Manufacturers, importers, and wholesalers who do not or cannot justify creating their own distribution points traditionally rely on resellers to interact with end customers. Of course, the Internet offers an alternative path to market, but that does not overcome logistical problems, credit control, and Internet marketing expertise, regardless of the hype advertised by hosting and e-commerce services. (That topic is beyond the scope of this particular article.)
Resellers can offer some significant financial benefits, although reseller margins are likely to be on the order of 30% or more. A bigger problem is the potential loss of control of just about everything about your brands, including market positioning, customer perceptions, and pricing.
Here are some examples
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An importer of branded products constantly described his business as a “wholesaler.” Its flagship brand was sold to the public through a well-known chain of specialty stores for several years with remarkable success. One component of our advice was to develop a new website that not only clearly identified the brand’s features and benefits, but also set out the “recommended” retail prices for each major product. The goal was to create stronger brand positioning and set price expectations in the minds of end users, facilitating favorable comparison before purchase, rather than relying entirely on the advice of the reseller. taking direct control of the marketing was rejected, despite our warning that the reseller might look to take over the import and distribution of the brand. It will not surprise you to learn that this is exactly what happened.
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The same importer also rejected our advice to put serious effort into building a strong brand identity for his own product range that would offer similar product benefits at lower prices and one that could be distributed through different resellers and / or direct to end-users via the Internet. It was not the first or last time we suggested that “if there is going to be a competitor, let it be you.”
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A leading manufacturer of rural products distributed a wide range of products through resellers, the latter also selling their competitors’ products through the same outlets. The company accepted our advice to significantly improve the brand identity through a combination of advertising, commercial promotion and, in particular, merchandising at the point of sale.
A significant finding was that the packaging of various products was inadequate, causing considerable inconvenience. The competitor did a significantly better job.
We also recommend that product identification and selection is much easier for end users. At no cost to the reseller, custom-made displays with product selection guides were developed and installed in the reseller’s showrooms.
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We recommended and received approval to run a “mystery shopper” campaign for a major camera brand. The results were significant, namely that highly qualified sales staff at reseller outlets invariably used our customers’ products, but did not consistently recommend or sell them to end customers. The reasons became obvious, namely that retail profit margins, commissions, business promotions, and other incentives outweighed brand considerations.
Go beyond the simple facts
Management will have their own views on what is wrong and probably some pretty fixed ideas on how to proceed. Often there will be resistance from certain sectors to any change. The difficult part for a consultant is convincing management that internal navel observation, no matter how thorough, may not in itself identify potentially important problems and solutions, especially if the latter seem somehow radical.
It is likely that no two scenarios are identical. However, the evaluation process is remarkably similar, even if the recommended solutions differ. The company of this author ASPAC Consulting deploys proven techniques that usually include the following stages:
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Review of any customer research / studies, if ever conducted
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Sales analysis: not just the usual accounting stuff, but looking for patterns in buying behavior for a year or so. This can be very indicative of any adverse action on the part of individual resellers, but also of any emerging trends.
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Discussions with a variety of client personnel, not just management. It should come as no surprise that the staff in the ordering department, the warehouse, and the loading dock have a very good understanding of what works, what doesn’t, and how the company’s customers, its products and services think. We offer guarantees that nothing adverse will be attributed to the person providing the information.
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External discussion with a selection of resellers, again at different levels to include both front-line staff and management, covering similar topics above. The people interviewed will tell us, in confidence, things that they would never say to a real representative of the company.
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Elaboration of “strategic options” summarizing findings and presenting some alternative solutions and probable results that will affect the different parts of the distribution chain.
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Scope of proposed work, if applicable
Reasons to consider the change
Implicit in the above will be the need to take a fresh, unbiased view of the entire marketing process from start to finish. It would be fair to say that consultants in general are not welcome in many companies and some of that attitude is deserved. However, the best ones provide new insights and solutions that meet the needs of the business and its customers.
Just one more thought on selecting a consultant – it will often be the mindset of the board and / or management on the selection criteria. If the company is of a significant size, it may be preferable to use only professional “high-level city” companies. To be frank, it won’t always be the right decision. A consultant with extensive category experience may be a better option than costly hired MBAs who may not have the same street or technical expertise to get the real story from stakeholders.