Tag Archives: channel management

Distributors Demystified: Use These Insights to Help You Help Them Sell More

business people and world map
Using distributors can be a key part of scaling up your sales reach. Be sure to budget the time and effort to make this tactic work for you.

By: Andrew Johnson, Ph.D.

Working with Distributors can be a great way to expand your sales reach as you grow.  This can be a very effective way to ramp up sales especially when you look to sell internationally.  It is important to have a good understanding of how best to support, motivate and manage your distributors prior to your product launch to make sure that you get the biggest bang for your buck here.

A few myths

  • Hire them and forget them.  Your distributors will require training, sales collateral and on-going support to be successful.  Whether you have a direct sales force or a distributor, they both require the same level of sales and marketing support.   In addition to this, you will likely need to plan on refresher training and customer visits with your distributors over time as there is turnover in their sales team and also to keep them motivated.
  • They will be excited to sell your new innovative product.  The business team that sold you on the contract will be excited about your product and its business potential.  The distributor’s sales team, not so much.  An unfamiliar new product takes time and effort to learn how to sell effectively.  When the distributor’s sales team member has a choice of selling an existing product versus a new one, everything else being equal, they are more likely to focus on what they already have confidence in selling.  Consider offering cash or other incentives for early sales for a period of time.  Once the distributor’s sales team has some success with your product, this challenge will become less of an issue.
  • Distributors will be less work than a direct sales force.  (see the first point in this list)  You will need to plan regular update meetings with your distributors to monitor progress and help them to succeed with your products.  In the early days, you will find that you need to provide more support to your distributor’s sales team as new sales people call with questions or issues.  With a direct sales team, you will not have to constantly deal with the same questions and issues.
  •  If you sign on with a big distributor, you will instantly have hundreds to thousands of sales folks selling your product.  The distributor’s business team will brag about the enormous size of their sales force, in practice the number of sales people that will actually learn and sell you product will be a fraction of that.  If you are lucky, you will have a few talented sales people that will have early success with your product.  They will tell their colleagues about this and interest in selling your product will increase throughout the sales force.  However, you need to make sure that you are not taken in by pronouncements of how ‘thousands will be selling your product every day’ this just is not true.
  • You can count on the experience, reputation and size of a distributor to mitigate some of your sales risk.  You can never outsource risk!  This is as true of sales as it is with any other risks that your business will face.  You will need to work with your distributor to help mitigate the risk of poor sales.  It doesn’t really matter if it is your own sales force or the distributor’s that is not closing sales.  In both cases there is a problem that you will need to address.

The number one thing that you can do to insure a good experience with your distributors is understanding that you will be expending a significant amount of time and effort (especially in the early days of the relationship) helping them to be successful with your product or service.  Whether you have a direct sales force or not, you will still need to plan on producing teaching materials and conducting training sessions so that your distributor’s sales force has a good understanding of your product and confidence to sell it successfully.  You will also need to provide them with a clear point of contact in your company that will handle all questions, concerns and technical issues in a timely manner (recommend that this be the Product Manager not one of your Sales team members).  You will also need to plan to travel with your distributors on a regular basis to insure that you are meeting their customers.  This will allow you to get critical customer feedback as well as motivating the distributor through demonstration of your commitment to support them.  Traveling with your distributors also allows you to further strengthen your connection with them and show them that you are not only actively managing them but are open to helping them be more successful.  In time, a supported distributor will put increasingly more effort into generating the leads and winning the greater numbers of sales that you expect.

Other advantages
Not all products are ideal for distributor based sales.  If your product is truly ‘game changing’ and requires a very technical sale, you will likely be better off with a direct sales force, at least in the early days after your product launch.  Once you have established enough sales with your direct team so that you have a good understanding of your ideal customer demographics, the most successful tactics for discovering and reaching them and the value proposition that has proven to be most effective, you are ready to consider bringing on a distributor to augment your sales efforts. 

There can be many other advantages of brining in a distributor other than expanded sales reach.  Keep the following in mind during your negotiations with prospective distributors.

  • Forward stocking locations:  This can be a particularly valuable asset to have when you start selling overseas.  Having your product warehoused in the same country where it is sold will insure timely delivery to your customers without the unpredictability and delays caused by getting through customs.  Being able to maintain stock at your distributor’s overseas warehouse will also allow you to take advantage of cheaper (and slower) shipping options like having your product delivered to them by ship rather than by air.
  • Shipping and handling services:  Distributors, especially larger ones, will be able to use their size and expertise to significantly reduce the costs of shipping and handling.  Your distributor already has the infrastructure and expertise in place for this, better to take advantage of this in the early days and save your money for other business expansion activities than customer fulfillment.
  • Marketing and Lead Generation Services:  Many distributors have their own Marketing Communications teams.  They can promote your products in their own marketing literature, at tradeshows or generate literature that has been translated for use with international customers.
  • Localized Promotions:  A good distributor knows the regional and cultural cues that will be most effective for your customers in their territories.  Work closely with your distributor to prepare custom promotions that are designed to appeal to their customers.   Discount and loyalty programs that are prepared for local and regional audiences are always more effective than a ‘one-size-fits-all’ global campaign.

