Picture the scene. You have lined up a meeting with a potential new distributor in an export market. You feel confident that you have a great sales opportunity and hope that you can sign this partner up as your local sales presence and grow the business.
The question is: Have you anticipated the questions the new distributor will ask you when you get there?
Channel development is a two-way process where both the manufacturer and reseller (distributor, agent, etc.) share the same vision for achieving sales and market penetration. Many companies fail to put themselves in the shoes of the channel partner and this can lead to a disconnect, possibly conflict down the road and nearly always sales underachievement. Before you start the process of channel recruitment, therefore, get prepared to answer the following questions which typically arise in most channel discussions:
- Tell me about your company, history and vision for the future?
The best channel partners want a partnership, rather than simply a buy/resell relationship. Your company history, progress and vision for the future will provide confidence that you are somebody they can invest their time and energy into working with for the longer term. If channel development is a key priority for you, consider investing in an impressive video or revamped presentation that will leave a lasting impression.
- How much demand exists for the product?
While you expect the local partner to access local sales opportunities, your obligation is to understand or at least provide an educated calculation of the overall market size and potential of your products. Not knowing this may undermine your credibility so invest in market research if necessary.
- Who is the competition and why are you better?
If you cannot answer this question then how can you expect a local sales partner to be successful? After all, you are the expert on your product and professional distributors and resellers will always want to know that your products and services have advantages in the marketplace. If you haven’t already done so, invest in market research in your target export markets (remember different competition may exist from one market to another) before you start recruiting sales partners.
- What are the most important segments or applications I should target?
Most companies have several target segments and applications and when you look at international markets each of these segments and applications can be of greater or lesser importance. For example, Germany has a large automotive market, France has a large aerospace market, Norway has a large oil processing market, etc. Europe is not one homogenous market, so do your research and gain an understanding of the key applications locally before you meet with the potential distributor.
- Tell me about your success in other markets with other distributors?
This is a key question for any new distributor. In other words, has your distribution model worked elsewhere? If it has, great, it will provide confidence to new partners to come on board. If it hasn’t worked then you need to be equally prepared and explain, honestly, why it didn’t and how it will be more successful in their market. Don’t lie or hide the facts; you are always better off being upfront and building trust with your new partners.
- What is your long-term channel strategy?
Professional channel partners want a partnership and understand that it can take a few years for real sales potential to be achieved. They will want to know what your overall channel strategy is, how many partners you intend to recruit, and how you intend to manage more than one partner in the same market should that arise. These are very practical questions for any new distributor and vague or unanswered questions will only undermine their confidence in signing up with you.
- What level of resources do you expect from me?
Every manufacturer would like to believe that export sales partners provide an almost full-time sales presence for them in the market. The reality is very different however. Most distributors and indirect sales organisations have multiple product lines and share their time among all of them. It is more realistic therefore that a local partner allocates X% of one sales person’s time or Y number of days per month to your products. Other resource questions include (a) local marketing and promotion, (b) stocking/inventory and (c) customer service. Often the percentage margin/markup earned by the distributor can be linked to the level of local resources they need to invest so defining the (ideal) role and level of resources you expect from the new partner before you engage with them is always a good idea.
- What support will I receive?
The converse of the previous question: Partners will always ask about marketing, training, local visits, technical support, etc. If pricing is a key negotiation issue be prepared to emphasise the high level of support you will provide to the partner in the marketplace.
- What sales should I realistically expect in the next 12-24 months from your products?
The million Euro question! Obviously, you want mega sales in a really short timeframe but is this realistic? Equally, you do not want the partner to 100% to dictate the sales objectives for your products in the local market – if they do you will not know if they are low or high and you, in turn, may make unrealistic sales forecasts. The bottom line is that this is a question where you need to have an educated answer and contribute to a mutually agreed sales target with your new partner.
- Do you have a contract that I can review?
Every professional sales partner will ask for a contract to review before adopting your product line. When properly prepared, contracts are of benefit to both the manufacturer and reseller and outline key issues such as territory definition, business terms, termination clauses, confidentiality, etc.
If you would like to speak to a member of the IMS Marketing team, please contact us on 091 739 450.