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The art of managing sales and distribution partners

Writer's picture: Alexander SerreAlexander Serre

Another Inside Story

by Alexander Serre


September 2022




Sales and distribution partners around the world come in different sizes and forms, from different countries, speaking different languages and with differing cultures, but the same methodology can be used for all.


Finding, choosing, negotiating with, and managing a distribution partner is a fundamentally critical part of a successful business development strategy.


Getting it right doesn’t necessarily guarantee success but getting it wrong can be extremely harmful, sometimes even suicidal, for a Start-up, a Scale-up or an SME.


An example of getting it wrong can be, for example, signing a distribution deal with a company in China, and then finding out that it’s not the right partner after all. There is a language problem, and cultural misunderstanding, a problem of leverage, a lack of motivation, and totally insufficient human resources allocated to the project.


Other reasons can include signing exclusive partnerships that actually hinder your growth instead of developing it or signing at inappropriate price levels leading to either no sales, or excessive sales but at negative margins or profitability.


Getting it right, can however contribute to growing your business significantly in different parts of the world. The key success factors are finding, selecting, negotiating, supporting, training, and managing the partner correctly.


What are the differences between a Sales and a Distribution partner.


A Sales partner is one that will only look after the Sales and possibly the Marketing of your product or service.


A distribution partner will look after the importation, storage, delivery and sometimes the after-sales service of your product or service.


And often, the partner will do both.


Partners can have exclusive, semi or non-exclusive contracts. The difference being very important to define in advance.



Finding a partner:


The beginning of the finding phase starts with determining where to look. What market does one want to target?


This strategic question will be answered after intensive market analysis of the various options. Each region of the world needs to be analysed and broken down into a standard SWOT analysis.


The choice of a sales and distribution partner will depend on:


1. The strength and weaknesses of one’s own product or service

2. Competitor products already present in a market

3. Substitute products already present in a market

4. Which sales and distribution partner the competition use

5. Which sales and distribution partner are still available

6. The fit of the other products sold by sales and distribution partner

7. Local price levels

8. The logistics involved in getting a product into the country or region on time

9. The tariffs involved in getting a product into the country or region

10. The ease and cost of storing the product

11. The level of stocks required

12. The need for a demonstration area

13. The ease and cost of installing the product or service

14. The need and ease of repairing or exchanging a product or service when it doesn’t function properly


These and many other factors will shape one’s business development strategy and the profile of the partner that one is looking for.


Once the market has been determined, one then has to look for companies would be best be suited as partners. This can be done by visiting exhibitions and/or by analysing who the competition is working with. One of the more successful methods is benchmarking. That is finding a successful company selling complementary products or services to one’s own and seeing who they use.


To get a better feel about the complexity of setting up a sales and distribution partner, here is how I proceeded when looking for a partner in the UK for a nanotechnology company in 2018.


I determined that Europe was one of the 3 primary business development regions. China and the US were the other two. The UK was singled out as one of the key target markets within Europe, alongside Switzerland which was the local market, France, and Germany.


We participated at a symposium that was focused on a subject that was very relevant to our product. The symposium was one of several annual events that regrouped the key actors of that industry, from users to suppliers. Having a stand there was a way of being present and taking the temperature of the market, the main actors, and, of course, who were the main suppliers.


Just being part of this symposium was already a lot of work and negotiations. A lot of research to determine which were the relevant symposiums and exhibitions for this market, contacting and negotiating with the organisers to get the best deal possible, and then the internal negotiations with the CEO to get the OK to spend around €5000 to participate. The agreed budget unfortunately did not include the possibility of giving a talk.


According to my research, I had identified several companies that were selling comparable solutions to ours, but not in direct competition. One of those companies was using a well-known microscope manufacturer as a distributor, and my aim was finding out more about it.


During one of the down time periods for the exhibitors when most visitors where listening to talks, I said to my technical colleague who was manning our stand with me, that I would absent for 10-15 minutes because I wanted to visit the potential partner’s stand.


I went over and started to talk to the person on their stand. It was the Sales Manager of the company that I had chosen as a benchmark, and I got enough information from him to confirm that potential partner could indeed be a potential distributor for us too. I also found out that the distributor’s Sales Manager wasn’t around on that day and would only be present the next day.


The next day I returned to the potential partner’s stand, met with the distributor’s Sales Manager, and was able to gain enough interest from him that he promised to come to my stand later for a further chat.


After an hour or so, he did indeed come around, confirming an initial interest. After a more in-depth discussion between the Manager, my technical colleague and I, it appeared that potential partner might be interested in selling our product in the UK.


The next steps involved meeting potential partner’s boss. I returned to the UK some weeks later for this meeting, making a detailed presentation of our product and listening to how we might fit into potential partner’s sales strategy in the UK.


Although the interest was high on the UK side, it needed approval from the European sales team.


My company was a small Swiss Startup, and our system integrated a microscope to be able to visualise the injection of the CRISPR components directly into live cells. At that time, the central microscope unit was supplied by another microscope manufacturer who treated us like the Startup that we were. High prices and poor after sales service.


The poor after sales service was a red flag for me. As a central part of our system, I asked myself what would happen when we sold a system on the other side of the planet, and that there was a problem with the microscope. My company hadn’t been addressed this when initially purchasing the microscopes.