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The 10 Essential Elements of Every Successful Life Science Startup

By:  Andrew Johnson, Ph.D.

keys with a success key fob

Paying attention to these 10 essential elements for a successful startup will greatly increase the prospect that you will get your hands on these keys!

Transforming breakthroughs from the lab into successful companies is a daunting but ultimately rewarding task.  For some, there is no better validation of the quality and value of their scientific discoveries than the kind you get when it generates demand from paying customers.  However, according to Shikhar Ghosh, senior lecturer at the Entrepreneurial Management Unit at Harvard University, 75% of startups fail largely because they have neglected one or more of the 10 essential elements of successful startups.1

 

The 10 Essential Elements of a Successful Startup Are:

  1. Compelling Value Proposition: Having a great idea or discovery does not always mean that you have a product or service that will generate the customer demand required to sustain a business.  Having an experienced Board of Advisors can help you figure this puzzle out and will also provide you with the introductions to the industry experts and Key Opinion Leaders you need to feel confident that you have a viable business hypothesis.
  2. Capital:  How much money will you need to keep your operation running until you start to generate revues?  How will you fund the company?  Grants, Foundation money, investments and bootstrapping are just some of the ways that entrepreneurs get the funding they need to get their product or service to market.
  3. Key Resources:  You need key people on your founding team with the technical know-how and business sophistication to shepherd you company from the early days to a real going concern.  In addition to the people, you need to make sure they have access to the resources they require to succeed like adequate lab space, access to equipment, reagents, regulatory guidance etc.
  4. Key Activities:  Seems like an obvious one.  It is critical to develop a detailed roadmap that describes all of the strategies, tactics and activities that need to be successfully completed to reach your ultimate goal for the company.  This plan will include critical milestones along the way so that the team can monitor progress and make course corrections as needed.  Also, this plan will allow you to develop a realistic budget which will help you to mitigate the risk of running out of capital before you have achieved a successful launch.  The best roadmaps break this down to enough detail to guide not only month to month activity but day to day efforts as well.
  5. Cost Structure:  After you have launched your product or service, your focus now shifts towards expanding profitability.  Your Operations team will be looking to reducing the costs of providing your product while your Sales & Marketing team will be executing on tactics that will bring in significantly more leads, and more sales.
  6. Key Partners:  You don’t need to go it alone.  Establishing strategic partnerships can help you expand your market reach when you set up co-marketing agreements and save capital when you share the cost of space, equipment and other resources that you can both profitably share.  Your team will also benefit from the experience and perspective of your partner as your relationship grows stronger.
  7. Customer Segmentation:  This is something that needs to be started way before you are even ready to sell.  It is important to know both who will want to buy your product as well as who will not.  This will not only help you with your marketing efforts but will also insure that you build the right offering.
  8. Demand Creation:  Once you have a good idea who your customers will be, figuring out how to reach them and what message they will find most compelling becomes a lot easier.  Running an effective beta-evaluation with perspective customers will provide you with key insights that will go a long way to insuring that you have a strong product launch and have a Sales & Marketing plan that will quickly scale up to meet the business growth goals you have set for the company.
  9. Sales Channels:  Having a well thought out Channel Management plan will greatly increase the chances that you will have a strong launch.  It is important to know how you will sell to your customers and then develop the resources and team that will allow you to execute this well.  Different channels have different demands and processes.  Be sure to consider whether you will be using a direct sales force, distributors, a combination of the two and how that would work etc.  Don’t’ forget to consider e-commerce!
  10. Revenue Streams:  Another seemingly obvious ‘element’.  Don’t’ forget that you can get revenue for intellectual property that you can monetize through licensing fees if you don’t commercialize it.  Be sure to consider other ‘products’ like extended warranties, service agreements and advanced training offerings for example.   There are many ways to generate revenue besides what you get from sales of your core product or service.
Chart from UpStart presentation

Making sure your Founding Team has the expertise to manage the “10 Essential Elements” is the best way to improve the odds of success for your startup.2

The Secret to Getting this Right
The secret to keeping on top of all these ‘elements of success’ is having a founding team with the depth and breadth of experience and know-how to cover all of these areas.  Each ‘element’ can require very specific skills and tactics.  Furthermore, it is critical that these are customized to fit the particular needs of your company.  The other thing to keep in mind here is that these ‘elements’ are not static in their timing and demands for resources.  Having at least a few team members that have done this before will insure that you get all of this right.  Founders should look to establish a Board of Advisors very early on to help manage all of this and or help you to find these key people for your founding team.

Notes: 

  1. Venture Capital Secret: 3 of 4 Start-Ups Fail
  2. The Life Science Startup: Bringing Innovative Science to Market with the Right Team 

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