One of the most common sales challenges that companies face is how to
overcome the reluctance or inability of some resellers to grow and the resultant
“drag” they create on the company’s plan to
increase revenues.
John Henderson, president/CEO of Frank
Lynn & Associates, Inc., has encountered
numerous companies facing the following
quandary: how to grow sales by adding
new sales channels without alienating
existing resellers and risking the current
revenue they generate. Many companies
take the easy way out — they avoid a confrontation and attempt to fix the existing
resellers.
Smart Business asked Henderson to discuss how manufacturers and service
providers should address this problem.
What is wrong with trying to ‘fix’ existing
resellers to drive new growth?
Trying to fix existing resellers is an
option. But if you look at your market
dynamics, you will likely find that your end
customers’ needs and their buying behaviors have changed, and new channel players have emerged to meet their needs.
Sticking with a reseller that no longer satisfies your customers is not a recipe for
growth. It is very hard for a reseller to recognize this shift in customer requirements
until it is too late.
Can managers take action to help their
resellers recognize that changes are occurring?
Yes, but only with a subset of your
resellers. Many are independently owned
and represent either a first-generation
owner who believes he or she is too old to
invest and take risks, or a second-generation owner who doesn’t understand the
business and/or is reluctant to change.
But most companies have a mix of
resellers and some can deliver the desired
growth. We have a process to classify
resellers based on their ability to grow. The categories are:
- Self-growing
- Growable
- Non-growable
What are key characteristics of self-growing
and growable resellers?
Self-growing resellers have a business
plan that defines how to grow their business. These resellers often are run by
entrepreneurs with growth goals that align
with the supplier’s goals.
Growable resellers have the desire to
grow and are willing to invest, but may
need assistance from the supplier to succeed.
If you ask the right questions, you can
effectively and accurately categorize your
resellers. We use a diagnostic tool for that
purpose.
How should a company’s sales force work
with these three types of resellers?
While members of the sales team may
believe they need to spend time with non-growables due to poor performance, by
definition, it is highly unlikely they will
change to help you achieve your growth
goals.
The sales force also should limit its time
with the self-growing resellers — they will
continue to make their contribution and
you will go along for the ride.
The best return on your sales efforts will
come from focusing on the growable dealers.
If a company does decide to replace a poor
performer, how does it minimize the risk?
Several critical steps need to be taken
including an assessment of your legal risks
in terminating existing relationships. But
the most important place to start is by
assessing customer needs. This will help
define the reseller characteristics.
The risk can be measured as well. Ask the
customer this question: ‘If your existing
reseller no longer provided you with our
product, would you buy the product the
reseller offers, or would you switch
resellers to have access to our product?’
The answer provides great insight to the
risk exposure.
JOHN HENDERSON is president and CEO of Frank Lynn &
Associates Inc. in Chicago. Reach him at (312) 558-4828 or
[email protected].