New Manufacturers and Distributors
Need to Recruit Each Other
Edition: September 2002 - Vol 10 Number 09
Author: Christopher Pancratz
Today’s market place is riddled with challenges that make an always intricate business even more difficult for distributors and manufacturers, managers and sales reps.
One of the major challenges is new products. For manufacturers (especially new manufacturers) the challenge is to get themselves and their product in front of the end user/customer and generate sales. For distributors, the challenge is to find compatible and profitable new products. The distributor’s need is made even more acute by their reps’ desire for a constant flow of new products to grab and hold their customers’ attention. Sometimes adding to the challenge is the distributor’s desire to reduce vendors and SKUs.
Medical products manufacturers know that they can follow many routes (including distributors) to bring a product to market. No single strategy is right for every product. In fact, distribution is not the channel of choice for every product in every market. And when it is the channel of choice, not every distributor is right for every product. Manufacturers who cannot find the right distributors to put their product in front of the end user can choose other alternatives, including direct marketing, the Internet, manufacturers reps and GPOs.
Manufacturers who choose to use distributors need to focus on their distributor recruiting. The old adage, “If you have seen one distributor, you have seen ONE distributor,” is certainly true in the healthcare products industry. In turn, distributors who want to carry new products from new manufacturers need to understand how and why manufacturers are recruiting them.
Because distributors offer a variety of services, the manufacturer needs to be clear on which services it really needs. Holding inventory, breaking bulk, packing and shipping, delivering, as well as invoicing, carrying accounts receivable and making collections are services that distributors offer and for which a vendor can often negotiate individually or in total.
However, most often, what manufacturers – especially new ones – really need from the distributor is access to end-users. Vendors are looking for distributors who have relationships with customers and who will take the product to the customer and convince them to buy.
Identifying and recruiting distributors with solid sales capabilities are most manufacturers’ highest priorities. Many distributors today have specialized in logistics and distribution services, and lack the capability of selling new products in their market. Others have focused on serving the customer by taking their regular order and providing whatever is requested.
But everything begins and ends with the user – the customer. Manufacturers need to consider who are the end users of their products in order to determine what type of distributors to use. For example, distributors who serve acute care facilities are not necessarily the best choice when the customer is a nursing home or a physician.
The manufacturer also needs to gauge the value of the product(s) to the distributor. This will be a major factor in the amount of attention that the distributor will pay to the product. It may dictate recruiting distributors with different strategies. For example, a low-unit-dollar, low-volume product may require distributors with catalog, direct mail or Internet strategies, rather than a strategy that involves distributor salespeople going to the customer.
It is important for both the distributor and the manufacturer to consider a new relationship to examine competitive situations. What competing products does the distributor currently carry? The potential impact to the relationship could be negative if the distributor is committed to the competing brand, or could be positive if the distributor is looking to replace the current brand.
An important question for the distributor to ask the manufacturer is, which competing distributors will have the product available. Especially in a situation where the distributor will commit sales support, it is important for him to know that he will actually get the business when his promotional efforts are successful and the customer buys.
Distributors have varied sales strategies, which need to be a consideration in the intended relationship. In addition to market focus (acute, long-term care, physician, etc.) and specialization by hospital department or medical specialty, distributors also choose different methods or combinations of methods to reach the customers. From field sales representatives and telesales reps to product shows, direct mail catalogs and the Internet, distributors sell through a variety of means. Manufacturers can attempt to align with those distributors whose strategies are best suited to their products.
If group purchasing is a factor for the products offered, manufacturers need to be sure that the distributors they recruit have (or, at least, can develop) relationships with GPOs. Conversely, distributors vested heavily in sales through a particular GPO will look for products that are already on contract with that GPO. Most GPOs today tend to limit the distributors and manufacturers who are authorized to participate in contracts, creating one more challenge to breaking through with a new product.
If you are not a leading-brand manufacturer, bringing new products to market and introducing them to end-users is a serious challenge in today’s market. Finding new products to bring to customers is just as challenging for most distributors.
Manufacturers must know their own needs and create a distributor profile for their products, and then match each distributor considered against that profile.
Distributors wishing to be proactive about finding new products should also have a profile. Theirs should include both their own capabilities – what they can offer a manufacturer – and what they need from a manufacturer and product.
Distributors also need to dedicate time (a very valuable resource) to meet with manufacturers having new products to discuss.
Initiating a new product relationship is an intricate process by which distributors and manufacturers align to bring products to the end user/customers. Both partners need to understand what they want and need before they begin the recruiting process, and then focus on prospective partners that meet the profile.
Christopher M. Pancratz is CEO and Principal Consultant of Pan Development Associates providing services in distributor recruiting, manufacturer/distributor relations and sales growth. Chris spend nearly 20 years with Chicago Hospital Supply Corporation, a healthcare products distributor in the Midwest, in many capacities from sales representative to President/CEO and served 10 years as Executive Director/Vice President of the Health Industry Distributors Association (HIDA).