Maximising the effectiveness of distributors and agents

© COPYRIGHT 2014 MSM SALES MANAGEMENT CONSULTANTS LIMITED. ALL RIGHTS RESERVED.

MSM SALES MANAGEMENT CONSULTANTS & SHARP TUDHOPE LAWYERS

THE CLOSEST THING TO CLONING Maximising the effectiveness of distributors and agents


Aug 2014


P.2 FOR MORE INFORMATION CONTACT Dan Hansen | Managing Director MSM Sales Management Consultants D: +64 (0) 7 571 1139 | M: +64 (0) 21 059 6233 Email: [email protected] Website: www.msmsalesmanagement.co.nz Kylie van Heerden | Partner Sharp Tudhope Lawyers D: +64 (0) 7 928 0777 | M: +64 (0) 21 039 9404 Email: [email protected] Website: www.sharptudhope.co.nz/


P.3 AGENDA

•  Introducing MSM and Sharp Tudhope Lawyers

•  The opportunity

•  Identifying the right distribution partners

•  Structuring the game rules

•  Developing long term relationships that deliver sustainable

sales as if you were there in person


P.4 INTRODUCING MSM

•  MSM specialises in delivering increased pro#tability through sales in

local and export markets.

•  Our expertise is in helping companies develop export sales in;

•  Food and beverage

•  Health, beauty and nutrition

•  Precision manufacturing and electronics

•  Innovation, Technology and Media

•  This year MSM will support in excess of $130m of gross sales, over $100m

will be related to export


P.5 MSM CLIENTS & PARTNERS


P.6 TRADITIONAL APPROACH


P.7 THE OPPORTUNITY

•  The majority of distributor and agent relationships start at

tradeshows

•  Very few relationships have clearly identi#ed success factors

•  Most relationships will last 12-24 months with little bene#t

to both parties... A Signi#cant opportunity cost

•  The challenge is, together how we can #nd more money


P.8 PARADIGM SHIFT

Add value

Reduce cost

Nominal $


P.9 THE CASE FOR DISTRIBUTORS AND AGENTS

•  Distributors and agents are all about leverage

•  Distributors work best for levering coverage

•  Agents work best for levering depth

•  Products that are technically orientated can be difficult to

place in the channel

•  Business culture can be difficult to lever

•  An appropriate value chain and price point must exist


P.10 IDENTIFYING THE RIGHT CHANNEL

•  Start with the end in mind...

•  The consumer

•  The region

•  Synergies with existing product mix

•  Distributor or agent

•  The reach and market involvement

•  The outcome (exit plan)


P.11 OPERATIONAL GAME RULES

•  Agree what success looks like

•  Write the distributor into your plans

•  Engage distributor resources i.e. sales team, marketing etc

•  Trade value i.e. exclusivity, territory etc

•  Educate and tool up the distributor

•  Extend your hand and your culture


P.12 SETTING THE GAME RULES

THE HOW AND THE WHAT How? Before putting pen to paper: •  Agree Key Objectives •  Decide on Structure (i.e. agency, sales rep,

distributor) •  Agree key commercial elements in principle.


P.13 Structure Options

2 most common relationship structures:

1.  Agent 2.  Distributor

Agents:

•  The agent acts on your behalf (similar to a sales rep). •  Ownership of goods does not pass to agent. •  Payment is generally by way of commission or a salary type

arrangement. •  You are generally liable for acts of the agent. Distributors:

•  The Distributor acts like an independent contractor, i.e. as a principal. •  The Distributor purchases goods from the Exporter and resells in

market, with a margin attached. •  The Distributor is generally liable for its actions.


P.14 The What

The Distribution ‘POT’ • Products • Price and Payment • Performance • Protection •  • Objectives • Obligations

• Type • Territory • Term and Termination


P.15 Products: •  De"ne Products subject to the agreement. •  Ensure #exibility to add / delete products from scope of agreement. Price and Payment: •  When setting price, take into account nature of risk being assumed by each party. •  Avoid being locked into pricing for too long a period. •  Be clear on payment terms (and currency). •  Ensure there is an ability to charge interest in event of default. Performance: •  Consider purchase targets. •  Consider rights if performance targets not met. Protection: •  Limit warranties and conditions (both express and implied) •  Limit liability. •  Ensure title retention until paid.


P.16 Objectives: •  Write these down! •  Consider consequences for failing to meet objectives. Obligations: •  Best efforts to sell. •  After sales service. •  Compliance with applicable laws. •  Storage of products •  Reporting •  Etc….


P.17 Type:

•  Exclusive / non-exclusive •  Restrictions •  Supplier Direct sales, i.e. via website.

Territory:

•  Clearly de"ne •  Jurisdiction / Governing Law.

Term and Termination:

•  Fixed or inde"nite •  Exit Strategy •  Rights to terminate


P.18 CREATING LONG TERM RELATIONSHIPS

•  Be the squeaky wheel, you're competing at a SKU level

•  Write the distributor into your plans

•  Share and reward success

•  Engage distributor resources i.e. sales team, marketing etc

•  Continually educate and tool-up the distributor

•  Measure and discuss performance at least quarterly


P.19 WHEN IT GOES AWRY

•  Transparency is key

•  Come back to success criteria

•  At #rst you don’t succeed, reengage

•  Seek to understand, most distributors act as a window to the

market

•  The opportunity cost of replacing distributors is signi#cant

•  Don’t be afraid to exit


P.20 MANAGING PERFORMANCE

Be clear on what performance requirements are, e.g:

•  Purchase / Sales Targets

•  Meeting obligations

Consider consequences of failure to meet performance criteria:

•  Loss of exclusivity

•  Termination

•  Indemnity

Be clear of process to manage poor performance, i.e:

•  Notice requirements / timeframes.

•  Opportunity to remedy.


P.21

•  Grace period where distributor can continue to supply current orders

•  Re-purchase of stock at cost •  Return of con"dential information

Be clear on process to deal with Disputes •  Negotiation •  Mediation •  International Arbitration

Consider what is to happen to surplus stock, i.e:


P.22 The best way to manage performance is to manage the relationship!

•  Regular contact •  In market visits •  Reporting


P.23 KEY TAKE-AWAYS

•  There is a paradigm shift in the business/distributor

relationship

•  Successful distributorships have synergy with the business

and the customer

•  The correct legal framework supports a good relationship

•  Measure and manage the partnership’s performance

•  Transparency is best

•  Don’t be afraid to leave


P.24 QUESTIONS

•  Common questions

•  What are the pro’s and con’s of exclusive

territories?

•  How do we integrate our sales team with a

distributor?

•  What type of tools could support our

distributor?

•  How do we engage distributor sales people?


MSM SALES MANAGEMENT CONSULTANTS & SHARP TUDHOPE LAWYERS

THE CLOSEST THING TO CLONING Maximising the effectiveness of distributors and agents


Aug 2014

Maximising the effectiveness of distributors and agents

Business

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