Welcome to Thomas Insights – every day we post the latest news and analysis to keep our readers up to date with what’s happening in the industry. Sign up here to get the day’s top stories straight to your inbox.
This is part 1 of a two part article on building and maintaining a great distribution chain. In this part, you will learn about the need for distribution channels, the types of distribution channels to consider, and how distribution partner locations and their potential types of interactions with prospects and customers determine the composition of your distribution channel. . In Part 2, you’ll learn how to align your channel partners with your business, what kinds of things can go wrong, and the steps to correct incompatible relationships.
Your business, like all other businesses, has a supply chain. Unfortunately, supply chains generate significant negative press for businesses.
However, your company also has a distribution chain. I know this because every business needs to reach out to its prospects and customers to sell and serve them. Unfortunately, your distribution chain probably isn’t creating enough value for your customers or even for your business.
A flow of interactions
All businesses need a distribution chain. And their single channel will likely consist of multiple channels. At a minimum, a business will sell through its website, on an e-commerce site, with internal sellers, and with external sellers. If it’s an international company, it will likely have independent local representation to minimize cultural or language issues.
In terms of service, the company may have direct employees in high density areas, third party service in low density areas, and local independent service engineers in low sales countries. Many business partners also support and maintain the products they sell.
Unfortunately, when setting up their distribution chain, many companies look at each location individually as the need arises rather than as part of a proactive, well-thought-out process. They make their decisions without considering that each decision will create a flow of interactions, which will create an overall image of the brand in people’s minds.
Here is an example of channel partner selection:
In 1981, IBM introduced the personal computer (PC). They decided that the product should be sold to existing business customers through their direct sellers and through independent resellers to small businesses and individuals.
Then, according to Computer Reseller News“IBM has created a rigorous authorization process, subjecting potential retailers to a carefully controlled verification process. The battle between retailers and franchisees was fiercely competitive. The prize – what became known as the vaunted IBM Medallion – was a license to sell the IBM PC. (Bold added for emphasis.)
What is a distribution chain and a distribution channel?
A timing chain refers to all companies that are responsible for selling and servicing a product during its useful life and for interacting with a potential customer.
In most situations, several companies perform the same function in the same country or in another geographical area depending on specific situations. These parallel businesses are called distribution channels.
Here are the most common types of distribution channels used by industrial OEMs:
- Direct employees (sales and service) – direct sales.
- E-commerce sites – direct sale.
- Wedding rings – Partnerships with companies that sell complementary products and services. Each partner sells and maintains its products.
- Distributors* – Purchase after-sales products and services, including spare parts, from the OEM and resell them in their region. They are also called resellers or dealers.
- VAR* (Value Added Resellers) – Buy from the OEM and then modify or add to the product to create more value for the customer.
- System integrators* – Buy from the OEM, then combine with other OEM products to provide a complex solution.
- Independent service companies – May work as a contractor for the OEM, other vendors, or directly for the equipment owner.
*Channels may provide services, outsource services to the OEM, or outsource services to an independent service company.
Understanding the differences between all of these channels is important if you want to have a stable, profitable, and long-term sales and support infrastructure. So whether you’re just starting out and trying to figure out how to sell and service your products or you have an established distribution chain that needs improvement, the first step for you is to design your ideal long-term distribution chain.
How to design a long-term distribution chain
Three variables must be evaluated and specified:
- Channel type – described above.
- interactions your company maintains with a prospect and a customer for the duration of the relationship.
- Pitches where you plan to become a partner, now and in the future.
Here are two fabricated examples without considering the maturity of your product, your customer and your company:
- You may decide that you need an e-commerce site and an independent third-party service organization in Montana and Wyoming because the market for your product in those states is small.
- In the mid-Atlantic states, you may want to work with a systems integrator because the market is medium-sized and you’ll sell better as part of a turnkey solution than if it were sold separately and serviced with a local field engineer.
In the meantime, this blog post describes a non-OEM country channel partner: “Effective August 16, 2019, SUN Automation Group is the exclusive representative in North and Central America for all Latitude Machinery Corp machinery, parts and support. . (CML). Latitude Machinery Corporation is a world-class manufacturer of corrugated board converting equipment, specializing in… The Taiwan-based company has partnered with SUN Automation to offer new and existing customers in North and Central America reliable service, support and sales from a North American based company. industry leader.
Typically, decisions about building a distribution chain are made at the state, country, or regional levels. However, the granularity of your plan should be tailored to your products and markets.
In the United States, you can have a mixture of states and regions. In the rest of the world, many businesses are organized regionally for management and nationally for sales and service outlets. And, in some industries, the service model includes on-site field and application engineers.
Interactions to consider
Interactions are important because each is a touchpoint that contributes to how prospects and customers envision doing business with your business. This is the definition of a brand.
Fortunately, many interactions are performed infrequently and are pre-programmed. For example, during initial user training after an installation is complete, there is usually some flexibility when the training will take place, and the duration is known so that a trainer can be flown into a city and stay in a hotel during the training. . This allows the trainer to build good relationships with clients without being physically based in the same location or in the same time zone.
It’s important to determine what interactions each channel partner will need to make when you start designing or redesigning your channels. Here are partial lists of interactions related to the sale of products and services. Many of these interactions will repeat for the lifetime of the gear and some will never occur on all accounts.
- Product-sale interactions:
- Inside Sales
- External sales
- Sale of services
- Advanced Service Sales
- Service-Related Interactions:
- Site planning visit prior to installation
- Remote Support
- Breakdown/repair service
- Depot Repairs (Return Material Authorization)
- Ordering and delivery of parts
- Preventive maintenance visits
- Provide advanced services
- Move Equipment
- Refurbish parts
- Downgrade Equipment
Read Part 2 next week for the rest of the timing chain story.
Sam Klaidman is the founder and principal advisor of Middlesex Council. It helps its B2B product manufacturer clients to increase the turnover and profitability of their services by applying the methodologies and techniques associated with the Customer Value Creation and Customer Experience businesses to support its customers in the design and the marketing of new services and the associated business transformations. Contact Sam here.
Image Credit: Gorodenkoff / Shutterstock.com