identify and recruit an indirect sales partner for your export market, contact Qupact International http://www.qupact.com

5 Tips for Effective Channel Development

From dealing with conflict between competing channels to implementing fair pricing policies, in the world of the international channel manager, there is never a dull moment. With ever-increasing complexity in the relationships that suppliers have with their various channel partners, it is often difficult to establish rules and practices that can be applied universally.

Having said this, there are some fundamentals that never change and 5 of the most common pitfalls that we've encountered in 25 years of developing sales through channels are as follows.

Effective Channel Development Tip 1 - expect the channel to take a business risk that you would not be prepared to take - many suppliers feel the channel should be prepared to takes risks (carrying inventory, extending warranty, providing customer credit, for example) that the it would not be prepared to take in that market. If it's not an acceptable business risk for you, the chances are, it's a bad choice for your channel partner as well.

Effective Channel Development Tip 2 - Remember that the end-customers are the channel's, not yours. The reason you're using the channel in the first place is because it has relationships with your target customers. The day you damage the channel's relationship with its end-customer or try to take it over, is the day the channel stops trusting you as a supplier.

Effective Channel Development Tip 3 - Maximise face-time - in the electronically-connected world in which we live, it's easy to replace face-time with conference calls, eLearning, eMail and social-media messaging. But people are still people and the especially where there are language and cultural barriers, the importance of meeting people and braking bread with your partners has never been greater.

Effective Channel Development Tip 4 - Know the people in the partner company that succeed by selling your products. It's not enough to deal with the senior management; make sure you understand which people in the channel get a success when your products or services sell. Then build relationships with them. They're the individuals that will make or break your business in the long-run

Effective Channel Development Tip 5 - Demonstrate unswerving loyalty - like any partnership, a channel relationship depends hugely on the trust that exists between the two people responsible for its day-to-day functioning. Break that trust once and it's almost impossible to rebuild. So, don't make promises your organisation can't keep and never let the channel find out about your plans for its market from a third party.

All of these are common-sense, but we are constantly amazed at the number of times exporters infringe or ignore the basics. For more information visit http://www.qupact.com/