Manufacturers, importers and wholesalers who do not or cannot justify creating their own distribution outlets have traditionally relied on resellers to interact with end customers. Of course, the Internet offers an alternative path to market, but that doesn’t outweigh logistical issues, credit control, and Internet marketing expertise, regardless of the hype that e-commerce and hosting services sell. (That topic is beyond the scope of this particular article.)
Resellers can offer some significant financial benefits, although reseller margins are likely to be on the order of 30% or more. A bigger issue is the potential loss of control of virtually everything about their brands, including market positioning, customer perceptions, and pricing.
Here are some examples
- One importer of branded goods consistently described his business as a “wholesale.” The main brand of him was sold to the public through a well-known chain of specialty stores for several years with conspicuous success. One component of our advice was to develop a new website that not only clearly identified the brand’s features and benefits, but also established “recommended” retail prices for each major product. The goal was to create a stronger brand positioning and set price expectations in the minds of end-users, making it easier to make a favorable pre-purchase comparison, rather than relying entirely on reseller 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 importation and distribution of the brand. It won’t come as a surprise to learn that this is exactly what happened.
- 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 has not been the first, nor the last time that we suggest that “if there is going to be a competitor, let it be you”.
- A leading manufacturer of rural products distributed a wide range of products through resellers, the latter also selling their 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.
A significant finding was that the packaging of various products was inadequate, causing considerable inconvenience. The competitor did a significantly better job.
We also recommend making product identification and selection much simpler for end users. At no cost to the reseller, custom display units with product selection guides were developed and installed in the reseller’s showrooms.
- We recommended and were approved to run a “mystery shopper” campaign for a major camera brand. The results were significant, namely that the highly qualified sales staff at the outlets invariably used our customers’ products, but did not consistently recommend or sell them to end customers. The reasons became obvious, namely that retail markups, commissions, trade promotions, and other incentives outweighed brand considerations.
Go beyond the simple facts
Management will have their own views on what’s wrong and probably some pretty set ideas about how to proceed. Often, there will be resistance from certain quarters to any change. The hard part for a consultant is convincing management that internal navel gazing, no matter how thorough, may miss identifying potentially important problems and solutions, especially if the latter seem radical in any way.
No two scenarios are likely to be identical. However, the evaluation process is remarkably similar, even if the recommended solutions differ. This author’s company, ASPAC Consulting, deploys proven techniques that typically include the following steps:
- Review of any customer studies/research, if ever conducted
- Sales analysis: not just the usual accounting stuff, but looking for patterns in buying behavior over a year or so. This can be highly indicative of any adverse action by individual resellers, but also of any emerging trends.
- Discussions with a variety of personal clients, not just management. It should come as no surprise that people in the ordering department, warehouse, and loading dock may have a very good understanding of what works, what doesn’t, and how customers think about the company, its products, and services. We offer guarantees that nothing adverse will be attributed to the person supplying the information.
- External discussion with a selection of resellers, again at different levels to include front line staff and management, covering previous similar issues. The people interviewed will tell us, in confidence, things that they would never tell a real representative of the company.
- Preparation of “strategic options” that summarize the findings and present some alternative solutions and probable results that will affect the different parts of the distribution chain.
- Scope of proposed work, if applicable
Reasons to consider the change
Implicit in the above will be the need for a new unbiased view of the entire end-to-end marketing process. It would be fair to say that consultants in general are not welcome at many companies and some of that attitude is deserved. However, the best ones provide new insights and solutions that address the needs of the business and its customers.
Just one more thought about selecting a consultant: it will often be the mindset of the board and/or management about the selection criteria. If the company is of a significant size, there may be a preference to use only professional firms from the “upper end of town.” To be frank about it, that’s not always going to be a wise decision. A consultant with experience in a broad category may be a better option than an expensively hired MBA who may not have the same street or technical experience to get the real story from stakeholders.