More often than not, distributors determine the profitability of the manufacturers' lines. Most manufacturers share the philosophy that when we help our distributors become better marketers, turns and profitability are created. In other words, a win-win.
Recently, however, this model is being challenged. The concept of what makes distributors and manufacturers “better marketers” is being redefined by some third-party individuals to mean “tap the manufacturer for more cash.” If that new direction takes hold, the very essence of two-step distribution will be ripped apart and turn into a lose-lose.
Forget the shipping improvements manufacturers made and continue to make. Never mind the national advertising or co-op advertising programs manufacturers support. Ignore the huge investment in EDI/e-commerce that both parties make to assure the smooth flow of product into the marketplace. Instead, today's mantra is, “Show me more money.” That mantra is going to jeopardize what manufacturers and distributors already have going for them: a system that works.
No manufacturer has ever had an endless stream of cash that distributors simply have to ask for in order to receive. For example, one of the recent “calls to action” in the industry is for a distributor to, “Use all possible earned dollars… and once you use them, ask for more.” The idea that a manufacturer has unlimited funding is absurd. Using all possible dollars just to use them is marketing suicide in any business.
On the other hand, if a distributor has developed a sound marketing idea, it is important for the distributor to present it to the manufacturer and discuss how to fund it. If you are serious about your idea, demonstrate that seriousness to the manufacturer by putting up some of your own money — not just asking for the manufacturer's.
Another misconception is that a distributor should have access to a minimum amount of co-op funding. This has always been true, but lately, the definition of “co-op” seems to be expanding far beyond its original intent. “Co-op” is based on the concept of cooperation — both sides contribute to the idea. There are two questions to answer for this concept to work properly: 1) what kind of idea is the cooperation all about; and, 2) how much money is involved by the parties cooperating?
The false belief — that co-op dollars are dollars that if the distributor does not use, someone else will — has somehow become prevalent. This is an incorrect conclusion because manufacturers do not have unlimited budgets, and even existing budgets get cut drastically when economic challenges emerge. Unless the distributor recognizes this, that distributor puts undue stress on the manufacturer and on its own ability to partner with that manufacturer.
Finally, our marketplace is being constantly reminded of a false notion that “market development funds” are always available for a distributor to use. Exactly what are such funds? These funds simply do not exist. In fact, the suggestion has been made that such funds create closer working relationships because the manufacturer and distributor become vested in the outcome.
However, isn't that already what is going on with two-step distribution itself — both the distributor and manufacturer work close and have a vested interest in the outcome of their business together?
Let's face it: a distributor and a manufacturer go into business together the minute one agrees to distribute the other's products. Disguising or suggesting there is another layer in this relationship confuses the real issues.
The key to a successful marketing partnership is to develop a plan and show a return for both parties — exactly what goes on in day-to-day two-step distribution! The objective of the distributor-manufacturer relationship is simple: sell more stuff. The “how you do that” has always been the marketing challenge, and figuring out the “how” has always been the result of true working partnerships.
This is not a time for challenging manufacturers or allowing non-manufacturers or non-distributors to set up an “us vs. them” attitude. This is a time for cooperation. If a manufacturer and a distributor need another program to become vested in the outcome of the relationship, then something is wrong with that relationship from the start. Let's re-examine the roots of two-step distribution and what commitment means on both of our parts. I invite your comments.
The author is vice president of marketing and sales for Bridgeport Fittings Inc., Stratford, Conn. He can be contacted at firstname.lastname@example.org