Building Synergy Between Distributors and Manufacturers
Updated: Sep 18, 2020
Within the building products industry, the goal of every player in the multistep distribution system is essentially the same: to increase sales, lower costs and increase profitability. Often, however, players lose sight of this end game alignment or aren’t properly synced to help each other grow, meet customer demand and continuously optimize the costs of doing business. Understanding the responsibilities of all facets of the manufacturer – distributor equation is critical to developing a long term synergistic relationship.
The responsibilities for a mutually beneficial arrangement begin with the manufacturer who starts the process by creating a quality product that meets the technical and use case needs of a customer. Marketing on both sides is made significantly easier by setting a strong foundation with an innovative product that solves a problem. Establishing a fair pricing structure that is in-line with market conditions helps provide an underlying base for marketing to begin. The brand content and marketing materials created by the manufacturer further build this foundation. Quality information that can easily be repurposed while maintaining the message is a crucial element. Once this foundation is set, the producer should aid in the marketing effort with properly funded co-op programs and marketing support to downstream customers.
The manufacturer-created foundation is set to enable and empower the distributor to be able to run with their side of the equation – to sell products in the highest volume with the lowest costs possible. On the distributor side, this begins with buying in large enough bulk to ensure proper margins and properly breaking down the bulk to ship to market. Managing this process well to keep constant inventory is a responsibility that distributors must accept with guaranteed accuracy, ensuring that end customers are able to purchase without delay. The bulk of marketing and promotion of the product is also in the hands of the distributor. The management of this advertising must be done in a way to best serve the manufacturer whose products are being sold. The most important aspect of the distributor relationship, however, is the final ownership of the relationship with the product’s end-user. Not only is closing the short term sale essential, but also equally important is planning for long term customer management and satisfaction.
Responsibilities on both sides of the equation are often passed back and forth between manufacturers and distributors without either side taking ownership. This diffusion of responsibility tends to accelerate in the areas of customer outreach and marketing. Understanding who does the bulk of the outreach, who supports it and how, and having a good collaborative process can greatly help smooth the relationship and ensure that both sides gain from the partnership. One way to increase the likelihood of a positive relationship is for both sides to supplement their sales force outreach with a multichannel marketing solution. By using data-driven, multi-touch communication through a variety of channels, brands and distributors can gain support while keeping marketing costs in check.
In an economic environment of smaller margins, squeezed sales forces, increasing technology, and company mergers, the acceptance of ownership of these responsibilities will often reduce profits in the short run, making it a difficult proposition. However, without both sides holding up their end of the bargain, long term profits suffer significantly. When all elements of the equation work together, long-run sales will grow and costs will decrease, providing a greatly increased bottom line for all parties across the spectrum.
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