Increasingly distributors are replacing direct salesforces in industrial marketing. They cost less, they absolve the manufacturer from the burdens of credit control and they provide a wide geographical spread of stocking points. But in appointing distributors the manufacturer loses control of the sharp end where the sale takes place. How can the principal identify weaknesses in a distribution network and what can be done about them?
The first indication of a weak distributor could be a fall in his sales performance. The manufacturer has the advantage of being able to compare the sales of each distributor and plot all their performances over time. A weak distributor can be spotted as one whose sales performance is out shone by others.
Of course relative sales performance may not tell the whole story. Distributors live in a competitive environment and some may suffer exceptional competition from other firms in their area. Nevertheless the warning bells will be sounded, and the principal will be able to discuss the problem with the distributor in good time.
A second indicator of a weak distributor could be the growth of complaints which find their way back to the principal from customers. The nature of the complaints could be significant. Are they concerned with lack of stock, difficulty in obtaining sales service, poor back up, high prices, etc? The complaints can be logged and become an important discussion point for resolving with the distributor.
A third means of assessing the strengths and weaknesses of distributors is to pose as a customer. The Market Research Society sanctions mystery shopping as long as it is carried out within its code of conduct. The depth of investigation which can be undertaken as a supposed buyer can vary from the odd simple telephone call to a nationwide programme of organised visits.
Certainly the principal should telephone distributors from time to time to see how they react to a general enquiry. Things to look for are the speed and efficiency with which the telephone is answered and the ability of the receptionist to direct the call to someone who can handle it. However, if a larger study is to be undertaken, it must be coordinated and carried out in a professional and unbiased way. It will therefore require the services of a team of interviewers who can measure the response of the distributor at each stage of the buying process. The important things to look out for are italicised below.
- Reception. This is most important since it is the first contact with the potential buyer. It is an area which tends to be handled badly, with inefficient receptionists who garble the name of the company and show conspicuous indifference to satisfying what may be an enquiry from a customer.
- The sales person's initial approach. The prospective buyer is eventually routed to a sales person who should attempt to establish needs. In a recent mystery shop we carried out, the interviewers were told to enter the distributors and record the way in which they were approached by sales people. In one instance it became clear that even after three-quarters of an hour, the sales staff were not going to turn the conversation to business. The potential buyer might be there still if he hadn't finally taken the initiative and stated the nature of his enquiry.
- Describing the product. Sales people are most at home when they can describe their products to a customer. However, it is not unusual for them to concentrate on product features at the expense of customer benefits.
- Handling the competition. In most markets a customer can be expected to shop around. It is revealing, therefore, in mystery shop to ask the sales person to justify the company’s products. In a commercial vehicle dealer study where interviewers posed as potential buyers, one salesman was so flummoxed by the question, "Why should I buy your vehicle rather than a competitor's?" that he confessed he could not think of an answer!
- Getting hold of the product. When a customer decides on the product, quite probably it will be wanted straightaway. Availability is therefore important. If the distributor does not have products in stock or cannot get hold of them quickly, the sale may be lost.
- Providing a demonstration. Just as distributors' sales staff can give an acceptable description of their products, so too they are quite good at demonstrations. In the case of office equipment distributors, a demonstration is nearly always part of the standard sales routine. However, in the vehicle research referred to earlier, one-third of the distributors had to be prompted to offer a demonstration.
- Offering discounts. Distributors frequently conflict with their principals about the high price of the products they sell. Yet in a recent survey on office equipment a quarter of all distributors offered a discount without being asked. A further half made the same offer after being asked. It seemed that distributors were all too eager to use price as the main sales weapon.
- Following up the sale. Once the potential customer has left the distributor's premises, it is important that the enquiry is followed up either personally or in writing with a quotation. In the vehicle dealer study only a half of the "customers" were sent a written quotation even though all had asked for one.
Mystery shopping can expose weaknesses in the many stages of the distributors' selling procedure. It may be a valuable lesson for the principal to extend the research to include some distributors outside the company's network.
The golden rule for helping a distributor improve its operation is "explain and train". Before raising criticisms of the distributor's business, however, the principal should attempt to understand the nuances of each locality. There may well be causes which are temporary or peculiar to a distributor, and these must be taken into account in any recommended changes.
A common weakness among distributors' sales staff is their failure to discover a customer's needs and relate the benefits of products to them. The sales person may fail to probe to find what the customer wants; may concentrate only on selling what the company has to offer. It may be thought easier to sell on price rather than push the benefits. The sales person needs training but this may not be within the facility of a small distributor. The principal should therefore assume the responsibility for both the sales product training and showing how to approach and convert prospects.
The principal may wish to manipulate the performance of the distributors' sales people by offering them sales incentives. Distributors have mixed views on principals' incentives. On the one hand they provide a boost to the sales staff's salary and so allow the distributor to recruit a higher class of personnel. On the other the distributor who allows a principal to make a payment to sales staff must concede a loss of control.
The installation of systems and procedures at dealers can help eliminate some of the weaknesses. For example, if it is important that a follow up takes place after the initial sales call or demonstration, it would not be difficult to set up a system which reminds the sales of this next step.
Systems can be devised for every part of the sales sequence. For example, a rule could be made that the telephone is answered before it rings more than three times; another might ensure that a customer is not kept waiting for more than five minutes in the showroom. Restrictions could be placed on the offering of discounts.
Of course all procedures and rules need policing if they are to be continuously observed. Further, it must be recognised that within a small distributor, overt bureaucracy is unacceptable and often unnecessary. So any procedures suggested to the distributors should be simple. They should be sold-in as ways of helping the distributor improve performance. A heavy hand is unlikely to work.