Selecting a partner:


So, I started internal discussions with our operations team and the CEO to discuss the possibilities of changing suppliers. I exposed my idea of linking the supply of microscopes to us to a worldwide, and not just Swiss, warranty system, but also to a potential distribution partnership. This could we a win-win situation, whereby the number of microscopes that we could buy from the supplier was directly linked to the sales efficiency of the distributor. The more of our systems the partner would sell, the more microscopes we would buy for them.


The first meeting was set up with our current microscope supplier who, as expected, politely declined our offer, and used the occasion to announce a price increase for the next year!


A second meeting was set up with potential partner I had met in the UK. The person in charge of the partner programme for Europe, came from Germany to visit us in Zurich. With the CEO and the operations manager, we presented our product and of course our global business development project.



Negotiating with the partner:


To cut a very long story short, potential partners Partnership Programme Manager was very impressed, not only by our revolutionary technology, but also about the logic of my win-win strategy.


A few days later I received a phone call from her saying that the European Sales management team were interested in visiting us again and discuss further the details of a possible collaboration.


Many months later, a deal was signed. Our new supplier would supply us with perfectly adapted microscopes for our system, at highly preferential prices, which included a worldwide warranty of 2 years, and access to its after-sales service worldwide, including in China, which was one of our target markets.


It also included a semi-exclusive distribution contract for Europe, with an initial pricing agreement. Prices for us to buy their microscopes, but also prices for them when they sold one of our systems.


Our purchase prices were slightly lower than the current supplier but included a more complete set of accessories and the 24-month warranty. We included in the deal that 24 months didn’t start and the moment of purchase, but at the date of installation of our system at the end-customer.


And our sales contract did not just apply to the UK, but to most of EMEA.


The deal was signed thanks to many different factors, with the large multinational signing with a small Startup for several key reasons:


  1. Because we no longer presented ourselves as a Startup. Part of my proposed strategic plan was to transform our initial Startup image into that of a Swiss Nanotech SME with a clear vision of the future growth and a clear coordinated, step-by-step approach.

  2. My experience in high level negotiations allowed us to ensure that the discussions went as we wanted them to go and not let us be blocked into a deal that was not also on our favour.

  3. The building of mutual trust and understanding over the previous months was also crucial. Several times, I had to discuss in a very determined way with our partner’s top Sales and Marketing management, to persuade them to agree to sign with us. Our collaboration was actually part of a new sales model for the partner in face of their position in Europe with their competitors. Several managers from our partner were invaluable allies in these negotiations.

  4. My age and experience also helped validate the seriousness of our approach.



Managing the partner:


We now had access to a hundred or so salespeople throughout the EMEA region.


But how do you get a microscope solutions salesperson to sell to a gene-editing system that costs 5-10 times more than their own microscopes.


Empathy is the key word here.


Having been a salesman myself, I know what motivates and demotivates a salesperson. The key elements are:

  • What’s in it for me?

  • Do I feel comfortable selling the product?

  • Do I trust the product?

  • Do I trust the company selling the product?


Although money motivates most successful salespeople, being successful is also part of the recipe. When selling a “commodity” product like a microscope, salespeople always like to have something new to say to his customers and prospects. Announcing the partnership with us and trying to get a new meeting with customers is a good way for a salesperson to have an advantage over his competitors.


The idea was that the salesperson could not only sell our system but also sell more of his own systems on the back of that.


In order for that happen, the salesperson will need training, and needs to meet the team from the supplier and be convinced that they will support them. A salesperson sells thanks to their image in the industry, with respect from their customers. They will never sell a product in which they don’t have full confidence in the product and the team.


Once again, trust is a key word. And building that trust with a sales force takes time and effort. The experience level of our own sales team was an important factor because an experienced salesperson would not listen to us if we ourselves were inexperienced.


Another vital success factor was also that key people within the partner’s management team were convinced of the interest of the partnership and pushed the project hard from the inside.


Sales, Marketing and Customer Support all worked hand-in-hand with us to promote this new business partnership.


There was an official communication to the press with a common statement, there was then an official internal launch of the product, with the organisation of an initial European kick-off meeting with over fifty EMEA salespeople present.


We were invited on the partner’s stands at various exhibitions.


We were able to give a series of online training webinars to all the local teams.


We made many common customer visits with their sales teams. These are ideal moments to not only get to know the customers and their needs better, but equally those of the sales force.



Conclusions:


I have a fairly simple rule with respect to indirect salespeople: give them everything that they want and need to be successful, and they will be.


Managing and motivating an indirect sales force in a very complex task that requires very specific hard and soft skills and a lot of experience to tackle the many obstacles along the way.


Striking lasting relationships quickly with a plethora of different types of people, from various countries, speaking in a multitude of languages, adapting to each company as well as country culture, traditions, negotiation styles, and objectives, is a key requirement.


As is the ability to listen and speak at the right moment, to read between the lines, or understand the unsaid.


These are some of the key skills that are essential for a successful and sustainable international business development plan.


The success of the partnership in Europe led to a further sales and distribution contract the partners Americas division. We went even further into the partnership approach together by discussing the possibilities of having one of our systems installed as a demo and proof of principle system either in their own labs, and/or at one of their major customers.


Several other sales and distribution partnerships were also signed in China and the Nordic countries, but those might be “inside stories” that I will tell in the future as each had their own specific strategies, approaches, and challenges.





For further information, comments, suggestions, and questions, don’t hesitate to contact me on Alex.Serre@Consulting-AwS.com.




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