Direct sales are an expensive, time-consuming and risky way to introduce new products or services to the marketplace. Yet companies seldom consider alternative strategies, like working with a distribution network, to handling their own direct sales. This mistake, however, is understandable. After all, how could anyone other than you actually sell your product?
In reality, there are many, many organizations that can do a much better job selling than you—which is exactly why you should consider building a distribution network.
Advantages of selling through a distribution network
A distribution network consists of individuals or companies that will serve as the “last mile” connection between your company and the end users of what you sell. Working with a distribution network has significant advantages over in-house sales such as:
Replicating an in-house national sales force is extremely challenging and can cost millions of dollars. You can achieve this reach by working with an established network. They've already done the hard work of building a network with a broad reach for you.
If you work with the right distributors, they will already have existing relationships with the type of consumer or company that buys your product. This eliminates the need to build trust in the relationship. Communicating the features and benefits of what you sell is the easy part. What takes time and effort is getting the buyer to trust what you have to say. An existing relationship eliminates this requirement.
The skill set required to build, test and refine a product is very different from the skills required to sell it. Working with a third party distribution network allows each partner to focus on what they do best.
Certain distributors, like value-added resellers, bundle your offering with their own. This creates a package of enhanced value to the end user. If you sell software that requires a high-degree of human contact for training, installation and maintenance, value-added resellers can provide the “high-touch” that you can’t.
Where to begin?
Before reaching out to potential distribution partners, study the existing purchase process for your target market. Determine how you can leverage that process for your own benefit. Maybe there are companies that you can approach to discuss working together.
It’s also important to speak to your existing internal sales staff and prepare them for this radical change. Your sales people will most likely have to stop focusing on individual end users and start focusing on signing up distributors. This is a different type of sale. Instead of focusing on the particular features of a product, they have to convince the distributors that it’s a good idea to commit time, energy and resources to the sale of your product. Selling your business requires different language and positioning compared to selling your product. The incentive structure that you use for your sales people will also need to reflect the new reality. They will close fewer contracts by targeting distributorships instead of customers, but each contract could potentially be far more lucrative for your company.
Next, you need to ensure that your information technology infrastructure is capable of handling the additional burden of tracking distributorship sales. This is important for calculating compensation, identifying problems, calculating profitability per distributor and more.
Finally you should consult your company attorney to prepare standard documentation for distributorship agreements. These agreements can change on a case by case basis, but having a boilerplate will speed the process along significantly.