In an ideal world, your key distributors
would develop annual business plans
for your product line and work closely with your distributor account managers
to get the plans implemented. In reality,
many manufacturers skip this planning
effort altogether. Those that require distributor plans often struggle — either to
convince distributors to create high-quality plans or to assure that the plans are
followed.
To understand a typical distributor planning process, Smart Business spoke with
Bob Segal, a principal at Frank Lynn &
Associates.
Why should a manufacturer require its distributors to create written plans?
The success of many manufacturers
hinges on the actions of tens or even hundreds of independent, mostly small, distributors. However, each distributor has
different customer targets, different product mixes, and different sales and technical
skills. Many lack strategic planning skills
and marketing departments. As independent businesses, they’re free to do what they
want.
A manufacturer can hope for the best or
use distributor plans to gain greater control
over its distribution destiny.
Is it realistic to expect or require plans from
each distributor?
No. Most manufacturers don’t have the
capacity to handle hundreds of individual
plans. Furthermore, most manufacturers
experience the 80:20 rule, where 80 percent of their revenue comes from 20 percent of their channel partners. At a minimum, suppliers should require plans from
key partners.
Not all manufacturers have the clout to
demand distributors create a plan. A small
company selling through Wal-Mart might
face an uphill battle to get a detailed, written plan. Still, vendors should ‘think big’
and not retreat unless facing a true negotiating mismatch. Even in those cases, scale
back the scope of the planning request
instead of giving up altogether.
What should be included in a distributor’s
plan?
Obviously, these plans should have highly
customized content. However, the typical
items a manufacturer should expect, or even
require, in a distributor plan might include:
Business background – a short strategy
statement, review of market conditions, a
competitive summary and a list of the distributor’s key financial, sales and technical
objectives
Product/services summary – a list of
(existing/future) services the distributor
provides and complementary product lines
carried
Customer mix – sales by market segment; a list of key/major accounts
Marketing plan – a listing of specific marketing activities including start and end
dates, people assigned and resources
required (of the distributor and of your company), covering trade shows, seminars, mailings, Web site, publications, advertising, etc.
Training/personnel plan – a schedule
of which distributor personnel will attend
what training sessions (yours or third-party) over the next year; hiring plans that
will affect your product line
Sales plan – major/key account activities,
joint sales expectations, telemarketing plans
Logistics plan – warehouse/technology
investments
Financial plan – agreement on sales targets, forecasting frequency, etc.
How big do these plans get?
First, it’s often helpful for the manufacturer to create a template. It’s a lot easier
for a distributor to fill in a formatted form
than to create a plan from scratch.
Furthermore, this assures the manufacturer it will get the type of information it seeks
(in a consistent format).
For a major supplier, distributors often
want to dedicate significant time to create a
comprehensive plan. Sometimes, the document becomes the overall strategic plan for
the distributor. Regardless, most plans consist of two to three pages of text with five or
six pages of tables or forms. Distributors
often attach appendices with sales spreadsheets, forecasts, trade show listings, etc.
What is the role of the manufacturer’s channel sales team in the planning process?
The channel managers should establish
an annual planning calendar with annual
account plans completed in December; formal, two-way reviews each quarter and
informal updates monthly.
Provided with a template, distributors —
not the account managers — should write
the business plans. The account managers
can add commitments from their company
to the plan during the annual planning
meeting.
The annual meeting should take place
between the account manager and the
owner or senior executive from the distributor. The actual meeting, to review last
year’s results and revise the plan for next
year, will likely require two to four hours. In
preparation, the account manager should
review, in detail, the distributor’s sales history, local market trends/conditions, the manufacturers’ fulfillment of past commitments,
new product plans, etc.
BOB SEGAL is a principal at Frank Lynn & Associates Inc. and
leader of the firm’s Brand Strategy Practice. Reach him at (312)
558-4808 or [email protected].
