Passing the Baton of Value: The Distribution System and Customer Satisfaction.

Reading time: 3 min

by Alice Alessandri and Alberto Aleo.

In a context of larger and larger globalized markets that require strong and widespread local presence, distribution systems – whether they are dealer networks, authorized resellers, representative warehouses, branches, or similar structures, play a fundamental role in the success of any business. If a network is not capable of ensuring product availability, providing pre- and post-sales services, or offering customers guidance in a purchase, all prior efforts might end up being undermined. However, a word of warning: if a distribution system, or equally a sales force, is not properly managed, it can go from being a value-creating asset into being a liability that separates companies from both their customers and the market, ultimately turning their strengths into weaknesses. Here are some suggestions to manage your distribution system effectively.

Pros & Cons.

First of all, it is useful to clarify who and what a commercial distribution system is for. As mentioned earlier, when a market is very large and the number of potential buyers for products and services is significantly high, it is unlikely that we will be able to reach and serve them without the support of a local network. However, this is not the only reason you should create one.

A system of branches and dealerships can help us reduce business risks by managing part of the most complex activities, such as handling incoming payments, providing certain services locally, acting as a warehouse to improve logistics and delivery times, mitigating market fluctuations, and simplifying and stabilizing cash flows.

But what’s the trade-off? Well, you need to give up part of our margins, concentrate risk among a limited number of intermediary players, make sure the supplies are consistent and adequately large, and accept that someone else will act as a “filter” between us and the market.

The areas where the company should be closer to the client and less “filtered” by the distribution system. 

B2B, B2C and B2B2C.

In our experience, we have realised that some companies using distribution channels tend to treat dealers, branches, and resellers as if they were customers, forgetting that there is an end user downstream who must ultimately be satisfied and taken care of. In practice, these companies see themselves purely as business-to-business (B2B) organizations, i.e. companies selling exclusively to other companies, while in reality the chain extends beyond that point and reaches the final customer. Therefore, if your product or service ultimately ends up “in the hands” of a consumer, you should also consider yourselves a business-to-consumer (B2C) company or, at least, what modern literature defines as B2B2C, which means to be part of a flow that starts between businesses, but which ultimately reaches the individual customer. This distinction is vital. Otherwise, you might end up building a strategy focused solely on convincing the distribution channel to stock your products while forgetting to support its subsequent sales activity toward the market, potentially creating highly dangerous information gaps in the process.

Networking with the network.

So, what is the best way to manage a distribution network? You should consider it a partner in creating satisfaction and value for the customers you share.

In commercial activities involving an intermediary sales channel, two key moments can be identified: sell-in, when the distributor purchases from us, and sell-out, when the distributor sells to the customer downstream. 

The salesperson shouldn’t just sell to the distribution network (Sell-In), but should also monitor the quality and the quantity of sales from the network to the end user (Sell-Out), or risk losing their direct contact with the real market.

In order to manage the process effectively we need to pay attention to both phases. In particular, we must support our partners and intermediaries in all sell-out activities by providing valid selling points to justify price and value, training, logistical and marketing support, and by receiving feedback in the form of sales data, customer reviews, willingness to collaborate, and any other insights that help maintain our presence even in the final stage of the sales. 

Nowadays, without adequate local coverage, businesses may struggle to meet their targets.

This is why a distribution system can be extremely valuable, but then again, it all depends on how it is managed, as it can either generate or destroy the distinctive value that sets a company apart, along with its results.

Never forget that both you and your partners are trying to satisfy the same customer, and that the success of both parties depends on how you collaborate, bearing in mind that your aim is to make your customers happy. They are the ones who will ultimately use your products or benefit from your services.

| partem claram semper aspice |