Delivering for Best-in-Class Wholesaler-Distributors
November 8, 2017  |  ByMark Dancer, NAW Institute for Distribution Excellence Fellow

Just as digital tools change the way that customers seek knowledge, make decisions and acquire products, so too will they change the way that manufacturers make plans to build awareness, strengthen their brands and design their channel programs and strategies. In my conversations with manufacturers, I find that their perception about the role of distributors in the marketplace and their contribution to a supplier’s sales and marketing objectives is changing … sometimes through proactive efforts and sometimes by a kind of low-level Darwinian evolution. But, the ongoing digital transformation of legacy channels, combined with new disruptive options, is changing the basic assumptions behind the long-standing manufacturer/distributor partnership.

Distributors should make sure they have a seat at the table with at least their best suppliers and help to shape the conversation in a way that leverages digital tools to strengthen the partnership and achieve improved mutual results. Below are four actions for distributors. Consider these as options and pick one or two. However, I challenge you to consider that the best path to upgrading your supplier partnerships in the digital age is to do all four, as a coordinated, well-planned initiative.

1. Know Your Supplier’s Distribution Policy and Digital Goals

Typically, manufacturers define their channel programs on a continuum from open to selective to exclusive distribution. Manufacturers with open distribution may sell to all comers with minimal authorization requirements and treat distributors more as customers than partners. Exclusive relationships often assign territories to a single distributor and may expect that distributors do not carry competing brands. Selective distribution lies in the middle. The number of distributors is limited and proportional to opportunity. Distributors are treated as partners, not customers.

These definitions are just a start. Once a distributor understands a supplier’s stated distribution policy, conversations can go deep and focus on what the manufacturer wants from a partnership and what they will give in return. Digging even deeper, it’s important to understand a supplier’s digital plans and how that relates to their distribution policy and partner expectations. In the digital age, it is very important to ask if those requirements have changed, or will change, with the adoption and use of digital tools. If the supplier can’t answer these questions, that is an opportunity, not a challenge, as a distributor can offer to work with the supplier to develop new plans. The worst scenario for a distributor is to be left out, by conscious or unconscious decisions as a supplier makes its own digital plans and adjusts its distribution policies.

2. Prove Your Value Add with Data

Once a distributor understands a supplier’s distribution policy, its value add created for customers can be understood in the context of a manufacturer’s overall channel policies and objectives. In the past, suppliers relied on research, segmentations and personal relationships to understand a distributor’s value add. Digital tools offer the opportunity to prove value add through new data collected by those tools. Examples include specification assistance, customized logistics support, customer satisfaction and more. Data is collected through CRM, marketing automation and website footprints, social media engagement and so on. By proving value add, distributors can work to cement their margins and, just as important, receive provable value from suppliers in return.

3. Map Your Digital Role Across the Customer Journey

Many suppliers are engaging digital marketing agencies to map their customers’ digital journey, meaning the process and steps that a customer follows to gather information, make decisions and follow through on execution through social media, online sourcing and any other digital method. Often, manufacturers engage digital marketing agencies to map a very detailed customer journey at considerable expense. While the product delivered by these agencies can be very powerful in helping a supplier create digital marketing and sales plans, which in turn will strength their brand and customer awareness, the digital agencies may not be familiar with the digital role played by distributors and, more importantly, the role they play for their suppliers in fulfilling a customer’s desired digital touchpoints.

If the language and methods of mapping a customer journey are not familiar to you as a distributor, you must get up to speed quickly. Going further, you should inquire if your suppliers have mapped their customers’ journey, of if they have plans to. Going even further, do your own work around customer journey and share it with your suppliers. In effect, customer journey mapping is changing the way that customers are understood by suppliers and distributors, and if both partners do not develop and share their customer journey understanding, they will diverge in their interpretation of the market and the partnership will be weakened.

4. Build Relationships with Senior Leaders around Channel Innovation

It used to be true that senior leaders at manufacturers had “grown up” in the organization by working in the field with customers and distributors. As these leaders advanced, they carried that knowledge with them, ensuring that the role distributors played in helping the manufacturers achieve their sales and marketing goals was understood, valued and protected. Today, this is changing for many reasons. Executives move from one company to another and do not necessarily bring along solid distributor relationships. Acquisitions by suppliers put new executives in place at the top of organizations, again without personal knowledge of distribution. As manufacturers attempt to compete globally, senior executives push channel management down in organizations as they focus on working around the world. These reasons and perhaps many others, weaken the manufacturer/distributor partnership and put distributors at risk.

Distributors that have a strong vision about the use of digital tools as well as foresight around where the industry may be headed, can use this knowledge to build new relationships with senior executives. It would be particularly beneficial if they can position digital expertise as part of an overall understanding of digital channel transformation and how the potential for disruption, and especially mutual innovation, can improve supplier business results. The key is to offer a truly strategic point of view. Distributors can’t climb the leadership ladder to meet executives who don’t know and understand distribution with tactical messages. You must have something that can get a leader’s attention.

And, you may need to build your credibility using digital tools through blogging, videos and customer testimonials to prove your digital bona fides. It’s hard work, but to ignore the challenge and focus only on supplier resources that directly manage your business to achieve tactical goals is to surrender the battlefield. If distributors want to have a strategic relationship with suppliers, distribution leaders must be able to carry on a strategic conversation about digital trends and the opportunity to achieve new, incremental and strategic results for both parties.

Looking for Ideas and Conversations

As mentioned in previous blog posts, as a NAW Institute Fellow, I’m looking for ideas, stories and unanswered questions about how distributors can compete in the digital age, defend their turf against disruptors like Amazon and offer customers new, innovative services. If anything in this post strikes a chord with you and your business, please reach out. I would welcome a conversation. I can be reached at mark.dancer@channelvation. And, check out my just-released digital research report for NAW, CEO Insights on Innovating the Distributor for the Digital Age. I know it will spur you to take action on your digital transformation journey.

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Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer founded the Network for Channel Innovation to drive awareness, advocacy and excellence for channel innovation, and to enable an exchange of ideas between channel leaders on business transformation, technology adoption, social impact and community engagement. For more than 30 years, Mark has worked with leading companies to achieve channel excellence across a wide range of industries in developed and emerging markets.
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