Qi3 – Quality, Insight, Integrity & Innovation - UNITING TECHNOLOGY & MARKETING

Agents, distributors or direct sales – some choices and pitfalls?

The following article was published in the June/July edition of the Eastern Director a magazine for members of the Institute of Directors.

It is one of those almost infallible rules of business to business companies exhibiting at major conferences that 10% of the leads will be from organisations wanting to be your distributor, from Bangladesh through Brazil to Bolton. They usually end up in the bin, but it does raise the question of what is the best sales organisation for a company, and how should this change as the company grows. This is not an easy question to answer at first sight, as the company could use a variety of distribution channels – direct sales, agents, general or specialist distributors, value added resellers, systems integrators, or others.

The need for general distributors, value added resellers or systems integrators will be fairly self evident, but the choice between a direct sales force and specialist distributors or agents can sometimes be a difficult one to make. Specialist distributors and agents can give you quick access to a wide range of customers growing initial sales quickly. They will carry a portfolio of complementary products, which gives them several reasons to get in front of your potential customers, and they are very good at providing local support in overseas or specialist markets. However, they often have a resistance to maximising your market share, especially if they believe that you will then introduce a direct sales force. A direct sales force will achieve higher market share, but is a fixed cost, and can be relatively expensive when sales volumes are low.

If you choose agents, make sure that you investigate the legal implications of this. EU law gives agents a considerable number of rights, treating them almost as a pseudo employee. If distributors pass you leads to deal with directly as part of your sales programme, and you pay them a commission, don’t unwittingly create an agency agreement.

When selecting external organisations such us distributors or value added resellers, there are two key things to evaluate – attitude and credibility. Attitude is a combination of factors. Your products have to be important to them and their future if they are to give them sufficient attention. They need to be ‘hungry’ and ambitious if your sales are going to grow significantly. And you need to like each other. Their credibility can be assessed by talking to customers and other players in the market.

A couple of final thoughts; which ever combination of sales channels you choose, don’t deliberately set them up in direct competition with each other (although don’t contravene the competition regulations). Such a situation rapidly de-motivates distributors or agents who will put their energies into selling the products of other principals. Second, you may decide to start with distributors and agents and then change over to direct sales. Whilst a valid strategy, be careful. Make sure that you give the distributors involved a good deal; otherwise it will have an adverse impact on the attitude of all your other distributors, who will surely find out what is going on.

Robin Higgons of Qi3, which specialises in marketing support for technology based companies, is a branch member. robin.higgons@qi3.co.uk

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