Both sides of the channel – manufacturers and distributors – spend a lot of time talking about how to craft win-win partnerships and strategic business agreements. But how do you turn that talk into reality?
As a manufacturer leader, I often found that distributors and manufacturers had trouble crafting win-win partnerships because they did not have goals and objectives clearly defined for key business drivers.
Strategic business agreements were focused on two major areas: Terms and conditions, and rebate programs focused on overall sales growth. Some years, that was enough, and other times, it wasn’t. Having a one-size-fits-all approach as distributor or manufacturer for all your partners may be easier to manage, but I predict it won’t deliver the full value that both sides need from a partnership program.
When I was sitting on the manufacturer side of the table, the main disconnect on why partnership planning did not work as well as expected was often obvious. We, or the distributor, did not come to the meeting properly prepared, or we had a simple lack of focus on what was important to both sides.
What is most important, and the best outcome for a distributor and manufacturer (or manufacturer rep), is to “grow business and profits” for both sides.
I’ve found that there are just two key business drivers that will help you focus on what to stay on top of in order to drive win-win relationships.
It starts with the big one: sales growth.
Anyone who says sales is not the most important partnership driver for the channel has probably never spent much time in the channel. As the Germans would say, sales is “uber alles,” which translates in English to “above everything else.” Sales growth is above everything else, so do not forget that should be your primary focus in your partnership agreement discussions.
I suggest that there is no better time than now to reset your Quarterly Business Reviews (QBRs) with your channel partners (distributor and manufacturer). Here are some suggested best practices and trends to consider that can help you improve your channel partnership performance.
The leading manufacturers and distributors are establishing new sales metrics by territory type, and setting yearly performance goals with each other that go beyond just total sales. Are you sharing key metrics with each other that unlock true partnership opportunities?
- If you are a distributor, are you coming to your QBRs with next-level metrics? For example: average order side; percentage of lines per order by manufacturer; total lines per order; turn and earns; inventory rank by SKU for the manufacturer; type of customer; number of buying customers, etc. The list of next-level data you can bring that changes a partnership conversation to your mutual advantage is endless.
- If you are a manufacturer or manufacturer rep, what next-level metrics are you bringing to your QBR? For example: top-selling SKU rank; new product vitality index for your company and for the distributor; top focused end user segments and data; gap analysis (which SKUs are top sellers for you that the distributor is not supporting you on); marketing support programs; first-time fill rates; backlog information, and so on. Again, this is a very long list of next-level data you can bring to the QBR.
Metrics that are next-level, and that are focused on sales, make everyone in the distributor-manufacturer meeting sit up and pay close attention.
The second big factor to help improve your QBRs is data.
The data the distributor needs vs. a manufacturer will not be in 100% alignment where POS is not shared. The critical breakthrough is to share as much data as you can to help each side grow more effectively.
- Data that distributors need: Lead generation from suppliers with support; Digital assets and product data; Top-selling SKUs online; End customer data on customers the distributors are not serving that they should be serving; Market size data to help them deploy their assets more effectively, etc.
- Data the manufacturers need: Top-buying customer type; number of customers who buy their products (Avg. customer value, percentage of their share of lines per order, and more); Key markets; Number of top customers; Number of new customers; New product vitality index (their scores versus other manufacturers), etc.
If you can focus your next QBR on next-level sales metrics and data that you haven’t brought to your standard QBR meeting before, I predict you will be surprised at the results.
J Schneider is the managing director of the consulting practice at Dorn Group. J is an author and public speaker with the unique ability of helping companies both formalize their vision for growth and implement change management across cross-functional teams. With over 25 years of conducting business for global manufacturers and distributors, J brings unique well-informed operating insights to the table that show industrial firms how to reduce unnecessary inefficiencies while hitting growth targets. J captures experiences from the field to fuel a customer-back approach in helping industrials develop company-wide innovation, strategic plans and customer experience improvements.
