Companies that have had some export success selling though distributors often reach a point where their sales growth flattens or stalls. They wish their exports were a strategic part of their business, with predictable double digit growth quarter after quarter, but they aren’t sure how to get there from where they are.
This series will outline the key steps needed to truly move your distributor export business to the next level – one where exports become a key strategic business unit. But warning: this is not an easy process, and requires some investments that may take a little time to pay back, as well as a bit of faith. Take comfort that many companies have made this shift, and have never looked back.
In our previous article, we discussed the importance of changing your mindset.
In this installment, we’ll look another key step in moving your export business to the next level: change the way you choose your distributors.
Most exporters begin by signing up distributors that approach them. They are typically so excited to find new foreign outlets for their products that they aren’t terribly picky about the partners they sign up. They figure any incremental sales are a good thing.
The likelihood of finding the best partners using this approach, however, are quite small.
Sure, you may occasionally get lucky and find a gem or two, but most will likely be transactional distributors. They order your products occasionally, but never really invest in growing the market.
The hard truth: you will never develop the international sales you need and deserve with those kinds of distributors.
The way Exporting 201 companies find partners is completely different. They identify their ideal distributors and recruit them.
They systematically identify desired par
tner criteria, seek out promising partners, and evaluate each against their criteria, usually using a scorecard or other consistent scoring method.
They look for distributors that will invest in growing the business, and in turn, they also invest in their distributors – becoming true partners, an aspect we’ll discuss in a later article in this series.
This process starts with data analysis, as well as corporate soul-searching. Data analysis helps tease out those parameters that your most successful distributors have (or have had) in common, and an honest look at why others have been less productive.
Suppliers need to identify and accept responsibility that some of their own past behaviors have resulted in poor distributor results, another aspect we’ll discuss later in this series. Managing distributors is a 2-way process, and simply placing all the blame on the distributors for poor performance is unlikely to result in real improvement. Exporting 201 suppliers identify necessary behavior changes they need to make, and implement steps to help make those adjustments.
Advanced exporters also recognize they need to make sometimes difficult decisions about terminating non-performing “legacy” distributors. When suppliers have been in Exporting 101 mode for several years, current personnel may not even know why or how certain distributors were signed. Personal relationships may have been developed over this time, even though sales results are poor or uneven.
There may be good reasons to keep on one or two of these poor-performing legacy distributors, but advanced exporters know the rest will need to be terminated. A few of these may be rehabilitated or brought up to your new standards, but these efforts need to be carefully targeted. And these initiatives need to be implemented with a clear “go/no-go” decision timeline. Too many beginning exporters waste a lot of time and energy having repeated and extended back-and-forth discussions with underperforming distributors.
Exporting 201 companies recognize that they need a completely different approach to finding distributors and interacting with them. We’ll explore how advanced exporters manage their distributor network differently in our next article.
rkets/or distributors are non-strategic and are simply “costing” you more than they are worth.
These non-strategic distributors cost you in many ways: they typically take up a disproportionate amount of your time – your scarcest resource – compared to the sales they bring in. Many companies think the distributor that only order periodically and makes few demands is one that doesn’t “cost” them much.
In our experience, however, most companies seriously underestimate just how much those partners cost them in terms of conference calls, samples, literature, order fulfilment, tracking down sales reports, and travel, not to mention the distraction and loss of focus. True, one of these distributors doesn’t cost all that much, but when you have several non-strategic distributors, the cumulative cost to your team and organization typically mounts to unsustainable levels.
All that is time and energy that can and should instead be focused on more strategic markets and distributors.
If there’s one thing our work with more than 400 clients over our collective nearly 100 years of experience has taught us, it’s that to truly grow your international sales, you must identify your highest-prospect partners and markets, and single-mindedly focus on growing sales there.
And that means you will just need to let some of your non-strategic partners — and the sales that come with them — go.
But don’t worry. The growing sales in your strategic markets will soon make up for and outpace all the lost sales from the non-strategic markets. And your organization will run smoother, with far fewer crises.
Note: a version of this article was previously published in Global Trade Magazine.
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