Improving Distributor – Manufacturer Relationships (April 01, 2004)
By Bill Childers
Serving today's customer requires ever-closer collaboration between distributors and manufacturers in the power transmission/motion control industry. At the same time, long-held beliefs and mistrust between channel partners stand as a barrier t...
By Bill Childers
Serving today’s customer requires ever-closer collaboration between distributors and manufacturers in the power transmission/motion control industry. At the same time, long-held beliefs and mistrust between channel partners stand as a barrier to improving the levels of planning, communication and trust in distributor-manufacturer relationships.
As result, the Power Transmission Distributors Association (PTDA) has developed a library of distributor-manufacturer relationship best practice case studies that are designed to provide inspiration and specific suggestions for those looking to work together to improve sales performance and profitability.
In this issue’s featured case study, we hear the thoughts of William A. (Bill) Childers, president and COO, NSK Canada Inc., Mississauga, Ont., as he discusses the NSK Best Practice of “Recognizing the value we provide.”
For more information on the Distributor-Manufacturer Relationship Best Practice project and a complete list of best practices, contact PTDA at 312-876-9461 or e-mail firstname.lastname@example.org.
As purchasing has gained power, distributors increasingly find themselves investing time and expertise at the design stage, only to lose the business when purchasing sends the spec out to multiple distributors to get the best price.
We recognize and support the value our distributors provide to us and to their customers by avoiding giving identical quotes to competing distributors who are just providing a me-too quote.
The reality is that we and most other manufacturers have more than one distributor in town. But in cases where they are working with the customer and bringing us new opportunities, our goal is to arm our distributor salespeople with some sense of exclusivity for those opportunities.
From a manufacturer point of view, we won’t ever have enough people to hit everyone; distributors allow us to effectively multiply our sales force. Whether the customer is designing a new line or product from the ground up, or redesigning an existing system, there’s a real opportunity for us and the distributor in the form of either a major one-time buy or an ongoing customer requirement.
Purchasing’s goal is to get the best price, because that’s how they measure success. While we try to sell the best overall cost solution, distributors know the importance of the ultimate price. Since we’ve got multiple authorized distributors in each area, they worry that they’ll do all this work and then get shopped and low-balled on price.
When a distributor comes in with a competing manufacturer’s products and tries to take the business, that’s fair game; we’re trying to do that and so are our competitors. But when another distributor comes in with the same exact quote developed by the first initial salesperson, that’s when we try to offer protection.
To show that we recognize the value distributors provide by coming to us with opportunities, we reward them by not quickly quoting the same price to every other distributor who gets a quote request. Doing so protects our distributors from the “quote me the same as” inquiry that is so common in our business. It allows them to charge for their true value without fear of a duplicate, low-ball price.
And since our distributors know they can gain some exclusivity by working with NSK on new opportunities, they are more likely to create these opportunities. Over the long term, we benefit from both great support for our products and the creation of new business.
The payoff for the customer is that know that distributor salespeople are confident they can get the order at a fair price; they are willing to invest the time to work with them to design the best solution.
As distributors focus on shoring up margins, it’s inevitable that the best will stop supporting those suppliers who quote the same opportunities without regard to who did the work, as well as those users who continually shop the price on their work.
“Me too” quotes hurt everyone in the channel: manufacturers, distributors and customers. Eliminating them is a prerequisite to addressing margin declines in our industry, while giving an incentive to application selling.
Bill Childers is president and COO of NSK Canada Inc., Mississauga, Ont., a member of the Power Transmission Distributors Association. PTDA is an association of industrial distributors and manufacturers dedicated to providing solutions to customer needs. A strong relationship between manufacturers and distributors, combined with focus on the customer, ensures high quality products and services that provide value. For more information, visit www.ptda.org.