Successful distributor plans Featured

7:00pm EDT February 28, 2007

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 bobsegal@franklynn.com.