Companies explore opportunities to sell overseas for a variety of reasons. These are led by risk mitigation, demand generation, to save costs and higher profit margins.
This article will help you gain crucial insights about executing a successful distribution module in a foreign country. You will find valuable tips on acquiring new distributors and how to establish a successful and sustainable relationship. This article will also help you avoid some of the crucial pitfalls and errors.
Acquiring new distributors
You will be able to find leads through a variety of channels. Trade shows allow you to showcase your product or service and attract potential distributors. You can also find leads through the internet. Visiting the competition’s website and social media channels can be quite insightful. One can also hire the services of local consultancies.
However, in my opinion, this is the easy part what you must focus on is filtering the right candidate.
1. Write an ideal profile – Many companies find distributors basis on short term needs. For some in-fact anyone ready to place that initial order becomes the right candidate. This is not a very healthy approach. You must also place importance to the culture fit and style of working. Write a profile that consists of the hard requirements in terms of capital, manpower, experience but also makes sure that you mention the softer points. Is it a family-run organisation, mostly it would be. Age of the decision-maker, communication ability, openness to new ideas, ability to grasp new technology is very important. In this age and time, I have come across leads who simply would not agree to use the most basic of CRM or Data Sharing modules.
2. Meet a few – Meet at least 5 to 8 potential leads before deciding. Try not to work on a first come first serve basis. The experience will tell you that this could be the first mistake you would do. This is not the step where you want to save time. Because in the long term if you end up with the wrong partner the time loss would be too high including the loss of revenue and brand perception
3. Written agreement – Try to form a practical relationship that is aimed at mutual benefit. The agreement should chart out responsibilities and expectation along with clean exit terms.
4. Exclusive relation – You will also have to check if the potential distributor is engaged with a competitors product. Try your best to avoid such a prospect. To set up a successful distribution exercise you will need all the help you can muster from your local partner. For your mutual success, important operational and commercial data will have to be shared, therefore, it may not be a very good idea to have your distributor also dealing with the competitor’s products.
The distributor may ask in return for an exclusive relationship too. This where you will have to take a learned decision. If you believe that the country is too large for one distributor then marking exclusive regions could be a good idea. It is only fair to have mutual terms.
Meet team members – Paying a visit to the potential distributor’s office is always a good idea. Many a time the real decisions could be in the hands of a senior manager who enjoys the trust of the owner. Meeting team members and reading their demeanour will give you a better idea of things to come.
Rules of Engagement
Now that you have acquired a distributor you need to set up clear rules of engagement. To avoid miscommunication have a written policy in place. Some of the key points to mention could be as follows
- Define business goal – Whether it is a certain turnover number or a volume that you wish to achieve, have your distributor come on board. These goals should be based on your capacity to deliver, market conditions and such credible data.
- Pricing – Pricing policy should be well defined. Who will control the end buyer price. What should be the distributor’s margin. These points should be discussed and agreed upon with much clarity. Try to base the discussion on data and market conditions rather than sounding arbitrary.
- After-sales service – This is the backbone of your relation. Do not undermine it. Have a very clear role and commercial definition in place around the responsibilities of providing after-sales service.
- Data Sharing – Have a clear understanding of what data is to be shared and placed in common domains. Figures around sales, lead bank and such topics should be covered. One thing I would like to add here is that visit the data regularly and find actionable insights. Many organisations although build data processes but seldom visit to benefit from it.
- Marketing – Ideally the marketing function should be controlled by the brand owners. However, if you have to depend on the distributor for marketing ensure you have a logo and brand procedure rule book.
- Investment – Many companies shy away from investing in the partnership and this could be a great mistake. Assign some budgets, to be safe you can deploy two tactics, the first that you peg your investment to the revenue generated and second you can invest in the form of a credit note to purchase your products. Using credit note ensures that the investment pulls the revenue further. Companies fail to build credible partnership if they fail to invest, you need a concrete gesture to extract seriousness from the other side.
- Review meetings – Monthly review meetings on a video call with a preset agenda should be held without fail. Ensure that the conversation is data and goal-driven. Try to personally visit once every six months or at least once a year, this is very important.
- Interpersonal relations – Please remember there are humans on the other side, a birthday wish, couriering a gift on a wedding and such gestures will go a long way. Build a strong relationship aided by emotional cues.
In conclusion, successful relations are build by choosing the right partner based not only on technical suitability but also find someone with a culture fit. The intent is very important, enter with the idea of building something profitable, sustainable and long-lasting. Focus on mutual development and long term goals. Use your global experience and knowledge to empower your distributors. Seek feedback and learn, respect local culture and norms.
If you enter the relationship with the idea of empowering and enriching all those who are associate you will find yourself in a long-lasting profitable partnership.