There’s a delicate balance between B2B distributors and their supplier partners. You need each other.
However, distributors and suppliers have divergent objectives, strategies and stakeholders. Suppliers looking for distributors are forever asking, “Do we really need all these distributors?” and “Is there a cheaper way to get our products to customers at a lower price?”
Not surprisingly, the three top distributor concerns, according to Modern Distribution Management’s 2015 Outlook Survey, are:
- Losing manufacturing lines
- Competition from outside the normal distribution channel
- Shifting channels by manufacturing from classic distribution
With that in mind, the real question distributors should be asking themselves is “How do I make myself the most valuable distribution channel for my suppliers?” and “How can I leverage new supplier development?” Not only will optimizing your relationship with your partners help you preserve your existing supplier relationships, but it will have other suppliers beating a path to your door, too.
If you’re looking to make yourself the most valuable of distribution channels for your suppliers, the answer may be simpler than you think. After all, you already own the customer relationship—it’s hidden within your invoice system. You know what, when, where and how customers buy with every transaction they make. If data mining is the new gold rush, you’re right on top of the motherlode. The trick is showing your suppliers how you can use this big data to target their co-op and market development funds to increase supplier sales.
Chances are each of your supplier agreements includes a paragraph about a “co-op marketing budget” or a “market development fund.” Suppliers typically allocate one to two percent of your annual purchases to help you market their products and services. In the past, this meant putting some co-branded ads in trade magazines or buying some branded hats. This usually doesn’t work.
Taking a more active approach to controlling these funds not only makes you a stronger partner for your suppliers, but can also set you apart from your competitors. Think about using those funds to build a loyalty program for your small business customers, such as resellers and contractors. You could use your market development funds to reward customers for their purchases and drive a greater share of their purchases to your organization.
Or, for Maintenance, Repair and Operations (MRO) customers who won’t allow their employees to take rewards, how about building an incentive program for your own sales and customer service personnel? Think about all the promos your suppliers try putting together for your sales people. Show them how they can fund one program that will really get the time and attention of your sales force, since it’s your program.
And what’s in it for the supplier? Obviously, short-term sales of targeted products to a wider range of customers. But you can also provide valuable insights from your data mine critical to their planning. Offering them roll-up reports showing the total number of contractors purchasing a specific product category and their share of that category helps them identify their own strengths and weaknesses. It also helps them plan future offerings and marketing initiatives.
Providing suppliers sales reports on MRO programs showing which of your reps sells their products (and even more importantly which don’t) helps them target their training efforts and sales initiatives. Finally, these reports can enhance your discussions with suppliers about what you really need from them to grow in the future.
Taking control makes you a much more valuable distributor partner, and sharing just a little of your incredibly rich data mine provides suppliers information and that’s nearly impossible for them to get anywhere else. Even more importantly, taking control differentiates you from competing distribution channels not only in the eyes of your suppliers, but also with your customers.