In my research for Innovate to Dominate, the 12th edition in NAW’s Facing the Forces of Change® series that will be published in November, I had many conversations with distributors about what suppliers will want from distributors in the digital age. I also asked suppliers. For the most part, I found that suppliers want what they have always wanted — coverage, clout and a return on channel compensation. These findings are disappointing, especially since both distributors and suppliers are facing many unknowns and challenges driven by digital transformation and disruption, and there is an opportunity to build on the traditional partnership for mutual benefit.
In the interest of kick-starting a conversation, I share top ideas from my best interviews with distributors and suppliers in this post. These ideas are not an exact answer, but rather themes that can be developed through analysis, innovation and an active dialog. First though, it’s worthwhile to confirm what they have always wanted as a foundation for mutual understanding and for exploring the relative worth of new offerings. The three traditional expectations of suppliers for distributors are
- Coverage. All things being equal, suppliers value distributors that can reach large swaths of the customers that are essential for executing the supplier’s share and growth objectives.
- Clout. Suppliers want to know if a distributor has the power to influence customer decisions around product and brand, and they value distributors that are loyal to their brand.
- Return on channel compensation. Suppliers value go-to-market options that generate a higher return on channel compensation (for example, discounts, rebates, payments, etc.) relative to other options (for example, distributor versus distributor, distributor versus virtual marketplace, etc.)
It is unlikely that these requirements will go away as important considerations when a supplier evaluates one distributor versus another or distribution versus disruptive players. They represent sound business considerations that go to achieving financial and marketplace objectives. But, as distributors innovate their business and develop new capabilities, new criteria may emerge — offerings that go to a supplier’s desire to offset its weaknesses in the digital age, or ones that position a distributor as a better partner for the future.
Our research did not yield a hard-and-fast answer to what suppliers will want from distributors in the future, but we have identified three ideas that are worth exploring. In fact, we suspect that uncertainty around supplier preferences is an advantage for distributors who can act first and define the new criteria before the die is cast. Our three ideas are:
- Foresight. Manufacturers, like distributors, are uncertain about what the future holds as the digital age arrives. Distributors (and their leaders) that can put forth a compelling vision of the future — as told through storytelling on social media and in person at real-world interactions — can position themselves as partners for innovation and transformation.
- Customer experience management. Suppliers may (or may not) embrace virtual marketplaces, but they are confident that virtual marketplaces will not be their partners for maintaining their brand power. In business markets, brands are built through experiences, and distributors have the customer relationships and feet-on-the-street to manage customer experiences as brand advocates for suppliers.
- Data mastery. In the digital age, the defining characteristic of every value chain and customer experience is the ability to collect and act on data to drive productivity, satisfaction and loyalty. Every distributor should position itself as a master of data, not just for their profitability, but to strengthen their ability to deliver suppliers with differentiated and highly efficient market access.
We will explore these emerging distributor competencies and many more (and in great depth) in NAW’s November release of Innovate to Dominate, the 12th edition in the Facing the Forces of Change® series. If you read this post and have different ideas or experiences, or questions you want to be answered, please reach out to me at firstname.lastname@example.org. If you’d like to be among the first to preorder the 2019 report, submit this form.