A case study on developing a third party reseller channel strategy
This company had for years operated through distribution channels but had not effectively developed a strategy for this. Many people within the client’s operation saw distributors as competitors and frequently ‘stole’ business from them, thus providing a disincentive for the distributor from working with the client. The client’s competitors were on the other hand building strong relationships with a range of channels enhancing their business to the detriment of the clients.
More than 150 companies or branches professed to be a Distributor or Reseller for this company. In truth many had been dormant for years and the more active ones carried limited stocks and ordered on a back-to-back basis. Because of this coverage, many resellers overlapped geographically with the consequence that over time few prospects or customers were referred to the distributor channel further exacerbating the poor relationship between the client and their distribution channels. The solution lay in the proposition that the client had to become more important to their reseller channels and these channels had to become more important to the client.
The solution devised was the creation of a small group of ‘Key Distributors’ that provided not only geographical coverage but could also cover the range of products manufactured by the client. These Key Distributors came from both existing distributors who were willing to put the investment in and the development of businesses, entirely new to the client. Each key distributor had to meet certain criteria a summary of which is given below:
- Technical Competence
- Ability to add value through product or market knowledge
- External Sales Force
- Need or desire to be proactive
- Financially sound
- Willingness to hold stock suited to local customer requirements
Many changes had to be made to the way the client worked, which included:
- Creation of client sales team to handle the Key Distributors
- Proactive management of leads and referrals
- ‘Hearts and Minds’ training of internal personnel to look upon distribution channels as part of the team
- Protection of distributor’s customers from poaching by other sales teams
- Open book policy
The client’s sales team, that was set up to look after these Key Distributors, were instructed to visit a minimum of two times per month to cover Management issues on one visit and to carry out joint visits with Distributor personnel on the other. In this way monitoring of stock and training of personnel could be carried out.
The issue of referrals was also very important to Key Distributors. In order to obtain a simple but consistent approach to this a spreadsheet was implemented that identified stock carried and (geographic) areas allocated. In this way any internal personnel could very quickly advise customers who their nearest Key Distributors were. Once this was done details were entered on the clients CRM system to ‘ring fence’ the customer for that particular Key Distributor.
Despite initial teething problems, in particular caused by the rejection of or non-adherence to the new strategy by internal staff, the approach worked. In the first year sales through direct distribution channels increased by 14% against a general distribution market decrease of 10%. In one noteworthy case, sales increased by approximately 80% in the first year and 45% in the second year.