Hadley Associates, Inc - Business Consultants
Insight-for-Clients

Industrial Distribution

- SUMMARY OBSERVATIONS -

DISTRIBUTOR NEEDS

Selected or limited distribution

Distributors want control over their marketing area so it can provide them with a profitable return. The market place judges what is reasonable, and what is not. Distributors want a balance of suppliers so no one dominates them.

Known or contract pricing

Distributors all want the lowest price available, but they know it will vary by their commitment level. What does comes across as important are: (a) known price schedules, (b) ability to ask for help in special circumstances (c) "a level playing field" and (d) structure to the program.

Performance discounts or incentives

Promotions do generate visibility and sales activity. Major hard goods distributors are well financed and take advantage of volume, promotional and/or payment discounts. The moderate size distributor can, if the benefit is significant, by switching buys. The minor distributor does not have the where-with-all for major purchases and sell to non-price sensitive customers.

Simplified order processing

Distributors want to have confidence that their order will be delivered when promised; they do not want surprises. The reason is that their customers are depending on them. Confidence in delivery is paramount, whether a small or large order. Delivery problems make them look bad.

Product quality

Distributors want their customers to be satisfied with what they purchase. This is defined by performing as expected. With production-oriented customers, this is even more critical because downtime is far more costly than the raw materials. There are different quality levels and most distributors have become very good at matching them to the customer's need.

Field sales support

Distributors carry a myriad of products; supplier support is essential. Manufacturer support can include market focus, leads, product knowledge and a communication link. Field reps have to be seen as working with the distributor. The Internet is quickly becoming a support vehicle tool.

Cost efficiencies

The success of a distributor is determined by their focus on manufacturing and distribution cost efficiencies in order to provide "total program value" and "pull-through demand". Distributors continue to represent lines that generate repeat business. New lines have to provide more value, features, uniqueness or control.

Supplier recognition

Branded programs must allow the distributor to be viewed as an extension of the manufacturer and be recognized for his valued support. It is not uncommon for successful distributors to display reward plaques from their suppliers, be on Distributor Councils and have logo-wear.

In completing various distribution channel assignments, Hadley Associates has observed these trends during the past five years:

Customer service
Has heightened as a business strategy, led by more demanding customers and competition; this is defined in many different ways; it is essential that "customer service" is well understood by all concerned

Product focus
"Niche-type" product line strategies and programs are winning; some manufacturers are very creative in designing products and leveraging specialty items; technological advances have become a given; most companies, unfortunately, underrate the importance of customer feedback in product management

Consolidation
Continues on three fronts, namely with end users, distributors and suppliers; has not changed in most industries; continue to see more concentration among the larger and the addition of more niche suppliers

Technical support
Growing as a strategic advantage, especially guaranteed cost reduction programs; technical support becoming more valuable than the field sales presence; the Internet has become a real force in technical areas

Field presence
Remains the single most important variable in marketing; few firms excel at it; for most companies, effectiveness varies widely from excellent to poor; the Internet is becoming a formable substitute

Management
Implementing change is taking less time with the better distributors; often it is the "new" distributor who is being more successful at it because he has little to lose and has fewer "favored" practices to justify

Computerization
Low key success factor for most distributors; suppliers and producers are the leading force in computerization; the better distributors are adapting because the investment in proprietary system is too great

Retailing Activity
Some independent distributors are becoming more retail-oriented; will not be the primary channel for years to come; e-commerce maybe a more successful business strategy for most distributors

To anticipate customers' needs, Hadley Associates recommends both manufacturers and industrial distributors review their situation every 3-to-5 years by assessing the following:

Marketing programs evaluation Relative Effectiveness Distributor/Manufacturer
  Strong-Fair-Weak Program Changes Needed

Written program structure
Level of distributor competition
Territory definition

Performance standards
Feedback of performance
Product assortment

Product availability
New product introduction
Suggested inventory levels

Inventory investment and turns
Competitive pricing
Discount structure

Growth/volume incentives
Product line profitability
Brand visibility and loyalty

Customer acceptance
Customer insistence
Sales promotions

Product literature (print/electronic)
Co-op advertising
Trade promotion

Quality assurance programs
Product warranties
Technical assistance/training

Customer leads/sales calls
Customer service
Accurate information

Notice in changes
Management recognition
Trusting relationship

Computer support
Internet strategy
E-Commerce

 

Hadley Associates is well experienced in completing program assessments and redefining distribution strategies. Please contact us if there is a need to revisit your situation.

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Hadley Associates is a consulting firm focused on industrial market research and facilitating strategic change. Drew Hill, principal consultant, is a certified focus group leader and management consultant.


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