Manufacturers, importers and wholesalers that do not or cannot justify creating their own distribution outlets traditionally rely upon resellers to interact with the end-customers. Of course, the Internet does offer an alternative path to market, but that does not overcome logistical problems, credit control and expertise in Internet-marketing regardless of the blurb peddled by hosting and e-commerce services. (That subject is beyond the scope of this particular article).
Resellers may offer some significant financial benefits, even though reseller margins are likely to be in the order of 30% or more. A bigger issue is the potential loss of control of virtually everything related to your brands, including market positioning, customer perceptions and pricing
Here are a few examples
An importer of name-brand products consistently described his business as a “wholesaler.” His major brand was sold to the public through a well-known chain of specialist stores for several years with conspicuous success. A component of our advice was to develop a new website that not only clearly identified the features and benefits of the brand, but also stated the “recommended” retail prices of each major product, The objective was to create stronger brand positioning as well as set price expectations in the minds of end-users, making it easier to make a favourable pre-purchase comparison, rather than rely entirely on the reseller’s advice This author’s advice to take direct control of marketing was rejected, despite our warning that the reseller might seek to take over the import and distribution of the brand. It will come as no surprise to know that is exactly what transpired.
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 to first, or the last time we have suggested that “if there is to be a competitor, let it be you”.
A leading manufacturer of rural products distributed a wide range of goods through resellers, the latter also selling his competitor’s products through the same outlets. The company accepted our advice to significantly enhance the brand identity through a combination of advertising, trade- promotion and, in particular, point-of-sale merchandising.
One significant finding was that the packaging of several products was inadequate, causing considerable inconvenience. The competitor did a significantly better job.
We also recommended making product identification and selection much simpler for the end-users. At no cost to the reseller, custom-made display units with product-selection guides were developed and installed in the reseller’s showrooms.
We recommended and received approval to conduct a “mystery-shopper” campaign for a major camera brand. The results were significant, namely that the highly skilled sales personnel in the reseller outlets invariable used our client’s products themselves, but did not consistently recommend and sell them to end-customers. The reasons became obvious, namely that retail profit margins, commissions, trade-promotions and other incentives outweighed brand considerations.
Getting beyond simple facts
Management will have its own views of what is wrong and probably some fairly fixed ideas on how to proceed. Frequently, there will be resistance from certain quarters to any changes. The hard part for a consultant is to convince management that internal navel-gazing, however thorough, may not in itself identify potentially important issues and solutions, especially if the latter appear in any way radical.
No two scenarios are likely to be identical. However, the process of evaluation is remarkably similar, even if the recommended solutions differ. This author’s company ASPAC Consulting deploys proven techniques that usually include the following stages:
Review of any customer studies/research if ever conducted
Sales analysis – not just the usual accounting stuff, but the search for patterns in buying behaviour over a year or so. This can be highly indicative of any adverse actions by individual resellers, but also of any emerging trends.
Discussions with a range of client personnel – not just the management. It should come as no surprise that personnel in the order department, warehouse and loading dock may have a very good understanding of what is working, what is not and how customers think of the company, its products and services. We offer guarantees that nothing adverse will be attributed to the individual supplying the information.
External discussion with a selection of resellers – again at different levels to include front line staff as well as management, covering similar issues above. The persons interviewed will tell us, in confidence, things they would never say to an actual company representative.
Preparation of “strategic options” summarising findings and presenting some alternative solutions and probable outcomes that will affect the various parties in the distribution chain.
Scope of proposed work, if appropriate
Reasons to consider change
Implicit in the above will be the need to take an fresh unbiased view of the complete end-to-end marketing process. It would be fair to say that consultants in general are not welcomed in many companies and some of that attitude is deserved. However, the better ones do provide fresh insights and solutions that encompass the needs of the business and its customers.
Just one more thought about the selection of a consultant – often it will be the mindset of the board and/or management about the selection criteria. If the company is of significant size there may be preference to use only the “top end of town” professional firms. To be blunt about it, that will not always be a wise decision. A consultant with broad category experience may be a better choice than MBA’s engaged at vast expense that may not have the same street-wise experience and or the technique to get the real story out of the stakeholders.
ASPAC Consulting has considerable experience in evaluating and recommending solutions across many reseller categories