IRCG Insights Blog

Distributors Must Differentiate to Minimize Channel Conflict

Written by Mike Marks on Wednesday, 21 August 2019.

channel conflictOne of the most common issues that arise between manufacturers and their distributors is channel conflict. For the manufacturer, channel conflict is a good sign. It’s an indication of wide market coverage. For the distributor, however, it may be a frightening reminder that they are just one part of the manufacturer’s go-to-market strategy. So, what does the distributor need to do to secure their position as a valuable sales resource for the manufacturer? How can they ensure they will continue to have a seat at the table?

The answer is to provide value that no other channel can. One way to accomplish this is through building stronger relationships with their customer base and meeting their needs through various channels, but the other is by creating a strategic relationship with the manufacturer.

Recently, I shared my thoughts on improving channel relationships in Your Channel Partners Are Talking … Are You Listening?, published by the National Association of Wholesaler-Distributors. If there were a single takeaway that distributors, it would be the importance of communication. The distributor-manufacturer relationship is a strategic one that must be based on both listening and responding. Communication helps you, the distributor, to understand the manufacturer’s challenges and expectations early on, allowing you to pivot with their changing needs.

Using communication as a tool to discover opportunity, distributors can differentiate their value proposition and manage channel conflict in a few ways:

Develop processes that help manufacturer partners solve challenges.

Manufacturers are driven by certain variables including maintaining brand integrity, understanding customer perspectives and discovering what is driving (or not driving) sales. Discern the processes involved in acquiring a new customer, maintaining them and extending the life of that customer relationship and then share these findings with your manufacturer partner. When it is channel-led business, the customer chooses the distributor before choosing the brand; do not let your sales reps shift business away tactically without considering the long-term impact on the relationship.

Be a reliable source of data.

Rather than remaining business as usual with your manufacturer partners, make your company irreplaceable by bringing valuable data to meetings. Share market trends, metrics and account updates to provide your manufacturer partners with the customer data only you can provide.

Identify opportunities to grow.

Your goal should be to help the manufacturer grow market share and protect existing revenue, intercept business when a competitor experiences a Critical Selling Event (CSE) and disrupt a working sourcing relationship. One way to do that is by identifying opportunities to grow using data and technology and then putting your field sales representatives in an offensive position to sell the value proposition, rather than the typical “womb-to-tomb” activities that include ordering, stocking and inventory counting. These activities can usually be tasked to other company members, without tying up valuable resources that should be designated to maintaining and procuring business.

Not only will these actions help solidify partnerships with your manufacturers, they open the door to better negotiations on your behalf. They will also result in better customer relationships, as you work together to better meet the market’s needs. Learn more in this video:

About the Author

Mike Marks

Mike Marks

Mike Marks co-founded IRCG in April 1987. He began his consulting practice after working in distribution management for more than 20 years. Over the years, his narrow focus in B2B channel-driven markets has created an extensive number of deep executive relationships within virtually every business vertical in construction, industrial, OEM, agricultural, and healthcare.

Mike has led project teams that improve market access by aligning resources to growth opportunities serving manufacturers, dealers, and distributors. Clients have ranged from small privately owned firms to many of the industry’s market share leaders. Ownership structures have included owner-operators, private equity, ESOPs, and publically traded firms. Mike is proud of the teams work and the confidence clients have shown with additional project work.

He has written extensively, and is frequently quoted on many industry issues. He has substantial board experience on both public and private distribution firms. His contributions to the field include serving multiple terms as a Research Fellow with the National Association of Wholesaler-Distributors, permanent faculty at Purdue University’s University of Industrial Distribution, eight years as Graduate Adjunct Faculty in the Industrial Distribution Program at Texas A & M University, and rendering several precedent-setting expert opinions in contract disputes between manufacturers and distributors.

Prior to forming IRCG, Mike held the position of Executive Vice President at Lex Electronics, an $800 million vertically integrated electronics distributor in Stamford, CT. Mike’s path to management in his early career was through increasing responsibilities in sales and sales management. He also completed a tour of duty as a manufacturer’s representative.

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