Using distributors can be a key part of scaling up your sales reach. Be sure to budget the time and effort to make this tactic work for you.
Working with distributors can be a great way to expand your sales reach as you grow. This can be a very effective way to ramp up sales, especially when you look to sell internationally. It is important to have a good understanding of how best to support, motivate, and manage your distributors prior to your product launch to make sure that you get the biggest bang for your buck here.
A few myths:
- Hire them and forget them. Your distributors will require training, sales collateral, and ongoing support to be successful. Whether you have a direct sales force or a distributor, they both require the same level of sales and marketing support. In addition to this, you will likely need to plan on refresher training and customer visits with your distributors over time, as there is turnover in their sales team, but also to keep them motivated
- They will be excited to sell your new innovative product. The business team that sold you on the contract will be excited about your product and its business potential. The distributor's sales team, not so much. An unfamiliar new product takes time and effort to learn how to sell effectively. When the distributor's sales team member has a choice of selling an existing product versus a new one, everything else being equal, they are more likely to focus on what they already have confidence in selling. Consider offering cash or other incentives for early sales for a period of time. Once the distributor's sales team has some success with your product, this challenge will become less of an issue
- Distributors will be less work than a direct sales force. (See the first point in this list.) You will need to plan regular update meetings with your distributors to monitor progress and help them to succeed with your products. In the early days, you will find that you need to provide more support to your distributor's sales team as new sales people call with questions or issues. With a direct sales team, you will not have to constantly deal with the same questions and issues
- If you sign on with a big distributor, you will instantly have hundreds to thousands of sales folks selling your product. The distributor's business team will brag about the enormous size of their sales force, but in practice, the number of sales people that will actually learn and sell your product will be a fraction of that. If you are lucky, you will have a few talented sales people that will have early success with your product. They will tell their colleagues about this, and interest in selling your product will increase throughout the sales force. However, you need to make sure that you are not taken in by pronouncements of how "thousands will be selling your product every day," which just is not true
- You can count on the experience, reputation, and size of a distributor to mitigate some of your sales risk. You can never outsource risk! This is as true of sales as it is with any other risks that your business will face. You will need to work with your distributor to help mitigate the risk of poor sales. It doesn't really matter if it is your own sales force or the distributor's that is not closing sales. In both cases there is a problem that you will need to address
The number one thing that you can do to ensure a good experience with your distributors is understanding that you will be expending a significant amount of time and effort (especially in the early days of the relationship) helping them to be successful with your product or service. Whether you have a direct sales force or not, you will still need to plan on producing teaching materials and conducting training sessions so that your distributor's sales force has a good understanding of your product and the confidence to sell it successfully. You will also need to provide them with a clear point of contact in your company that will handle all questions, concerns, and technical issues in a timely manner (recommend that this be the product manager, not one of your sales team members).
You will also need to plan to travel with your distributors on a regular basis to ensure that you are meeting their customers. This will allow you to get critical customer feedback and will motivate the distributor through demonstration of your commitment to support them. Traveling with your distributors also allows you to further strengthen your connection with them and show them that you are not only actively managing them, but are open to helping them to be more successful. In time, a supported distributor will put increasingly more effort into generating the leads and winning the greater numbers of sales that you expect.
Not all products are ideal for distributor-based sales. If your product is truly "game changing" and requires a very technical sale, you will likely be better off with a direct sales force, at least in the early days after your product launches. Once you have established enough sales with your direct team so that you have a good understanding of your ideal customer demographics, the most successful tactics for discovering and reaching them, and the value proposition that has proven to be most effective, you are ready to consider bringing on a distributor to augment your sales efforts.
There can be many other advantages of bringing in a distributor other than expanded sales reach. Keep the following in mind during your negotiations with prospective distributors.
- Forward stocking locations. This can be a particularly valuable asset to have when you start selling overseas. Having your product warehoused in the same country where it is sold will ensure timely delivery to your customers without the unpredictability and delays caused by getting through customs. Being able to maintain stock at your distributor's overseas warehouse will also allow you to take advantage of cheaper (and slower) shipping options, like having your product delivered to them by ship rather than by air
- Shipping and handling services. Distributors, especially larger ones, will be able to use their size and expertise to significantly reduce the costs of shipping and handling. Your distributor already has the infrastructure and expertise in place for this. Better to take advantage of this in the early days and save your money for business expansion activities beyond customer fulfillment
- Marketing and lead generation services. Many distributors have their own Marketing Communications teams. They can promote your products in their own marketing literature, at tradeshows, or they can generate literature that has been translated for use with international customers
- Localized promotions. A good distributor knows the regional and cultural cues that will be most effective for your customers in their territories. Work closely with your distributor to prepare custom promotions that are designed to appeal to their customers. Discount and loyalty programs that are prepared for local and regional audiences are always more effective than a "one-size-fits-all" global campaign
Picture Credit: © Svidenovic | Dreamstime Stock Photos & Stock Free Images
This article was originally published in the blog hosted by UpStart Life Sciences.
Andrew L. Johnson, Ph.D.
Andrew L. Johnson, Ph.D. is the founder and president of UpStart Life Sciences, a weekly blog and consulting firm dedicated to the challenges and opportunities facing entrepreneurs and investors in the process of starting and growing new companies in the life sciences.
Dr. Johnson has over 20 years of product commercialization experience (>30 product launches in proteomics, genomics, cell biology and diagnostics). As a business leader and Cell & Molecular biologist, Dr. Johnson has a unique understanding and expertise in successfully addressing the business development and technical issues that both emerging and established companies face as they go to market and grow.