Ensure Your Future Market Position

  • Gather the right data: Get information on brand positions by distributor, their market orientation, chain affiliation, etc. And study the profiles of major players.
  • Develop organizational discipline: Develop a data gathering, planning, system and implementation discipline to gather the right information on branches and roll it up for strategic planning purposes.
  • Develop scenario plans: Develop a vision of your future distribution mix under different sets of major assumptions and major industry events. Choose distribution to align your brand(s) with the right distribution to reach desired market segments.
  • Make Your Bets: Document, Review and Communicate your plans
  • Coordinate, Monitor, And adjust plans as you make your plays

12 Best Practices of Distribution Planning

The expert companies who have dealt with these issues have 12 best practices which give them leading competitive capability:

  1. Their top management is committed to sound distribution strategy and planning.
  2. They have a senior manager dedicated to the job of distribution planning and management.
  3. They have grasped the importance of chains to a distribution portfolio.
  4. They understand chain management expectations of suppliers.
  5. They understand the concept of distribution intensity: number of required authorizations in a territory to serve the demand.
  6. They balance their mix of distribution to cover market segments requiring different intensity as well as take advantage of multiple location opportunities with chains. They understand the three basic distribution strategies: exclusive, selective and intensive, and when to use them.
  1. They understand the related concepts of coverage, penetration and market share.
  2. They know their strategic moves: Maintain, Penetrate, Grow, Terminate.
  3. They have a disciplined distribution planning process.
  4. They have a distribution planning system which helps identify the market size, distributor volume by brand, distributor volume by market segment and helps process what-if scenarios with different distributor portfolios.
  5. They create trade area game plans with 1 or 2 conditional options to the base plan.
  6. They organize to coordinate the game plans: a. To optimize total market share and b. To achieve maximum impact with coordinated solicitation, authorization and termination moves.

Industrial, Electrical and other Construction Products with many skus and many users that generate frequent, small transactions ($100-$1000 average) require distributors that carry an assortment of products that a tradesman wants to buy from one source. With a mainland land mass of 2.7 times that of Europe, it takes a lot of distributors to serve the North American market.

There are two challenges with choosing distribution:

  1. Consolidation is causing manufacturers to choose up sides with distribution. You need to identify possible scenarios and response plans. Or pre-emptive plans
  2. Channel Subsegments. Distribution channels may have subdivided into specialties or at least strong tendencies to specialize, and manufacturer brands within a product category have arisen to fill those specialties. Spotting these trends is crucial to choosing the right distribution as well as making intelligent acquisitions so you can achieve marketing and sales synergies.

The best manufacturers want more exclusive representation from distributors. They want the best distributors to cover the market in each trading area. It’s not just strong product lines that enable them to ask. It’s a sound policy of distribution planning backed up with information about market size, share, and the volume by brand of distributors in a trading area. Manufacturers can then make solid decisions they can back up. Decisions that make sure they’ll be with the players for the future. Distribution Planning helps you do this.

How Distributors Choose Manufacturers

Explanation

Do the markets I serve accept this brand for breadth, quality, and value? Do they appeal to the market segments that are most important to me?

Explanation

For certain product categories, does the manufacturer belong to my marketing group?

Explanation

If I commit to them, do they have staying power?

Explanation

Is this business important in the corporate portfolio and worthy of investment?

Is there a record of steady R&D, facilities, service and marketing investment?

Explanation

Do they have a sound logic for authorizing distributors by brand?

Do they have a reputation for and history of applying it equitably?

Explanation

Do they provide adequate resources to create demand and develop business in my trading area?

  • Rebate and co-op programs
  • Local representation (& specification support)
  • Competitive Pricing Support
  • Responsive service
  • Training
  • Promotional Materials & Programs

Diagnose Your Distribution Position

Every manufacturer wants market share. How you get it is another matter. The time honored technique of measuring coverage and penetration is useful. It will tell you if you have too many distributors or too few by territory. It will also tell you if you’re in the right chains regionally and nationally. That’s a baseling. The real magic is in identifying the subtle segments of the channel where your brands need to play to reach your desired end market segments.

That takes a disciplined process of identifying brand positions and market segment mix by distributor location and rolling that up into chain summaries as well. There is no substitute for this strategic information asset. The process detailed next is how to do it.

Twelve Step Success Process

  • Develop your Distribution Planning System and Discipline. Get top management buy-in, support, and firm communication to the sales management that you are serious about the effort. Consider compensating reps for the information as part of their commission structure.
  • Develop  distribution authorization and termination policies and processes
  • Set  up  a distribution planning council that reviews all authorization and termination decisions
  • Educate field sales management in the planning discipline, distribute distributor and market size data tools.
  • Field sales gathers intelligence and runs workshops to develop competitive brand volume estimates and market segment mix by location.
  • Field sales managers evaluate current share and chain positions, adjust estimates, submit to headquarters.
  • Headquarters benchmarks competitive data, notes inconsistencies in data compilations against known estimates, notes “macro” share positions by territory and chain.
  • Field adjusts data, holds workshops to categorize distributors for new authorizations, penetration, termination or aggressive growth.
  • Field sales generates optional distribution plans and submits to headquarters.
  • Regional and National Sales Management review plans, give feedback for field managers to adjust plans. Final goals set.
  • Reorganize  to implement your plan
  • Measure success against goals and adjust plans in periodic review meetings