club catalyst. Earning more from your distributor

There’s hardly any industry that does not rely on distributors, in one form or another, to meet its business objectives. The auto industry has dealers, insurance has agents, white goods has retailers, real estate has brokers, brands have franchisees, FMCG has dealers, IT has resellers. In industries where the end consumer is unknown, the distributor is the only means to know customer preferences, market trends, and the likes.

They are a key element in the network and in some industries exert much power on the producer of goods/services. No wonder then that business heads are constantly looking for ways and means to get them do more or secure a greater share of their business.

Generally speaking, what the producers are able to get from their distributors is driven by the margins, special schemes, and promotions. Of course, enduring association plays a key role as does the relationship between the organisations. What else do distributors support? Product managers involve them for product inputs, service managers listen to them for common customer grievances, and senior management pat their backs for achieving the numbers.

Metrics that score Even as many companies have built excellent distribution muscle, very few seem to apply/measure/develop metrics that could help them grow from strength to strength. For example, given the scale of distributors at a reasonably sized India business, the perennial question remains – which distributors to focus on, which ones to attract, and which ones to divest. Mostly, revenue turns out to be a key driver for this decision, and rightly so. But how about the value and volume of sales? What about growth, product mix, customer quality, repeat business, longevity, territories serviced? Depending on which industry you belong to, this could mean studying reams of historical data across various parameters … reason good enough to go back to mere revenue. Unless the merits of this labour are known. Let’s look at some of them.

Many organisations classify customers into Platinum, Gold, Silver, and such. Investigating which distributors have similar traits can be a fundamental process to understand and therefore better align your strategies for them.

Would it be valuable to find out which of your distributors are promotion seekers vs consistent performers, volume vs value sellers, early adopters vs long-term bets? One could then determine which dealers to go after for new product introductions, which ones for high-value/low-value offerings, and so on. . By analysing its select distributors’ performance along with industry data, a mutual fund house was able to identify which of its distributors were short-term gainers, which ones were mass-oriented and which ones preferred the value play. A hospitality major who wanted to decide in which states they should increase their distribution presence married their performance data with macro data (per capita income, cars sold, literacy ratio) of various states to arrive at the final set of states.

Tracking past performance to predict future business can help you proactively arrest unwanted outcomes, such as which distributors are likely to defect.

A broadbased financial services provider, facing competition from traditional as well as technology-driven newbies felt pricing pressure and wanted to understand which of its distributors were more likely to churn or reduce their business significantly. It put together a year’s worth of transactional data and added elements such as service records, payment history, lineage and margin to not just predict but also understand what leads to the changes. Surprisingly, resolution of complaints and payment issues came out as more important contributors to churn compared to traditional parameters such as pricing and tenure. The insurance industry, which employs a large number of agents, has similarly found that the key reasons for agent attrition can include unexpected ones such as manager changes and team size.

Rate your distributor You have heard of Quality score or CSAT score. Why not have a monthly Distributor score? One that takes into account all the parameters that determine the “right” distributor for you, such as value mix, margin, share of business, territory, and growth. One could also assign varying weights to these parameters to reflect organisational preferences or seasonal changes. Thus the sales managers could assign a larger portion of their time to the “right” distributors that matter. Distributors could be awarded on their composite performance over time, not just the previous quarter’s revenue. And as one FMCG manager said, ‘if I want to rationalise my distributors I would like to know their total value to me, not just revenue’.

There are many other possibilities if one invests equal time and attention on the distributors as the end customers. Needless to say, the outcomes are certainly more rewarding than the labour!

MAKRAND JADHAV is CO-FOUNDER & COO of KLOUTIX SOLUTIONS

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