Following my previous post on optimal management of distributors in ASEAN, I want to discuss several key issues that arise when engaging distributors in the ASEAN region as indicated in the image below:
Address the Lack of Aggressiveness
Understand Where Your Product Fits in the Distributor’s Portfolio
■ Sales representatives of MNCs might not find their distributors to be aggressive enough until they truly understand the role their product is playing in the distributor’s portfolio and his business
■ Training your team about the economics of the distributor’s business will allow your sales representatives to set more realistic targets while creating a more sustainable relationship between both parties
What is happening: In the illustration above, your product provides the highest gross margin (34%) to your distributor’s business, but it has a relatively lower inventory turnover (sells slower) and provides the lowest actual contribution (impact on the bottom line) to their business compared to products 1, 2, and 3
Why is this the case: The distributor has to incur several variable costs in order to sell your product; thus your actual contribution value to their business can differ. The illustration on the right explains some of these costs that to serve your business
Choosing the Right Partner by Learning the Distributor’s “Earns” and “Turns”
■ Right Partner: Detailed knowledge of how your business contributes to the bottom line of the distributor can help you chose the most suitable partner—one whose current product portfolio complements the attributes of your product
■ Right Fit: Distributors who can attain higher “earn” and “turn” are likely to be much more aggressive about pushing your product
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