Tools for Growth, Vehicles for Retention or Transference of Margin?

Distributor Programs and Co-op Strategies

Since the late ‘60’s, suppliers have used rebate programs as marketing tools.  Initially the goal was to increase market share.  The programs then evolved to recognizing distributor support.  Today most programs provide distributors with their profitability … but is a rebate program the same as a distributor program?

Distributor Programs

Distributor programs, by definition, are strategies that position manufacturers to their channel.  Hence, these endeavors should be holistic – providing supporting distributors with an array of services that engender a stronger, more profitable relationship with the manufacturer.

To drive performance, distributor programs need to espouse the strategic direction of the manufacturer while emphasizing those issues that are important to its channel partners.  By working together, increased revenue and profitability can be attained.

6 Steps to Developing a Distributor Program

To effectively develop a distributor program, and to keep it fresh, these 6 steps need to be taken (or periodically reviewed)

1.       Analyze your channel base to identify where the business is coming from (large distributors, independents, market segment, distributor size, regionality)

2.       Talk to distributors and your sales organization– Conduct a survey and/or ask what is important to them (service, training, marketing support, rebate, credits, e-commerce/EDI)?

3.       Review competitive programs and ask distributors what they like, and don’t like, about the program

4.       Identify what your goals are

5.       Structure the program, develop the infrastructure, determine your costs and project an ROI.

6.       Communicate to your sales force and your customers

While this may appear easy, most manufacturers make the mistake of simplifying a program too much (i.e. make it a rebate program) and listen to their lawyers too much (make the program the same for everyone).

Effective distributor programs consider integrating the following:

·           Historical sales performance

·           Local Market Share

·           Desired sales growth

·           Training utilization

·           End-user Support

·           Marketing Support

·           Co-op Funding Support and/or Market Development Funds

·           Proprietary Promotional Support

·           Service Commitments

·           Cash & Non-Cash Rewards for Management and Staff

·           Recognition

In most instances, a “one size fits all” approach limits a manufacturer’s ability to motivate its channel.  The best programs segment distribution by market segment and/or by volume.  It is important that your program be viewed as “attainable” for it to be effective.

By weaving your distributor program into a comprehensive marketing tool, distributors will make a greater commitment to your company.

Most companies experience the 80/20 rule.  But do your current “20” get 80% of your support?  How could you broaden your base and increase your share, without increasing your distribution?